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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended June 30, 2002
 
or
 
 
¨
 
TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from ____________ to ____________
 
Commission File Number: 0-27488
 
INCYTE GENOMICS, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
     
94-3136539
(State or other jurisdiction of
incorporation or organization)
     
(IRS Employer Identification No.)
 
3160 Porter Drive
Palo Alto, California 94304
(Address of principal executive offices)
 
(650) 855-0555
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x Yes            ¨ No
 
The number of outstanding shares of the registrant’s Common Stock, $0.001 par value, was 67,529,022 as of June 30, 2002.
 

Table of Contents
 
INCYTE GENOMICS, INC.
 
INDEX
 
PART I:    FINANCIAL INFORMATION
   
Page
Item 1
        
       
3
       
4
       
5
       
6
       
7
Item 2
      
15
Item 3
      
36
PART II:    OTHER INFORMATION
     
Item 1
      
37
Item 2
      
38
Item 3
      
38
Item 4
      
38
Item 5
      
39
Item 6
      
39
       
40
       
41
       
42

2

Table of Contents
 
PART I:    FINANCIAL INFORMATION
 
Item 1:    Financial Statements
 
INCYTE GENOMICS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
    
June 30,
2002
     
December 31,
2001*
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
44,193
 
   
$
43,368
 
Marketable securities—available-for-sale
   
 
431,958
 
   
 
464,535
 
Accounts receivable, net (1)
   
 
25,129
 
   
 
54,038
 
Prepaid expenses and other current assets
   
 
26,240
 
   
 
29,280
 
    
  
Total current assets
   
 
527,520
 
   
 
591,221
 
Property and equipment, net
   
 
45,264
 
   
 
47,927
 
Long-term investments (2)
   
 
45,690
 
   
 
45,272
 
Intangible and other assets, net (3)
   
 
27,262
 
   
 
21,139
 
    
  
Total assets
   
$
645,736
 
   
$
705,559
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable (4)
   
$
8,447
 
   
$
7,347
 
Accrued compensation
   
 
14,852
 
   
 
18,812
 
Other accrued liabilities
   
 
18,042
 
   
 
20,934
 
Deferred revenue
   
 
16,857
 
   
 
24,045
 
Accrued restructuring charges
   
 
11,016
 
   
 
14,970
 
    
  
Total current liabilities
   
 
69,214
 
   
 
86,108
 
Convertible subordinated notes
   
 
172,250
 
   
 
179,248
 
    
  
Total liabilities
   
 
241,464
 
   
 
265,356
 
    
  
Stockholders’ equity:
                  
Common stock
   
 
67
 
   
 
67
 
Additional paid-in capital
   
 
712,098
 
   
 
707,412
 
Deferred compensation
   
 
(5,767
)
   
 
(8,127
)
Accumulated other comprehensive income
   
 
(3,005
)
   
 
8,990
 
Accumulated deficit
   
 
(299,121
)
   
 
(268,139
)
    
  
Total stockholders’ equity
   
 
404,272
 
   
 
440,203
 
    
  
Total liabilities and stockholders’ equity
   
$
645,736
 
   
$
705,559
 
    
  
  *
 
The condensed consolidated balance sheet at December 31, 2001 has been derived from the audited financial statements at that date.
(1)
 
Includes receivables from companies considered related parties of $3.1 million and $10.9 million at June 30, 2002 and December 31, 2001, respectively.
(2)
 
Includes investments in companies considered related parties of $26.1 million and $17.3 million at June 30, 2002 and December 31, 2001, respectively.
(3)
 
Includes loans to executive officers of $1.2 million and $0 million at June 30, 2002 and December 31, 2001, respectively.
(4)
 
Includes accounts payable to companies considered related parties of $1.5 million and $0 million at June 30, 2002 and December 31, 2001, respectively.
 
See accompanying notes

3

Table of Contents
 
INCYTE GENOMICS, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
    
Three Months Ended
June 30,
     
Six Months Ended
June 30,
  
    
2002
     
2001
     
2002
     
2001
  
Revenues (1)
   
$
29,059
 
   
$
56,051
 
   
$
58,073
 
   
$
107,172
 
Operating expenses:
                                    
Research and development (2)
   
 
37,717
 
   
 
55,155
 
   
 
71,460
 
   
 
111,114
 
Selling, general and administrative
   
 
12,748
 
   
 
18,591
 
   
 
26,916
 
   
 
35,152
 
Other expenses
   
 
1,371
 
   
 
—  
 
   
 
1,371
 
   
 
—  
 
    
  
  
  
Total operating expenses
   
 
51,836
 
   
 
73,746
 
   
 
99,747
 
   
 
146,266
 
    
  
  
  
Loss from operations
   
 
(22,777
)
   
 
(17,695
)
   
 
(41,674
)
   
 
(39,094
)
Interest and other income (expense), net (3)
   
 
6,601
 
   
 
8,723
 
   
 
14,758
 
   
 
18,637
 
Interest expense
   
 
(2,389
)
   
 
(2,535
)
   
 
(4,927
)
   
 
(5,145
)
Gain on repurchase of convertible subordinated notes
  
 
1,937
 
   
 
—  
 
   
 
1,937
 
   
 
2,386
 
Gain (loss) on certain derivative financial instruments, net
   
 
(613
)
   
 
1,841
 
   
 
(473
)
   
 
1,214
 
    
  
  
  
Loss before income taxes and accounting change
   
 
(17,241
)
   
 
(9,666
)
   
 
(30,379
)
   
 
(22,002
)
Provision for income taxes
   
 
300
 
   
 
225
 
   
 
603
 
   
 
480
 
    
  
  
  
Loss before accounting change
   
 
(17,541
)
   
 
(9,891
)
   
 
(30,982
)
   
 
(22,482
)
Cumulative effect of accounting change
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
2,279
 
    
  
  
  
Net loss
   
$
(17,541
)
   
$
(9,891
)
   
$
(30,982
)
   
$
(20,203
)
    
  
  
  
Per share data:
                                    
Loss before accounting change
   
$
(0.26
)
   
$
(0.15
)
   
$
(0.46
)
   
$
(0.34
)
Cumulative effect of accounting change
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
0.03
 
    
  
  
  
Basic and diluted net loss per share
   
$
(0.26
)
   
$
(0.15
)
   
$
(0.46
)
   
$
(0.31
)
    
  
  
  
Shares used in computing basic and diluted net loss per share
   
 
67,440
 
   
 
66,076
 
   
 
67,154
 
   
 
65,911
 
    
  
  
  
(1)
 
Includes revenues from transactions with companies considered related parties of $0.5 million and $7.0 million for the three months ended June 30, 2002 and 2001, respectively, and revenues of $1.2 million and $12.6 million for the six months ended June 30, 2002 and 2001, respectively.
(2)
 
Includes expenses from transactions with companies considered related parties of $2.7 million and $0 million for the three months ended June 30, 2002 and 2001, respectively, and expenses of $5.5 million and $0 million for the six months ended June 30, 2002 and 2001, respectively.
(3)
 
Includes a gain of $0.8 million on conversion of a convertible note from a related party into preferred stock of the related party for the six months ended June 30, 2002.
 
See accompanying notes

4

Table of Contents
 
INCYTE GENOMICS, INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
 
    
Three Months Ended
June 30,
     
Six Months Ended
June 30,
  
    
2002
     
2001
     
2002
     
2001
  
Net loss
   
$
(17,541
)
   
$
(9,891
)
   
$
(30,982
)
   
$
(20,203
)
Other comprehensive loss, net of taxes:
                                    
Unrealized losses on marketable securities
   
 
(2,188
)
   
 
(1,940
)
   
 
(11,747
)
   
 
(5,459
)
Foreign currency translation adjustments
   
 
(69
)
   
 
(25
)
   
 
(248
)
   
 
(13
)
    
  
  
  
Other comprehensive income loss
   
 
(2,257
)
   
 
(1,965
)
   
 
(11,995
)
   
 
(5,472
)
    
  
  
  
Comprehensive loss
   
$
(19,798
)
   
$
(11,856
)
   
$
(42,977
)
   
$
(25,675
)
    
  
  
  
 
See accompanying notes

5