Incyte INCY · USD

Note 18. Segment InformationWe operate in one operating segment, and therefore one reportable segment, focused on the global discovery, development and commercialization of proprietary therapeutics. We manage business activities on a consolidated basis through the development and commercialization of oncology and dermatology products, which are sold to U.S. and international customers. Our determination that we operate as a single operating segment is consistent with the financial information regularly reviewed by the chief operating decision maker for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting for future periods. Our chief operating decision maker is the Chief Executive Officer.The accounting policies for our single operating segment are the same as those described in the summary of significant accounting policies. Our single operating segment generates revenues from the development and commercialization of oncology and dermatology pharmaceutical products, which are developed by our research and development department, as well as from product royalties, milestone and contract revenues from the out-licensing of our intellectual property to third parties. For our segment, the chief operating decision maker uses net income, that also is reported on the consolidated statements of operations as consolidated net income, to allocate resources (including employees, property, and financial resources), predominantly during the annual budget and forecasting process. The chief operating decision maker also uses consolidated net income, along with non-financial inputs and qualitative information, to evaluate our performance, establish compensation, monitor budget versus actual results, and decide the level of investment in our various operating activities and other capital allocation activities. The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets.

Note 2. RevenuesAs discussed in Note 1, revenues are recognized under guidance within ASC 606. The following table presents our disaggregated revenues for the periods presented (in thousands):For the Years Ended,December 31,202520242023JAKAFI revenues, net$3,092,515 $2,792,107 $2,593,732 OPZELURA revenues, net678,455 508,293 337,864 ICLUSIG revenues, net134,071 114,319 111,623 MINJUVI/MONJUVI revenues, net144,578 119,236 37,057 PEMAZYRE revenues, net86,727 81,748 83,642 NIKTIMVO revenues, net151,636 — — ZYNYZ revenues, net66,351 3,185 1,250 Total product revenues, net4,354,333 3,618,888 3,165,168 JAKAVI product royalty revenues457,729 418,840 367,583 OLUMIANT product royalty revenues144,600 135,572 136,138 TABRECTA product royalty revenues26,702 22,746 17,793 Other product royalty revenues7,878 2,171 1,967 Total product royalty revenues636,909 579,329 523,481 Milestone and contract revenues150,000 43,000 7,000 Total revenues$5,141,242 $4,241,217 $3,695,649 For further information on the MINJUVI/MONJUVI revenues, refer to Note 5 and for further information on our revenue-generating contracts, refer to Note 7.

Note 17. Commitments and ContingenciesCommitmentsIn August 2021, we entered into a revolving credit and guaranty agreement, which was subsequently amended in May 2023 and June 2024 (as amended, the “Credit Agreement”), among the Incyte Corporation, as borrower, subsidiary Incyte Holdings Corporation, as a guarantor, a group of lenders (the “Lenders”), and J.P. Morgan Chase Bank, N.A. as administrative agent. Under the Credit Agreement, the Lenders have committed to provide an unsecured revolving credit facility in an aggregate principal amount of up to $500.0 million. The June 2024 amendment to the Credit Agreement extended the maturity date of the revolving credit facility from August 2024 to June 2027. We may increase the maximum revolving commitments or add one or more incremental term loan facilities to the Credit Agreement, subject to obtaining commitments from any participating lenders and certain other conditions, in an amount not to exceed (1) $250.0 million plus (2) an additional amount, so long as after giving effect to the incurrence of such additional amount, our pro forma consolidated leverage ratio would not exceed 0.25:1.00 above its consolidated leverage ratio in effect immediately prior to giving effect to such increase. Loans under the Credit Agreement will bear interest, at our option, at a per annum rate equal to either (a) a base rate (but not less than 1.00%) plus an applicable rate per annum varying from 0.125% to 0.875% depending on the consolidated leverage ratio or (b) a rate based on the secured overnight financing rate (“SOFR”) plus a credit spread adjustment of 0.10% (but not less than 0.00%), plus an applicable rate per annum varying from 1.125% to 1.875% depending on the consolidated leverage ratio. Commitment fees payable on the undrawn amount range from 0.150% per annum to 0.225% per annum, based on our consolidated leverage ratio. We may, at our option, prepay any borrowings under the Credit Agreement, in whole or in part, at any time and from time to time without premium or penalty, subject to customary exceptions. As of December 31, 2025, we were in compliance with all financial and operational covenants under the terms of the Credit Agreement and there were no outstanding borrowings or letters of credit outstanding.

Note 14. Income TaxesWe are subject to U.S. federal, state and foreign corporate income taxes. The provision for income taxes is based on income before provision for income taxes as follows (in thousands):Year Ended December 31, 202520242023U.S.$1,571,743 $401,760 $1,084,254 Non-U.S.92,708 (85,130)(250,039)Income before provision for income taxes$1,664,451 $316,630 $834,215 Our provision for income taxes consists of the following (in thousands):Year Ended December 31, 202520242023Current:Federal$80,508$322,682$344,407State42,99843,95548,106Foreign6,6102,9313,001130,116369,568395,514Deferred:Federal240,361 (106,549)(139,468)State7,072 21,824(19,625)Foreign252 (828)195 247,685 (85,553)(158,898)Total provision for income taxes$377,801 $284,015 $236,616 Income taxes paid, net of (refunds) received, consisted of the following for the year ended December 31, 2025 (in thousands):Year Ended December 31, 2025Federal$178,100 StateKentucky20,798Tennessee(10,836)All other states19,345Foreign4,771 Total income taxes paid$212,178 Income taxes paid prior to the adoption of ASU 2023-09 for the years ended December 31, 2024 and 2023 were $373.1 million and $378.2 million respectively.A reconciliation of income taxes at the U.S. federal statutory rate to the provision for income taxes is as follows (in thousands):Year Ended December 31,2025$%U.S. federal statutory rate$349,53521.0 %State and local income taxes, net of federal benefit(1)36,3942.2 %Foreign tax effects(12,607)(0.8)%Effects of changes in tax laws or rates enacted in the current period(49,289)(3.0)%Effect of cross-border tax lawsForeign-derived intangible income(34,240)(2.1)%Tax CreditsResearch and development tax credits(59,998)(3.6)%Changes in valuation allowances123,243 7.4%Nontaxable or nondeductible items13,5280.8%Changes in unrecognized tax benefits14,2080.9%Other adjustments(2,973)(0.1)%Effective income tax rate$377,801 22.7%1 State taxes in Kentucky, California, and Delaware made up the majority (greater than 50%) of the tax effect in this category.Our effective tax rate for the year ended December 31, 2025 was higher than the U.S. statutory rate primarily due to state income taxes and an increase in our valuation allowance against certain U.S. deferred tax assets. This was partially offset by tax rate benefits associated with research and development and orphan drug tax credit generations, the foreign derived intangible income deduction and the enactment of U.S. tax legislation discussed below.

Note 5. AcquisitionsTafasitamabOn February 5, 2024, pursuant to a purchase agreement with MorphoSys AG (“MorphoSys”), we acquired exclusive global rights to tafasitamab, a humanized Fc-modified CD19-targeting immunotherapy marketed in the United States as MONJUVI (tafasitamab-cxix) and outside of the United States as MINJUVI (tafasitamab). We previously had the rights to tafasitamab outside of the United States under a January 2020 collaboration and license agreement with MorphoSys, which has now been terminated; therefore, this new agreement gave us all of the remaining global rights to tafasitamab. Under the terms of the purchase agreement, we made a payment of $25.0 million to MorphoSys and gained global development and commercialization rights for tafasitamab along with MONJUVI inventory. Since February 5, 2024, we now recognize revenue and costs for all U.S. commercialization and clinical development and MorphoSys is no longer eligible to receive future milestone, profit split and royalty payments under the now-terminated collaboration and license agreement. We evaluated the set of activities and assets acquired under the purchase agreement and concluded that it did not meet the definition of a business because the acquired set did not include a substantive process. Therefore, the transaction was accounted for as an asset acquisition under U.S. GAAP and the total purchase price, inclusive of direct transaction costs, was allocated to the acquired MONJUVI inventory, in accordance with applicable accounting guidance.Under the purchase agreement, we also became the successor to MorphoSys under its collaboration and license agreement with Xencor, Inc. (“Xencor”), pursuant to which Xencor granted MorphoSys an exclusive, worldwide license, including the right to sublicense under certain conditions, for tafasitamab. During the first quarter of 2025, we paid Xencor a development milestone of $12.5 million for the FDA acceptance of the Biologics License Application filing for the use of tafasitamab for follicular lymphoma, which was recorded in research and development expense. In June 2025, we recorded a $25.0 million regulatory milestone owed to Xencor for the FDA approval of MONJUVI for the treatment of follicular lymphoma. This milestone payment was capitalized as an intangible asset and included in other intangible assets, net on the consolidated balance sheet as of December 31, 2025.

Incyte is committed to maintaining robust oversight and governance of potential cybersecurity risks and to implementing processes and controls that help us identify, assess and manage such risks. To date, we have not experienced a cybersecurity threat or incident that has resulted in a material adverse impact to our business or operations. However, we cannot guarantee that we will not experience such a threat or incident in the future, given the increasing sophistication of those responsible for cybersecurity incidents. While we seek to detect and investigate unauthorized attempts and attacks against our network and to prevent their occurrence where practicable through our internal processes and tools, we remain potentially vulnerable to known or unknown threats. In some instances, we can be unaware of a threat or incident or its magnitude and effects. Further, there is increasing regulation regarding responses to cybersecurity incidents, including reporting to regulators, which could subject us to additional liability and reputational harm. See “Item 1A. Risk Factors” for more information on our cybersecurity risks.We aim to incorporate and align with industry best practices throughout our cybersecurity program. Our cybersecurity strategy focuses on implementing effective and efficient controls, technologies and other processes to assess, identify, manage and mitigate material cybersecurity risks. These include, among other things, having mechanisms in place to detect and monitor unusual network activity, utilizing vulnerability assessment scans and tools, and conducting external and internal penetration tests and security assessments using the National Institute of Standards and Technology Cybersecurity Framework. We engage third party experts to assist with numerous aspects of our cybersecurity program, including vulnerability assessment scans, penetration tests and security assessments. These outside experts are utilized on a rotating basis to enable us to receive multiple viewpoints on the security of our technological resources. Additionally, from time to time, our internal audit function reviews and assesses various aspects of our cybersecurity program.

Note 6. InventoryOur inventory balance consists of the following (in thousands):December 31,20252024Raw materials$27,860 $27,590 API and Work-in-process343,678 331,178 Finished goods71,754 48,431 Total inventory$443,292 $407,199 Inventories, stated at the lower of cost and net realizable value, consist of raw materials, active pharmaceutical ingredients (“API”), work in process, and finished goods, inclusive of freight and inventoriable overhead. At December 31, 2025, $101.1 million of inventory was classified as current on the consolidated balance sheet as we expect this inventory to be consumed for commercial use within the next twelve months. At December 31, 2025, $342.2 million of inventory was classified as non-current on the consolidated balance sheet as we did not expect this inventory to be consumed for commercial use within the next twelve months. We obtain some inventory components from a limited number of suppliers due to technology, availability, price, quality or other considerations. The loss of a supplier, the deterioration of our relationship with a supplier, or any unilateral violation of the contractual terms under which we are supplied components by a supplier could adversely affect our total revenues and gross margins.We capitalize inventory after regulatory approval as the related costs are expected to be recoverable through the commercialization of the product. Costs incurred prior to regulatory approval are recorded as research and development expense in our consolidated statements of operations. At December 31, 2025, inventory with approximately $43.6 million of product costs incurred prior to regulatory approval had not yet been sold. We expect to sell the pre-commercialization inventory over the next 9 months to 31 months and, as a result, cost of product revenues will reflect a lower average per unit cost of materials.

Note 12. Stock CompensationWe recorded $249.3 million, $266.1 million and $215.9 million, respectively, of stock compensation expense for the years ended December 31, 2025, 2024 and 2023. Stock compensation expense within the consolidated statements of operations included research and development expense for the years ended December 31, 2025, 2024 and 2023 of $150.2 million, $161.3 million and $126.7 million, respectively. Stock compensation expense within the consolidated statements of operations also included selling, general and administrative expense for the years ended December 31, 2025, 2024 and 2023 of $95.6 million, $102.5 million and $86.1 million, respectively. Stock compensation expense within the consolidated statements of operations also included cost of product revenues for the years ended December 31, 2025, 2024 and 2023 of $3.5 million, $2.3 million and $3.1 million, respectively.Additionally, as described in Note 5, as part of the Escient acquisition, during the year ended December 31, 2024, we recognized on our consolidated statements of operations related compensation expense of approximately $31.5 million associated with the accelerated vesting for certain Escient stock awards in connection with the acquisition.We utilized the Black-Scholes valuation model for estimating the fair value of the stock options granted, with the following weighted-average assumptions:Employee Stock OptionsFor the year ended December 31, Employee Stock Purchase PlanFor the year ended December 31,202520242023202520242023Average risk-free interest rates4.10 %4.15 %4.01 %3.95 %4.88 %4.72 %Average expected life (in years)5.025.035.050.500.500.50Volatility29 %30 %32 %34 %27 %25 %Weighted-average fair value (in dollars)24.0021.0724.3515.9012.3412.68The risk-free interest rate is derived from the U.S. Federal Reserve rate in effect at the time of grant. The expected life calculation is based on the observed and expected time to the exercise of options by our employees based on historical exercise patterns for similar type options. Expected volatility is based on the historical volatility of our common stock over the period commensurate with the expected life of the options. A dividend yield of zero is assumed based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends.