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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 September 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 to be filed 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
 
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
 
x    Yes        ¨    No
 
The number of outstanding shares of the registrant’s Common Stock, $0.001 par value, was 67,930,212 as of September 30, 2002.

Table of Contents
INCYTE GENOMICS, INC.
 
INDEX
 
    
Page
PART I: FINANCIAL INFORMATION
     
Item 1
      
3
       
3
       
4
       
5
       
6
       
7
Item 2
      
15
Item 3
      
35
Item 4
      
35
PART II: OTHER INFORMATION
     
Item 1
      
35
Item 6
      
36
       
37
       
38
       
40
       
41

2

Table of Contents
 
PART I:    FINANCIAL INFORMATION
 
Item 1:    Financial Statements
 
INCYTE GENOMICS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
    
September 30, 2002
     
December 31, 2001*
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
15,736
 
   
$
43,368
 
Marketable securities—available-for-sale
   
 
437,093
 
   
 
464,535
 
Accounts receivable, net (1)
   
 
14,780
 
   
 
54,038
 
Prepaid expenses and other current assets (2)
   
 
21,700
 
   
 
29,280
 
    
  
Total current assets
   
 
489,309
 
   
 
591,221
 
Property and equipment, net
   
 
44,422
 
   
 
47,927
 
Long-term investments (3)
   
 
44,644
 
   
 
45,272
 
Intangible and other assets, net (4)
   
 
24,679
 
   
 
21,139
 
    
  
Total assets
   
$
603,054
 
   
$
705,559
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable (5)
   
$
7,216
 
   
$
7,347
 
Accrued compensation
   
 
13,095
 
   
 
18,812
 
Accrued and other current liabilities (6)
   
 
16,480
 
   
 
20,934
 
Deferred revenue
   
 
15,516
 
   
 
24,045
 
Accrued restructuring charges
   
 
8,122
 
   
 
14,970
 
    
  
Total current liabilities
   
 
60,429
 
   
 
86,108
 
Convertible subordinated notes
   
 
172,143
 
   
 
179,248
 
    
  
Total liabilities
   
 
232,572
 
   
 
265,356
 
    
  
Stockholders’ equity:
                  
Common stock
   
 
68
 
   
 
67
 
Additional paid-in capital
   
 
712,720
 
   
 
707,412
 
Deferred compensation
   
 
(4,038
)
   
 
(8,127
)
Accumulated other comprehensive income (loss)
   
 
(736
)
   
 
8,990
 
Accumulated deficit
   
 
(337,532
)
   
 
(268,139
)
    
  
Total stockholders’ equity
   
 
370,482
 
   
 
440,203
 
    
  
Total liabilities and stockholders’ equity
   
$
603,054
 
   
$
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 under SFAS 57 of $1.2 million and $10.9 million at September 30, 2002 and December 31, 2001, respectively.
(2)
 
Includes loan receivable from a company considered a related party under SFAS 57 of $1.5 million and $0 million at September 30, 2002 and December 31, 2001, respectively, and prepaid expenses of $0.7 million and $0.9 million at September 30, 2002 and December 31, 2001, respectively.
(3)
 
Includes investments in companies considered related parties under SFAS 57 of $26.1 million and $17.3 million at September 30, 2002 and December 31, 2001, respectively.
(4)
 
Includes loans to executive officers of $1.2 million and $0 million at September 30, 2002 and December 31, 2001, respectively. See Note 4.
(5)
 
Includes accounts payable to companies considered related parties under SFAS 57 of $1.5 million and $0 million at September 30, 2002 and December 31, 2001, respectively.
(6)
 
Includes accruals of payments to companies considered related parties under SFAS 57 of $5.0 million and $0 million at September 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 September 30,
     
Nine Months Ended September 30,
  
    
2002
     
2001
     
2002
     
2001
  
Revenues (1)
   
$
22,390
 
   
$
57,319
 
   
$
80,463
 
   
$
164,491
 
Operating expenses:
                                    
Research and development (2)
   
 
47,406
 
   
 
50,662
 
   
 
118,761
 
   
 
161,776
 
Selling, general and administrative
   
 
12,147
 
   
 
17,886
 
   
 
39,063
 
   
 
53,038
 
Loss on sale of assets
   
 
9
 
   
 
5,777
 
   
 
114
 
   
 
5,777
 
Other expenses
   
 
292
 
   
 
—  
 
   
 
1,663
 
   
 
—  
 
    
  
  
  
Total operating expenses
   
 
59,854
 
   
 
74,325
 
   
 
159,601
 
   
 
220,591
 
    
  
  
  
Loss from operations
   
 
(37,464
)
   
 
(17,006
)
   
 
(79,138
)
   
 
(56,100
)
Interest and other income, net (3)
   
 
1,648
 
   
 
3,003
 
   
 
16,406
 
   
 
21,640
 
Interest expense
   
 
(2,450
)
   
 
(2,547
)
   
 
(7,377
)
   
 
(7,692
)
Gain on repurchase of convertible subordinated notes
   
 
—  
 
   
 
—  
 
   
 
1,937
 
   
 
2,386
 
Gain (loss) on certain derivative financial instruments, net
   
 
155
 
   
 
(1,052
)
   
 
(318
)
   
 
162
 
    
  
  
  
Loss before income taxes and accounting change
   
 
(38,111
)
   
 
(17,602
)
   
 
(68,490
)
   
 
(39,604
)
Provision for income taxes
   
 
300
 
   
 
225
 
   
 
903
 
   
 
705
 
    
  
  
  
Loss before accounting change
   
 
(38,411
)
   
 
(17,827
)
   
 
(69,393
)
   
 
(40,309
)
Cumulative effect of accounting change
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
2,279
 
    
  
  
  
Net loss
   
$
(38,411
)
   
$
(17,827
)
   
$
(69,393
)
   
$
(38,030
)
    
  
  
  
Basic and diluted net loss per share:
                                    
Loss before accounting change
   
$
(0.57
)
   
$
(0.27
)
   
$
(1.03
)
   
$
(0.61
)
Cumulative effect of accounting change
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
0.03
 
    
  
  
  
Basic and diluted net loss per share
   
$
(0.57
)
   
$
(0.27
)
   
$
(1.03
)
   
$
(0.58
)
    
  
  
  
Shares used in computing basic and diluted net loss per share
   
 
67,740
 
   
 
66,370
 
   
 
67,348
 
   
 
66,064
 
    
  
  
  
(1)
 
Includes revenues from transactions with companies considered related parties under SFAS 57 of $0.2 million and $11.0 million for the three months ended September 30, 2002 and 2001, respectively, and revenues of $1.5 million and $23.6 million for the nine months ended September 30, 2002 and 2001, respectively.
(2)
 
Includes expenses from transactions with companies considered related parties under SFAS 57 of $5.1 million and $0.3 million for the three months ended September 30, 2002 and 2001, respectively, and expenses of $10.6 million and $0.3 million for the nine months ended September 30, 2002 and 2001, respectively.
(3)
 
Includes a gain of $0.8 million on conversion of a convertible note from a company considered a related party under SFAS 57 into preferred stock of the related party for the nine months ended September 30, 2002.
 
See accompanying notes

4

Table of Contents
 
INCYTE GENOMICS, INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
 
    
Three Months Ended September 30,
     
Nine Months Ended September 30,
  
    
2002
     
2001
     
2002
     
2001
  
Net loss
   
$
(38,411
)
   
$
(17,827
)
   
$
(69,393
)
   
$
(38,030
)
Other comprehensive income (loss), net of taxes:
                                    
Unrealized gains (losses) on marketable securities
   
 
2,257
 
   
 
(4,107
)
   
 
(9,490
)
   
 
(9,566
)
Foreign currency translation adjustments
   
 
12
 
   
 
48
 
   
 
(236
)
   
 
35
 
    
  
  
  
Other comprehensive income (loss)
   
 
2,269
 
   
 
(4,059
)
   
 
(9,726
)
   
 
(9,531
)