Incyte Genomics Reports Record Revenues for Third Quarter 2001 Announces Restructuring to Focus on Its Core Information Business and Leverage Its Industry-Leading Intellectual Property Portfolio in Licensing and Therapeutic Discovery While Improving Overall Operating Performance Palo Alto, CA October 25, 2001 - Incyte Genomics, Inc. (Nasdaq: INCY), the leading genomic information company, today reported consolidated financial results for the three and nine months ended September 30, 2001. Incyte also announced a restructuring that includes plans to exit certain unprofitable custom genomics operations and reductions in its staff to focus on core operations. Revenues for the quarter increased 10% to $57.3 million from $52.0 million for the comparable quarter in 2000. This brought the revenues for the nine-month period ending September 30, 2001 to $164.5 million, a 19% increase over revenues of $138.8 million for the same nine-month period in 2000. "Consistent with our strategy to focus on the increasing value of our unique combination of intellectual property and genomic information content, we announced some exciting collaborations during this quarter that include the antibody licensing deal with Genentech, the therapeutic antibody validation efforts with Medarex and several other licensing and subscription transactions," said Roy A. Whitfield, Chief Executive Officer of Incyte. "The various collaborations demonstrate an increasing demand for our intellectual property and content while building our internal therapeutic discovery programs." Third-quarter revenues from Database and Partnership programs increased 13% to $45.2 million from $39.8 million for the same quarter in 2000. Third-quarter revenues for Custom Genomics programs were $12.2 million, consistent with the revenue level for the same quarter in 2000. Incyte reported a net loss for the quarter of $17.8 million, or $0.27 per diluted share, compared with a net loss of $7.6 million, or $0.12 per diluted share, for the same quarter in 2000. Non-cash charges associated with goodwill amortization accounted for $3.0 million of the 2001 net loss. Also included in the results for the third quarter of 2001 were: An expense of $1.1 million related to a decline in the value of warrants held in other companies during the quarter. A loss of $5.8 million from the divestiture of the transgenics product line. Included in "Interest income and other income/(expense), net" is an impairment loss of $5.3 million related to the write down of long term investments. For the nine months ended September 30, 2001, Incyte reported a net loss of $38.0 million, or $0.58 per diluted share, compared with $22.4 million, or $0.36 per diluted share, for the same period in 2000. "Although the total loss for the quarter was $17.8 million, it included $3.0 million associated with goodwill amortization, $5.8 million from the loss related to the divestiture of the transgenics operations, $5.3 million from the write down of our long term investments and $1.1 million resulting from the adoption of SFAS 133," said John Vuko, Chief Financial Officer of Incyte. "Excluding these items, the net loss for the quarter was $2.6 million. This demonstrates the strength of the core database and partnership business considering that it is supporting the ongoing investment in our internal therapeutic discovery and full-length gene programs." "We remain very pleased with the strength of our core database and partnership businesses. Our recent results continue to validate the great value in Incyte's areas of key competitive advantage, which include information and intellectual property rights relating to genes, proteins and antibodies," said Mr. Whitfield. "However, as we have indicated in the last two earnings conference calls, the markets for microarrays, public domain clones, transgenics and contract-sequencing services, where success is less dependent on our key competitive advantages, have been marked by increasing competition and margin erosion that appear to be a permanent trend. As a result, the custom genomics operations no longer provide a strategic benefit to our core database and intellectual property business and have increasingly been diluting our focus and our resources while contributing to our operating losses. Thus, we made the hard decision to divest or restructure these non-core product lines to enable us to more fully capitalize on the opportunities available to our core businesses." "Following the restructure, we will continue to participate in the proprietary clone market," said Mr. Whitfield. "With respect to the microarray market, we expect to benefit from the numerous strategic collaborations with microarray manufacturers that rely on our extensive gene content and currently provides a growing royalty stream." Today, many of the world's microarray manufacturers have recognized the value of the Incyte LifeSeq Gold gene content and have entered into strategic collaborations with Incyte to standardize their product lines through the inclusion of this information. These collaborations allow Incyte to benefit from the sales of microarrays without having to be a manufacture of them. The typical microarray collaboration allows Incyte to earn a royalty on each microarray sold. In addition, users of Agilent, Motorola and other microarrays are linked by the Internet back to related Incyte content, creating potential intellectual property licensing opportunities surrounding the genes being analyzed. These strategic benefits are achieved at no cost to Incyte with significant upside revenue potential from royalties and related content and intellectual property licensed over the Internet. In addition to the discontinuation and restructuring of Incyte's custom genomics product lines, which will result in the closure of Incyte's facilities in Fremont, California and St. Louis, Missouri, Incyte also will make infrastructure and other related personnel reductions at its other locations. The company also proposes to discontinue, by year-end, its internal program on therapeutic single nucleotide polymorphisms (SNP) discovery, which has been concentrated in Cambridge, UK. Although the SNP efforts have been successful at generating the valuable intellectual property to complete Incyte patent filings and support internal target validation programs, Incyte proposes to discontinue the program to permit the company to focus its resources on higher priority programs. Financial Impact and Q4 2001 Guidance Incyte will be reducing its worldwide workforce by approximately 400 employees. To recognize the costs associated with these actions, in addition to the charge of $5.8 million recorded in the third quarter associated with the transgenics transaction, the company anticipates recognizing an additional non-recurring charge that could exceed $80 million in the fourth quarter. Approximately 25% of the fourth-quarter costs are anticipated to be cash related and the remainder is primarily associated with the write-off of assets. In addition, revenue guidance for Fourth quarter of Fiscal 2001 will be in the range of $50-55 million and will be predominantly database and partnership revenues. Net loss for the quarter, without accounting for restructuring charges, is anticipated to be in the range of $10-15 million. Impact of September 11, 2001 Terrorist Events "The tragic events of September 11 have affected us all. Although our immediate business has not been seriously affected, the business has been impacted in another way," said Mr. Whitfield. "As we have disclosed in past conference calls, we have had an aggressive search underway for a president. Recently, a strong, European based candidate for president, with whom we had negotiated the terms of an employment agreement, was extended an offer. As a result of the September 11 events, the candidate declined the offer for personal and family reasons. Although disappointing, the pool of talent we have had access to has been tremendous and has provided numerous other strong candidates." Company management will host a conference call on Thursday, October 25, 2001 at 9:30 a.m. PDT to discuss the company's results. The dial-in number for the conference call in the U.S will be (877) 692-2588 and the International number will be (973) 872-3462. A replay of the conference call will be available through October 31, 2001 (12:00 midnight PDT). The replay dial-in number for U.S. and International callers will be (973) 341-3080 and the PIN number access code will be 2914135. Incyte Genomics, Inc. has developed the leading integrated platform of genomic technologies designed to aid in the understanding of the molecular basis of disease. Incyte develops and markets genomic databases and partnership programs, and related reagents. These products, programs and services assist pharmaceutical and biotechnology researchers with all phases of drug discovery and development including gene discovery, understanding disease pathways, identifying new disease targets and the discovery and correlation of gene sequence variation to disease. In addition, Incyte has the largest portfolio of issued United States patents covering human full-length genes and the proteins they encode and is leveraging its intellectual property position to be a leader in therapeutic discoveries. For more information, visit Incyte's web site at http://www.incyte.com. Except for the historical information contained herein, the matters set forth in this press release, including without limitation statements as to the Company's plans to enhance, and to further capitalize on, its core business through the announced restructuring, the increasing demand for Incyte's intellectual property and content, the impact of Incyte's collaborations with other third parties in building the Company's therapeutic discovery programs, market trends, the benefits to the Company to be derived from its strategic collaborations, including the potential royalty, content and intellectual property licensing opportunities for the Company from its microarray collaborations, the number of job losses to be incurred through the Company's restructuring, guidance as to the expected non-recurring charge for the fourth quarter of 2001, and the components thereof, and as to revenues and net loss for the fourth quarter of 2001, the Company's progress in its search for a new president, the ability of Incyte's products and services to enhance the research efforts of its customers and Incyte's ability to leverage its intellectual property position to become a leader in therapeutic discoveries, are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of factors that may cause results to differ, including Incyte's ability to obtain and retain customers, the impact of competition and technological advances, the effectiveness and extent of utilization of databases in pharmaceutical research and development, further changes in the Company's business plan, finalization of the specific list of assets to be written down, the number of employees entitled to receive retention benefits, and other costs to be recognized in connection with the restructuring, changes in consumer demand for the Company's products, the success of the Company in negotiating future licensing and collaborative transactions, and Incyte's ability to obtain patent protection for its discoveries and to continue to be effective in expanding its patent coverage and to grow its intellectual property portfolio, see Incyte's SEC reports, including its Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. Incyte disclaims any intent or obligation to update these forward-looking statements. - Tables Follow - ###