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 months ended March 31, 2021 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, 2010 included in our Annual Report on Form 10-K for the year ended
December 31, 2020 previously filed with the SEC.

Forward-Looking Statements

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-cxix);

? 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 our drug products and drug candidates;

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;

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;

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? 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 and governmental

proceedings;

? our expectations regarding competition;

? expectations relating to the anticipated completion dates for our Delaware

headquarters expansion project and 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 our drug products and drug

candidates;

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;

? 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;

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? 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

? Delaware headquarters expansion project and our large molecule production

facility;

? 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;

? risks relating to our ability to sustain profitability;

? 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.

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Summary Risk Factors

Our business is subject to numerous risks and uncertainties that could affect
our ability to successfully implement our business strategy and affect our
financial results. You should carefully consider all of the information in this
report and, in particular, the following principal risks and all of the other
specific factors described in Item 1A. of this report, "Risk Factors," before
deciding whether to invest in our company.

We depend heavily on JAKAFI/JAKAVI (ruxolitinib), and if we are not able to

? maintain revenues from JAKAFI/JAKAVI or those revenues decrease, our business

may be materially harmed.

If we or our collaborators are unable to obtain, or maintain at anticipated

? levels, reimbursement for JAKAFI/JAKAVI or our other products from government

and other third-party payors, our results of operations and financial condition

could be harmed.

A limited number of specialty pharmacies and wholesalers represent a

? significant portion of revenues from JAKAFI, and the loss of, or significant

reduction in sales to, any one of these specialty pharmacies or wholesalers

could harm our operations and financial condition.

If we are unable to establish and maintain effective sales, marketing and

? distribution capabilities, or to enter into agreements with third parties to do

so, we will not be able to successfully commercialize our products.

If we fail to comply with applicable laws and regulations, we could lose our

? approval to market our products or be subject to other governmental enforcement

activity.

If the use of our products harms or is perceived to harm patients, our

? regulatory approvals could be revoked or otherwise negatively impacted or we

could be subject to costly product liability claims.

? If we market our products in a manner that violates various laws and

regulations, we may be subject to civil or criminal penalties.

? Competition for our products, in particular JAKAFI/JAKAVI, could harm our

business and result in a decrease in our revenue.

The COVID-19 pandemic and measures to address the pandemic have adversely

? affected and can in the future adversely affect our business and results of

operations.

We or our collaborators may be unsuccessful in discovering and developing drug

? candidates, and we may spend significant time and money attempting to do so, in

particular with our later stage drug candidates.

If we or our collaborators are unable to obtain regulatory approval in and

? outside of the United States for drug candidates, we and our collaborators will

be unable to commercialize those drug candidates.

Health care reform measures could impact the pricing and profitability of

? pharmaceuticals, and adversely affect the commercial viability of our or our

collaborators' products and drug candidates.

Conflicts between us and our collaborators or termination of our collaboration

? agreements could limit future development and commercialization of our drug

candidates and harm our business.

If we are unable to establish collaborations to fully exploit our drug

? discovery and development capabilities or if future collaborations are

unsuccessful, our future revenue prospects could be diminished.

If we fail to enter into additional in-licensing agreements or if these

? arrangements are unsuccessful, we may be unable to increase our number of

successfully marketed products and our revenues.

? Even if one of our drug candidates receives regulatory approval, we may

determine that commercialization would not be worth the investment.

Any approved drug product that we bring to the market may not gain market

 ? acceptance by physicians, patients, healthcare payors and others in the medical
   community.


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We have limited capacity to conduct preclinical testing and clinical trials,

? and our resulting dependence on other parties could result in delays in and

additional costs for our drug development efforts.

We face significant competition for our drug discovery and development efforts,

? and if we do not compete effectively, our commercial opportunities will be

reduced or eliminated.

Our reliance on others to manufacture our drug products and drug candidates

? could result in drug supply constraints, delays in clinical trials, increased

costs, and withdrawal or denial of regulatory approvals.

If we fail to comply with the extensive legal and regulatory requirements

? affecting the health care industry, we could face increased costs, penalties

and a loss of business.

The illegal distribution and sale by third parties of counterfeit or unfit

? versions of our or our collaborators' products or stolen products could harm

our business and reputation.

As most of our drug discovery and development operations are conducted at our

? headquarters in Wilmington, Delaware, the loss of access to this facility would

negatively impact our business.

If we lose any of our key employees or are unable to attract and retain

? additional personnel, our business and ability to achieve our objectives could

be harmed.

? If we fail to manage our growth effectively, our ability to develop and

commercialize products could suffer.

We may acquire businesses or assets, form joint ventures or make investments in

? other companies that may be unsuccessful, divert our management's attention and

harm our operating results and prospects.

? Risks associated with our operations outside of the United States could

adversely affect our business.

If product liability lawsuits are brought against us, we could face substantial

? liabilities and may be required to limit commercialization of our products, and

our results of operations could be harmed.

Because our activities involve the use of hazardous materials, we may be

? subject to claims relating to improper handling, storage or disposal of these

materials that could be time consuming and costly.

We expect to continue to incur significant expenses to discover and develop

? drugs, which could result in future losses and impair our achievement of and

ability to sustain profitability in the future.

If we are unable to raise additional capital in the future when we require it,

? our efforts to broaden our product portfolio or commercialization efforts could

be limited.

? Our marketable securities and long term investments are subject to risks that

could adversely affect our overall financial position.

If we are unable to achieve milestones, develop product candidates to license

? or renew or enter into new collaborations, our royalty and milestone revenues

and future prospects for those revenues may decrease.

Any arbitration or litigation involving us and regarding intellectual property

? infringement claims could be costly and disrupt our drug discovery and

development efforts.

? Our inability to adequately protect or enforce our proprietary information may

result in loss of revenues or otherwise reduce our ability to compete.

If the effective term of our patents is decreased or if we need to refile some

? of our patent applications, the value of our patent portfolio and the revenues

we derive from it may be decreased.

International patent protection is particularly uncertain and costly, and our

? involvement in opposition proceedings may result in the expenditure of

substantial sums and management resources.

Significant disruptions of information technology systems, breaches of data

? security, or unauthorized disclosures of sensitive data could harm our business

and subject us to liability or reputational damage.

Increasing use of social media could give rise to liability, breaches of data

 ? security, or reputational damage, which could harm our business and results of
   operations.


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Overview

Incyte is a biopharmaceutical company focused on the discovery, development and
commercialization of proprietary therapeutics. Our global headquarters is
located in Wilmington, Delaware, where we conduct global commercial and clinical
development operations. We also conduct commercial and clinical development
operations from our European headquarters in Morges, Switzerland and our
Japanese office in Tokyo.

As described in more detail below, we operate in two therapeutic areas that are
defined by the indications of our approved medicines and the diseases for which
our clinical candidates are being developed. One therapeutic area is
Hematology/Oncology, which is comprised of Myeloproliferative Neoplasms (MPNs)
and Graft-Versus-Host Disease (GVHD), as well as solid tumors and hematologic
malignancies. The other therapeutic area is Inflammation and Autoimmunity
(IAI)/Dermatology commercial franchise. We are also eligible to receive
milestones and royalties on molecules discovered by us and licensed to third
parties.

Hematology and Oncology

Our hematology and oncology franchise is comprised of four approved products,
which are JAKAFI (ruxolitinib), MONJUVI (tafasitamab-cxix), PEMAZYRE
(pemigatinib) and ICLUSIG (ponatinib), as well as numerous clinical development
programs.

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 (MF), in December 2014 for the treatment of adults with
polycythemia vera (PV) 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 our collaboration partner Novartis Pharmaceutical International
Ltd., 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.

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 and GVHD.

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.

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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.  MF 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 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

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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, 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.

MONJUVI (tafasitamab-cxix)

In January 2020, we and MorphoSys AG entered into 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 United States with MorphoSys, and we have
exclusive development and commercialization rights outside of the United States.

In July 2020, we and MorphoSys announced that the FDA approved MONJUVI
(tafasitamab-cxix), which 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 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.

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In August 2020, we and MorphoSys announced that MONJUVI in combination with lenalidomide had been included in the latest National Comprehensive Cancer Network (NCCN) Clinical Practice Guidelines in Oncology for B-cell Lymphomas.

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 ~40% of patients not responding to
initial therapy or relapsing thereafter. We estimate that there are ~10,000
patients diagnosed in the United States 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%).

PEMAZYRE (pemigatinib)

In April 2020, we announced that the FDA approved PEMAZYRE (pemigatinib), a
selective fibroblast growth factor receptor (FGFR) kinase 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).

In March 2021, PEMAZYRE was approved by the Japanese Ministry of Health, Labour
and Welfare (MHLW) for the treatment of patients with unresectable biliary tract
cancer (BTC) with an FGFR2 fusion gene, worsening after cancer chemotherapy.
Also in March 2021, PEMAZYRE was approved by the European Commission (EC) for
the treatment of adults with locally advanced or metastatic cholangiocarcinoma
with an FGFR2 fusion or rearrangement that have progressed after at least one
prior line of systemic therapy.

PEMAZYRE is the first internally discovered product to be globally commercialized by us.

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 United States, 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). 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.

ICLUSIG (ponatinib)

In June 2016, we acquired the European operations of ARIAD Pharmaceuticals, Inc.
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).

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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.

Clinical Programs in Hematology and Oncology

Ruxolitinib and itacitinib

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 us 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 (BAT), 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.
Additional data announced in December 2020 showed that best overall response
(BOR) rate, defined as any response up to week 24, was achieved in a
significantly higher percentage of patients with ruxolitinib therapy compared to
BAT. An sNDA seeking FDA approval of ruxolitinib in steroid-refractory chronic
GVHD has been accepted for Priority Review.

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.

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 opened two pivotal trials of ruxolitinib in
combination with parsaclisib (PI3K?) in first-line MF (LIMBER-313) and in MF
patients with a suboptimal response to ruxolitinib monotherapy (LIMBER-304),
respectively, and both trials are ongoing. 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, and
additional discovery and development initiatives are also ongoing within the
LIMBER program, which are evaluating both internally-discovered compounds,
including itacitinib (JAK1), and candidates from collaboration partners.

Tafasitamab

Tafasitamab is an anti-CD19 antibody and is being investigated as a therapeutic
option in B cell malignancies in a number of ongoing and planned 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. firstMIND is a
Phase Ib safety trial of tafasitamab as a first-line therapy for patients with
DLBCL, and frontMIND, a placebo-controlled Phase III trial evaluating
tafasitamab in

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combination with lenalidomide added to rituximab plus chemotherapy (R-CHOP) as a first-line therapy for patients with DLBCL, is planned to begin in 2021.

A placebo-controlled Phase III trial (inMIND) of tafasitamab added to lenalidomide plus rituximab (R2) in patients with relapsed or refractory follicular or marginal zone lymphomas is ongoing, and we are preparing to initiate both a proof-of-concept study (topMIND) of tafasitamab in combination with parsaclisib (PI3K?) in patients with relapsed or refractory B-cell malignancies and a proof-of-concept study of tafasitamab, lenalidomide and plamotamab in patients with r/r DLBCL.

In May 2020, we announced the validation of the European Marketing Authorization
Application (MAA) for tafasitamab seeking approval of tafasitamab in combination
with lenalidomide, followed by tafasitamab monotherapy, for the treatment of
adult patients with r/r DLBCL; the validation of the MAA by the European
Medicines Agency (EMA) confirms that the submission is ready to enter the formal
review process. In January 2021, we announced that Health Canada accepted the
New Drug Submission (NDS) for tafasitamab in combination with lenalidomide,
followed by tafasitamab monotherapy, as a treatment for adults with r/r DLBCL.

In January 2021, the FDA granted orphan drug designation to tafasitamab as a treatment for patients with follicular lymphoma.

Pemigatinib

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-207,
which is an ongoing solid tumor-agnostic trial evaluating pemigatinib in
patients with driver-alterations of FGF/FGFR.

Pemigatinib 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.

Parsaclisib

The PI3K? pathway mediates oncogenic signaling in B cell malignancies.
Parsaclisib is a PI3K? 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.
The FDA has granted orphan drug designation and Fast Track designation to
parsaclisib as a treatment for patients with follicular lymphoma, marginal zone
lymphoma and mantle cell lymphoma.

In December 2020, we announced preliminary results from the ongoing CITADEL
monotherapy development program, which was designed to enable registration of
parsaclisib. Results from four cohorts were presented at the American Society of
Hematology (ASH), including in r/r follicular lymphoma (CITADEL-203), in
BTK-naïve r/r marginal zone lymphoma (CITADEL-204) and in both BTK-naïve and
BTK-experienced r/r mantle cell lymphoma (CITADEL-205).

Retifanlimab

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

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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.

In January 2021, we announced that the FDA had accepted for Priority Review the
Biologics License Application (BLA) for retifanlimab as a treatment for
previously treated patients with advanced squamous cell carcinoma of the anal
canal (SCAC) who have progressed following standard platinum-based chemotherapy.
In March 2021, the Marketing Authorization Application (MAA) seeking approval of
retifanlimab in SCAC was validated by the European Medicines Agency (EMA).The
submissions were based on data from the Phase II POD1UM-202 trial of
retifanlimab in patients with locally advanced or metastatic SCAC who have
progressed following standard platinum-based chemotherapy, preliminary results
of which were presented at ESMO in September 2020. The Phase III POD1UM-303
trial of retifanlimab in combination with platinum-based chemotherapy as a
first-line treatment for patients with SCAC is underway.

The Phase III POD1UM-304 trial is evaluating retifanlimab in combination with platinum-based chemotherapy as a first-line treatment for patients with non-small cell lung cancer (NSCLC), and in October 2020, our collaboration partner Zai Lab announced dosing of the first patient in China.

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, for the treatment of certain patients with locally advanced
or metastatic SCAC and for the treatment of Merkel cell carcinoma (MCC). The FDA
and EMA have granted orphan drug designation to retifanlimab as a treatment for
patients with locally advanced or metastatic SCAC and the FDA has granted orphan
drug designation to retifanlimab as a treatment for patients with MCC.

                      Indication and status
ruxolitinib           Steroid-refractory chronic GVHD1: sNDA under Priority
(JAK1/JAK2)           Review
itacitinib (JAK1)     Treatment-naïve chronic GVHD: Phase III (GRAVITAS-309)
Once-a-day            Myelofibrosis, polycythemia vera and GVHD: clinical
ruxolitinib           pharmacology studies
(JAK1/JAK2)
ruxolitinib +         Myelofibrosis: Phase III (first-line therapy) (LIMBER-313)
parsaclisib           Myelofibrosis: Phase III (suboptimal responders to
(JAK1/JAK2 + PI3K?)   ruxolitinib) (LIMBER-304)
ruxolitinib +         Myelofibrosis: Phase II in preparation
INCB57643
(JAK1/JAK2 + BET)
ruxolitinib +         Myelofibrosis: Phase II in preparation
INCB00928
(JAK1/JAK2 + ALK2)
itacitinib (JAK1)     Myelofibrosis: Phase II (low platelets)
ruxolitinib + CK08042 Myelofibrosis: PoC in preparation
(JAK1/JAK2 +
CB-Tregs)
tafasitamab           r/r DLBCL: Phase II (L-MIND); Phase III (B-MIND); MAA and
(CD19)3               NDS under review
                      1L DLBCL: Phase Ib (firstMIND); Phase III (frontMIND) in
                      preparation
                      r/r follicular & marginal zone lymphomas: Phase III
                      (inMIND)
                      r/r B-cell malignancies: PoC with parsaclisib (PI3K?)
                      (topMIND) in preparation
                      r/r B-cell malignancies: PoC with lenalidomide and
                      plamotamab in preparation4

pemigatinib           CCA: Phase II (FIGHT-202), Phase III (FIGHT-302)
(FGFR)                8p11 MPN: Phase II (FIGHT-203)
                      Tumor agnostic: Phase II (FIGHT-207)

parsaclisib           r/r follicular lymphoma: Phase II (CITADEL-203)
(PI3K?)               r/r marginal zone lymphoma: Phase II (CITADEL-204)


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                   r/r mantle cell lymphoma: Phase II (CITADEL-205)
                   r/r follicular or marginal zone lymphoma: Phase III
                   (CITADEL-302) in preparation
                   1L mantle cell lymphoma: Phase III (CITADEL-310) in
                   preparation

retifanlimab       SCAC: Phase II (POD1UM-202); Phase III
(PD-1)5            (PODIUM-303); BLA under Priority Review; MAA under
                   review
                   MSI-high endometrial cancer: Phase II (POD1UM-101,
                   POD1UM-204)
                   Merkel cell carcinoma: Phase II (POD1UM-201)
                   NSCLC: Phase III (POD1UM-304)

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

2. Development collaboration with Cellenkos, Inc.

3. tafasitamab development in collaboration with MorphoSys.

4. Clinical collaboration with MorphoSys and Xencor, Inc. to investigate the combination of tafasitamab plus lenalidomide in combination with Xencor's CD20xCD3 XmAb bispecific antibody, plamotamab.

5. retifanlimab licensed from MacroGenics.

Earlier-Stage Development Programs in Hematology and Oncology

We also have a number of other earlier-stage clinical programs in hematology and
oncology, 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.


Modality               Candidates
Small molecules        INCB01158 (ARG)1, INCB81776 (AXL/MER), epacadostat (IDO1),
                       INCB86550 (PD-L1), INCB106385 (A2A/A2B)

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

                       INCAGN2390 (TIM-3), INCA00186 (CD73)

Bispecific antibodies MCLA-145 (PD-L1xCD137)3

1. INCB01158 licensed from Calithera Biosciences, Inc.

2. Discovery collaboration with Agenus Inc.

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

Inflammation and AutoImmunity (IAI)

We do not yet have any approved products in IAI. In anticipation of the potential FDA approval of our most advanced program, ruxolitinib cream for use in mild-to-moderate atopic dermatitis (AD), we recently established Incyte Dermatology as a new commercial franchise in the United States.

Clinical Programs in Dermatology

Ruxolitinib cream is a potent, selective inhibitor of JAK1 and JAK2 that provides the opportunity to directly target diverse pathogenic pathways that underlie certain dermatologic conditions, including atopic dermatitis and vitiligo.

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 (AD) 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
have been completed. Additional pooled analysis from the TRuE-AD program were
presented at the American Academy of Dermatology (AAD) in April 2021, with
results demonstrating ruxolitinib cream's safety and efficacy across various
patient subgroups.

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In September 2020, we purchased a priority review voucher (PRV) from a third
party, with the intent to use it in connection with our submission seeking FDA
approval of ruxolitinib cream for the treatment of mild-to-moderate AD. In
February 2021, we announced that the NDA seeking approval for ruxolitinib cream
as a treatment for patients with mild-to-moderate AD was accepted for Priority
Review by the FDA. The Prescription Drug User Fee Act (PDUFA) action date is
June 21, 2021.

AD is a skin disorder that causes long term inflammation of the skin resulting
in itchy, red, swollen and cracked skin. 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 adolescent and adult patients with AD.

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. In April 2021, updated 104-week data from
the Phase II trial were presented at AAD, with results showing continued
efficacy in patients treated with ruxolitinib cream through 104 weeks, with a
longer duration of treatment being associated with greater levels of
repigmentation.

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.

We are also developing INCB54707, which is an oral small molecule selective JAK1
inhibitor. INCB54707 is undergoing evaluation in patients with hidradenitis
suppurativa (HS), a chronic skin condition where lesions develop as a result of
inflammation and infection of the sweat glands. In October 2020, initial results
from the clinical program were presented and a randomized Phase IIb trial of
INCB54707 is underway in patients with HS. In March 2021, we initiated a Phase
II trial evaluating INCB54707 in patients with vitiligo.

Clinical Programs in Other IAI

A Phase II trial of parsaclisib in patients with autoimmune hemolytic anemia
(AIHA), a rare red blood cell disorder, is 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.

                    Indication and status
ruxolitinib cream1  Atopic dermatitis: Phase III (TRuE-AD1, TRuE-AD2; primary
(JAK1/JAK2)         endpoint met); NDA under Priority Review
                    Vitiligo: Phase III (TRuE-V1, TRuE-V2; recruitment complete
                    in both trials)

INCB54707 (JAK1)    Hidradenitis suppurativa: Phase II
                    Vitiligo: 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.

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Collaborative Partnered Programs

As described below under "-License Agreements and Business Relationships," we
are eligible for milestone payments and royalties on certain products that we
licensed to third parties. These include OLUMIANT (baricitinib), which is
licensed to our collaborative partner Eli Lilly and Company, and JAKAVI
(ruxolitinib) and TABRECTA (capmatinib), which are licensed to Novartis.

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.



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.

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.

Atopic Dermatitis. 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 AD.

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 AD 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 AD.
In January 2020, we and Lilly announced that baricitinib met the primary
endpoint in both BREEZE-AD4 and BREEZE-AD5, the results of which completed the
placebo-controlled data program intended to support global registrations. An
sNDA for baricitinib has been submitted by Lilly for the treatment of patients
with AD. In April 2021, we and Lilly announced the FDA extended the review
period for the sNDA for baricitinib for the treatment of moderate to severe
atopic dermatitis by three months to allow time for additional data analyses.

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In January 2020, Lilly announced that baricitinib had been submitted for
regulatory review in Europe as a treatment for patients with moderate-to-severe
AD. In October 2020, Lilly announced that the European Commission approved
baricitinib as OLUMIANT for the treatment of moderate-to-severe AD in adult
patients who are candidates for systemic therapy. In December 2020, baricitinib
was approved by the MHLW for the treatment of patients with moderate-to-severe
AD.

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 two Phase III trials of
baricitinib in patients with SLE, BRAVE I and BRAVE II.

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. In March 2021, we and Lilly
announced positive results from BRAVE-AA2, the Phase III trial evaluating the
efficacy and safety of once-daily baricitinib in adults with severe alopecia
areata. In April 2021, we and Lilly announced positive results from the Phase
III portion of BRAVE-AA1. The two studies showed statistically significant
improvement in scalp hair regrowth across both baricitinib dosing groups when
compared to placebo.

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 September 2020, we and Novartis announced that GEOMETRY mono-1
results were published in The New England Journal of Medicine.

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); approved in European
(JAK1/JAK2)1    Union and Japan; sNDA under review
                Severe alopecia areata: Phase III (BRAVE-AA1, BRAVE-AA2)
                Systemic lupus erythematosus: Phase III (BRAVE I, BRAVE II)

capmatinib      NSCLC (with MET exon 14 skipping mutations): approved in United
(MET)2          States and Japan

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. Additional information regarding our collaboration agreements,
including their financial and accounting impact on our business and results of
operations, can be found in Note 9 of notes to our condensed consolidated
financial statements.

Out-License Agreements

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. 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.

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. 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. In
May 2020, we amended our agreement with Lilly to enable Lilly to commercialize
baricitinib for the treatment of COVID-19.

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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 indications in mainland China, Hong Kong, Macau

and
Taiwan.

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 retained an option to assist in the promotion of INCMGA0012 in Zai Lab's licensed territories.

In-License Agreements

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. Under the
terms of this agreement, as amended in February 2017, 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, two of which were removed from the
collaboration under the February 2017 amendments.

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.

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.

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 inhibitors, including INCB01158 (CB-1158), which is currently in Phase II clinical trials, for multiple myeloma.

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,

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an investigational monoclonal antibody that inhibits PD-1. MacroGenics has retained the right to develop and commercialize, at its cost and expense, its pipeline assets in combination with INCMGA0012.

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 validated targets.

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. 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.

COVID-19

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").  We and our collaboration partners Lilly
and Novartis initiated a number of 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 not on
mechanical ventilation and who have COVID-19 associated cytokine storm. We
sponsored this collaborative study in the United States and our collaboration
partner Novartis International Pharmaceutical Ltd. sponsored the study outside
of the United States.

In December 2020, we announced initial results from RUXCOVID, where treatment
with ruxolitinib plus SoC did not prevent complications compared to SoC
treatment alone in patients with COVID-19 associated cytokine storm. The
RUXCOVID study has been completed and the data will be further analyzed to
determine any potential impact on other studies of ruxolitinib in patients with
COVID-19, including our Expanded Access Program in the United States, which
allows eligible patients with severe COVID-19 associated cytokine storm to
receive ruxolitinib.

In March 2021, results from a second Phase III clinical trial 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 were announced.  Ruxolitinib
failed to reduce mortality due to any cause through Day 29 although in the U.S.
study population (91% of total study patients), there was a clinically and
statistically significant improvement in mortality in each of the 5mg and 15mg
ruxolitinib arms.

In April 2020, Lilly 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 (ACTT-2). The study is investigating the
efficacy and safety of baricitinib as a potential treatment for hospitalized
patients diagnosed with COVID-19 in the United States, and Lilly is also
planning an expansion to include Europe and Asia.

In September 2020, we and Lilly announced initial results from ACTT-2, where
baricitinib in combination with remdesivir reduced the time to recovery in
comparison with remdesivir alone. Additional data announced in October 2020
showed that baricitinib plus remdesivir resulted in a numerical decrease in
mortality through Day 29 compared to remdesivir alone, with a more pronounced
reduction seen in more severely ill patients.

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In November 2020, we and Lilly announced that the FDA issued an Emergency Use
Authorization (EUA) for the distribution and emergency use of baricitinib to be
used in combination with remdesivir in hospitalized adult and pediatric patients
two years of age or older with suspected or laboratory confirmed COVID-19 who
require supplemental oxygen, invasive mechanical ventilation, or extracorporeal
membrane oxygenation. In December 2020, we and Lilly announced that data from
ACTT-2 supportive of the EUA were published in the New England Journal of
Medicine.

In April 2021, we and Lilly announced that the primary endpoint was not met in
COV-BARRIER, the Phase III randomized, double-blind, placebo-controlled study to
evaluate the efficacy and safety of baricitinib in hospitalized adults not on
mechanical ventilation and who have COVID-19. There was, however, a 38%
reduction in mortality by Day 28 in patients treated with baricitinib in
addition to SoC.

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 in an amount that reflects the consideration we expect to
receive in exchange for those goods or services. We apply the following
five-step model in order to determine this amount: (i) identification of the
promised goods or services in the contract; (ii) determination of whether the
promised goods or services are performance obligations, including whether they
are distinct in the context of the contract; (iii) measurement of the
transaction price, including the constraint on variable consideration; (iv)
allocation of the transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each performance
obligation, which for the Company is generally at a point in time. We also
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 United States. 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 United States 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

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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.

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, we determine the transaction price, in addition
to any upfront payment, by estimating the amount of variable consideration,
including milestone payments, at the outset of the contract utilizing the most
likely amount method. Our contractual milestones 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. We include milestones
in the transaction price only to the extent that it is probable that a
significant reversal in the amount of cumulative revenue recognized will not
occur when the uncertainty associated with the milestone is subsequently
resolved. Given the high level of uncertainty of achievement, variable
consideration associated with milestones are fully constrained until
confirmation of the satisfaction or completion of the milestone by the
third-party. We review our estimate of the transaction price each period, and
make revisions to such estimates as necessary.

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

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graded vesting, are recognized as compensation expense over the requisite
service period using the accelerated attribution 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 United States, Canada, 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 a discount rate 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

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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.

Recent Accounting Pronouncements

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 while
enhancing reporting disclosures. This guidance is effective for fiscal years
beginning after December 15, 2020 and interim periods therein. We adopted this
guidance for the period beginning January 1, 2021. Upon adoption, ASU No.
2019-12 had an immaterial impact on the condensed consolidated financial
statements.

Results of Operations

We recorded net income of $53.5 million and basic and diluted net income per
share of $0.24 for the three months ended March 31, 2021, as compared to net
loss of $720.6 million and basic and diluted net loss per share of $3.33 in

the
corresponding period in 2020.

Revenues.


                                       For the Three Months Ended,
                                                March 31,
                                         2021               2020

                                              (in millions)
JAKAFI revenues, net                 $       465.7      $       459.5
ICLUSIG revenues, net                         25.6               27.2
PEMAZYRE revenues, net                        13.5                  -
Total product revenues, net                  504.8              486.7
JAKAVI product royalty revenues               65.6               56.3
OLUMIANT product royalty revenues             32.3               25.5
TABRECTA product royalty revenues              2.0                  -
Total product royalty revenues                99.9               81.8
Total revenues                       $       604.7      $       568.5




The increase in JAKAFI product revenues for the three months ended March 31,
2021 as compared to the corresponding period in 2020 was comprised of a volume
decrease of $4.9 million, including the impact of a decline in new patient
starts due to the COVID-19 pandemic, and higher patient demand and channel
inventory stocking in the prior year comparative period, due to the potential
for COVID-19 related supply disruptions, offset by a price increase of $11.1
million. Additionally, 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

Three Months Ended March 31, 2021                 Fees          Chargebacks      Discounts        Returns        Total
Balance at January 1, 2021                   $         8,536    $     

66,991 $ 1,284 $ 1,568 $ 78,379 Allowances for current period sales

                   15,448         111,306           8,150            313       135,217
Allowances for prior period sales                         63         (1,010)               -              -         (947)
Credits/payments for current period sales            (8,470)        (56,786)         (7,015)              -      (72,271)
Credits/payments for prior period sales              (5,614)        (26,632)           (407)          (131)      (32,784)
Balance at March 31, 2021                    $         9,963    $     93,869    $      2,012    $     1,750    $  107,594


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.

Cost of Product Revenues.


                                                         For the Three Months Ended,
                                                                  March 31,
                                                         2021                  2020

                                                                (in millions)
Product costs                                       $           4.5       $           3.4
Salary and benefits related                                     1.3                   0.8
Stock compensation                                              0.2                   0.2
Royalty expense                                                17.8                  17.5

Amortization of definite-lived intangible assets                5.4        

5.4

Total cost of product revenues                      $          29.2       $

27.3

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 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.

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Operating Expenses.

Research and development expenses

                                              For the Three Months Ended,
                                                       March 31,
                                               2021               2020

                                                     (in millions)
Salary and benefits related                $       76.6      $          68.1
Stock compensation                                 29.9                 28.7
Clinical research and outside services            171.8                

963.6

Occupancy and all other costs                      28.6                 

24.9

Total research and development expenses $ 306.9 $ 1,085.3

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 months ended March 31, 2021 as compared to the corresponding period in
2020 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 decrease in clinical research and outside services expense for the three
months ended March 31, 2021 as compared to the corresponding period in 2020 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 $11.5
million and $805.5 million, respectively, for the three months ended March 31,
2021 and 2020. Research and development expenses for the three months ended
March 31, 2021 and 2020 were net of $3.6 million and $1.7 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, timing of drug supply,
including API, 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.

Selling, general and administrative expenses

                                                                 For the Three Months Ended,
                                                                          March 31,
                                                                   2021               2020

                                                                        (in millions)
Salary and benefits related                                    $        47.9      $        36.1
Stock compensation                                                      17.2               13.6
Other contract services and outside costs                               88.7               61.4
Total selling, general and administrative expenses             $       

153.8 $ 111.1

The increase in salary and benefits related expense for the three months ended
March 31, 2021 as compared to the corresponding period in 2020 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. 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 other contract services and outside costs for the three months ended
March 31, 2021, as compared to the corresponding

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period in 2020, was due primarily to expenses related to the establishment of
our dermatology commercial organization, expenses related to activities to
support the potential launch of ruxolitinib cream for the treatment of atopic
dermatitis, expense recognized in connection with a legal reserve, as discussed
in Note 15 of notes to our condensed consolidated financial statements, and the
timing of certain expenses.

Change in fair value of acquisition-related contingent consideration

Acquisition-related contingent consideration, which consists of our future
royalty obligations to ARIAD/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 months ended
March 31, 2021 and 2020 was $5.5 million and $6.6 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 months ended March 31, 2021 and 2020 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 months ended
March 31, 2021 and 2020, our 50% share of the costs for tafasitamab was $10.5
million and $2.1 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 months
ended March 31, 2021 and 2020 was ($1.4) million and $8.7 million, respectively.
The decrease in other income (expense), net primarily relates to lower interest
income for the three months ended March 31, 2021.

Interest expense. Interest expense for the three months ended March 31, 2021 and
2020 was $0.4 million and $0.6 million, respectively. Included in interest
expense for the three months ended March 31, 2020 was $0.2 million of non-cash
charges to amortize the discounts on our convertible senior notes due November
2020. Included in interest expense for the three months ended March 31, 2021 and
2020 was $0.3 million of interest expense on our finance lease liabilities.

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,
                                                              March 31,
                                                       2021                2020

                                                            (in millions)
Agenus                                            $        (5.9)      $       (28.8)
Calithera                                                  (4.3)               (2.2)
Merus                                                        9.4               (6.3)
MorphoSys                                                 (23.7)               (9.9)
Syros                                                      (3.2)               (0.9)

Total unrealized loss on long term investments $ (27.7) $

(48.1)

Provision for income taxes. The provision for income taxes for the three months ended March 31, 2021 and 2020 was $15.8 million and $16.6 million, respectively.

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Liquidity and Capital Resources

Due to historical net losses, we had an accumulated deficit of $1.7 billion as
of March 31, 2021. 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 March 31, 2021, we
had available cash, cash equivalents and marketable securities of $2.0 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 provided by operating activities for the three months ended March 31,
2021 was $206.1 million and net cash used in operating activities for the three
months ended March 31, 2020 was $683.4 million. The $889.5 million increase 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 in investing activities was
$59.8 million for the three months ended March 31, 2021, which represented
purchases of marketable securities of $39.3 million, capital expenditures of
$48.1 million and purchase of long term equity investment of $8.7 million,
offset in part by the sale and maturity of marketable securities of $35.2
million and the sale of long term investment of $1.1 million.  Net cash used in
investing activities was $108.6 million for the three months ended March 31,
2020, which represented purchases of marketable securities of $147.4 million,
capital expenditures of $39.3 million, and purchase of long term equity
investment of $95.5 million, offset in part by the sale and maturity of
marketable securities of $173.6 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, capital expenditures
and maturities/sales and purchases of marketable securities.

Net cash provided by financing activities was $12.8 million and $2.5 million,
respectively, for the three months ended March 31, 2021 and 2020, 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.

Our capital expenditures for construction activities and our non-operating
contractual operating and finance lease obligations are discussed in Note 7 of
notes to our condensed consolidated financial statements. In addition, 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; and expenditures for future strategic equity investments or
potential acquisitions. 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. These contingent future payments are
discussed in detail in Note 9 of notes to our condensed consolidated financial
statements.

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.

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Off Balance Sheet Arrangements

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

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