Cerevel Therapeutics Holdings(CERE) - 2022 Q4 - Annual Report

PART I Business Cerevel Therapeutics is a clinical-stage biopharmaceutical company focused on developing new therapies for neuroscience diseases, with a pipeline largely in-licensed from Pfizer - Cerevel's core strategy combines a targeted approach to neuroscience with advanced chemistry to design therapies for diseases like schizophrenia, Parkinson's, and epilepsy[12] - The company's scientific approach is built on three pillars: targeting specific neurocircuitry, achieving receptor subtype selectivity to minimize off-target effects, and using differentiated pharmacology (e.g., partial agonists, allosteric modulators) to fine-tune neural network activity[12][30] - Substantially all of the company's current asset portfolio was in-licensed from Pfizer in August 2018, under an agreement that includes future milestone and royalty payment obligations[63] Our Pipeline Cerevel Therapeutics Clinical Pipeline Summary | Compound | Disease Area | Phase | Upcoming Milestone | Mechanism | | :--- | :--- | :--- | :--- | :--- | | Lead Programs | | | | | | Emraclidine | Schizophrenia | Phase 2 | Data 1H 2024 | M4 PAM | | Emraclidine | Alzheimer's Disease Psychosis | Phase 1 | Ph. 1 Data | M4 PAM | | Darigabat | Epilepsy | Phase 2 | Data Under Review | GABA α2/3/5 PAM | | Darigabat | Panic Disorder | Phase 2 | Initiation Q2 2023 | GABA α2/3/5 PAM | | Tavapadon | Parkinson's (Monotherapy) | Phase 3 | Data 2H 2024 | D1/D5 Partial Agonist | | Tavapadon | Parkinson's (Adjunctive) | Phase 3 | Data Mid-Year 2024 | D1/D5 Partial Agonist | | CVL-871 | Dementia-Related Apathy | Phase 2a | Data 2H 2024 | D1/D5 Partial Agonist | | Other Programs | | | | | | CVL-354 | MDD / Substance Use Disorder | Phase 1 | Ph. 1 Data | KOR Antagonist | | PDE4 Inhibitor | Psychiatric, Neuroinflammatory & Other | Phase 1 | Ph. 1 Data | PDE4 Inhibitor | | M4 Agonist | Psychiatric & Neurological | Preclinical | Candidate Selection | M4 Agonist | Our Lead Programs - The company's lead programs are emraclidine for schizophrenia, darigabat for epilepsy and panic disorder, and tavapadon for Parkinson's disease. These programs are positioned to potentially become backbone therapies in their respective indications[29] - Emraclidine (Schizophrenia & Alzheimer's Psychosis): An M4-selective Positive Allosteric Modulator (PAM). Phase 1b results showed statistically significant improvement in PANSS total score. Two Phase 2 trials are ongoing with data expected in 1H 2024. It also received FDA Fast Track Designation for Alzheimer's disease psychosis[2][34] - Darigabat (Epilepsy & Panic Disorder): A GABAA receptor PAM selective for alpha-2/3/5 subunits, designed to minimize sedation. A Phase 2 trial in focal epilepsy (REALIZE) is ongoing, with readout delayed beyond 2023. A Phase 2 trial in panic disorder is planned for Q2 2023 following positive Phase 1 results[2][35][60] - Tavapadon (Parkinson's Disease): A selective D1/D5 receptor partial agonist. A Phase 3 program (TEMPO-1, -2, -3, -4) is underway for both early-stage (monotherapy) and late-stage (adjunctive) Parkinson's. Data readouts are expected in mid-2024 and 2H 2024[20][29] Our Other Programs - CVL-871 (Dementia-Related Apathy): A selective D1/D5 partial agonist with a lower level of agonism than tavapadon, designed for cognitive and behavioral symptoms. It has received FDA Fast Track Designation. Data from the Phase 2a trial is now expected in 2H 2024 due to slower-than-expected enrollment[29][36] - The early-stage pipeline includes CVL-354 (KORA for MDD), a selective PDE4 inhibitor program, and an M4 agonist program for psychiatric and neurological indications[38][55] Intellectual Property - The company's intellectual property portfolio was primarily acquired through an exclusive worldwide license from Pfizer. The company relies on patents, trade secrets, and know-how to protect its technology[153][768] - Key patent families for lead candidates have statutory expiration dates, excluding extensions, in 2037 for emraclidine, 2033 for darigabat, and 2034 for tavapadon and CVL-871[746][769] Government Regulation - The company is subject to extensive regulation by the FDA in the United States and comparable authorities in foreign jurisdictions, covering all stages from research and development to post-approval marketing[771][797] - The FDA drug approval process involves preclinical testing, submitting an Investigational New Drug (IND) application, conducting Phase 1, 2, and 3 clinical trials under Good Clinical Practices (GCP), and submitting a New Drug Application (NDA) for review[747][800] - The FDA offers programs to expedite development and review, such as Fast Track, Breakthrough Therapy, and Priority Review, for drugs addressing serious conditions with unmet medical needs. The company has received Fast Track Designation for emraclidine and CVL-871[69][159] - In the European Union, marketing authorization is obtained through centralized, decentralized, or mutual recognition procedures administered by the EMA and national authorities[167][807] Risk Factors The company faces substantial risks inherent to a clinical-stage biopharmaceutical firm, including drug development uncertainty, financial losses, funding needs, and reliance on product candidate success and third parties - The company is a clinical-stage entity with a limited operating history, has incurred significant financial losses since its 2018 inception ($351.5 million in 2022), and expects to continue incurring losses for the foreseeable future[9][177] - Cerevel's business is highly dependent on the successful clinical development, regulatory approval, and commercialization of its lead product candidates. Failure or significant delays in any of these programs would materially harm the business[9][793] - The company has experienced clinical trial delays. Enrollment for the Phase 3 TEMPO program (tavapadon) and the Phase 2 REALIZE trial (darigabat) has been negatively impacted by post-COVID environmental factors, pushing expected data readouts[187] - The company relies on third parties for manufacturing and conducting clinical trials. Any failure by these partners to perform satisfactorily could delay or prevent regulatory approval and commercialization[9][219] - Major shareholders Bain Investor and Pfizer collectively own approximately 56.2% of the company's common stock, giving them significant influence over corporate actions[839] Properties The company's principal executive offices and laboratory space are located in 61,000 square feet of leased space in Cambridge, Massachusetts - Cerevel's headquarters and lab facilities are located in a 61,000 sq. ft. leased space in Cambridge, MA, with the lease running until 2030[297] Legal Proceedings Cerevel Therapeutics is not currently a party to any material legal proceedings, nor is management aware of any pending or threatened - The company is not currently a party to any material legal proceedings[271] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on NASDAQ under "CERE", with no history or future plans for cash dividends, retaining earnings for growth - The company's common stock trades on NASDAQ under the symbol "CERE"[301] - Cerevel has never paid cash dividends and does not plan to in the foreseeable future, intending to retain earnings for business development[325] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) As a clinical-stage biopharmaceutical company, Cerevel has incurred significant operating losses, funded by equity and debt, with cash reserves expected to cover operations for at least 12 months Results of Operations Comparison of Operating Results (in thousands) | Line Item | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Research and development | $280,259 | $161,855 | $103,303 | | General and administrative | $87,589 | $58,243 | $45,813 | | Total operating expenses | $367,848 | $220,098 | $149,116 | | Loss from operations | ($367,848) | ($220,098) | ($149,116) | | Net loss | ($351,511) | ($225,334) | ($152,142) | - The 73% increase in R&D expense from 2021 to 2022 was driven by the continued advancement of the tavapadon, emraclidine, and darigabat programs, increased investment in preclinical research, and growth in workforce[361] - The 50% increase in G&A expense from 2021 to 2022 was primarily due to higher personnel costs and other costs to support organizational growth, including market research and development activities[342] Research and Development Expenses by Program (in thousands) | Program | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Tavapadon | $57,953 | $48,858 | $31,678 | | Emraclidine | $74,331 | $15,472 | $16,360 | | Darigabat | $22,388 | $19,461 | $10,984 | | CVL-871 | $3,904 | $4,773 | $1,003 | | Other R&D programs | $21,999 | $15,973 | $8,414 | | Unallocated & Personnel | $99,684 | $57,318 | $34,864 | | Total R&D | $280,259 | $161,855 | $103,303 | Liquidity and Capital Resources - As of December 31, 2022, the company had cash, cash equivalents, and marketable securities totaling $950.2 million and an accumulated deficit of $967.8 million[321] - Major financing activities in 2022 included a follow-on public offering raising net proceeds of $238.3 million and an offering of 2.50% Convertible Senior Notes due 2027 raising net proceeds of $334.8 million[346] - The company has funding agreements with NovaQuest and Bain to provide up to $125.0 million to support tavapadon development, of which $37.5 million was received in April 2022[346] Summary of Cash Flows (in thousands) | Cash Flow Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | ($293,187) | ($178,546) | ($117,802) | | Net cash used in investing activities | ($388,834) | ($435,661) | ($18,892) | | Net cash provided by financing activities | $623,191 | $423,602 | $440,835 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include interest rate sensitivity on marketable securities and equity price risk from convertible notes, with minimal foreign currency exposure - The company's primary market risks are interest rate risk on its marketable securities portfolio and equity price risk related to its 2027 Convertible Senior Notes[406] - A hypothetical 100 basis point adverse movement in interest rates would result in an estimated loss in fair value of approximately $3.6 million to its interest rate-sensitive instruments as of December 31, 2022[407] Financial Statements and Supplementary Data This section refers to the full consolidated financial statements and related notes appended to the Annual Report - The full financial statements are appended to the report, as referenced in Item 15[410] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective, affirmed by an unqualified auditor's opinion - Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2022[412][428] - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[415] PART III Directors, Executive Officers, Corporate Governance, Compensation, and Shareholder Matters Information on directors, executive compensation, and corporate governance is incorporated by reference from the forthcoming 2023 proxy statement - Information regarding directors, executive compensation, and corporate governance is incorporated by reference from the forthcoming 2023 proxy statement[398][399][420] PART IV Exhibit and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K - This section provides an index of all financial statements and exhibits filed with the Form 10-K[236][237]