INCYTE : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

The following discussion of our financial condition and results of operations as
of and for the three and six months ended June 30, 2020 should be read in
conjunction with the unaudited condensed consolidated financial statements and
notes to those statements included elsewhere in this Quarterly Report on
Form 10-Q and our audited consolidated financial statements as of and for the
year ended December 31, 2019 included in our Annual Report on Form 10-K for the
year ended December 31, 2019 previously filed with the SEC.

This report contains forward-looking statements that involve risks and
uncertainties. These statements relate to future periods, future events or our
future operating or financial plans or performance. Often, these statements
include the words "believe," "expect," "target," "anticipate," "intend," "plan,"
"seek," "estimate," "potential," or words of similar meaning, or future or
conditional verbs such as "will," "would," "should," "could," "might," or "may,"
or the negative of these terms, and other similar expressions. These
forward-looking statements include statements as to:

the discovery, development, formulation, manufacturing and commercialization of

? our compounds, our drug candidates and JAKAFI®/JAKAVI® (ruxolitinib), PEMAZYRE

   ® (pemigatinib), ICLUSIG® (ponatinib) and MONJUVI® (tafasitamab);

? our plans to further develop our operations outside of the United States;

? conducting clinical trials internally, with collaborators, or with clinical

research organizations;

? our collaboration and strategic relationship strategy, and anticipated benefits

and disadvantages of entering into collaboration agreements;

? our licensing, investment and commercialization strategies, including our plans

to commercialize JAKAFI, PEMAZYRE, ICLUSIG and MONJUVI;

the regulatory approval process, including obtaining U.S. Food and Drug

? Administration and other international health authorities approval for our

products in the United States and abroad;

? the safety, effectiveness and potential benefits and indications of our drug

candidates and other compounds under development;

? the timing and size of our clinical trials; the compounds expected to enter

clinical trials; timing of clinical trial results;

? our ability to manage expansion of our drug discovery and development

operations;

? future required expertise relating to clinical trials, manufacturing, sales and

marketing;

? obtaining and terminating licenses to products, drug candidates or technology,

or other intellectual property rights;

? the receipt from or payments pursuant to collaboration or license agreements

resulting from milestones or royalties;

? plans to develop and commercialize products on our own;

? plans to use third-party manufacturers;

? plans for our manufacturing operations;

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expected expenses and expenditure levels; expected uses of cash; expected

? revenues and sources of revenues, including milestone payments; expectations

   with respect to inventory;

? expectations with respect to reimbursement for our products;

? the expected impact of recent accounting pronouncements and changes in tax

   laws;

? expected losses; fluctuation of losses; currency translation impact associated

with collaboration royalties;

? our profitability; the adequacy of our capital resources to continue

operations;

? the need to raise additional capital;

? the costs associated with resolving matters in litigation;

? our expectations regarding competition;

expectations relating to our new European headquarters, including construction

? activities, and the anticipated completion date for our large molecule

production facility;

? our investments, including anticipated expenditures, losses and expenses;

? our patent prosecution and maintenance efforts; and

the potential effects of the COVID-19 pandemic and efforts undertaken or to be

? undertaken by us or applicable governmental authorities on local and global

economic conditions, and on our business, results of operations and financial

condition.

These forward-looking statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from those projected and include, but are not limited to:

? our ability to successfully commercialize JAKAFI, ICLUSIG, PEMAZYRE and

MONJUVI;

our ability to maintain at anticipated levels reimbursement for our products

? from government health administration authorities, private health insurers and

   other organizations;

? our ability to establish and maintain effective sales, marketing and

   distribution capabilities;

the risk of reliance on other parties to manufacture our products, which could

? result in a short supply of our products, increased costs, and withdrawal of

   regulatory approval;

? our ability to maintain regulatory approvals to market our products;

? our ability to achieve a significant market share in order to achieve or

   maintain profitability;

the risk of civil or criminal penalties if we market our products in a manner

? that violates health care fraud and abuse and other applicable laws, rules and

   regulations;

? our ability to discover, develop, formulate, manufacture and commercialize our

drug candidates;

? the risk of unanticipated delays in, or discontinuations of, research and

development efforts;

? the risk that previous preclinical testing or clinical trial results are not

necessarily indicative of future clinical trial results;

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? risks relating to the conduct of our clinical trials;

? changing regulatory requirements;

? the risk of adverse safety findings;

? the risk that results of our clinical trials do not support submission of a

marketing approval application for our drug candidates;

? the risk of significant delays or costs in obtaining regulatory approvals;

? risks relating to our reliance on third-party manufacturers, collaborators, and

clinical research organizations;

? risks relating to the development of new products and their use by us and our

current and potential collaborators;

? risks relating to our inability to control the development of out-licensed

compounds or drug candidates;

? risks relating to our collaborators' ability to develop and commercialize

JAKAVI, OLUMIANT, TABRECTA and the drug candidates licensed from us;

? costs associated with prosecuting, maintaining, defending and enforcing patent

claims and other intellectual property rights;

? our ability to maintain or obtain adequate product liability and other

insurance coverage;

? the risk that our drug candidates may not obtain or maintain regulatory

approval;

? the impact of technological advances and competition, including potential

generic competition;

? our ability to compete against third parties with greater resources than ours;

? risks relating to changes in pricing and reimbursement in the markets in which

we may compete;

? risks relating to governmental healthcare reform efforts, including efforts to

control, set or cap pricing for our commercial drugs in the U.S and abroad;

? competition to develop and commercialize similar drug products;

our ability to obtain and maintain patent protection and freedom to operate for

? our discoveries and to continue to be effective in expanding our patent

coverage;

? the impact of changing laws on our patent portfolio;

? developments in and expenses relating to litigation;

? our ability to in-license drug candidates or other technology;

? unanticipated construction, other delays or changes in plans relating to our

new European headquarters and large molecule production facility;

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? our ability to integrate successfully acquired businesses, development programs

or technology;

? our ability to obtain additional capital when needed;

? fluctuations in net cash provided and used by operating, financing and

investing activities;

? our ability to analyze the effects of new accounting pronouncements and apply

new accounting rules;

? our history of operating losses;

? risks related to public health pandemics such as the COVID-19 pandemic; and

? the risks set forth under "Risk Factors."

Given these risks and uncertainties, you should not place undue reliance on
these forward-looking statements. Except as required by federal securities laws,
we undertake no obligation to update any forward-looking statements for any
reason, even if new information becomes available or other events occur in the
future.

In this report all references to "Incyte," "we," "us," "our" or the "Company"
mean Incyte Corporation and our subsidiaries, except where it is made clear that
the term means only the parent company.

Incyte, JAKAFI and PEMAZYRE are our registered trademarks. We also refer to trademarks of other corporations and organizations in this Quarterly Report on Form 10-Q.

Overview

Incyte is a biopharmaceutical company focused on the discovery, development and
commercialization of proprietary therapeutics. Our global headquarters is
located in Wilmington, Delaware. We conduct our European clinical development
operations from our offices in Geneva, Switzerland, and Lausanne, Switzerland;
our Japanese office is in Tokyo.

COVID-19

Effects of the COVID-19 Pandemic on Our Business

In December 2019, coronavirus disease of 2019, or COVID-19, was first reported
in Wuhan, China. In March 2020, the World Health Organization declared COVID-19
a pandemic ("the COVID-19 Pandemic") and certain governments, including the
State of Delaware where our primary offices and laboratory spaces are located,
enacted stay-at-home orders and sweeping restrictions to travel and business
activity were initiated by corporations and governments.

We took aggressive, proactive actions early on to protect the health of our
employees, and their families, including voluntarily requiring almost all
personnel across our global enterprise to work remotely and restricting access
to our sites to personnel who were required to perform critical business
continuity activities.  In May 2020, we initiated a return to full laboratory
work at our facilities in Wilmington, Delaware, as well as a gradual return to
office-based working, where allowed under local guidelines, at our offices in
North America, Europe and Japan.

While we currently believe we are well-positioned to function in a hybrid
on-site and virtual or remote fashion, the extent of the COVID-19 Pandemic's
effect on our operational and financial performance will depend on future
developments, including the duration, spread and intensity of the pandemic,
protective measures, and the reimposition of protective measures, implemented by
governmental authorities or by us to protect our employees, and effects of the
pandemic and such protective measures on our suppliers, collaborators, services
providers and healthcare organizations serving patients, all of which are
uncertain and difficult to predict considering the rapidly evolving landscape.
As a result, it is not currently possible to ascertain or predict the overall
long-term impact of the COVID-19 Pandemic on our business.

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To date, we have not seen a material effect on the results of our commercial
operations, or our manufacturing supply chain, and we have increased
manufacturing efforts of ruxolitinib to respond to the COVID-19 Pandemic and to
pre-clinical and clinical study requests. New patient starts for JAKAFI
treatment decreased as a result of shelter in place and other protective
measures, and if decreases in new patient starts continue, our revenues in
future periods could be adversely affected. We continue to anticipate that
short-term effects may continue to emerge across different aspects of our global
clinical trial programs. For example, while we expect ongoing monitoring of
already-enrolled patients to continue, difficulties in monitoring may result as
a consequence of shelter in place orders and other protective measures
implemented by governmental authorities or clinical trial sites.  In addition,
new patient recruitment in certain clinical trials has been and may in the
future be impacted, in particular with respect to our earlier stage clinical
trials. We also expect the conduct of clinical trials may continue to vary by
disease state and by severity of disease, as well as by geography, as some
regions are more adversely impacted. Until our return to full laboratory work,
our discovery laboratories were staffed by essential personnel, and hence
certain discovery programs experienced delays. Still, we caution that the
duration and severity of the continuing COVID-19 Pandemic remains uncertain and
we may not yet be able to assess its consequences accurately or fully at this
time.

Clinical Trials to Address COVID-19

In April 2020, we announced the initiation of a Phase III clinical trial
(RUXCOVID) to evaluate the efficacy and safety of ruxolitinib plus
standard-of-care (SoC), compared to SoC therapy alone, in patients with COVID-19
associated cytokine storm. The SoC therapy is currently evolving and could be
subject to change. We sponsor this collaborative study in the United States and
our collaboration partner Novartis International Pharmaceutical Ltd. sponsors
the study outside of the United States.

We have also opened a second Phase III clinical trial in the United States to
evaluate the efficacy and safety of ruxolitinib plus SoC, compared to SoC
therapy alone, in COVID-19 patients on mechanical ventilation and who have acute
respiratory distress syndrome (ARDS), a type of respiratory failure
characterized by rapid onset of widespread inflammation in the lungs. The SoC
therapy is currently evolving and could be subject to change.

We have launched an Expanded Access Program in the United States to allow eligible patients with COVID-19 associated cytokine storm to receive ruxolitinib.

In April 2020, our collaboration partner Eli Lilly and Company announced that it
has entered into an agreement with the National Institute of Allergy and
Infectious Diseases (NIAID), part of the National Institutes of Health, to study
baricitinib as an arm in NIAID's Adaptive COVID-19 Treatment Trial. The study is
investigating the efficacy and safety of baricitinib as a potential treatment
for hospitalized patients diagnosed with COVID-19 in the US, and Lilly is also
planning an expansion to include Europe and Asia.

In addition, in June 2020, Lilly announced that the first patient had been enrolled in a Phase III randomized, double-blind, placebo-controlled study to evaluate the efficacy and safety of baricitinib in hospitalized adults with COVID-19.

Marketed Indications - JAKAFI (ruxolitinib)

JAKAFI (ruxolitinib) is our first product to be approved for sale in the United
States. It was approved by the U.S. Food and Drug Administration (FDA) in
November 2011 for the treatment of adults with intermediate or high-risk
myelofibrosis, in December 2014 for the treatment of adults with polycythemia
vera who have had an inadequate response to or are intolerant of hydroxyurea and
in May 2019 for the treatment of steroid-refractory acute graft-versus-host
disease (GVHD) in adult and pediatric patients 12 years and older. Myelofibrosis
and polycythemia vera are both myeloproliferative neoplasms (MPNs), a type of
rare blood cancer, and GVHD is an adverse immune response to an allogeneic
hematopoietic stem cell transplant (HSCT). Under our collaboration agreement
with Novartis, Novartis received exclusive development and commercialization
rights to ruxolitinib outside of the United States for all hematologic and
oncologic indications and sells ruxolitinib outside of the United States under
the name JAKAVI.

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In 2003, we initiated a research and development program to explore the
inhibition of enzymes called janus associated kinases (JAK). The JAK family is
composed of four tyrosine kinases-JAK1, JAK2, JAK3 and Tyk2-that are involved in
the signaling of a number of cytokines and growth factors. JAKs are central to a
number of biologic processes, including the formation and development of blood
cells and the regulation of immune functions. Dysregulation of the JAK-STAT
signaling pathway has been associated with a number of diseases, including
myeloproliferative neoplasms, other hematological malignancies, rheumatoid
arthritis and other chronic inflammatory diseases.

We have discovered multiple potent, selective and orally bioavailable JAK inhibitors that are selective for JAK1 or JAK1 and JAK2. JAKAFI is the most advanced compound in our JAK program. It is an oral JAK1 and JAK2 inhibitor.

JAKAFI is marketed in the United States through our own specialty sales force
and commercial team. JAKAFI was the first FDA-approved JAK inhibitor for any
indication and was the first FDA-approved product in all three of its current
indications. JAKAFI remains the first-line standard of care in MF and remains
the only FDA-approved product for PV and steroid-refractory acute GVHD. The FDA
has granted JAKAFI orphan drug status for MF, PV, ET, acute lymphoblastic
leukemia (ALL) and GVHD.

To help ensure that all eligible patients have access to JAKAFI, we have
established a patient assistance program called IncyteCARES (CARES stands for
Connecting to Access, Reimbursement, Education and Support). IncyteCARES helps
ensure that any patient with intermediate or high-risk MF, uncontrolled PV or
steroid-refractory acute GVHD who meets certain eligibility criteria and is
prescribed JAKAFI has access to the product regardless of ability to pay and has
access to ongoing support and educational resources during treatment.

JAKAFI is distributed primarily through a network of specialty pharmacy providers and wholesalers that allow for efficient delivery of the medication by mail directly to patients or direct delivery to the patient's pharmacy. Our distribution process uses a model that is well-established and familiar to physicians who practice within the oncology field.

To further support appropriate use and future development of JAKAFI, our U.S.
Medical Affairs department is responsible for providing appropriate scientific
and medical education and information to physicians, preparing scientific
presentations and publications, and overseeing the process for supporting
investigator sponsored trials.

Myelofibrosis.  Myelofibrosis is a rare, life-threatening condition. MF,
considered the most serious of the myeloproliferative neoplasms, can occur
either as primary MF, or as secondary MF that develops in some patients who
previously had polycythemia vera or essential thrombocythemia. We estimate there
are between 16,000 and 18,500 patients with MF in the United States. Based on
the modern prognostic scoring systems referred to as International Prognostic
Scoring System and Dynamic International Prognostic Scoring System, we believe
intermediate and high-risk patients represent 80%  to 90%  of all patients with
MF in the United States and encompass patients over the age of 65, or patients
who have or have ever had any of the following: anemia, constitutional symptoms,
elevated white blood cell or blast counts, or platelet counts less than 100,000
per microliter of blood.

Most MF patients have enlarged spleens and many suffer from debilitating
symptoms, including abdominal discomfort, pruritus (itching), night sweats and
cachexia (involuntary weight loss). There were no FDA approved therapies for MF
until the approval of JAKAFI.

The FDA approval was based on results from two randomized Phase III trials
(COMFORT-I and COMFORT-II), which demonstrated that patients treated with JAKAFI
experienced significant reductions in splenomegaly (enlarged spleen). COMFORT-I
also demonstrated improvements in symptoms. The most common hematologic adverse
reactions in both trials were thrombocytopenia and anemia. These events rarely
led to discontinuation of JAKAFI treatment. The most common non-hematologic
adverse reactions were bruising, dizziness and headache.

In August 2014, the FDA approved supplemental labeling for JAKAFI to include
Kaplan-Meier overall survival curves as well as additional safety and dosing
information. The overall survival information is based on three-year data from
COMFORT-I and II, and shows that at three years the probability of survival for
patients treated with JAKAFI in COMFORT-I was 70% and for those patients
originally randomized to placebo it was 61%. In COMFORT-II, at three years the
probability of survival for patients treated with JAKAFI was 79% and for
patients originally randomized to best

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available therapy it was 59%. In December 2016, we announced an exploratory pooled analysis of data from the five-year follow-up of the COMFORT-I and COMFORT-II trials of patients treated with JAKAFI, which further supported previously published overall survival findings.

In September 2016, we announced that JAKAFI had been included as a recommended
treatment in the latest National Comprehensive Cancer Network (NCCN) Clinical
Practice Guidelines in Oncology for myelofibrosis, underscoring the important
and long-term clinical benefits seen in patients treated with JAKAFI.

In October 2017, the FDA approved updated labeling for JAKAFI to include the
addition of new patient-reported outcome (PRO) data from the COMFORT-I study, as
well as updating the warning related to progressive multifocal
leukoencephalopathy. An exploratory analysis of PRO data of patients with
myelofibrosis receiving JAKAFI showed improvement in fatigue-related symptoms at
Week 24. Fatigue response (defined as a reduction of 4.5 points or more from
baseline in the PROMIS® Fatigue total score) was reported in 35% of patients
treated with JAKAFI versus 14% of the patients treated with placebo.

Polycythemia Vera.  PV is a myeloproliferative neoplasm typically characterized
by elevated hematocrit, the volume percentage of red blood cells in whole blood,
which can lead to a thickening of the blood and an increased risk of blood
clots, as well as an elevated white blood cell and platelet count. When
phlebotomy can no longer control PV, chemotherapy such as hydroxyurea, or
interferon, is utilized. Approximately 25,000 patients with PV in the United
States are considered uncontrolled because they have an inadequate response to
or are intolerant of hydroxyurea, the most commonly used chemotherapeutic agent
for the treatment of PV.

In December 2014, the FDA approved JAKAFI for the treatment of patients with PV
who have had an inadequate response to or are intolerant of hydroxyurea. The
approval of JAKAFI for PV was based on data from the pivotal Phase III RESPONSE
trial. In this trial, patients treated with JAKAFI demonstrated superior
hematocrit control and reductions in spleen volume compared to best available
therapy. In addition, a greater proportion of patients treated with JAKAFI
achieved complete hematologic remission-which was defined as achieving
hematocrit control, and lowering platelet and white blood cell counts. In the
RESPONSE trial, the most common hematologic adverse reactions (incidence > 20%)
were thrombocytopenia and anemia. The most common non-hematologic adverse events
(incidence >10%) were headache, abdominal pain, diarrhea, dizziness, fatigue,
pruritus, dyspnea and muscle spasms.

In March 2016, the FDA approved supplemental labeling for JAKAFI to include
additional safety data as well as efficacy analyses from the RESPONSE trial to
assess the durability of response in JAKAFI treated patients after 80 weeks. At
this time, 83% patients were still on treatment, and 76% of the responders at 32
weeks maintained their response through 80 weeks.

In June 2016, we announced data from the Phase III RESPONSE-2 study of JAKAFI in
patients with inadequately controlled PV that was resistant to or intolerant of
hydroxyurea who did not have an enlarged spleen. These data showed that JAKAFI
was superior to best available therapy in maintaining hematocrit control (62.2%
vs. 18.7%, respectively; P<0.0001) without the need for phlebotomy.

In August 2017, we announced that JAKAFI had been included as a recommended treatment in the latest NCCN Guidelines for patients with polycythemia vera who have had an inadequate response to first-line therapies, such as hydroxyurea.

Graft-versus-host disease. GVHD is a condition that can occur after an
allogeneic HSCT (the transfer of genetically dissimilar stem cells or tissue).
In GVHD, the donated bone marrow or peripheral blood stem cells view the
recipient's body as foreign and attack various tissues. 12-month survival rates
in patients with Grade III or IV steroid-refractory acute GVHD are 50% or less,
and the incidence of steroid-refractory acute and chronic GVHD is approximately
3,000 per year in the United States.

In June 2016, we announced that the FDA granted Breakthrough Therapy designation
for ruxolitinib in patients with acute GVHD. In May 2019, the FDA approved
JAKAFI for the treatment of steroid-refractory acute GVHD in adult and pediatric
patients 12 years and older. The approval was based on data from REACH1, an

open-label, single-arm,

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multicenter study of JAKAFI in combination with corticosteroids in patients with
steroid-refractory grade II-IV acute GVHD. The overall response rate (ORR) in
patients refractory to steroids alone was 57% with a complete response (CR) rate
of 31%. The most frequently reported adverse reactions among all study
participants were infections (55%) and edema (51%), and the most common
laboratory abnormalities were anemia (75%), thrombocytopenia (75%) and
neutropenia (58%).

We have retained all development and commercialization rights to JAKAFI in the
United States and are eligible to receive development and sales milestones as
well as royalties from product sales outside the United States. We hold patents
that cover the composition of matter and use of ruxolitinib, which patents,
including applicable extensions, expire in late 2027.

Marketed Indications - ICLUSIG (ponatinib)

In June 2016, we acquired the European operations of ARIAD Pharmaceuticals, Inc.
(ARIAD) and obtained an exclusive license to develop and commercialize ICLUSIG
(ponatinib) in Europe and other select countries. ICLUSIG is a kinase inhibitor.
The primary target for ICLUSIG is BCR-ABL, an abnormal tyrosine kinase that is
expressed in chronic myeloid leukemia (CML) and Philadelphia-chromosome positive
acute lymphoblastic leukemia (Ph+ ALL).

In the European Union, ICLUSIG is approved for the treatment of adult patients
with chronic phase, accelerated phase or blast phase CML who are resistant to
dasatinib or nilotinib; who are intolerant to dasatinib or nilotinib and for
whom subsequent treatment with imatinib is not clinically appropriate; or who
have the T315I mutation, or the treatment of adult patients with Ph+ ALL who are
resistant to dasatinib; who are intolerant to dasatinib and for whom subsequent
treatment with imatinib is not clinically appropriate; or who have the T315I
mutation.

Marketed Indications - PEMAZYRE (pemigatinib)

In April 2020, we announced that the FDA approved PEMAZYRE (pemigatinib), a
selective fibroblast growth factor receptor (FGFR) inhibitor, for the treatment
of adults with previously treated, unresectable locally advanced or metastatic
cholangiocarcinoma with an FGFR2 fusion or other rearrangement as detected by an
FDA-approved test. PEMAZYRE is the first and only FDA-approved treatment for
this indication, which was approved under accelerated approval based on overall
response rate and duration of response (DOR).

Cholangiocarcinoma is a rare cancer that arises from the cells within the bile
ducts. It is often diagnosed late (stages III and IV) and the prognosis is poor.
The incidence of cholangiocarcinoma with FGFR2 fusions or rearrangements is
increasing, and it is currently estimated that there are 2,000-3,000 patients in
the U.S., Europe and Japan.

The approval of PEMAZYRE was based on data from FIGHT-202, a multi-center,
open-label, single-arm study evaluating PEMAZYRE as a treatment for adults with
cholangiocarcinoma. In FIGHT-202, and in patients harboring FGFR2 fusions or
rearrangements (Cohort A), PEMAZYRE monotherapy resulted in an overall response
rate of 36% (primary endpoint), and median DOR of 9.1 months (secondary
endpoint). Warnings and precautions included in the PEMAZYRE prescribing
information include potential for eye problems such as dry or inflamed eyes,
inflamed cornea, increased tears and a disorder of the retina; high levels of
phosphate in the blood; and, for women who are pregnant, a risk of harm to the
unborn baby or loss of pregnancy. FIGHT-302, a Phase III trial of pemigatinib
for the first-line treatment of patients with cholangiocarcinoma and FGFR2
fusions or rearrangements, is ongoing.

We have retained all rights to PEMAZYRE globally, other than those granted to
Innovent Biologics, Inc. to develop and commercialize pemigatinib in hematology
and oncology in mainland China, Hong Kong, Macau and Taiwan.

Marketed Indications - MONJUVI (tafasitamab)

In July 2020, we and our collaboration partner MorphoSys AG announced that the
FDA approved MONJUVI (tafasitamab-cxix), a CD19-directed cytolytic antibody that
is indicated in combination with lenalidomide for the treatment of adult
patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) not
otherwise specified, including

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DLBCL arising from low grade lymphoma, and who are not eligible for autologous
stem cell transplant (ASCT). MONJUVI was approved under accelerated approval
based on overall response rate.

DLBCL is the most common type of non-Hodgkin lymphoma in adults worldwide,
comprising 40% of all cases. DLBCL is characterized by rapidly growing masses of
malignant B-cells in the lymph nodes, spleen, liver, bone marrow or other
organs. It is an aggressive disease with 30-40% of patients not responding to
initial therapy or relapsing thereafter. We estimate that there are ~10.000
patients diagnosed in the U.S. each year with relapsed or refractory diffuse
large B-cell lymphoma (r/r DLBCL) who are not eligible for ASCT.

The approval of MONJUVI was based on data from the MorphoSys-sponsored Phase II
L-MIND study, an open label, multicenter, single arm trial of MONJUVI in
combination with lenalidomide as a treatment for adult patients with r/r DLBCL.
Results from the study showed an objective response rate (ORR) of 55% (39 out of
71 patients; primary endpoint) and a complete response (CR) rate of 37% (26 out
of 71 patients). The median duration of response (mDOR) was 21.7 months. The
most frequent serious adverse reactions were infections (26%), including
pneumonia (7%) and febrile neutropenia (6%).

In January 2020, we entered into a collaboration and licensing agreement with MorphoSys to further develop and commercialize MONJUVI globally. We will co-commercialize MONJUVI with MorphoSys in the United States, and we have exclusive commercialization rights outside the United States.

Clinical Programs in Oncology

We believe that the future of cancer treatment lies in the use of targeted therapies, which aim to block the effects of cancer-causing mutations, and immune therapies, which seek to recruit the patient's own immune system to tackle cancer. Our most advanced programs are detailed below.

JAK Inhibition

As part of our ongoing LIMBER (Leadership in MPNs BEyond Ruxolitinib) clinical
development initiative, which is designed to improve and expand therapeutic
options for patients with myeloproliferative neoplasms, we are evaluating
combinations of ruxolitinib with other therapeutic modalities, as well as
developing a once-a-day formulation of ruxolitinib for potential use as
monotherapy and combination therapy. Based on positive Phase II data, we are
preparing a pivotal trial program of ruxolitinib in combination with parsaclisib
(PI3K?) as both first-line therapy for MF patients and in MF patients with an
inadequate response to ruxolitinib monotherapy. Additional Phase II trials
combining ruxolitinib with investigational agents from our portfolio such as
INCB57643 (BET) and INCB00928 (ALK2) in patients with MF are in preparation.
Development of the combination of ruxolitinib and INCB53914 (PIM) has been
discontinued. There are currently no plans for the further development of
INCB53914.

As part of our development efforts to evaluate JAK inhibition in GVHD, the REACH
clinical program is evaluating ruxolitinib in patients with steroid-refractory
GVHD and includes REACH2, a Novartis-sponsored Phase III trial in
steroid-refractory acute GVHD, and REACH3, a Phase III trial in
steroid-refractory chronic GVHD that is co-sponsored by Incyte and Novartis.

In October 2019, we and Novartis announced that REACH2 met its primary endpoint
of superior ORR at Day 28 with ruxolitinib treatment compared to best available
therapy. No new safety signals were observed, and the ruxolitinib safety profile
in REACH2 was consistent with that seen in previously reported studies in
steroid-refractory acute GVHD. In April 2020, we and Novartis announced that
data from REACH2 were published in The New England Journal of Medicine.

In July 2020, we and Novartis announced that REACH3 met its primary endpoint of
superior ORR at Month 6 with ruxolitinib treatment compared to best available
therapy, as well as both key secondary endpoints, significantly improving
patient-reported symptoms and failure-free survival. No new safety signals were
observed, and the ruxolitinib safety profile in REACH3 was consistent with that
seen in previously reported studies in steroid-refractory chronic GVHD.

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A second JAK inhibitor in development is itacitinib, which is a selective JAK1
inhibitor. Itacitinib is being evaluated in GRAVITAS-309, a pivotal Phase III
trial of itacitinib in patients with steroid-naïve chronic GVHD. The FDA has
granted itacitinib orphan drug status for GVHD.

FGFR Inhibition

Pemigatinib is a potent and selective inhibitor of the fibroblast growth factor
receptor (FGFR) isoforms 1, 2 and 3 with demonstrated activity in preclinical
studies. The FGFR family of receptor tyrosine kinases can act as oncogenic
drivers in a number of liquid and solid tumor types.

We initiated the FIGHT clinical program to evaluate pemigatinib across a
spectrum of cancers that are driven by FGF/FGFR alterations. The program
initially included three Phase II trials - FIGHT-201 in patients with bladder
cancer, FIGHT-202 in patients with cholangiocarcinoma, and FIGHT-203 in patients
with 8p11 myeloproliferative syndrome (8p11 MPN). Based on data generated from
these ongoing trials, we have initiated additional trials, including FIGHT-205,
which is evaluating pemigatinib plus pembrolizumab versus pemigatinib alone
versus standard of care for metastatic or unresectable urothelial carcinoma in
cisplatin-ineligible patients whose tumors express FGFR3 mutation or
rearrangement, and FIGHT-207 which is a solid tumor-agnostic trial evaluating
pemigatinib in patients with driver-alterations of FGF/FGFR.

In April 2020, we announced the FDA approval of pemigatinib as PEMAZYRE for the
treatment of adults with previously treated, unresectable locally advanced or
metastatic cholangiocarcinoma with an FGFR2 fusion or other rearrangement as
detected by an FDA-approved test. Pemigatinib was previously granted
Breakthrough Therapy designation by the FDA as a treatment for patients with
previously treated, advanced/metastatic or unresectable FGFR2 translocated
cholangiocarcinoma and has Breakthrough Therapy designation as a treatment for
patients with myeloid/lymphoid neoplasms with FGFR1 rearrangement (8p11 MPN) who
have relapsed or are refractory to initial chemotherapy. In January 2020, we
announced that the Marketing Authorization Application (MAA) for pemigatinib as
a treatment of adults with locally advanced or metastatic cholangiocarcinoma
with an FGFR2 fusion or rearrangement that is relapsed or refractory after at
least one line of systemic therapy had been validated by the European Medicines
Agency (EMA).

CD19 antagonism

In January 2020, we and MorphoSys announced a collaboration and license
agreement to further develop and commercialize MorphoSys' proprietary anti-CD19
antibody tafasitamab (MOR208) globally. The agreement became effective March
2020. Tafasitamab is an Fc-engineered antibody against CD19 currently in
clinical development for the treatment of B cell malignancies. We have rights to
co-commercialize tafasitamab in the U.S. with MorphoSys, and we have exclusive
development and commercialization rights outside of the U.S.

Tafasitamab is being investigated as a therapeutic option in B cell malignancies
in a number of ongoing combination trials. An open-label Phase II combination
trial (L-MIND) is investigating the safety and efficacy of tafasitamab in
combination with lenalidomide in patients with relapsed or refractory diffuse
large B cell lymphoma (r/r DLBCL), and the ongoing Phase III B-MIND trial is
assessing the combination of tafasitamab and bendamustine versus rituximab and
bendamustine in r/r DLBCL. First-MIND is a Phase Ib safety trial of tafasitamab
as a first-line therapy for patients with DLBCL.

PI3K-delta Inhibition

The PI3K-delta pathway mediates oncogenic signaling in B cell malignancies.
Parsaclisib is a PI3K-delta inhibitor that has demonstrated potency and
selectivity in preclinical studies and has potential therapeutic utility in the
treatment of patients with lymphoma. We initiated the CITADEL clinical program
to evaluate parsaclisib in non-Hodgkin lymphomas, and we are currently running
Phase II trials in follicular lymphoma, marginal zone lymphoma and mantle cell
lymphoma.

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PD-1 Antagonism

In October 2017, we and MacroGenics, Inc. announced an exclusive global
collaboration and license agreement for MacroGenics' retifanlimab (formerly
INCMGA0012), an investigational monoclonal antibody that inhibits PD-1. Under
this collaboration, we obtained exclusive worldwide rights for the development
and commercialization of retifanlimab in all indications. The molecule is
currently being evaluated both as monotherapy and in combination therapy across
various tumor types. Potentially registration-enabling trials in squamous cell
carcinoma of the anal canal (SCAC), microsatellite instability-high (MSI-H)
endometrial cancer and Merkel cell carcinoma are ongoing.

Preparations are ongoing to initiate both the Phase III POD1UM-304 trial of
retifanlimab in combination with platinum-based chemotherapy as a first-line
treatment for patients with non-small cell lung cancer (NSCLC) and the Phase III
POD1UM-303 trial of retifanlimab in combination with platinum-based chemotherapy
as a first-line treatment for patients with SCAC.

Retifanlimab has been granted Fast Track designation for the treatment of
certain patients with advanced or metastatic MSI-H or DNA mismatch repair (dMMR)
endometrial cancer and for the treatment of certain patients with locally
advanced or metastatic SCAC. The FDA has granted orphan drug designation to
retifanlimab as a treatment for patients with locally advanced or metastatic
SCAC.

                  Indication and status
ruxolitinib       Steroid-refractory chronic GVHD: Phase III (REACH3)1 Primary
(JAK1/JAK2)       endpoint met
                  Refractory myelofibrosis: Phase III with parsaclisib (PI3K?)
                  in preparation; Phase II with INCB57643 (BET) in preparation
                  Myelofibrosis: Phase II with INCB00928 (ALK2) in preparation

Once-a-day        Myelofibrosis and polycythemia vera: clinical pharmacology
ruxolitinib       studies
(JAK1/JAK2)

itacitinib (JAK1) Treatment-naïve chronic GVHD: Phase III (GRAVITAS-309)

pemigatinib       Cholangiocarcinoma: Phase II (FIGHT-202), Phase III
(FGFR)            (FIGHT-302); MAA under review
                  Bladder cancer: Phase II (FIGHT-201, FIGHT-205)
                  8p11 MPN: Phase II (FIGHT-203)
                  Tumor agnostic: Phase II (FIGHT-207)

tafasitamab       r/r DLBCL: Phase II (L-MIND); Phase III (B-MIND); MAA under
(CD19)2           review
                  1L DLBCL: Phase Ib (First-MIND)

parsaclisib       Follicular lymphoma: Phase II (CITADEL-203)
(PI3K?)           Marginal zone lymphoma: Phase II (CITADEL-204)
                  Mantle cell lymphoma: Phase II (CITADEL-205)

retifanlimab      MSI-high endometrial cancer: Phase II (POD1UM-101)
(PD-1)3           Merkel cell carcinoma: Phase II (POD1UM-201)
                  SCAC: Phase II (POD1UM-202); Phase III (PODIUM-303) in
                  preparation
                  NSCLC: Phase III (POD1UM-304) in preparation

1. Clinical development of ruxolitinib in GVHD conducted in collaboration with Novartis.

2. Tafasitamab development in collaboration with MorphoSys.

3. Retifanlimab licensed from MacroGenics.

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Earlier-Stage Programs

We also have a number of other earlier-stage clinical programs, as detailed in
the table below. We intend to describe these programs more fully if we obtain
clinical proof-of-concept and establish that a program warrants further
development in a specific indication or group of indications. Based on emerging
data from the LSD1 inhibitor program, development of INCB59872 has been
discontinued.


Modality               Candidates
Small molecules        INCB01158 (ARG)1, INCB81776 (AXL/MER), epacadostat (IDO1),
                       INCB86550 (PD-L1)

Monoclonal antibodies2 INCAGN1876 (GITR), INCAGN2385 (LAG-3), INCAGN1949 (OX40),

                       INCAGN2390 (TIM-3)

Bispecific antibodies MCLA-145 (PD-L1xCD137)3

1. INCB01158 development in collaboration with Calithera Biosciences, Inc.

2. Discovery collaboration with Agenus Inc.

3. MCLA-145 development in collaboration with Merus N.V.

Clinical Programs outside Oncology

Ruxolitinib cream

Atopic dermatitis. Atopic dermatitis is a skin disorder that causes the skin to
become red, scaly, and itchy. Onset can occur at any age, but is more common in
infants and children. In the United States, we estimate that there are
approximately 10 million diagnosed and treated adolescent and adult patients
with mild to moderate atopic dermatitis.

In April 2020, safety and efficacy data from the two Phase III trials in the
TRuE-AD program evaluating ruxolitinib cream in mild-to-moderate atopic
dermatitis were presented at the Revolutionizing Atopic Dermatitis (RAD) virtual
symposium; both trials met their primary endpoints. The 44-week long-term safety
and efficacy portion of both the TRuE-AD1 and TRuE-AD2 trials are ongoing.

Vitiligo. Vitiligo is a long-term skin condition characterized by patches of the
skin losing their pigment. It is estimated that vitiligo affects 0.5-2% of the
US population and, therefore, there are at least 1.5 million patients in the
United States with this disorder. There are no FDA approved treatments for
repigmentation of vitiligo lesions.

In June 2019, primary endpoint data after 6 months of therapy from the Phase II
trial of ruxolitinib cream in patients with vitiligo showed a significant
benefit over vehicle control, and a global, pivotal Phase III program was
initiated in September 2019. In October 2019, updated data from the Phase II
trial showed, after 12 months of therapy, additional improvement in the
repigmentation of vitiligo lesions.

Other

A Phase II trial of INCB54707, a JAK1 selective inhibitor, is ongoing in
patients with hidradenitis suppurativa, an inflammatory skin disease. A Phase II
trial of parsaclisib in patients with autoimmune hemolytic anemia (AIHA), a rare
red blood cell disorder, is also ongoing. The FDA has granted orphan drug
designation to parsaclisib as a treatment for patients with AIHA.

A Phase II trial of INCB00928 is in preparation for patients with fibrodysplasia
ossificans progressiva (FOP), a disorder in which muscle tissue and connective
tissue are gradually replaced by bone. The FDA has granted Fast Track
designation and orphan drug designation to INCB00928 as a treatment for patients
with FOP.



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                    Indication and status
ruxolitinib cream1  Atopic dermatitis: Phase III (TRuE-AD1, TRuE-AD2; primary
(JAK1/JAK2)         endpoints met)
                    Vitiligo: Phase III (TRuE-V1, TRuE-V2)
INCB54707 (JAK1)    Hidradenitis suppurativa: Phase II

parsaclisib (PI3K?) Autoimmune hemolytic anemia: Phase II INCB00928 (ALK2) Fibrodysplasia ossificans progressiva: Phase II in

                    preparation

1. Novartis' rights for ruxolitinib outside of the United States under our Collaboration and License Agreement with Novartis do not include topical administration.

Partnered Programs



Baricitinib

We have a second JAK1 and JAK2 inhibitor, baricitinib, which is subject to our
collaboration agreement with Lilly, in which Lilly received exclusive worldwide
development and commercialization rights to the compound for inflammatory and
autoimmune diseases. The Phase III program of baricitinib in patients with
rheumatoid arthritis incorporated all three rheumatoid arthritis populations
(methotrexate naïve, biologic naïve, and tumor necrosis factor (TNF) inhibitor
inadequate responders); used event rates to fully power the baricitinib program
for structural comparison and non-inferiority vs. adalimumab; and evaluated
patient-reported outcomes. All four Phase III trials met their respective
primary endpoints.



In January 2016, Lilly submitted an NDA to the FDA and an MAA to the EMA for
baricitinib as treatment for rheumatoid arthritis. In February 2017, we and
Lilly announced that the European Commission approved baricitinib as OLUMIANT
for the treatment of moderate-to-severe rheumatoid arthritis in adult patients
who have responded inadequately to, or who are intolerant to, one or more
disease-modifying antirheumatic drugs (DMARDs). In July 2017, the Japanese
Ministry of Health, Labour and Welfare (MHLW) granted marketing approval for
OLUMIANT for the treatment of rheumatoid arthritis (including the prevention of
structural injury of joints) in patients with inadequate response to
standard-of-care therapies. In June 2018, the FDA approved the 2mg dose of
OLUMIANT for the treatment of adults with moderately-to-severely active
rheumatoid arthritis (RA) who have had an inadequate response to one or more
tumor necrosis factor (TNF) inhibitor therapies.

Rheumatoid Arthritis.  Rheumatoid arthritis is an autoimmune disease
characterized by aberrant or abnormal immune mechanisms that lead to joint
inflammation and swelling and, in some patients, the progressive destruction of
joints. Rheumatoid arthritis can also affect connective tissue in the skin and
organs of the body.

Current rheumatoid arthritis treatments include the use of non-steroidal
anti-inflammatory drugs, disease-modifying anti-rheumatic drugs, such as
methotrexate, and the newer biological response modifiers that target
pro-inflammatory cytokines, such as tumor necrosis factor, implicated in the
pathogenesis of rheumatoid arthritis. None of these approaches to treatment is
curative; therefore, there remains an unmet need for new safe and effective
treatment options for these patients. Rheumatoid arthritis is estimated to
affect about 1% of the world's population.

Atopic Dermatitis. Atopic dermatitis (AtD) is a condition that makes the skin
red and itchy and which is common in children but can occur at any age. Atopic
dermatitis is long lasting and tends to flare periodically and then subside.
Lilly has conducted a Phase IIa trial and a Phase III program to evaluate the
safety and efficacy of baricitinib in patients with moderate-to-severe atopic
dermatitis. The JAK-STAT pathway has been shown to play an essential role in the
dysregulation of immune responses in atopic dermatitis. Therefore, we believe
that inhibiting cytokine pathways dependent on JAK1 and JAK2 may lead to
positive clinical outcomes in atopic dermatitis.

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In February 2019, we and Lilly announced that baricitinib met the primary
endpoint in BREEZE-AD1 and BREEZE-AD2, two Phase III studies evaluating the
efficacy and safety of baricitinib monotherapy for the treatment of adult
patients with moderate to severe AtD and, in August 2019, we and Lilly announced
that baricitinib met the primary endpoint in BREEZE-AD7, a Phase III study
evaluating the efficacy and safety of baricitinib in combination with
standard-of-care topical corticosteroids in patients with moderate to severe
AtD. In January 2020, we and Lilly announced that baricitinib met the primary
endpoint in both BREEZE-AD4 and BREEZE-AD5, the results of which complete the
placebo-controlled data program intended to support global registrations. In
January 2020, Lilly announced that baricitinib had been submitted for regulatory
review in Europe as a treatment for patients with moderate to severe AtD.

Systemic Lupus Erythematosus. Systemic lupus erythematosus (SLE) is a chronic
disease that causes inflammation. In addition to affecting the skin and joints,
it can affect other organs in the body such as the kidneys, the tissue lining
the lungs and heart, and the brain. Lilly has conducted a Phase II trial to
evaluate the safety and efficacy of baricitinib in patients with SLE.
Baricitinib's activity profile suggests that it inhibits cytokines implicated in
SLE such as type I interferon (IFN), type II IFN-?, IL-6, and IL-23 as well as
other cytokines that may have a role in SLE, including granulocyte macrophage
colony stimulating factor (GM-CSF) and IL-12. The potential impact of
baricitinib on the IFN pathway is highly relevant to SLE, as clinical and
preclinical studies have established that this pathway is involved in the
pathogenesis of SLE. Lilly is currently running a Phase III trial of baricitinib
in patients with SLE.

Alopecia Areata. Alopecia areata is an autoimmune disorder in which the immune
system attacks the hair follicles, causing hair loss in patches. In March 2020,
Lilly announced that baricitinib received Breakthrough Therapy designation for
the treatment of alopecia areata, based on the positive Phase II results of
Lilly's adaptive Phase II/III study BRAVE-AA1. The Phase III portion of
BRAVE-AA1 is ongoing.

Capmatinib

Capmatinib is a potent and highly selective MET inhibitor. The investigational
compound has demonstrated inhibitory activity in cell-based biochemical and
functional assays that measure MET signaling and MET dependent cell
proliferation, survival and migration. Under our agreement, Novartis received
worldwide exclusive development and commercialization rights to capmatinib and
certain back-up compounds in all indications. Capmatinib is being evaluated in
patients with hepatocellular carcinoma, non-small cell lung cancer and other
solid tumors, and may have potential utility as a combination agent.

MET is a clinically validated receptor kinase cancer target. Abnormal MET
activation in cancer correlates with poor prognosis. Dysregulation of the MET
pathway triggers tumor growth, formation of new blood vessels that supply the
tumor with nutrients, and causes cancer to spread to other organs. Dysregulation
of the MET pathway is seen in many types of cancers, including lung, kidney,
liver, stomach, breast and brain.

In May 2020, we and Novartis announced the FDA approval of capmatinib as
TABRECTA for the treatment of adult patients with metastatic NSCLC whose tumors
have a mutation that leads to MET exon 14 skipping (METex14) as detected by an
FDA-approved test. TABRECTA is the first and only treatment approved to
specifically target NSCLC with this driver mutation and is approved for
first-line and previously treated patients regardless of prior treatment type.

The FDA approval of TABRECTA was based on results from the pivotal GEOMETRY
mono-1 study. In the METex14 population (n=97), the confirmed overall response
rate was 68% and 41% among treatment-naive (n=28) and previously treated
patients (n=69), respectively, based on the Blinded Independent Review Committee
(BIRC) assessment per RECIST v1.1. In patients taking TABRECTA, the study also
demonstrated a median duration of response of 12.6 months in treatment-naive
patients (19 responders) and 9.7 months in previously treated patients (28
responders). The most common treatment-related adverse events (AEs) (incidence
?20%) are peripheral edema, nausea, fatigue, vomiting, dyspnea, and decreased
appetite.

In June 2020, we and Novartis announced that the MHLW approved TABRECTA for METex14 mutation-positive advanced and/or recurrent unresectable NSCLC.

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NSCLC is the most common type of lung cancer, impacting more than 2 million
people per year globally. Approximately 3-4 percent of all patients with NSCLC
have tumors with a mutation that leads to MET exon 14 skipping. Though rare,
this mutation is an indicator of especially poor prognosis and poor responses to
standard therapies, including immunotherapy.

                Indication and status
baricitinib     Atopic dermatitis: Phase III (BREEZE-AD)
(JAK1/JAK2)1    Systemic lupus erythematosus: Phase III
                Severe alopecia areata: Phase III (BRAVE-AA1)

capmatinib      NSCLC (with MET exon 14 skipping mutations): FDA and MHLW approved
(MET)2

1. Baricitinib licensed to Lilly

2. Capmatinib licensed to Novartis

License Agreements and Business Relationships

We establish business relationships, including collaborative arrangements with
other companies and medical research institutions to assist in the clinical
development and/or commercialization of certain of our drugs and drug candidates
and to provide support for our research programs. We also evaluate opportunities
for acquiring products or rights to products and technologies that are
complementary to our business from other companies and medical research
institutions.

Below is a brief description of our significant business relationships and collaborations and related license agreements that expand our pipeline and provide us with certain rights to existing and potential new products and technologies.

Novartis

In November 2009, we entered into a Collaboration and License Agreement with
Novartis. Under the terms of the agreement, Novartis received exclusive
development and commercialization rights outside of the United States to
ruxolitinib and certain back-up compounds for hematologic and oncology
indications, including all hematological malignancies, solid tumors and
myeloproliferative diseases. We retained exclusive development and
commercialization rights to JAKAFI (ruxolitinib) in the United States and in
certain other indications. Novartis also received worldwide exclusive
development and commercialization rights to our MET inhibitor compound
capmatinib and certain back-up compounds in all indications. We retained options
to co-develop and to co-promote capmatinib in the United States.

Under this agreement, we received an upfront payment and immediate milestone
payment totaling $210.0 million and were initially eligible to receive
additional payments of up to approximately $1.2 billion if defined development,
regulatory and sales milestones are achieved. We are also eligible to receive
tiered, double-digit royalties ranging from the upper-teens to the mid-twenties
percent on future ruxolitinib net sales outside of the United States, and
tiered, worldwide royalties on future capmatinib net sales that range from 12%
to 14%. In addition, Novartis has received reimbursement and pricing approval
for ruxolitinib in a specified number of countries, and we are now obligated to
pay to Novartis tiered royalties in the low single-digits on future ruxolitinib
net sales within the United States. Each company is responsible for costs
relating to the development and commercialization of ruxolitinib in its
respective territories, with costs of collaborative studies shared equally.
Novartis is also responsible for all costs relating to the development and
commercialization of capmatinib.

In April 2016, we amended this agreement to provide that Novartis has exclusive
research, development and commercialization rights outside of the United States
to ruxolitinib (excluding topical formulations) in the GVHD field. Under this
amendment, we received a $5.0 million payment in exchange for the development
and commercialization rights to ruxolitinib in GVHD outside of the United States
and became eligible to receive up to $75.0 million of additional potential
development and regulatory milestones relating to GVHD.

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In May 2020, we recognized a $25.0 million development milestone and a $45.0
million regulatory milestone for the FDA approval of capmatinib as TABRECTA. In
June 2020, we recognized a $20.0 million regulatory milestone for the MHLW
approval of TABRECTA. Exclusive of the upfront payment of $150.0 million
received in 2009 and the immediate milestone of $60.0 million earned in 2010, we
have recognized and received, in the aggregate, $157.0 million for the
achievement of development milestones, $280.0 million for the achievement of
regulatory milestones and $120.0 million for the achievement of sales milestones
through June 30, 2020.

The Novartis agreement will continue on a program-by-program basis until
Novartis has no royalty payment obligations with respect to such program or, if
earlier, the termination of the agreement or any program in accordance with the
terms of the agreement. Royalties are payable by Novartis on a
product-by-product and country-by-country basis until the latest to occur of
(i) the expiration of the last valid claim of the licensed patent rights
covering the licensed product in the relevant country, (ii) the expiration of
regulatory exclusivity for the licensed product in such country and (iii) a
specified period from first commercial sale in such country of the licensed
product by Novartis or its affiliates or sublicensees. The agreement may be
terminated in its entirety or on a program-by-program basis by Novartis for
convenience. The agreement may also be terminated by either party under certain
other circumstances, including material breach.

Lilly

In December 2009, we entered into a License, Development and Commercialization
Agreement with Lilly. Under the terms of the agreement, Lilly received exclusive
worldwide development and commercialization rights to baricitinib and certain
back-up compounds for inflammatory and autoimmune diseases. We received an
initial payment of $90.0 million, and were initially eligible to receive
additional payments of up to $665.0 million based on the achievement of defined
development, regulatory and sales milestones.

We retained options to co-develop our JAK1/JAK2 inhibitors with Lilly on a
compound-by-compound and indication-by-indication basis. Lilly is responsible
for all costs relating to the development and commercialization of the compounds
unless we elect to co-develop any compounds or indications. If we elect to
co-develop any compounds and/or indications, we would be responsible for funding
30% of the associated future global development costs from the initiation of a
Phase IIb trial through regulatory approval, including post-launch studies
required by a regulatory authority. We would receive an incremental royalty rate
increase across all tiers resulting in effective royalty rates ranging up to the
high twenties on potential future global net sales for compounds and/or
indications that we elect to co-develop.  For indications that we elect not to
co-develop, we would receive tiered, double-digit royalty payments on future
global net sales with rates ranging up to 20% if the product is successfully
commercialized. If we have started co-development funding for any indication, we
can at any time opt out and stop future co-development cost sharing. If we elect
to do this, we would still be eligible for our base royalties plus an
incremental pro-rated royalty commensurate with our contribution to the total
co-development cost for those indications for which we co-funded.  We previously
had retained an option to co-promote products in the United States but, in March
2016, we waived our co-promotion option as part of an amendment to the
agreement.

In July 2010, we elected to co-develop baricitinib with Lilly in rheumatoid
arthritis, and subsequently in several additional indications, and became
responsible for funding 30% of the associated global development costs for such
indications from the initiation of the Phase IIb trial through regulatory
approval, including post-launch studies required by a regulatory authority. In
April 2019, we elected to end additional co-funding of the development of
baricitinib in all indications, effective as of January 1, 2019. Pursuant to the
terms of the Lilly agreement, we will continue to receive base tiered royalties
on global net sales of OLUMIANT in all indications, as well as pro-rated
incremental royalties, as described above.

In March 2016, we entered into an amendment to the agreement with Lilly that
allows us to engage in the development and commercialization of ruxolitinib in
the GVHD field. Upon execution of the amendment, we paid Lilly an upfront
payment of $35.0 million and Lilly is eligible to receive up to $40.0 million in
regulatory milestone payments relating to ruxolitinib in the GVHD field.  In May
2019, the approval of JAKAFI in steroid-refractory acute GVHD triggered a $20.0
million milestone payment to Lilly.

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In May 2020, we amended our agreement with Lilly to enable Lilly to
commercialize baricitinib for the treatment of COVID-19.  In addition to the
royalties described above, we will be entitled to receive additional royalty
payments with rates in the low teens on global net sales of baricitinib for the
treatment of COVID-19 that exceed a specified aggregate global net sales
threshold.

Exclusive of the upfront payment of $90.0 million received in 2009, we have recognized and received, in the aggregate, $149.0 million for the achievement of development milestones and $235.0 million for the achievement of regulatory milestones through June 30, 2020.

The Lilly agreement will continue until Lilly no longer has any royalty payment
obligations or, if earlier, the termination of the agreement in accordance with
its terms. Royalties are payable by Lilly on a product-by-product and
country-by-country basis until the latest to occur of (i) the expiration of the
last valid claim of the licensed patent rights covering the licensed product in
the relevant country, (ii) the expiration of regulatory exclusivity for the
licensed product in such country and (iii) a specified period from first
commercial sale in such country of the licensed product by Lilly or its
affiliates or sublicensees. The agreement may be terminated by Lilly for
convenience, and may also be terminated under certain other circumstances,
including material breach.

Agenus

In January 2015, we entered into a License, Development and Commercialization
Agreement with Agenus Inc. and its wholly-owned subsidiary, 4-Antibody AG (now
known as Agenus Switzerland Inc.), which we collectively refer to as Agenus.
Under this agreement, the parties have agreed to collaborate on the discovery of
novel immuno-therapeutics using Agenus' antibody discovery platforms. In
February 2017, we and Agenus amended this agreement.

Under the terms of this agreement, as amended, we received exclusive worldwide
development and commercialization rights to four checkpoint modulators directed
against GITR, OX40, LAG-3 and TIM-3. In addition to the initial four program
targets, we and Agenus have the option to jointly nominate and pursue additional
targets within the framework of the collaboration, and in November 2015, three
more targets were added. Targets may be designated profit-share programs, where
all costs and profits are shared equally by us and Agenus, or royalty-bearing
programs, where we are responsible for all costs associated with discovery,
preclinical, clinical development and commercialization activities. The programs
relating to GITR and OX40 and two of the undisclosed targets were profit-share
programs until February 2017, while the other targets currently under
collaboration are royalty-bearing programs.  The February 2017 amendment
converted the programs relating to GITR and OX40 to royalty-bearing programs and
removed from the collaboration the profit-share programs relating to the two
undisclosed targets, with one reverting to us and one reverting to Agenus.
 Should any of those removed programs be successfully developed by a party, the
other party will be eligible to receive the same milestone payments as the
royalty-bearing programs and royalties at a 15% rate on global net sales.  There
are currently no profit-share programs.  For each royalty-bearing product other
than GITR and OX40, Agenus will be eligible to receive tiered royalties on
global net sales ranging from 6% to 12%.  For GITR and OX40, Agenus will be
eligible to receive 15% royalties on global net sales. Under the February 2017
amendment, we paid Agenus $20.0 million in accelerated milestones relating to
the clinical development of the GITR and OX40 programs.  Agenus was initially
eligible to receive up to an additional $510.0 million in future contingent
development, regulatory and commercialization milestones across all programs in
the collaboration.  As of June 30, 2020, we have paid Agenus an aggregate of
$10.0 million in development milestones. The agreement may be terminated by us
for convenience upon 12 months' notice and may also be terminated under certain
other circumstances, including material breach.

Takeda (ARIAD)

In June 2016, we acquired from ARIAD Pharmaceuticals, Inc. all of the
outstanding shares of ARIAD Pharmaceuticals (Luxembourg) S.à.r.l., the parent
company of ARIAD's European subsidiaries responsible for the development and
commercialization of ICLUSIG in the European Union and other countries.  We
obtained an exclusive license to develop and commercialize ICLUSIG in Europe and
other select countries. ARIAD was subsequently acquired by Takeda Pharmaceutical
Company Limited in 2017.  As such, Takeda will be eligible to receive from us
tiered royalties on net sales of ICLUSIG in our territory and up to $135.0
million in potential future oncology development and regulatory

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approval milestone payments, together with additional milestone payments for non-oncology indications, if approved, in our territory.

Merus

In December 2016, we entered into a Collaboration and License Agreement with
Merus N.V. Under this agreement, which became effective in January 2017, the
parties have agreed to collaborate with respect to the research, discovery and
development of bispecific antibodies utilizing Merus' technology platform.  The
collaboration encompasses up to eleven independent programs.

The most advanced collaboration program is MCLA-145, a bispecific antibody
targeting PD-L1 and CD137, for which we received exclusive development and
commercialization rights outside of the United States. Merus retained exclusive
development and commercialization rights in the United States to MCLA-145.  Each
party will share equally the costs of mutually agreed global development
activities for MCLA-145, and fund itself any independent development activities
in its territory.  Merus will be responsible for commercializing MCLA-145 in the
United States and we will be responsible for commercializing it outside of the
United States.

In addition to receiving rights to MCLA-145 outside of the United States, we
received worldwide exclusive development and commercialization rights to up to
ten additional programs.  Of these ten additional programs, Merus retained the
option, subject to certain conditions, to co-fund development of up to two such
programs.  If Merus exercises its co-funding option for a program, Merus would
be responsible for funding 35% of the associated future global development costs
and, for certain of such programs, would be responsible for reimbursing us for
certain development costs incurred prior to the option exercise.  Merus will
also have the right to participate in a specified proportion of detailing
activities in the United States for one of those co-developed programs. All
costs related to the co-funded collaboration programs are subject to joint
research and development plans and overseen by a joint development committee,
but we will have final determination as to such plans in cases of dispute.  We
will be responsible for all research, development and commercialization costs
relating to all other programs.

In February 2017, we paid Merus an upfront non-refundable payment of $120.0
million. For each program as to which Merus does not have commercialization or
development co-funding rights, Merus will be eligible to receive up to $100.0
million in future contingent development and regulatory milestones, and up to
$250.0 million in commercialization milestones as well as tiered royalties
ranging from 6% to 10% of global net sales.  For each program as to which Merus
exercises its option to co-fund development, Merus will be eligible to receive a
50% share of profits (or sustain 50% of any losses) in the United States and be
eligible to receive tiered royalties ranging from 6% to 10% of net sales of
products outside of the United States.  If Merus opts to cease co-funding a
program as to which it exercised its co-development option, then Merus will no
longer receive a share of profits in the United States but will be eligible to
receive the same milestones from the co-funding termination date and the same
tiered royalties described above with respect to programs where Merus does not
have a right to co-fund development and, depending on the stage at which Merus
chose to cease co-funding development costs, Merus will be eligible to receive
additional royalties ranging up to 4% of net sales in the United States.  For
MCLA-145, we and Merus will each be eligible to receive tiered royalties on net
sales in the other party's territory at rates ranging from 6% to 10%.

The Merus agreement will continue on a program-by-program basis until we have no
royalty payment obligations with respect to such program or, if earlier, the
termination of the agreement or any program in accordance with the terms of the
agreement.  The agreement may be terminated in its entirety or on a
program-by-program basis by us for convenience.  The agreement may also be
terminated by either party under certain other circumstances, including material
breach, as set forth in the agreement.  If the agreement is terminated with
respect to one or more programs, all rights in the terminated programs revert to
Merus, subject to payment to us of a reverse royalty of up to 4% on sales of
future products, if Merus elects to pursue development and commercialization of
products arising from the terminated programs.

Calithera

In January 2017, we entered into a Collaboration and License Agreement with Calithera Biosciences, Inc. Under this agreement, we received an exclusive, worldwide license to develop and commercialize small molecule arginase

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inhibitors, including INCB01158 (CB-1158), which is currently in Phase I
clinical trials, for hematology and oncology indications. We have agreed to
co-fund 70% of the global development costs for the development of the licensed
products for hematology and oncology indications. Calithera will have the right
to conduct certain clinical development under the collaboration, including
combination studies of a licensed product with a proprietary compound of
Calithera. We will be entitled to 60% of the profits and losses from net sales
of licensed product in the United States, and Calithera will have the right to
co-detail licensed products in the United States, and we have agreed to pay
Calithera tiered royalties ranging from the low to mid-double digits on net
sales of licensed products outside the United States. Calithera may opt out of
its co-funding obligation, in which case the U.S. profit sharing will no longer
be in effect, and we have agreed to pay Calithera tiered royalties ranging from
the low to mid-double digits on net sales of licensed products both in the
United States and outside the United States, and additional royalties to
reimburse Calithera for previously incurred development costs.

Calithera retains rights to certain arginase inhibitors that are not part of the
collaboration for specific orphan indications outside of hematology and
oncology, subject to our rights to negotiate a license for any such programs
under specified circumstances if Calithera elects to out-license them.

In January 2017, we paid Calithera an upfront license fee of $45.0 million and have agreed to pay potential development, regulatory and sales milestone payments of over $430.0 million if the profit share is in effect, or $750.0 million if the profit share terminates.

The Calithera agreement will continue on a product-by-product and
country-by-country basis for so long as we are developing or commercializing
products in the United States (if the parties are sharing profits in the United
States) and until we have no further royalty payment obligations, unless earlier
terminated according to the terms of the agreement. The agreement may be
terminated in its entirety or on a product-by-product and/or a
country-by-country basis by us for convenience. The agreement may also be
terminated by us for Calithera's uncured material breach, by Calithera for our
uncured material breach and by either party for bankruptcy or patent challenge.
If the agreement is terminated early with respect to one or more products or
countries, all rights in the terminated products and countries revert to
Calithera.

MacroGenics

In October 2017, we entered into a Global Collaboration and License Agreement
with MacroGenics. Under this agreement, we received exclusive development and
commercialization rights worldwide to MacroGenics' INCMGA0012, an
investigational monoclonal antibody that inhibits PD-1. Except as set forth in
the succeeding sentence, we will have sole authority over and bear all costs and
expenses in connection with the development and commercialization of INCMGA0012
in all indications, whether as a monotherapy or as part of a combination
regimen.  MacroGenics has retained the right to develop and commercialize, at
its cost and expense, its pipeline assets in combination with INCMGA0012.  In
addition, MacroGenics has the right to manufacture a portion of both companies'
global clinical and commercial supply needs of INCMGA0012.  As of June 30, 2020,
we have paid MacroGenics an upfront payment of $150.0 million and milestones
totaling $15.0 million.  MacroGenics will be eligible to receive up to an
additional $405.0 million in future contingent development and regulatory
milestones, and up to $330.0 million in commercial milestones as well as tiered
royalties ranging from 15% to 24% of global net sales.

The MacroGenics agreement will continue until we are no longer commercializing,
developing or manufacturing INCMGA0012 or, if earlier, the termination of the
agreement in accordance with its terms.  The agreement may be terminated in its
entirety or on a licensed product by licensed product basis by us for
convenience.  The agreement may also be terminated by either party under certain
other circumstances, including material breach, as set forth in the agreement.

Syros

In January 2018, we entered into a target discovery, research collaboration and
option agreement with Syros Pharmaceuticals, Inc. Under this agreement, Syros
will use its proprietary gene control platform to identify novel therapeutic
targets with a focus in myeloproliferative neoplasms and we have received
options to obtain exclusive worldwide rights to intellectual property resulting
from the collaboration for up to seven validated targets.  We will have
exclusive worldwide rights to develop and commercialize any therapies under the
collaboration that modulate those

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validated targets.  We paid Syros $2.5 million in cash for access to proprietary
technology and $7.5 million in cash for research and development services. We
have agreed to pay Syros up to $54.0 million in target selection and option
exercise fees should we decide to exercise all of our options under the
agreement. For products resulting from the collaboration against each of the
seven selected and validated targets, we have agreed to pay up to $50.0 million
in potential development and regulatory milestones and up to $65.0 million in
potential sales milestones. Syros is also eligible to receive low single-digit
royalties on net sales of products resulting from the collaboration.

Innovent

In December 2018, we entered into a research collaboration and licensing
agreement with Innovent Biologics, Inc. Under the terms of this agreement,
Innovent received exclusive development and commercialization rights to
pemigatinib and our clinical-stage product candidates itacitinib and parsaclisib
in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan. In
January 2019, we recognized an upfront payment under this agreement of $40.0
million upon our transfer of the intellectual property related to the
clinical-stage product candidates to Innovent. In addition, we were initially
eligible to receive $20.0 million in connection with the first related IND
filing in China, up to an additional $129.0 million in potential development and
regulatory milestones, and up to $202.5 million in potential sales milestones.
We are also eligible to receive tiered royalties from the high-teens to the
low-twenties on future sales of products resulting from the collaboration. We
retain an option to assist in the promotion of the three product candidates in
the Innovent territories. In June 2019, we recognized the $20.0 million
milestone for the first related IND filing in China. In April 2020, we
recognized a $5.0 million milestone for the FDA approval of pemigatinib as
PEMAZYRE.

Zai Lab

In July 2019, we entered into a collaboration and license agreement with a
subsidiary of Zai Lab Limited. Under the terms of this agreement, Zai Lab
received development and exclusive commercialization rights to INCMGA0012 in
hematology and oncology in mainland China, Hong Kong, Macau and Taiwan. We
recognized an upfront payment under this agreement of $17.5 million in August
2019 upon our transfer of technology related to the licensed product candidate
to Zai Lab, and are eligible to receive an additional $60.0 million in potential
development, regulatory and sales milestones, as well as tiered royalties from
the low to mid-twenties. We also retain an option to assist in the promotion of
INCMGA0012 in Zai Lab's licensed territories.

MorphoSys

In January 2020, we entered into a Collaboration and License Agreement with
MorphoSys AG and MorphoSys US Inc., a wholly-owned subsidiary of MorphoSys AG,
covering the worldwide development and commercialization of MOR208
(tafasitamab), an investigational Fc engineered monoclonal antibody directed
against the target molecule CD19 that is currently in clinical development by
MorphoSys. MorphoSys has exclusive worldwide development and commercialization
rights to tafasitamab under a June 2010 collaboration and license agreement with
Xencor, Inc. The agreement became effective in March 2020 after clearance by the
German and Austrian antitrust authorities and expiration of the waiting period
under the Hart-Scott Rodino Antitrust Improvements Act of 1976.

Under the terms of the agreement, we received exclusive commercialization rights
outside of the United States, and MorphoSys and we have co-commercialization
rights in the United States, with respect to tafasitamab.  MorphoSys is
responsible for leading the commercialization strategy and booking all revenue
from sales of tafasitamab in the United States, and we and MorphoSys are both
responsible for commercialization efforts in the United States and will share
equally the profits and losses from the co-commercialization efforts. We will
lead the commercialization strategy outside of the United States, and will be
responsible for commercialization efforts and book all revenue from sales of
tafasitamab outside of the United States, subject to our royalty payment
obligations set forth below. We and MorphoSys have agreed to co-develop
tafasitamab and to share development costs associated with global and
U.S.-specific clinical trials, with Incyte responsible for 55% of such costs and
MorphoSys responsible for 45% of such costs.  Each company is responsible for
funding any independent development activities, and we are responsible for
funding development activities specific to territories outside of the United
States. All development costs related to the collaboration are subject to a

joint development plan.

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In March 2020, we paid MorphoSys an upfront non-refundable payment of $750.0
million. MorphoSys is eligible to receive up to $740.0 million in future
contingent development and regulatory milestones and up to $315.0 million in
commercialization milestones as well as tiered royalties ranging from the
mid-teens to mid-twenties of net sales outside of the United States.  MorphoSys'
right to receive royalties in any particular country will expire upon the last
to occur of (a) the expiration of patent rights in that particular country, (b)
a specified period of time after the first post-marketing authorization sale of
a licensed product comprising tafasitamab in that country, and (c) the
expiration of any regulatory exclusivity for that licensed product in that
country.

Critical Accounting Policies and Significant Estimates

The preparation of financial statements requires us to make estimates,
assumptions and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates. We base our
estimates on historical experience and various other assumptions that we believe
to be reasonable under the circumstances, the results of which form our basis
for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from
those estimates under different assumptions or conditions. We believe the
following critical accounting policies reflect the more significant judgments
and estimates used in the preparation of our condensed consolidated financial
statements. See Note 2 of Notes to the Condensed Consolidated Financial
Statements for a complete list of our significant accounting policies.

Revenue Recognition. We recognize revenue only when we have satisfied a
performance obligation through transferring control of the promised good or
service to a customer. Control, in this instance, may mean the ability to
prevent other entities from directing the use of, and receiving benefit from, a
good or service. The standard indicates that an entity must determine at
contract inception whether it will transfer control of a promised good or
service over time or satisfy the performance obligation at a point in time
through analysis of the following criteria: (i) the entity has a present right
to payment, (ii) the customer has legal title, (iii) the customer has physical
possession, (iv) the customer has the significant risks and rewards of ownership
and (v) the customer has accepted the asset. We assess collectability based
primarily on the customer's payment history and on the creditworthiness of

the
customer.

Product Revenues

Our product revenues consist of U.S. sales of JAKAFI and PEMAZYRE and European
sales of ICLUSIG.  Product revenues are recognized once we satisfy the
performance obligation at a point in time under the revenue recognition criteria
as described above. We recognize revenues for product received by our customers
net of allowances for customer credits, including estimated rebates,
chargebacks, discounts, returns, distribution service fees, patient assistance
programs, and government rebates, such as Medicare Part D coverage gap
reimbursements in the U.S. These sales allowances and accruals are recorded
based on estimates which are described in detail below.  Estimates are assessed
as of the end of each reporting period and are updated to reflect current
information.  We believe that our sales allowances and accruals are reasonable
and appropriate based on current facts and circumstances.

Customer Credits: Our customers are offered various forms of consideration,
including allowances, service fees and prompt payment discounts. We expect our
customers will earn prompt payment discounts and, therefore, we deduct the full
amount of these discounts from total product sales when revenues are recognized.
Service fees are also deducted from total product sales as they are earned.

Rebates and Discounts:  We accrue rebates for mandated discounts under the
Medicaid Drug Rebate Program in the U.S. and mandated discounts in Europe in
markets where government-sponsored healthcare systems are the primary payers for
healthcare. These accruals are based on statutory discount rates and expected
utilization as well as historical data we have accumulated since product launch.
Our estimates for expected utilization of rebates are based on data received
from our customers. Rebates are generally invoiced and paid in arrears so that
the accrual balance consists of an estimate of the amount expected to be
incurred for the current quarter's activity, plus an accrual balance for known
prior quarters' unpaid rebates. If actual future rebates vary from estimates, we
may need to adjust prior period accruals, which would affect revenue in the

period of adjustment.

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Chargebacks: Chargebacks are discounts that occur when certain contracted customers purchase directly from our wholesalers at a discounted price. The wholesalers, in turn, charges back to us the difference between the price initially paid by the wholesalers and the discounted price paid by the contracted customers. In addition to actual chargebacks received, we maintain an accrual for chargebacks based on the estimated contractual discounts on the inventory levels on hand in our distribution channel. If actual future chargebacks vary from these estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment.

Medicare Part D Coverage Gap: Medicare Part D prescription drug benefit mandates
manufacturers to fund 70% of the Medicare Part D insurance coverage gap for
prescription drugs sold to eligible patients. Our estimates for the expected
Medicare Part D coverage gap are based on historical invoices received and in
part from data received from our customers. Funding of the coverage gap is
generally invoiced and paid in arrears so that the accrual balance consists of
an estimate of the amount expected to be incurred for the current quarter's
activity, plus an accrual balance for known prior quarters. If actual future
funding varies from estimates, we may need to adjust prior period accruals,
which would affect revenue in the period of adjustment. Additionally, beginning
in January 2020, the amount of spending required by eligible patients in the
Medicare Part D insurance coverage gap increased 30% due to the expiration of a
provision in the Patient Protection and Affordable Care Act, which now results
in a change in the True Out of Pocket (TrOOP) calculation methodology. The
methodological change has resulted in an increase in required spending by
patients and, in turn, an increase in manufacturers' contributions on behalf of
patients in the Medicare Part D insurance coverage gap.

Co-payment Assistance:  Patients who have commercial insurance and meet certain
eligibility requirements may receive co-payment assistance. We accrue a
liability for co-payment assistance based on actual program participation and
estimates of program redemption using data provided by third-party
administrators.

Product Royalty Revenues

Royalty revenues on commercial sales for JAKAVI and TABRECTA by Novartis are
estimated based on information provided by Novartis. Royalty revenues on
commercial sales for OLUMIANT by Lilly are estimated based on information
provided by Lilly. We exercise judgment in determining whether the information
provided is sufficiently reliable for us to base our royalty revenue recognition
thereon. If actual royalties vary from estimates, we may need to adjust the
prior period, which would affect royalty revenue and receivable in the period of
adjustment.

Milestone and Contract Revenues

At the inception of a contract, the transaction price reflects the amount of
consideration we expect to be entitled to in exchange for transferring promised
goods or services to our collaborator. We review our estimate of the transaction
price each period, and make revisions to such estimates as necessary. Milestone
and contract revenues from collaborative agreements with multiple performance
obligations is determined based upon assessment of each distinct promised good
or service's estimated fair value and recognized based upon the completion of
the promised good or service to our collaborator.

Our license agreements often include contractual milestones, which typically
relate to the achievement of pre-specified development, regulatory and
commercialization events outside of our control, such as regulatory approval of
a compound, first patient dosing or achievement of sales-based thresholds. As
such, milestones associated with our collaborations involve a substantial degree
of uncertainty and risk that they may never be received.  Given the uncertainty
associated with achieving these milestones, constraints on the allocated
consideration are assessed each reporting period. Revenues are recognized when
achievement is probable, which may not be until achieved.

Stock Compensation.  Share-based payment transactions with employees, which
include stock options, restricted stock units (RSUs) and performance shares
(PSUs), are recognized as compensation expense over the requisite service period
based on their estimated fair values at the date of grant as well as expected
forfeiture rates based on actual experience. The stock compensation process
requires significant judgment and the use of estimates, particularly surrounding
Black-Scholes assumptions such as stock price volatility over the option term
and expected option lives, as well as expected forfeiture rates and the
probability of PSUs vesting. The fair value of stock options, which are subject
to graded vesting, are recognized as compensation expense over the requisite
service period using the accelerated attribution

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method.  The fair value of RSUs that are subject to cliff vesting are recognized
as compensation expense over the requisite service period using the
straight-line attribution method, and the fair value of RSUs that are subject to
graded vesting are recognized as compensation expense over the requisite service
period using the accelerated attribution method.  The fair value of PSUs are
recognized as compensation expense beginning at the time in which the
performance conditions are deemed probable of achievement. We assess the
probability of achievement of performance conditions, including projected
product revenues and clinical development milestones, as of the end of each
reporting period. Once a performance condition is considered probable, we record
compensation expense based on the portion of the service period elapsed to date
with respect to that award, with a cumulative catch-up, net of estimated
forfeitures, and recognize any remaining compensation expense, if any, over the
remaining requisite service period using the straight-line attribution method
for PSUs that are subject to cliff vesting and using the accelerated attribution
method for PSUs that are subject to graded vesting.

Income Taxes. We account for income taxes using an asset and liability approach
to financial accounting for income taxes.  Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statement carrying amounts and tax bases of assets and liabilities
using enacted tax rates in effect for years in which the basis differences are
expected to reverse. We periodically assess the likelihood of the realization of
deferred tax assets, and reduce the carrying amount of these deferred tax assets
to an amount that is considered to be more-likely-than-not to be realizable. Our
assessment considers recent cumulative earnings experience, projections of
future taxable income (losses) and ongoing prudent and feasible tax planning
strategies.  When performing our assessment on projections of future taxable
income (losses), we consider factors such as the likelihood of regulatory
approval and commercial success of products currently under development, among
other factors.   Significant judgment is required in making this assessment and,
to the extent that a reversal of any portion of our valuation allowance against
our deferred tax assets is deemed appropriate, a tax benefit will be recognized
against our income tax provision in the period of such reversal.

We recognize the tax benefit from an uncertain tax position only if it is
more-likely-than-not that the position will be sustained upon examination by the
taxing authorities, including resolutions of any related appeals or litigation
processes, based on the technical merits of the position. The tax benefit that
is recorded for these positions is measured at the largest amount of benefit
that is greater than 50 percent likely of being realized upon ultimate
settlement. We adjust the level of the liability to reflect any subsequent
changes in the relevant facts surrounding the uncertain positions. Any interest
and penalties on uncertain tax positions are included within the tax provision.

We record estimates and prepare and file tax returns in various jurisdictions
across the U.S., Europe, and Asia based upon our interpretation of local tax
laws and regulations.  While we exercise significant judgment when applying
complex tax laws and regulations in these various taxing jurisdictions, many of
our tax returns are open to audit, and may be subject to future tax, interest,
and penalty assessments.

We believe our estimates for the valuation allowances against certain deferred
tax assets and the amount of benefits associated with uncertain tax positions
recognized in our financial statements are appropriate based upon our assessment
of the factors mentioned above.

Acquisition-related contingent consideration.  Acquisition-related contingent
consideration, which consists of our future royalty obligations to ARIAD/Takeda,
was recorded on the acquisition date at the estimated fair value of the
obligation, in accordance with the acquisition method of accounting. The fair
value of the contingent consideration was determined using an income approach
based on estimated ICLUSIG revenues in the European Union and other countries.
As the fair value measurement is based on significant inputs that are
unobservable in the market, this represents a Level 3 measurement.

The fair value of the acquisition-related contingent consideration is remeasured
each reporting period, with changes in fair value recorded in the consolidated
statements of operations. The assumptions used to determine the fair value of
the acquisition-related contingent consideration include projected ICLUSIG
revenues and discount rates which, require significant judgement and are
analyzed on a quarterly basis. While we use the best available information to
prepare our projected ICLUSIG revenues and discount rate assumptions, actual
ICLUSIG revenues and/or market conditions could differ significantly.  Changes
to one or multiple inputs could have a material impact on the amount of
acquisition-related contingent consideration expense recorded during the
reporting period.

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Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU No.
2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments." This guidance applies to all entities
and impacts how entities account for credit losses for financial assets measured
at amortized cost and available for sale debt securities. ASU 2016-13 requires
financial assets measured at amortized cost to be presented at the net amount
expected to be collected. The measurement of expected credit losses is based on
relevant information about past events, including historical experience, current
conditions, and reasonable and supportable forecasts that affect the
collectability of the reported amounts. An entity must use judgment in
determining the relevant information and estimation methods that are appropriate
in its circumstances.  For trade receivables, loans and held-to-maturity debt
securities, entities will be required to estimate expected credit losses over
the lifetime of the asset.  For available-for-sale debt securities, entities
will be required to recognize an allowance for credit losses rather than an
other-than-temporary impairment that reduces the cost basis of the investment.
Further, an entity will recognize any improvements in estimated credit losses on
its available-for-sale debt securities immediately in earnings.

Upon adoption, we assessed each financial asset measured at amortized cost and
each available-for-sale debt security held for the impact of the guidance as of
January 1, 2020 and noted an insignificant impact due to the minimal credit risk
associated with our financial assets subject to ASC 326. As such, it was
concluded that a reserve for credit losses was de minimis on the adoption date.
Financial assets will continue to be assessed on a quarterly basis in future
periods.

In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic
820): Disclosure Framework - Changes to the Disclosure Requirements for Fair
Value Measurement," which eliminates the required disclosure of the amount of
and reason for transfers between Level 1 and Level 2 of the fair value
hierarchy. The guidance also eliminates the required disclosure of the entity's
valuation process for Level 3 fair value measurements, however public entities
are required to disclose the range and weighted average used to develop
significant unobservable inputs for Level 3 fair value measurements. This
guidance is effective for fiscal years beginning after December 15, 2019. We
adopted this guidance for the period beginning January 1, 2020 and enhanced our
disclosures in Note 4 to the condensed consolidated financial statements to
comply with the standard.

In August 2018, the FASB issued ASU No. 2018-14, "Compensation - Retirement
Benefits - Defined Benefit Plans - General," an update to Subtopic ASC 715-20.
The guidance amended year-end disclosure requirements related to defined benefit
pension plans, and does not affect interim disclosures. The guidance is
effective for fiscal years ending after December 15, 2020 and is permitted for
early adoption. The standard is to be applied on a retrospective basis. Incyte
sponsors defined benefit plans for employees located in Europe. We are currently
analyzing the impact of ASU No. 2018-14 on the condensed consolidated financial
statements.

In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and
Other - Internal-Use Software," an update to Subtopic ASC 350-40. The guidance
directs accounting for service contracts for cloud computing arrangements to
follow guidance within ASC 350-40 to determine capitalization of implementation
costs. The guidance is effective for fiscal years beginning after December 15,
2019 and may be applied on either a retrospective or prospective basis. We
adopted this guidance for the period beginning January 1, 2020 on a prospective
basis. New contracts for development of internal-use software were assessed and
no qualifying contracts were identified during the period. We will continue to
assess contracts and will disclose material, qualifying contracts if identified
in future periods.

In November 2018, the FASB issued ASU No. 2018-18, "Collaborative Arrangements
(Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606." The
guidance clarifies the interactions between Topic 808 and Topic 606, including
clarifications on revenue recognition, unit of account, and reporting disclosure
requirements. The guidance is effective for fiscal years beginning after
December 15, 2019. We adopted this guidance for the period beginning January 1,
2020 retrospectively to the date of our initial application of ASC 606, and
noted that in assessment of our collaborative agreements, there was no material
financial statement impact. Our collaborative arrangements and their associated
accounting conclusions are described in detail within Note 9 to the condensed
consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This guidance applies to all entities and aims to reduce the complexity of tax accounting standards

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while enhancing reporting disclosures. This guidance is effective for fiscal
years beginning after December 15, 2020 and interim periods therein. Early
adoption is permitted for any annual periods for which financial statements have
not been issued and interim periods therein. We are currently analyzing the
impact of ASU No. 2019-12 on the condensed consolidated financial statements.

Results of Operations

We recorded net income of $290.3 million and basic net income per share of $1.33
and diluted net income per share of $1.32 for the three months ended June 30,
2020, as compared to net income of $105.3 million and basic net income per share
of $0.49 and diluted net income per share of $0.48 in the corresponding period
in 2019.  We recorded net loss of $430.3 million and basic and diluted net loss
per share of $1.98 for the six months ended June 30, 2020, as compared to net
income of $207.6 million and basic net income per share of $0.97 and diluted net
income per share of $0.96 in the corresponding period in 2019.

Revenues.


                                        For the Three Months Ended,          For the Six Months Ended,
                                                  June 30,                           June 30,
                                          2020               2019             2020              2019

                                               (in millions)                       (in millions)
JAKAFI revenues, net                  $       473.7      $       409.5    $       933.2     $       785.1
ICLUSIG revenues, net                          22.8               24.4             50.0              45.0
PEMAZYRE revenues, net                          3.8                  -              3.8                 -
Total product revenues, net                   500.3              433.9            987.0             830.1

JAKAVI product royalty revenues                66.2               56.9            122.6             102.5
OLUMIANT product royalty revenues              25.8               19.1             51.3              35.2
TABRECTA product royalty revenues               0.7                  -              0.7                 -
Total product royalty revenues                 92.7               76.0            174.6             137.7
Milestone and contract revenues                95.0               20.0     

       95.0              60.0
Total revenues                        $       688.0      $       529.9    $     1,256.6     $     1,027.8

The increase in JAKAFI product revenues for the three months ended June 30, 2020
as compared to the corresponding period in 2019 was comprised of a volume
increase of $52.9 million and a price increase of $11.3 million. The increase in
JAKAFI product revenues for the six months ended June 30, 2020 as compared to
the corresponding period in 2019 was comprised of a volume increase of $135.1
million and a price increase of $13.0 million. Our product revenues may
fluctuate from quarter to quarter due to our customers' purchasing patterns over
the course of the year, including as a result of increased inventory building by
customers in advance of expected or announced price increases. Product revenues
are recorded net of estimated product returns, pricing discounts including
rebates offered pursuant to mandatory federal and state government programs and
chargebacks, prompt pay discounts and distribution fees and co-pay assistance.
Our revenue recognition policies require estimates of the aforementioned sales
allowances each period.

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The following table provides a summary of activity with respect to our sales allowances and accruals (in thousands):

                                                                                   Co-Pay
                                              Discounts and      Government      Assistance
                                              Distribution      Rebates and      and Other        Product

Six Months Ended June 30, 2020                    Fees          Chargebacks      Discounts        Returns         Total
Balance at January 1, 2020                   $         6,530    $     

54,762 $ 703 $ 1,660 $ 63,655 Allowances for current period sales

                   28,144         167,522           8,731            662        205,059
Allowances for prior period sales                      (160)             485               -          (596)          (271)
Credits/payments for current period sales           (21,898)       (127,476)         (7,513)              -      (156,887)
Credits/payments for prior period sales              (5,753)        (30,174)           (252)          (226)       (36,405)
Balance at June 30, 2020                     $         6,863    $     65,119    $      1,669    $     1,500    $    75,151


Government rebates and chargebacks are the most significant component of our
sales allowances. Increases in certain government reimbursement rates are
limited to a measure of inflation, and when the price of a drug increases faster
than this measure of inflation it will result in a penalty adjustment factor
that causes a larger sales allowance to those government related entities. We
expect government rebates and chargebacks as a percentage of our gross product
sales will continue to increase in connection with any future product price
increases greater than the rate of inflation, and any such increase in these
government rebates and chargebacks will have a negative impact on our reported
product revenues, net. We adjust our estimates for government rebates and
chargebacks based on new information regarding actual rebates as it becomes
available.  Claims by third-party payors for rebates and chargebacks are
frequently submitted after the period in which the related sales occurred, which
may result in adjustments to prior period accrual balances in the period in
which the new information becomes available. We also adjust our allowance for
product returns based on new information regarding actual returns as it becomes
available.

We expect our sales allowances to fluctuate from quarter to quarter as a result of the Medicare Part D Coverage Gap, the volume of purchases eligible for government mandated discounts and rebates as well as changes in discount percentages which are impacted by potential future price increases, rate of inflation, and other factors.

Product royalty revenues on commercial sales of JAKAVI and TABRECTA by Novartis
are based on net sales of licensed products in licensed territories as provided
by Novartis. Product royalty revenues on commercial sales of OLUMIANT by Lilly
are based on net sales of licensed products in licensed territories as provided
by Lilly.

Our milestone and contract revenues for the six months ended June 30, 2020, were
derived from a $5.0 million milestone under the Innovent research collaboration
and licensing agreement and $90.0 million in milestones under the Novartis
collaboration and license agreement. Our milestone and contract revenues for the
six months ended June 30, 2019, were derived from a $40.0 million upfront
payment and a $20.0 million milestone under the Innovent research collaboration
and licensing agreement.

Cost of Product Revenues.


                                         For the Three Months Ended,           For the Six Months Ended,
                                                  June 30,                             June 30,
                                          2020                2019             2020                2019

                                                (in millions)                        (in millions)

Product costs                         $         3.7       $         3.1    $         6.9       $         6.0
Salary and benefits related                     0.9                 0.6    

         1.8                 1.3
Stock compensation                              0.2                 0.2              0.5                 0.4
Royalty expense                                23.2                20.1             40.7                33.5
Amortization of definite-lived
intangible assets                               5.4                 5.4             10.8                10.8

Total cost of product revenues $ 33.4 $ 29.4 $ 60.7 $ 52.0

Cost of product revenues includes all JAKAFI, ICLUSIG and PEMAZYRE related product costs, employee personnel costs, including stock compensation, for those employees dedicated to the production of our commercial

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products, low single-digit royalties to Novartis on all sales of JAKAFI in the
United States and amortization of our licensed intellectual property rights for
ICLUSIG using the straight-line method over the estimated useful life of 12.5
years. The increase in cost of product revenues for the three and six months
ended June 30, 2020 as compared to the corresponding periods in 2019 was due
primarily to increased royalties to Novartis on all JAKAFI sales in the United
States.

Operating Expenses.

Research and development expenses.

                                                For the Three Months Ended,          For the Six Months Ended,
                                                          June 30,                           June 30,
                                                  2020               2019              2020              2019

                                                       (in millions)                       (in millions)
Salary and benefits related                   $        64.9      $        57.7    $        133.0      $     120.7
Stock compensation                                     32.5               27.6              61.2             55.0
Clinical research and outside services                165.5              177.4           1,129.1            331.2
Occupancy and all other costs                          23.7               26.7              48.6             53.0

Total research and development expenses $ 286.6 $ 289.4 $ 1,371.9 $ 559.9

We account for research and development costs by natural expense line and not
costs by project. The increase in salary and benefits related expense for the
three and six months ended June 30, 2020 as compared to the corresponding
periods in 2019 was due primarily to increased development headcount to sustain
our development pipeline. Stock compensation expense may fluctuate from period
to period based on the number of awards granted, stock price volatility and
expected award lives, as well as expected award forfeiture rates which are used
to value equity-based compensation.

The increase in clinical research and outside services expense for the six
months ended June 30, 2020 as compared to the corresponding period in 2019 was
primarily due to upfront consideration related to our collaborative agreement
with MorphoSys recorded during 2020. Research and development expenses include
upfront and milestone expenses related to our collaborative agreements of $3.5
million and $809.0 million, respectively, for the three and six months ended
June 30, 2020. Research and development expenses include upfront and milestone
expenses related to our collaborative agreements of $25.0 million and $25.3
million, respectively, for the three and six months ended June 30, 2019.
Research and development expenses for the three and six months ended June 30,
2020 and 2019 were net of $3.2 million, $4.9 million, $2.4 million and $6.4
million, respectively, of costs reimbursed by our collaborative partners.

In addition to one-time expenses resulting from upfront fees in connection with
the entry into any new or amended collaboration agreements and payment of
milestones under those agreements, research and development expenses may
fluctuate from period to period depending upon the stage of certain projects and
the level of pre-clinical and clinical trial related activities. Many factors
can affect the cost and timing of our clinical trials, including requests by
regulatory agencies for more information, inconclusive results requiring
additional clinical trials, slow patient enrollment, adverse side effects among
patients, insufficient supplies for our clinical trials and real or perceived
lack of effectiveness or safety of our investigational drugs in our clinical
trials. In addition, the development of all of our products will be subject to
extensive governmental regulation. These factors make it difficult for us to
predict the timing and costs of the further development and approval of our

products.

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Selling, general and administrative expenses.

                                                For the Three Months Ended,         For the Six Months Ended,
                                                          June 30,                           June 30,
                                                  2020               2019             2020              2019

                                                       (in millions)                      (in millions)
Salary and benefits related                   $        34.9      $        31.4    $       71.0      $       62.8
Stock compensation                                     13.6               12.8            27.1              25.8
Other contract services and outside costs              69.5               61.7           131.0             141.3
Total selling, general and administrative
expenses                                      $       118.0      $       

105.9 $ 229.1 $ 229.9

The increase in salary and benefits related expense for the six months ended
June 30, 2020 as compared to the corresponding period in 2019 was due primarily
to increased headcount. This increased headcount was due primarily to the
ongoing commercialization efforts related to JAKAFI for intermediate or
high-risk myelofibrosis, uncontrolled polycythemia vera and GVHD as well as
increased headcount related to our European operations. The decrease in other
contract services and outside costs for the six months ended June 30, 2020 as
compared to the corresponding period in 2019 was due primarily to a decrease in
donations to independent non-profit patient assistance organizations in the
United States. Stock compensation expense may fluctuate from period to period
based on the number of awards granted, stock price volatility and expected award
lives, as well as expected award forfeiture rates which are used to value
equity-based compensation.

Change in fair value of acquisition-related contingent consideration

Acquisition-related contingent consideration, which consists of our future
royalty obligations to Takeda, was recorded on the acquisition date, June 1,
2016, at the estimated fair value of the obligation, in accordance with the
acquisition method of accounting. The fair value of the acquisition-related
contingent consideration is remeasured quarterly.  The change in fair value of
the acquisition-related contingent consideration for the three and six months
ended June 30, 2020 was $6.1 million and $12.7 million, respectively, which is
recorded in change in fair value of acquisition-related contingent consideration
on the condensed consolidated statements of operations. The change in fair value
of the acquisition-related contingent consideration for the three and six months
ended June 30, 2019 was $6.6 million and $13.3 million, respectively, which is
recorded in change in fair value of acquisition-related contingent consideration
on the condensed consolidated statements of operations. The change in fair value
for the three and six months ended June 30, 2020 and 2019 was due primarily to
the passage of time as there were no other significant changes in the key
assumptions during the periods.

Collaboration loss sharing

Under the collaboration and license agreement with MorphoSys, which was executed
in March 2020, we and MorphoSys are both responsible for the commercialization
efforts of tafasitamab in the United States and will share equally the profits
and losses from the co-commercialization efforts. For the three and six months
ended June 30, 2020, our 50% share of the costs for tafasitamab was $13.3
million and $15.4 million, respectively, as recorded in collaboration loss
sharing on the condensed consolidated statement of operations.

Other income (expense).

Other income (expense), net. Other income (expense), net for the three and six
months ended June 30, 2020 was $4.8 million and $13.5 million, respectively.
Other income (expense), net for the three and six months ended June 30, 2019 was
$15.0 million and $24.4 million, respectively. The decrease in other income
(expense), net for the six months ended June 30, 2020 primarily relates to a
decrease in interest income.

Interest expense. Interest expense for the three and six months ended June 30,
2020 was $0.6 million and $1.2 million, respectively.  Interest expense for the
three and six months ended June 30, 2019 was $0.3 million and $0.7 million,
respectively. Included in interest expense for the three and six months ended
June 30, 2020 was $0.2 million and $0.4 million, respectively, of non-cash
charges to amortize the discount on the 2020 Notes and approximately $0.3
million

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and $0.6 million, respectively, of interest expense on our finance lease liabilities. Included in interest expense for the three and six months ended June 30, 2019 was $0.2 million and $0.4 million, respectively, of non-cash charges to amortize the discount on the 2020 Notes.

Unrealized gain (loss) on long term investments. Unrealized gains and losses on
long term investments will fluctuate from period to period, based on the change
in fair value of the securities we hold in our publicly held collaboration
partners. The following table provides a summary of those unrealized gains

and
(losses):


                                                             For the Three Months Ended,          For the Six Months Ended,
                                                                      June 30,                             June 30,
                                                             2020                 2019              2020              2019

                                                                    (in millions)                       (in millions)
Agenus                                                   $        26.2       $           0.5    $      (2.7)      $       11.0
Calithera                                                          1.5                 (4.9)           (0.7)             (0.2)
Merus                                                             12.7                 (0.4)             6.4               2.1
MorphoSys                                                         27.5                     -            17.6                 -
Syros                                                              4.4                   0.2             3.5               3.5

Total unrealized gain (loss) on long term investments $ 72.3

$ (4.6) $ 24.1 $ 16.4

Provision for income taxes. The provision for income taxes for the three and six
months ended June 30, 2020 and was $17.0 million and $33.5 million,
respectively. The provision for income taxes for the three and six months ended
June 30, 2019 and was $3.4 million and $5.1 million, respectively.  The increase
in provision for income taxes for the three and six months ended June 30, 2020
primarily relates to federal and state tax liabilities that are not fully
sheltered by net operating losses or research and development tax credit
carryforwards. The increase was also driven by reduced tax benefits for
stock-based compensation in the current period.

Liquidity and Capital Resources

Due to historical net losses, we had an accumulated deficit of $1.9 billion as
of June 30, 2020. We have funded our research and development operations through
sales of equity securities, the issuance of convertible notes, cash received
from customers, and collaborative arrangements. At June 30, 2020, we had
available cash, cash equivalents and marketable securities of $1.6 billion. Our
cash and marketable securities balances are held in a variety of
interest-bearing instruments, including money market accounts, and U.S.
government debt securities. Available cash is invested in accordance with our
investment policy's primary objectives of liquidity, safety of principal and
diversity of investments.

Net cash used in operating activities for the six months ended June 30, 2020 was
$414.0 million and net cash provided by operating activities for the six months
ended June 30, 2019 was $308.6 million.  The $722.6 million decrease in cash
provided by operating activities was due primarily to cash outflows in March
2020 related to our collaboration and license agreement with MorphoSys and
changes in working capital.

Our investing activities, other than purchases, sales and maturities of
marketable securities, have consisted predominantly of capital expenditures and
purchases of long term investments.  Net cash used by investing activities was
$151.8 million for the six months ended June 30, 2020, which represented
purchases of marketable securities of $287.4 million, capital expenditures of
$83.1 million and purchases of long term equity investments of $95.5 million,
offset in part by the sale of long term investment of $4.5 million and the sale
and maturity of marketable securities of $309.7 million. Net cash used in
investing activities was $69.7 million for the six months ended June 30, 2019,
which represented purchases of marketable securities of $104.0 million and
capital expenditures of $65.6 million, offset in part by the sale and maturity
of marketable securities of $99.8 million. In the future, net cash used by
investing activities may fluctuate significantly from period to period due to
the timing of strategic equity investments, acquisitions, and capital
expenditures and maturities/sales and purchases of marketable securities.

Net cash provided by financing activities was $58.9 million and $13.5 million,
respectively, for the six months ended June 30, 2020 and 2019, primarily
representing proceeds from the issuance of common stock under our stock plans,
offset in part by cash paid to ARIAD/Takeda for contingent consideration.

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The following summarizes our significant contractual obligations as of June 30,
2020 and the effect those obligations are expected to have on our liquidity and
cash flow in future periods (in millions):


                                                       Less Than      Years      Years        Over
                                            Total       1 Year        2 - 3      4 - 5       5 Years
Contractual Obligations:

Principal on convertible senior debt       $  18.9    $      18.9    $     -    $      -    $       -
Interest on convertible senior debt            0.1            0.1         

-           -            -
Finance lease liabilities                     44.0            1.9        5.9         5.6         30.6
Operating lease liabilities                   27.4           11.0        9.9         2.1          4.4
Other non-cancelable obligations               3.2            1.6        1.5         0.1            -
Total contractual obligations              $  93.6    $      33.5    $  17.3    $    7.8    $    35.0


We have entered into and may in the future seek to license additional rights
relating to technologies or drug development candidates in connection with our
drug discovery and development programs. Under these licenses, we may be
required to pay upfront fees, milestone payments, and royalties on sales of
future products, which are not reflected in the table above.

In October 2019, we entered into an agreement with Wilmington Friends School
Inc., to purchase property for $50.0 million to expand our global headquarters.
Under that agreement, closing of the purchase is subject to certain standard
closing conditions, including an initial diligence period and a subsequent
approval period.

We believe that our cash flow from operations, together with our cash, cash
equivalents and marketable securities, will be adequate to satisfy our capital
needs for the foreseeable future. Our cash requirements depend on numerous
factors, including our expenditures in connection with our drug discovery and
development programs and commercialization operations; expenditures in
connection with litigation or other legal proceedings; costs for future facility
requirements; our receipt of any milestone or other payments under any
collaborative agreements we may enter into, including the agreements with
Novartis, Lilly, Innovent and Zai Lab; and expenditures in connection with
strategic relationships and license agreements, including our agreements with
Agenus, ARIAD/Takeda, Calithera, Lilly, MacroGenics, MorphoSys, Merus and Syros,
strategic equity investments or potential acquisitions. To the extent we seek to
augment our existing cash resources and cash flow from operations to satisfy our
cash requirements for future acquisitions or other strategic purposes, we expect
that additional funding can be obtained through equity or debt financings or
from other sources. The sale of equity or additional convertible debt securities
in the future may be dilutive to our stockholders, and may provide for rights,
preferences or privileges senior to those of our holders of common stock. Debt
financing arrangements may require us to pledge certain assets or enter into
covenants that could restrict our operations or our ability to incur further
indebtedness.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements other than those that are discussed above.

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