Incyte Announces $88 Million Expense Reduction, Launch of its First Drug Discovery Program and Third Quarter 2002 Financial Results PALO ALTO, CA, November 12, 2002 - Incyte Genomics, Inc. (Nasdaq: INCY) today announced a program to eliminate $88 million of expenses, the launch of its first fully-staffed drug discovery program and its third quarter financial results. Incyte plans to eliminate approximately 37 percent of its 700-person work force immediately and consolidate its Palo Alto, California office and research facilities. The company intends to take a one-time charge of up to $40 million during the fourth quarter of 2002 as a result of the expense reduction program. Incyte's drug discovery group has launched its first fully-staffed program and is moving rapidly to identify antagonists of a chemokine receptor, which have the potential to treat inflammatory diseases. Incyte's third quarter loss includes approximately $8 million of prepaid license and software write-offs. The company projects fourth quarter revenues of $20-25 million and a net loss, including one-time charges for the expense reduction program, of $63-68 million. The company is proceeding with its stock repurchase program and so far has bought back approximately 500,000 shares. Paul Friedman, M.D., Incyte's chief executive officer, stated: "After speaking with customers, reviewing our business operations and finalizing the three-year development plan for our information activities, we have concluded that we can substantially reduce costs without compromising our products and services. By eliminating excess capacity and managing the information product line more efficiently, we believe we can continue to offer our customers innovative database products and licensing opportunities and maintain a rapid pace of progress in drug discovery. "Our commitment to innovation in information products and drug discovery is reflected in several recent accomplishments: the successful roll out of the LifeSeq Foundation database three-year content plan; the introduction of the BioKnowledge Retriever database management tool to subscribers of Incyte's BioKnowledge Library; the launch of our first fully-staffed drug discovery program; and the agreement we announced this morning to acquire Maxia Pharmaceuticals. "This has been a challenging but productive year for Incyte. I believe we are on the right path and that we will succeed in creating superior information products for our customers, effective new medicines for patients and significant and lasting value for our shareholders in the years ahead." Spending and Staff Reductions Incyte plans to eliminate approximately $88 million of annual expenses beginning in 2003, through a combination of decreased spending, job reductions and office consolidations. This does not affect the company's plan to expand its drug discovery efforts. Effective immediately, the company is eliminating approximately 37 percent of its 700-person workforce at its offices in Palo Alto, California, Beverly Massachusetts and Cambridge, England. In addition, the company plans to consolidate four of its office and research facilities in Palo Alto, California into two locations to reduce overhead. As a result of these actions, the company expects to incur a charge of up to $40 million during the fourth quarter of 2002. Drug Discovery Programs Incyte has launched its first fully-staffed drug discovery program. The company's drug discovery group is working to develop orally active small molecules that antagonize the interaction of a specific chemokine with its receptor. Antagonists of this chemokine may be useful in treating chronic inflammation associated with rheumatoid arthritis and other chronic inflammatory diseases. Robert Stein, M.D., Ph.D., president and chief scientific officer of Incyte, stated: "Although we have recently launched this program, we have quickly established the relevant biological assays and have already identified attractive proprietary lead compounds. These are currently being optimized, and we anticipate choosing a candidate for development from this program in 2003." Incyte now has approximately 80 scientists working at its Newark, Delaware facility to discover novel small molecules to treat cancer, inflammatory diseases and other medical conditions. The company plans to hire 80 to 100 additional scientists during the next year to support its drug discovery programs. Third Quarter Results The company had total third quarter 2002 revenues of $22.4 million, of which $21.9 million was associated with the information product line (including database subscriptions, partnership programs and licensing activities), compared to total revenues of $57.3 million and information product line revenues of $45.2 million for the same period last year. The decrease in total revenues for the quarter resulted from the discontinuation of the custom genomics product lines that had generated revenues of $12.1 million during the third quarter of 2001, and lower information product line revenue from a slowdown in spending by database subscribers and licensors of Incyte's intellectual property, as reported by the company in September 2002. The company's net loss for the quarter ended September 30, 2002, before approximately $8 million of asset write-offs, was $30.4 million or $0.45 per share. The $8 million includes prepaid license and software write-offs that relate to assets that have limited value to Incyte. Including the $8 million, the net loss for the third quarter was $38.4 million, or $0.57 per share, compared to $17.8 million, or $0.27 per share, for the same quarter in 2001. Research and development expenses for the quarter ended September 30, 2002 were $47.3 million versus $47.7 million for the same quarter in 2001. Included in the third quarter expenses for 2002 are approximately $8 million of prepaid license and software write-offs and approximately $3 million of accelerated collaboration expenses reflecting the progress that has been made with one of our discovery and development collaborators. Selling, general and administrative expenses during the third quarter of 2002 decreased 32 percent to $12.1 million compared to $17.9 million for the same period in 2001. This reduction in expenses primarily reflects staff reductions, lower litigation costs and the closing of certain facilities as a result of the discontinuation of certain product lines in the fourth quarter of 2001. As of September 30, 2002, the company had $452.8 million in cash and marketable securities, compared to $476.2 million as of June 30, 2002. The company expects to end the year with $410 to $420 million in cash and marketable securities. Conference Call Information Incyte's senior management will host a conference call on Tuesday, November 12, 2002 at 2:00 p.m. PST to discuss the company's third quarter 2002 financial results and recent activities. The domestic dial in number for the conference call will be 800-473-6123 and the international dial in number will be 973-582-2710. A replay of the conference call will be available through November 19, 2002 (12:00 midnight PST). The replay dial in number for both U.S. and International callers will be 973-341-3080 and the PIN number access code will be 3568672. A webcast will be distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at www.companyboardroom.com or by visiting any of the investor sites in CCBN's Individual Investor Network such as America Online's Personal Finance Channel. Institutional investors can access the call via CCBN's password protected event management site, StreetEvents (www.streetevents.com). About Incyte Incyte is a drug discovery company that develops proprietary genomic information and applies its expertise in medicinal chemistry and molecular, cellular and in vivo biology to the discovery of novel small molecule and protein therapeutics. Incyte has created the largest commercial portfolio of issued U.S. patents covering human, full-length genes and the proteins they encode, and markets this information, as well as genomic and proteomic information, to many of the world's leading pharmaceutical and biotechnology companies and academic research centers. The company has assembled an experienced and talented drug discovery team that is identifying potential new drug therapies for cancer, inflammatory diseases and other medical conditions. Incyte's executive offices and research and development facilities are located in Palo Alto, California, Beverly, Massachusetts and Newark, Delaware. For more information, please visit Incyte's web site at http://www.incyte.com. Forward-Looking Statements Except for the historical information contained herein, the matters set forth in this press release, including without limitation statements as to our plans to reduce expenditures in 2003 and the expected spending reductions, workforce reductions and office consolidations; the percentage and number of job losses to be incurred through our expense reduction program; the amount of the one-time charge to be incurred in the fourth quarter of 2002 and the timing of such charge; the timing of the identification of any candidate for development from the Company's first fully-staffed drug discovery program; guidance for revenues and net loss for the fourth quarter of 2002; Incyte's ability to continue to deliver information products and intellectual property licensing opportunities to customers and to maintain its drug discovery progress while reducing headcount and expenses; Incyte's anticipated success in creating superior information products and new medicines and increasing shareholder value; Incyte's hiring plans for 2003; the company's expected year-end balance for cash and short-term investments 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, including the number of employees entitled to receive severance benefits or other costs to be recognized in connection with the expense reduction program; our ability to consolidate our facilities and to exit and close facilities upon anticipated timelines; the diversion of efforts of management and other key employees; the ability to operate Incyte's information product line successfully with reduced headcount and expenditures; the impact of competition and alternative technologies, processes and approaches on Incyte's business; Incyte's ability to compete against competitors that may have greater financial or other resources; the ability to maintain capital and to raise additional capital necessary to fund Incyte's business operations; competition to recruit employees with the same skill sets and in the same geographic regions desired by Incyte; unexpected cash requirements; changes in customer demand for Incyte's products and services; economic factors that may impact Incyte's business and product offerings and its stock price generally; changes in Incyte's business plan; Incyte's ability to obtain patent protection for its discoveries and to continue to be effective in expanding its patent coverage; changes in patent laws; and other risks detailed from time to time in Incyte's SEC reports, including its Quarterly Report on Form 10-Q for the Quarter ended June 30, 2002. Incyte disclaims any intent or obligation to update these forward-looking statements. - Tables Follow -