Neurocrine Biosciences, Inc. (NASDAQ:NBIX) Q2 2022 Earnings Conference Call August 4, 2022 4:30 PM ET Company Participants Todd Tushla - Vice President of Investor Relations Kevin Gorman - Chief Executive Officer Matt Abernethy - Chief Financial Officer Eiry Roberts - Chief Medical Officer Eric Benevich - Chief Commercial Officer Kyle Gano - Chief Business Development and Strategy Officer Conference Call Participants Phil Nadeau - Cowen & Company Leonid Timashev - RBC Capital Markets Paul Matteis - Stifel T ...

Financial Performance - INGREZZA net product sales for Q2 2022 reached $349.6 million, a 32% increase from $264.8 million in Q2 2021[92]. - Total net product sales for the first half of 2022 were $657.0 million, up 32% from $497.8 million in the same period last year[92]. - Collaboration revenues for Q2 2022 totaled $26.2 million, compared to $22.1 million in Q2 2021, driven by milestone revenue from MTPC's DYSVAL launch[93]. - For the three months ended June 30, 2022, the net loss was $16.9 million compared to a net income of $42.3 million for the same period in 2021, primarily due to a $70.0 million loss on extinguishment related to convertible senior notes repurchase[107]. Expenses and Losses - Total research and development expenses for the first half of 2022 were $238.1 million, significantly higher than $148.0 million in the same period last year[98]. - Sales, general and administrative expenses for Q2 2022 were $182.8 million, up from $143.2 million in Q2 2021, reflecting increased investment in commercial initiatives[104]. - The company recognized a $70.0 million loss on extinguishment related to the repurchase of $210.8 million of convertible senior notes in Q2 2022[105]. Cash Flow and Capital - Total cash, cash equivalents, and marketable securities decreased to $1,053.5 million as of June 30, 2022, down from $1,272.0 million as of December 31, 2021[109]. - Cash flows from operating activities for the six months ended June 30, 2022, were $97.6 million, a decrease from $190.5 million in the same period of 2021[110]. - Cash flows from financing activities included the repurchase of $210.8 million aggregate principal amount of convertible senior notes for $279.0 million in cash during the second quarter of 2022[113]. - The company anticipates significant future capital requirements, including potential payments of up to $10.8 billion upon achieving certain event-based milestones related to collaboration and license agreements[115]. Working Capital and Debt - Total working capital as of June 30, 2022, was $733.6 million, slightly up from $727.0 million as of December 31, 2021[109]. - Total debt outstanding decreased by $210.8 million to $170.4 million after the repurchase of approximately 55% of total debt in Q2 2022[89]. Legal Matters - The company filed multiple lawsuits against Teva Pharmaceuticals and its affiliates, as well as Zydus Pharmaceuticals and others, in the United States District Court for the District of Delaware, with trials scheduled for January 2, 2024[131][132][133]. - The lawsuits aim to prevent the sale of generic versions of INGREZZA, indicating the company's focus on protecting its intellectual property[132]. - The company believes that none of the ongoing legal claims will have a material adverse effect on its business or financial condition[134]. Research and Development - The FDA accepted the IND application for NBI-1117568 for schizophrenia, with a $30.0 million milestone expense anticipated in Q3 2022[89]. - The company suspended clinical trial activities in Russia and Ukraine due to the ongoing conflict, impacting certain development efforts[90]. Investments and Facilities - The company is investing in new campus facilities and scientific equipment, with a $7.6 million increase in capital expenditures compared to the previous year[112]. - The company has secured a lease agreement for a new four-building campus facility in San Diego, California, which will serve as its corporate headquarters upon completion[119]. Accounts Receivable - The company reported an increase in accounts receivable due to extended customer payment terms attributed to the expansion of its distribution network[111].

| --- | --- | --- | --- | --- | |---------------------------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | Advancing | | | | | | Life-Changing Discoveries in Neuroscience | | | | | | Q1 2022 Corporate Presentation | | | | | | May 4, 2022 Nasdaq: NBIX | | | | | | | | | | | Safe Harbor Statement and Non-GAAP Financial Measures 2 In addition to historical facts, this presentation contains forward-looking statements that involve a number of risks and uncert ...

Financial Data and Key Metrics Changes - Neurocrine Biosciences reported strong Q1 performance with INGREZZA sales totaling $303 million, marking a significant achievement in a typically challenging quarter [11] - The company exited Q1 with a record number of new patients, reflecting an improving external environment and benefits from commercial initiatives [12] - The gross to net guidance for Q1 was around $5,300 per script, with an expectation of $5,400 per TRx for the full year, indicating a 2% headwind in Q1 [30] Business Line Data and Key Metrics Changes - The INGREZZA franchise experienced over 30% year-over-year growth in Q1, driven by improved healthcare professional access and effective execution by field teams [14] - The company expanded its sales force by 140 representatives, which is expected to benefit growth in the latter half of the year [14][15] - The management noted that while Q2 is expected to show sequential growth, the percentage increase may be lower than in previous years due to the strong performance in Q1 [12][15] Market Data and Key Metrics Changes - The company highlighted that approximately 85% of the estimated 600,000 people living with tardive dyskinesia (TD) remain undiagnosed or untreated, indicating a significant market opportunity [17] - The external environment has improved, but challenges remain, particularly in adapting to remote healthcare delivery [7] Company Strategy and Development Direction - Neurocrine is focused on expanding the INGREZZA franchise and advancing its clinical pipeline, including filing a supplemental NDA for INGREZZA in Huntington's disease [8][20] - The company is committed to increasing awareness and treatment of TD through significant commercial investments and an expanded sales force [17] - The management emphasized the importance of adapting to the evolving healthcare landscape, including the integration of telemedicine [56] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the trajectory of INGREZZA and the ability to treat more TD patients, despite the challenges posed by the conflict in Ukraine [110] - The company is looking forward to a wealth of data readouts in 2023, indicating a strong pipeline and growth potential [111] Other Important Information - The company received regulatory approval for valbenazine in Japan for the treatment of tardive dyskinesia, which is expected to support its launch plans [20] - The humanitarian crisis in Ukraine has impacted some clinical programs, but the company is implementing contingency plans to mitigate these effects [24][110] Q&A Session Summary Question: Can you provide context around compliance improvement this quarter? - Management noted a less significant decline in refill rates from Q4 to Q1, attributed to improved management of the reauthorization process and a better access environment [30] Question: Was there any impact from inventory during the quarter? - Management reported no significant swings in inventory and described the quarter as clean from that regard [32] Question: How is the split between psychiatrists and neurologists in terms of scripts? - Historically, the split has been about 80% psychiatry and 20% neurology, with efforts to better penetrate the neurology segment through an expanded sales team [35] Question: What are the plans for ONGENTYS given its commercial performance? - Management acknowledged lower-than-expected sales for ONGENTYS but emphasized positive feedback from prescribers and plans to continue focusing on neurologists [41][44] Question: What are the key drivers for new patient starts? - The company identified increased awareness, improved healthcare professional access, and direct-to-consumer campaigns as key drivers for new patient starts [71] Question: How does the company differentiate its M4 program from competitors? - The M4 program is a highly selective orthosteric agonist, with potential advantages over competitors, and the company is considering a range of other indications [107]

Part I. Financial Information This section presents the unaudited condensed consolidated financial statements and their accompanying notes [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flows [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific reporting dates Condensed Consolidated Balance Sheets | Metric | March 31, 2022 (in millions) | December 31, 2021 (in millions) | Change (in millions) | | :----- | :--------------------------- | :------------------------------ | :------------------- | | Total Assets | $2,144.5 | $2,072.5 | +$72.0 | | Total Liabilities | $753.4 | $698.5 | +$54.9 | | Total Stockholders' Equity | $1,391.1 | $1,374.0 | +$17.1 | | Cash and cash equivalents | $270.2 | $340.8 | -$70.6 | | Accounts receivable | $263.5 | $185.5 | +$78.0 | | Equity securities | $91.3 | $63.7 | +$27.6 | | Convertible senior notes | $377.7 | $335.1 | +$42.6 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) This table details the company's revenues, expenses, and net income for the three-month periods Condensed Consolidated Statements of Income and Comprehensive Income | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | YoY Change (in millions) | YoY Growth | | :----- | :---------------------------------------------- | :---------------------------------------------- | :----------------------- | :--------- | | Total Revenues | $310.6 | $236.6 | +$74.0 | 31.3% | | Net Product Sales | $305.0 | $231.0 | +$74.0 | 32.0% | | Total Operating Expenses | $307.5 | $205.1 | +$102.4 | 49.9% | | Operating Income | $3.1 | $31.5 | -$28.4 | -90.2% | | Net Income | $13.9 | $32.1 | -$18.2 | -56.7% | | Basic EPS | $0.15 | $0.34 | -$0.19 | -55.9% | | Diluted EPS | $0.14 | $0.33 | -$0.19 | -57.6% | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in the company's equity, including net income and stock-based compensation Condensed Consolidated Statements of Stockholders' Equity | Metric | December 31, 2021 (in millions) | March 31, 2022 (in millions) | | :----- | :------------------------------ | :--------------------------- | | Total Stockholders' Equity | $1,374.0 | $1,391.1 | | Net income | — | $13.9 | | Unrealized loss on debt securities available-for-sale, net of tax | — | $(7.6) | | Cumulative-effect adjustment due to adoption of ASU 2020-06 | — | $(32.3) | | Stock-based compensation expense | — | $37.0 | | Issuances of common stock under stock plans | — | $6.1 | - Adoption of ASU 2020-06 on January 1, 2022, resulted in a cumulative-effect adjustment that reduced additional paid-in capital by **$106.8 million** and accumulated deficit by **$74.5 million**, while increasing the carrying amount of 2024 Notes by **$42.2 million** and reducing deferred tax liabilities by **$9.9 million**[20](index=20&type=chunk)[79](index=79&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details cash flows from operating, investing, and financing activities for the specified periods Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | YoY Change (in millions) | | :----- | :---------------------------------------------- | :---------------------------------------------- | :----------------------- | | Net cash (used in) provided by operating activities | $(40.5) | $87.3 | -$127.8 | | Net cash (used in) provided by investing activities | $(31.6) | $63.1 | -$94.7 | | Net cash provided by financing activities | $6.1 | $15.1 | -$9.0 | | Change in cash, cash equivalents and restricted cash | $(66.0) | $165.5 | -$231.5 | | Cash, cash equivalents and restricted cash at end of period | $278.0 | $355.8 | -$77.8 | - Net cash used in operating activities for Q1 2022 primarily reflected increased investment in ongoing commercial initiatives (TD Spotlight advertising, expanded salesforce) and the clinical portfolio, alongside an increase in accounts receivable due to extended customer payment terms[115](index=115&type=chunk) - Net cash used in investing activities for Q1 2022 included a **$7.7 million** equity investment in Xenon in connection with the FDA's acceptance of the amended KAYAK study protocol[116](index=116&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Organization and Significant Accounting Policies](index=7&type=section&id=1.%20Organization%20and%20Significant%20Accounting%20Policies) This note describes the company's organizational structure and key accounting policies, including ASU 2020-06 adoption - The company adopted ASU 2020-06 on January 1, 2022, using the modified retrospective transition method, which simplified accounting for convertible instruments by removing separation models and accounting for convertible debt wholly as debt[20](index=20&type=chunk) - The adoption of ASU 2020-06 resulted in a cumulative effect adjustment that increased the carrying amount of the 2024 Notes by **$42.2 million**, reduced deferred tax liabilities by **$9.9 million**, reduced additional paid-in capital by **$106.8 million**, and reduced the accumulated deficit by **$74.5 million**[20](index=20&type=chunk) [2. Collaboration and License Agreements](index=7&type=section&id=2.%20Collaboration%20and%20License%20Agreements) This note details the company's various collaboration and license agreements, outlining potential milestone payments and royalties - Collaboration with Heptares (effective Dec 2021) for M1, M4, or dual M1/M4 receptor agonists, with Neurocrine having exclusive worldwide rights (excluding Japan) and potential future payments up to **$2.6 billion** in milestones plus royalties[21](index=21&type=chunk)[22](index=22&type=chunk) - Collaboration with Takeda (2020) for early to mid-stage psychiatry compounds, including luvadaxistat, NBI-1065845, NBI-1065846, and four non-clinical stage compounds, with potential future payments up to **$1.9 billion** in milestones plus royalties[25](index=25&type=chunk)[26](index=26&type=chunk) - Collaboration with Idorsia (2020) for NBI-827104 (T-type calcium channel blocker) for rare pediatric epilepsy and essential tremor, with potential future payments up to **$1.7 billion** in milestones plus royalties[30](index=30&type=chunk)[31](index=31&type=chunk) - Collaboration with Xenon (2019) for sodium channel inhibitors, including NBI-921352. A **$15.0 million** regulatory milestone was paid in Q1 2022 for FDA's acceptance of the amended KAYAK study protocol, including a **$7.7 million** equity purchase and **$7.3 million** expensed as R&D. Potential future payments up to **$1.7 billion** in milestones plus royalties[33](index=33&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - Out-licensed rights to valbenazine in Japan and other select Asian markets to MTPC (2015). MTPC received Japanese approval for DYSVAL (valbenazine) in March 2022, triggering a **$20.0 million** milestone payment expected in Q2 2022, plus potential future sales-based milestones up to **$35.0 million** and tiered royalties[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - Out-licensed global rights to elagolix to AbbVie (2010). Recognized elagolix royalty revenue of **$4.2 million** for Q1 2022, down from **$4.5 million** in Q1 2021. Potential future payments up to **$366.0 million** in milestones plus tiered royalties[49](index=49&type=chunk)[50](index=50&type=chunk) [3. Debt Securities](index=11&type=section&id=3.%20Debt%20Securities) This note provides information on the company's debt securities, including amortized cost, fair value, and unrealized losses Debt Securities Portfolio | Security Type | Contractual Maturity | Amortized Cost (March 31, 2022, in millions) | Fair Value (March 31, 2022, in millions) | Unrealized Loss (March 31, 2022, in millions) | | :------------ | :------------------- | :------------------------------------------- | :--------------------------------------- | :-------------------------------------------- | | Commercial paper | 0 to 1 years | $99.1 | $98.7 | $(0.4) | | Corporate debt securities | 0 to 1 years | $163.7 | $162.6 | $(1.1) | | Securities of government-sponsored entities | 0 to 1 years | $134.6 | $133.4 | $(1.2) | | Corporate debt securities | 1 to 3 years | $341.8 | $336.6 | $(5.2) | | Securities of government-sponsored entities | 1 to 3 years | $209.3 | $204.4 | $(4.9) | | **Total** | | **$948.5** | **$935.7** | **$(12.8)** | - As of March 31, 2022, **168 debt securities** were in an unrealized loss position, primarily due to changes in interest rates. The company does not intend to sell these investments before recovery of their amortized cost basis[52](index=52&type=chunk) [4. Fair Value Measurements](index=12&type=section&id=4.%20Fair%20Value%20Measurements) This note explains methodologies for fair value measurements of financial instruments, including debt and equity securities - Investments in debt securities available-for-sale are classified as Level 2, with fair values estimated using third-party pricing services and industry standard valuation models[60](index=60&type=chunk)[63](index=63&type=chunk) - Equity security investment in Voyager was transferred from Level 3 to Level 1 during Q1 2022 as the associated holding period restriction expired, resulting in an unrealized gain of **$20.8 million** included in earnings[65](index=65&type=chunk) [5. Inventories](index=13&type=section&id=5.%20Inventories) This note presents a breakdown of the company's inventory components, including raw materials, work in process, and finished goods Inventories Breakdown | (in millions) | March 31, 2022 | December 31, 2021 | | :------------ | :------------- | :---------------- | | Raw materials | $9.2 | $11.2 | | Work in process | $4.4 | $3.6 | | Finished goods | $15.4 | $15.7 | | **Total inventories** | **$29.0** | **$30.5** | [6. Cash, Cash Equivalents and Restricted Cash](index=13&type=section&id=6.%20Cash,%20Cash%20Equivalents%20and%20Restricted%20Cash) This note provides a reconciliation of cash, cash equivalents, and restricted cash for the specified periods Cash, Cash Equivalents and Restricted Cash Reconciliation | (in millions) | March 31, 2022 | March 31, 2021 | | :------------ | :------------- | :------------- | | Cash and cash equivalents | $270.2 | $352.6 | | Restricted cash included in other assets | $7.8 | $3.2 | | **Total cash, cash equivalents and restricted cash** | **$278.0** | **$355.8** | [7. Leases](index=13&type=section&id=7.%20Leases) This note details the company's lease agreements, including a new corporate headquarters facility and associated liabilities - On February 8, 2022, the company entered into a lease agreement for a new four-building campus facility in San Diego, expected to be the new corporate headquarters, with a **13.6-year** initial lease term and options for two five-year renewals[70](index=70&type=chunk) - Monthly base rent for the new campus facility will be **$6 per square foot**, subject to annual escalations of **3%**, following a **10-month** rent abatement period after each building's lease commencement date[70](index=70&type=chunk) Operating Lease Liabilities | (in millions) | Amount | | :------------ | :----- | | Total operating lease payments | $150.3 | | Less accreted interest | $30.9 | | Total operating lease liabilities | $119.4 | | Noncurrent operating lease liabilities | $102.5 | [8. Convertible Senior Notes](index=14&type=section&id=8.%20Convertible%20Senior%20Notes) This note describes the company's outstanding convertible senior notes, including principal amount, carrying value, and interest expense - As of March 31, 2022, **$381.2 million** aggregate principal amount of **2.25%** fixed-rate convertible senior notes due May 15, 2024, remained outstanding[81](index=81&type=chunk)[122](index=122&type=chunk) - The company irrevocably elected in December 2021 to settle the principal amount of the 2024 Notes in cash upon conversion and any conversion premium in either cash or shares of common stock[84](index=84&type=chunk) Convertible Senior Notes Carrying Amount and Fair Value | (in millions) | March 31, 2022 | December 31, 2021 | | :------------ | :------------- | :---------------- | | Net Carrying Amount | $377.7 | $335.1 | | Fair Value | $491.7 | $464.7 | Convertible Senior Notes Interest Expense | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------ | :-------------------------------- | :-------------------------------- | | Coupon interest | $2.2 | $2.2 | | Amortization of debt discount and issuance costs | $0.4 | $4.2 | | Total Interest Expense | $2.6 | $6.4 | [9. Earnings per Share](index=16&type=section&id=9.%20Earnings%20per%20Share) This note presents the calculation of basic and diluted earnings per share for the three-month periods Earnings per Share Calculation | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change | | :----- | :-------------------------------- | :-------------------------------- | :--------- | | Net income - basic and diluted | $13.9 | $32.1 | -$18.2 | | Weighted-average shares outstanding (Basic) | 95.3 | 94.2 | +1.1 | | Weighted-average shares outstanding (Diluted) | 97.6 | 98.2 | -0.6 | | Earnings per share, basic | $0.15 | $0.34 | -$0.19 | | Earnings per share, diluted | $0.14 | $0.33 | -$0.19 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition and results of operations for Q1 2022 versus Q1 2021 [Overview](index=17&type=section&id=Overview) This overview highlights Neurocrine Biosciences' core purpose, key commercial products, and collaboration activities - Neurocrine Biosciences' core purpose is to relieve suffering for patients with neurological, endocrine, and psychiatric disorders, leveraging three decades of neuroscience insight[93](index=93&type=chunk) - INGREZZA (valbenazine) for tardive dyskinesia, launched in May 2017, represents the significant majority of total net product sales[93](index=93&type=chunk) - ONGENTYS (opicapone) for Parkinson's disease, launched in September 2020, is an FDA-approved add-on treatment[93](index=93&type=chunk) - Collaborates with AbbVie on ORILISSA (endometriosis) and ORIAHNN (uterine fibroids), receiving tiered royalties on net sales[93](index=93&type=chunk) [Business Highlights](index=17&type=section&id=Business%20Highlights) This section summarizes key business achievements, including regulatory approvals and associated milestone payments - MTPC received Japanese Ministry of Health, Labour and Welfare approval for DYSVAL (valbenazine) for tardive dyskinesia in March 2022[94](index=94&type=chunk) - This approval entitles Neurocrine to a **$20.0 million** milestone payment upon MTPC's first commercial sale of DYSVAL in Japan, anticipated in Q2 2022[94](index=94&type=chunk) [Impacts of Macro-Economic Factors on Our Business](index=17&type=section&id=Impacts%20of%20Macro-Economic%20Factors%20on%20Our%20Business) This section discusses the effects of global events, such as COVID-19 and the Russia/Ukraine conflict, on operations [COVID-19 Global Pandemic](index=17&type=section&id=COVID-19%20Global%20Pandemic) This subsection addresses the company's response to the COVID-19 pandemic, focusing on patient safety and clinical study continuity - The company prioritizes patient and caregiver safety, continued access to INGREZZA (no supply disruption expected), and advancing clinical studies amidst the COVID-19 pandemic[94](index=94&type=chunk) - The financial and operational impact of COVID-19 remains uncertain, dependent on mitigation measures, new variants, and vaccine effectiveness[95](index=95&type=chunk) [Russia/Ukraine Conflict](index=17&type=section&id=Russia/Ukraine%20Conflict) This subsection outlines the impact of the Russia/Ukraine conflict on clinical trial activities and future development timelines - All planned clinical trial activities for valbenazine and NBI-1065844 in Russia and Ukraine have been suspended due to the ongoing conflict[96](index=96&type=chunk) - The duration and impact of the conflict on clinical development and regulatory efforts are highly unpredictable[97](index=97&type=chunk) [Results of Operations for the Three Months Ended March 31, 2022 and 2021](index=18&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031,%202022%20and%202021) This section analyzes the company's financial performance, detailing revenues and operating expenses for the specified periods [Revenues](index=18&type=section&id=Revenues) This subsection provides a breakdown of total revenues, including net product sales and collaboration revenues Total Revenues Breakdown | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | YoY Change (in millions) | YoY Growth | | :----- | :---------------------------------------------- | :---------------------------------------------- | :----------------------- | :--------- | | Total Revenues | $310.6 | $236.6 | +$74.0 | 31.3% | | Net Product Sales | $305.0 | $231.0 | +$74.0 | 32.0% | | Collaboration Revenues | $5.6 | $5.6 | $0.0 | 0.0% | [Net Product Sales by Sales Product](index=18&type=section&id=Net%20Product%20Sales%20by%20Sales%20Product) This subsection details net product sales for INGREZZA and ONGENTYS, highlighting their individual contributions Net Product Sales by Product | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change (in millions) | YoY Growth | | :------------ | :-------------------------------- | :-------------------------------- | :----------------------- | :--------- | | INGREZZA net product sales | $302.6 | $229.6 | +$73.0 | 31.8% | | ONGENTYS net product sales | $2.4 | $1.4 | +$1.0 | 71.4% | | **Total net product sales** | **$305.0** | **$231.0** | **+$74.0** | **32.0%** | - Increased INGREZZA net product sales primarily reflected increased new patient starts[98](index=98&type=chunk) [Collaboration Revenues by Category](index=18&type=section&id=Collaboration%20Revenues%20by%20Category) This subsection categorizes collaboration revenues, primarily from elagolix royalties and other non-cash contributions Collaboration Revenues by Type | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change (in millions) | | :------------ | :-------------------------------- | :-------------------------------- | :----------------------- | | Elagolix royalty revenue | $4.2 | $4.5 | -$0.3 | | Non-cash collaboration revenue and other | $1.4 | $1.1 | +$0.3 | | **Total collaboration revenues** | **$5.6** | **$5.6** | **$0.0** | - Collaboration revenues primarily reflected royalties earned on AbbVie net sales of ORILISSA and ORIAHNN[99](index=99&type=chunk) [Operating Expenses](index=18&type=section&id=Operating%20Expenses) This subsection summarizes the company's total operating expenses, including cost of revenues, R&D, and SG&A Total Operating Expenses | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change (in millions) | YoY Growth | | :------------ | :-------------------------------- | :-------------------------------- | :----------------------- | :--------- | | Cost of revenues | $4.6 | $2.9 | +$1.7 | 58.6% | | Research and development | $102.2 | $73.2 | +$29.0 | 39.6% | | Selling, general and administrative | $200.7 | $129.0 | +$71.7 | 55.6% | | **Total operating expenses** | **$307.5** | **$205.1** | **+$102.4** | **49.9%** | [Cost of Revenues](index=18&type=section&id=Cost%20of%20Revenues) This subsection analyzes the cost of revenues, primarily driven by increased INGREZZA net product sales Cost of Revenues Analysis | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change (in millions) | YoY Growth | | :------------ | :-------------------------------- | :-------------------------------- | :----------------------- | :--------- | | Cost of revenues | $4.6 | $2.9 | +$1.7 | 58.6% | - The increase in cost of revenues was driven by increased INGREZZA net product sales, reflecting higher new patient starts[100](index=100&type=chunk) [Research and Development by Category](index=18&type=section&id=Research%20and%20Development%20by%20Category) This subsection breaks down R&D expenses by stage, including late-stage, early-stage, research and discovery, and milestone payments Research and Development Expenses by Category | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change (in millions) | YoY Growth | | :------------ | :-------------------------------- | :-------------------------------- | :----------------------- | :--------- | | Late stage | $14.4 | $13.0 | +$1.4 | 10.8% | | Early stage | $16.6 | $5.5 | +$11.1 | 201.8% | | Research and discovery | $15.9 | $9.4 | +$6.5 | 69.1% | | Milestone | $7.3 | $0.0 | +$7.3 | N/A | | Payroll and benefits | $37.3 | $35.5 | +$1.8 | 5.1% | | Facilities and other | $10.7 | $9.8 | +$0.9 | 9.2% | | **Total research and development** | **$102.2** | **$73.2** | **+$29.0** | **39.6%** | - Early-stage expenses increased due to higher investment in Phase II epilepsy and neuropsychiatry programs[104](index=104&type=chunk) - Research and discovery expenses increased due to higher investment in preclinical development programs[105](index=105&type=chunk) - Milestone expenses included **$7.3 million** recognized in connection with the FDA's acceptance of the amended KAYAK study protocol in January 2022[106](index=106&type=chunk) [Selling, General and Administrative](index=19&type=section&id=Selling,%20General%20and%20Administrative) This subsection details the increase in SG&A expenses, primarily due to commercial initiatives and expanded salesforce Selling, General and Administrative Expenses | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change (in millions) | YoY Growth | | :------------ | :-------------------------------- | :-------------------------------- | :----------------------- | :--------- | | Sales, general and administrative | $200.7 | $129.0 | +$71.7 | 55.6% | - Increased expenses reflected higher investment in ongoing commercial initiatives, including the TD Spotlight-branded direct-to-consumer INGREZZA advertising campaign (launched May 2021) and deployment of an expanded salesforce[108](index=108&type=chunk) - Personnel expenses also increased due to higher headcount and increased non-cash stock-based compensation[108](index=108&type=chunk) [Other Income (Expense), Net](index=19&type=section&id=Other%20Income%20(Expense),%20Net) This subsection analyzes other income and expenses, including interest expense and unrealized gains on equity securities Other Income (Expense), Net | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change (in millions) | | :------------ | :-------------------------------- | :-------------------------------- | :----------------------- | | Interest expense | $(2.6) | $(6.4) | +$3.8 | | Unrealized gain on equity securities | $19.9 | $0.7 | +$19.2 | | Investment income and other, net | $1.0 | $1.4 | -$0.4 | | **Total other income (expense), net** | **$18.3** | **$(4.3)** | **+$22.6** | - The increase in other income, net, primarily reflected periodic fluctuations in the fair values of equity security investments[109](index=109&type=chunk) [Provision for (Benefit from) Income Taxes](index=20&type=section&id=Provision%20for%20(Benefit%20from)%20Income%20Taxes) This subsection discusses the company's income tax provision and the factors influencing its effective tax rate Provision for (Benefit from) Income Taxes | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change (in millions) | | :------------ | :-------------------------------- | :-------------------------------- | :----------------------- | | Provision for (benefit from) income taxes | $7.5 | $(4.9) | +$12.4 | - The effective tax rate for Q1 2022 was higher than federal and statutory rates primarily due to excess tax expense related to stock-based compensation[110](index=110&type=chunk) [Net Income](index=20&type=section&id=Net%20Income) This subsection analyzes the drivers behind the change in net income and diluted earnings per share Net Income and Diluted EPS | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change (in millions) | YoY Growth | | :------------ | :-------------------------------- | :-------------------------------- | :----------------------- | :--------- | | Net income | $13.9 | $32.1 | -$18.2 | -56.7% | | Diluted earnings per share | $0.14 | $0.33 | -$0.19 | -57.6% | - The decrease in net income was primarily due to increased investment in ongoing commercial initiatives (TD Spotlight, expanded salesforce) and an expanded clinical portfolio, offsetting increased INGREZZA net product sales[111](index=111&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet financial obligations, covering liquidity sources, financial condition, and cash flows [Sources of Liquidity](index=20&type=section&id=Sources%20of%20Liquidity) This subsection discusses the company's current capital resources and potential future funding strategies - The company believes existing capital resources and anticipated revenues will cover funding requirements for at least the next **12 months**[112](index=112&type=chunk) - The company may seek additional funding through public/private equity markets, debt financing, or strategic alliances, but cannot guarantee availability on acceptable terms[112](index=112&type=chunk) - Disruptions in global financial markets, such as those from the COVID-19 pandemic, could make accessing capital more difficult[112](index=112&type=chunk) [Information Regarding Our Financial Condition](index=20&type=section&id=Information%20Regarding%20Our%20Financial%20Condition) This subsection provides key metrics related to the company's financial position, including total assets, liabilities, and working capital Key Financial Condition Metrics | (in millions) | March 31, 2022 | December 31, 2021 | | :------------ | :------------- | :---------------- | | Total cash, cash equivalents and marketable securities | $1,205.9 | $1,272.0 | | Total current assets | $1,018.2 | $972.8 | | Total current liabilities | $253.5 | $245.8 | | Total working capital | $764.7 | $727.0 | [Information Regarding Our Cash Flows](index=20&type=section&id=Information%20Regarding%20Our%20Cash%20Flows) This subsection summarizes the company's cash flow activities from operations, investing, and financing Summary Cash Flow Activities | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | YoY Change (in millions) | | :------------ | :-------------------------------- | :-------------------------------- | :----------------------- | | Net cash (used in) provided by operating activities | $(40.5) | $87.3 | -$127.8 | | Net cash (used in) provided by investing activities | $(31.6) | $63.1 | -$94.7 | | Net cash provided by financing activities | $6.1 | $15.1 | -$9.0 | | **Change in cash, cash equivalents and restricted cash** | **$(66.0)** | **$165.5** | **-$231.5** | [Net Cash (Used in) Provided by Operating Activities](index=21&type=section&id=Net%20Cash%20(Used%20in)%20Provided%20by%20Operating%20Activities) This subsection analyzes factors influencing net cash flow from operating activities, including commercial initiatives and accounts receivable - Net cash used in operating activities for Q1 2022 was **$(40.5) million**, compared to **$87.3 million** provided in Q1 2021[114](index=114&type=chunk) - This change reflected increased investment in commercial initiatives (TD Spotlight advertising, expanded salesforce) and the clinical portfolio, as well as an increase in accounts receivable due to extended customer payment terms[115](index=115&type=chunk) [Net Cash (Used in) Provided by Investing Activities](index=21&type=section&id=Net%20Cash%20(Used%20in)%20Provided%20by%20Investing%20Activities) This subsection details cash flows from investing activities, including debt security investments and equity purchases - Net cash used in investing activities for Q1 2022 was **$(31.6) million**, compared to **$63.1 million** provided in Q1 2021[114](index=114&type=chunk) - Fluctuations were primarily due to timing differences in purchases, sales, and maturities of debt security investments and changes in portfolio-mix[116](index=116&type=chunk) - Q1 2022 also included a **$7.7 million** equity investment in Xenon related to the FDA's acceptance of the amended KAYAK study protocol[116](index=116&type=chunk) [Net Cash Provided by Financing Activities](index=21&type=section&id=Net%20Cash%20Provided%20by%20Financing%20Activities) This subsection explains the sources of cash from financing activities, primarily from common stock issuances - Net cash provided by financing activities was **$6.1 million** in Q1 2022, primarily from issuances of common stock under benefit plans[117](index=117&type=chunk)[15](index=15&type=chunk) [Material Cash Requirements](index=21&type=section&id=Material%20Cash%20Requirements) This subsection outlines future capital needs, including potential milestone payments, debt obligations, and lease commitments - Future capital requirements are subject to numerous uncertainties, including commercial success of products, R&D progress, regulatory approvals, and commercialization costs[118](index=118&type=chunk)[119](index=119&type=chunk)[121](index=121&type=chunk) - The company has potential future payments of up to **$10.8 billion** upon achievement of certain event-based milestones under existing collaboration and license agreements[119](index=119&type=chunk) - As of March 31, 2022, **$381.2 million** aggregate principal amount of 2024 Notes remained outstanding, requiring interest payments of **$8.6 million** in 2022, **$8.6 million** in 2023, and **$4.3 million** in 2024, plus the principal amount at maturity[122](index=122&type=chunk) - The company entered into a new lease agreement in February 2022 for a four-building campus facility in San Diego, which will serve as its new corporate headquarters[124](index=124&type=chunk) [Critical Accounting Policies and Estimates](index=22&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This subsection confirms no changes to the company's critical accounting policies and estimates from the prior annual report - No changes were made to critical accounting policies as disclosed in the 2021 Annual Report on Form 10-K[126](index=126&type=chunk) [Interest Rate Risk](index=22&type=section&id=Interest%20Rate%20Risk) This section assesses the company's exposure to interest rate fluctuations and its impact on the investment portfolio - The company maintains a diversified investment portfolio consisting of low-risk, investment-grade debt securities with maturities of up to **three years**[127](index=127&type=chunk) - A **1%** unfavorable change in interest rates as of March 31, 2022, would not have had a material effect on the fair value of the investment portfolio[127](index=127&type=chunk) [Forward-Looking Statements](index=22&type=section&id=Forward-Looking%20Statements) This section cautions readers about forward-looking statements, highlighting inherent risks and uncertainties - The report contains forward-looking statements that involve risks and uncertainties, and actual results could differ materially from those anticipated[128](index=128&type=chunk) - Readers should refer to Part II, Item 1A "Risk Factors" for factors that could substantially harm the business, results of operations, and financial condition[129](index=129&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section cross-references the discussion of market risk, specifically interest rate risk, to the MD&A section - The discussion on market risk, including interest rate risk, is cross-referenced to Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Interest Rate Risk"[131](index=131&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the company's disclosure controls and procedures, confirming their effectiveness as evaluated by management - The CEO and CFO concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2022[133](index=133&type=chunk) - No significant changes in internal control over financial reporting occurred during the quarter ended March 31, 2022, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[134](index=134&type=chunk) Part II. Other Information This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) This section outlines ongoing patent infringement lawsuits filed by the company against ANDA filers for generic INGREZZA - The company received notices from Teva, Lupin, Crystal Pharmaceutical, and Zydus Pharmaceuticals regarding ANDA filings for generic INGREZZA, each containing a Paragraph IV Patent Certification[136](index=136&type=chunk) - Lawsuits were filed in the U.S. District Court for the District of Delaware against these ANDA filers, and the cases have been consolidated with a trial scheduled for January 2, 2024[137](index=137&type=chunk) - The company believes that none of the pending claims or actions are likely to have a material adverse effect on its business, financial condition, or results of operations, but litigation outcomes are unpredictable[140](index=140&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) This section details various risk factors that could materially affect the company's business, operating results, or financial condition [Summary Risk Factors](index=24&type=section&id=Summary%20Risk%20Factors) This subsection provides a concise overview of the primary risks, including commercialization challenges and macroeconomic impacts - Risks include challenges in commercializing INGREZZA and ONGENTYS, intense competition, and technological uncertainty in product development[142](index=142&type=chunk) - Clinical trials may be delayed or fail due to safety reasons or the conflict between Russia and Ukraine[142](index=142&type=chunk) - The business could be adversely affected by health pandemics (COVID-19) and disruptions in third-party operations[142](index=142&type=chunk) [Risks Related to Our Company](index=25&type=section&id=Risks%20Related%20to%20Our%20Company) This subsection details specific risks pertaining to the company's operations, commercialization efforts, and financial stability - The ability to successfully commercialize INGREZZA and ONGENTYS depends on market acceptance, effective sales/marketing, and adequate third-party reimbursement, which can be impacted by pricing controls and coverage limitations[143](index=143&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - The COVID-19 pandemic continues to pose risks, including limited access for sales representatives, increased telehealth use impacting diagnosis of movement disorders, and potential disruptions to supply chains and clinical trials[145](index=145&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - The conflict between Russia and Ukraine has led to the suspension of planned clinical trial activities in those regions, potentially delaying development timelines for valbenazine and increasing costs[170](index=170&type=chunk) - The company relies heavily on current collaborators (AbbVie, MTPC, BIAL, Xenon, Idorsia, Takeda) for development, manufacturing, and commercialization, exposing it to risks related to control, funding, disputes, and intellectual property[171](index=171&type=chunk)[172](index=172&type=chunk) - Managing rapid organizational growth, including an expanded salesforce, and retaining qualified personnel are critical challenges that could impact development and commercialization goals[175](index=175&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk) - Dependence on a limited number of third-party manufacturers and suppliers for INGREZZA and ONGENTYS creates risks of production difficulties, supply delays, and compliance issues[178](index=178&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) - The company's **$381.2 million** in convertible senior notes due 2024 could adversely affect liquidity if conversion features are triggered, requiring cash settlement[189](index=189&type=chunk)[190](index=190&type=chunk) - The company has a history of losses and expects increased expenses for the foreseeable future, requiring significant revenues to achieve and sustain profitability[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) - Customer concentration is a risk, with **three customers** representing approximately **77%** of total product revenue and **81%** of accounts receivable as of March 31, 2022[209](index=209&type=chunk) - The company may require additional funding for R&D, clinical trials, regulatory approvals, and commercialization, and cannot guarantee that adequate funds will be available on reasonable terms[210](index=210&type=chunk) [Risks Related to Our Industry](index=40&type=section&id=Risks%20Related%20to%20Our%20Industry) This subsection outlines industry-specific risks, such as intense competition, technological uncertainty, and regulatory compliance challenges - Intense competition from academic institutions, government agencies, research institutions, and biotechnology/pharmaceutical companies, including generic equivalents, could reduce demand for products[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk) - The development of product candidates is subject to technological uncertainty, with only a small number of programs resulting in commercially successful drugs, and potential products may fail in clinical trials or regulatory approval[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - Failure to obtain and protect intellectual property (patents, trade secrets) could allow competitors to market similar products, leading to costly infringement claims and potential loss of proprietary rights[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - Healthcare reform measures, such as the ACA and other legislative initiatives, could adversely affect business by imposing pricing controls, limiting coverage/reimbursement, and increasing compliance costs[219](index=219&type=chunk)[220](index=220&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) - Relationships with healthcare professionals and customers are subject to federal and state healthcare laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA), and non-compliance could lead to significant penalties, reputational harm, and operational restructuring[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk)[234](index=234&type=chunk) - Promoting "off-label" uses for drug products could lead to significant liability, including civil and criminal sanctions[236](index=236&type=chunk) - The company is highly dependent on information technology systems and faces risks from security breaches, ransomware, and cyber-attacks, which could interrupt operations, lead to data loss, and harm reputation[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk)[242](index=242&type=chunk) - Stringent and changing data privacy and information security obligations (e.g., EU GDPR, UK GDPR, CCPA, CPRA) require significant resources for compliance, and failure could result in substantial fines, litigation, and operational restrictions[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk) - Potential product liability exposure from clinical trials and commercialized products (INGREZZA, ONGENTYS) could exceed insurance coverage, leading to financial losses, decreased demand, and reputational damage[253](index=253&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of or incorporated by reference into the Form 10-Q - The report includes exhibits such as the Certificate of Incorporation, Bylaws, Indenture and First Supplemental Indenture for the 2024 Convertible Notes, and certifications from the CEO and CFO[263](index=263&type=chunk) [Signatures](index=50&type=section&id=Signatures) This section contains the legally required signatures, confirming the report's authorization on behalf of Neurocrine Biosciences, Inc - The report is duly signed on behalf of Neurocrine Biosciences, Inc. by Matthew C. Abernethy, Chief Financial Officer, on May 4, 2022[267](index=267&type=chunk)

Financial Performance - INGREZZA net product sales reached $1.1 billion in 2021, up from $993.1 million in 2020 and $752.9 million in 2019, representing the majority of total net product sales [21]. - Two significant customers accounted for approximately 82% of total product revenue for 2021, indicating a high concentration risk [197]. - The company has an accumulated deficit of $0.6 billion as of December 31, 2021, due to historical operating losses [183]. - The market price of the company's common stock has fluctuated between approximately $72 and $120 per share over the last twelve months [195]. - The company expects to increase expenses and investments in the coming years to fund operations and product development, despite having been profitable for the year ended December 31, 2021 [187]. Product Development and Clinical Trials - The company plans to submit a supplemental new drug application for valbenazine for the treatment of Huntington chorea in the second half of 2022, following positive top-line data from the KINECT-HD study [30]. - A Phase III clinical study for valbenazine in dyskinetic cerebral palsy has been initiated, with top-line data expected in 2023, involving 144 pediatric and adult patients [31]. - The company has initiated a Phase II clinical study for NBI-827104 in essential tremor, with top-line data anticipated in mid-2022, involving 28 adult patients [33]. - The STEAMBOAT study for NBI-827104 in pediatric patients with EE-CSWS has been initiated, with top-line data expected in the second half of 2022, involving 24 patients aged 4 to 12 years [36]. - The KAYAK study for NBI-921352, a Nav1.6 sodium channel inhibitor, has been initiated with 52 adolescent patients aged 12 to 21 years, and the protocol was amended to include pediatric patients aged 2 to 11 years [37]. - A Phase II study for NBI-921352 in 100 adult patients with focal onset seizures is underway, with top-line data expected in 2023 [38]. - Crinecerfont is being evaluated in a Phase III study involving 165 adult patients with classic congenital adrenal hyperplasia (CAH), with top-line data anticipated in 2023 [40]. - A separate Phase III study for crinecerfont includes 81 pediatric patients aged 2 to 17 years, also expecting top-line data in 2023 [41]. - A Phase III study for valbenazine, a VMAT2 inhibitor, is being conducted with 400 patients with schizophrenia, with top-line data expected in 2023 [44]. - NBI-1065845, an AMPA potentiator, is in a Phase II study with 212 adult patients with inadequate response to treatment in major depressive disorder, with data expected in 2023 [51]. - NBI-1065846, a GPR139 agonist, is being tested in 88 adult patients with major depressive disorder experiencing anhedonia, with top-line data anticipated in 2023 [53]. Market and Competitive Landscape - Tardive dyskinesia affects an estimated 600,000 people in the United States, while Parkinson's disease affects approximately 1 million people in the U.S. and over 10 million worldwide [23][25]. - ORILISSA and ORIAHNN, both out-licensed to AbbVie, target endometriosis and uterine fibroids, affecting nearly 200 million women globally and over 10 million in the U.S. [26][27]. - The company faces intense competition in the biotechnology and pharmaceutical industries, with many competitors having greater financial resources and expertise [117]. - The commercial success of INGREZZA and ONGENTYS will depend on their acceptance as safe and effective by the medical community and patients [135]. - Governmental and third-party payors may impose pricing controls or limit coverage and reimbursement for the company's products, potentially impacting revenues [136]. Regulatory and Compliance Issues - The ongoing evaluation of the impact of COVID-19 on business operations remains uncertain, with potential changes in policies affecting patient access and interactions [19]. - The FDA provides a 5-year exclusivity period for new medicinal compounds in the US, with additional exclusivity for orphan drugs potentially extending to 7 years [63]. - The approval process for product candidates varies by country, with potential delays and additional testing required for foreign approvals [90]. - Post-approval requirements include ongoing FDA regulation, recordkeeping, and potential mandatory revisions to labeling based on new safety information [96]. - The company is subject to ongoing regulatory obligations for INGREZZA, including post-marketing requirements and potential Phase IV clinical trials [174]. Workforce and Organizational Growth - The company has grown to a team of more than 900 employees as of December 31, 2021, adding over 200 new employees during 2021 [125]. - The company plans to continue adding employees in 2022, focusing on expanding its commercial salesforce and research and development organizations [126]. - The expanded specialty salesforce in the US consists of approximately 350 sales professionals, focusing on psychiatry, neurology, and long-term care [68]. - The company anticipates completing its salesforce expansion by the second quarter of 2022 [68]. Intellectual Property and Legal Matters - INGREZZA is protected by 19 issued US patents expiring between 2027 and 2040, with a potential extension of up to 2 years for patent No. 8,039,627, expiring in 2029 [12]. - ONGENTYS is covered by 9 issued US patents expiring between 2026 and 2035, with a potential extension of up to 4 years for one patent [12]. - ORILISSA has 5 issued US patents expiring between 2024 and 2036, with a potential extension of up to 5 years for patents expiring in 2024 [12]. - ORIAHNN is protected by 4 issued US patents expiring between 2024 and 2034, with a potential extension of up to 5 years for one patent [12]. - The company is engaged in various intellectual property litigation matters related to INGREZZA, which may result in substantial costs [206]. Financial Risks and Future Outlook - The company has a history of losses and expects to increase expenses for the foreseeable future, raising concerns about sustaining profitability [133]. - The company may incur additional indebtedness, which could limit cash flow and expose it to financial risks [182]. - Changes in tax laws could adversely affect the company's business and financial condition, impacting cash flows and results of operations [190]. - The company may require additional funding for research and development, clinical trials, and establishing manufacturing capabilities in the future [198]. - The impact of the COVID-19 pandemic continues to pose challenges for accessing capital and conducting business operations [200].

Financial Data and Key Metrics Changes - The 2022 net sales guidance for INGREZZA is projected to be between $1.25 billion and $1.35 billion, marking the first time the company has provided annual sales guidance [14][19] - The GAAP operating expense range for 2022 is estimated to be between $1.1 billion and $1.15 billion, with a significant increase in sales force expansion and direct-to-consumer advertising [19][20] Business Line Data and Key Metrics Changes - INGREZZA's Q4 performance showed a total prescription growth of 8% sequentially and 32% year-over-year, marking the third consecutive quarter of growth during the pandemic [23][27] - The company has expanded its sales force to over 350 members, focusing on psychiatry, neurology, and long-term care [29] Market Data and Key Metrics Changes - The total addressable market for tardive dyskinesia (TD) in the U.S. is estimated at 600,000 patients, with only about 25% currently diagnosed [108][110] - The use of antipsychotics continues to grow, leading to an increase in the TD patient population, with 70 million prescriptions written in the past year [115][116] Company Strategy and Development Direction - The company aims to accelerate growth through a combination of expanding its sales force and enhancing its commercial initiatives, including a direct-to-consumer advertising campaign [17][29] - The R&D pipeline includes 12 mid- to late-stage clinical programs, with plans to submit a supplemental new drug application for valbenazine for Huntington's disease in the second half of 2022 [34][35] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the external environment improving, which is expected to positively impact patient access and sales [28][69] - The company acknowledges the challenges posed by COVID-19 but believes that the reopening of clinics and increased patient visits will drive growth in the latter half of 2022 [9][16] Other Important Information - The company is focused on addressing the unmet medical needs in neurology and psychiatry, with a strong emphasis on innovative therapies [42][100] - The company plans to continue exploring business development opportunities to enhance its pipeline and market presence [99] Q&A Session Summary Question: Can you give us some sense of what would be proof of concept for essential tremor? - The proof-of-concept study includes several endpoints, with a primary focus on tremor amplitude measured by accelerometer, and a statistically significant difference is sought [48] Question: How does the demand growth for INGREZZA compare to pre-COVID levels? - Prior to the pandemic, the company experienced a growth trajectory of a couple of hundred million dollars per year, and a 20% midpoint growth in guidance aligns with that performance [51][52] Question: Is your guidance impacted by inventory stocking for INGREZZA? - The guidance reflects underlying demand for INGREZZA sales, and inventory fluctuations are expected to net out over the year [56][58] Question: What are the expectations for long-term care opportunities? - Long-term care represents a significant incremental opportunity, with several million people in facilities potentially treated with antipsychotics that cause TD [103][104] Question: How fast is the total addressable TD market growing? - The TD population is growing due to the increased use of antipsychotics, with estimates rising from around 500,000 to 600,000 patients over the past five years [116]

Company Vision and Purpose - The company's vision is understanding the brain to treat the body, relieving patient suffering, and taking responsibility beyond medicine[5] - The company's purpose is to relieve suffering for people with great needs, but few options[6] Commercial Products and Pipeline - Commercial products are fueling pipeline investment, focusing on neurology, neuroendocrinology, and psychiatry[7,9] - The company achieved approximately $1 billion in annual sales in 35 years[13] - The company has a strong financial position with approximately $13 billion in cash and investments as of September 30, 2021[13] - The company has 13 total mid- to late-stage programs[13] Pipeline Focus and Development - The company is tackling difficult and undertreated diseases in neuroscience, including Parkinson's Disease, Tardive Dyskinesia, and others[15,16] - Development programs are dominated by mid- and late-stage studies[56] - There are approximately 500000 undiagnosed and untreated patients in the US with TD[13] Upcoming Milestones - Significant milestones this year include valbenazine sNDA filing for Chorea in Huntington Disease and Phase 2 data for NBI-827104 in CSWS and Essential Tremor[59] - 2023 clinical activities & milestones include Crinecerfont registrational top-line data for CAH in adults and pediatrics, and valbenazine sNDA approval for Chorea in Huntington Disease[60]

Neurocrine Biosciences, Inc. (NASDAQ:NBIX) Q3 2021 Earnings Conference Call November 1, 2021 4:30 PM ET Company Participants Todd Tushla - Vice President, Investor Relations Kevin Gorman - Chief Executive Officer and Director Matt Abernethy - Chief Financial Officer Eric Benevich - Chief Commercial Officer Eiry Roberts - Chief Medical Officer Conference Call Participants Neena Garg - Citi Paul Matteis - Stifel Carter Gould - Barclays Tazeen Ahmad - Bank of America Phil Nadeau - Cowen Company Anupam Rama - J ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-22705 NEUROCRINE BIOSCIENCES, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdictio ...