Intra-Cellular Therapies(US:ITCI)2024-02-22 12:42Part I Business Intra-Cellular Therapies, Inc. is a biopharmaceutical company focused on CNS disorders, commercializing CAPLYTA for schizophrenia and bipolar depression while advancing a pipeline for various neurological conditions - The company's core commercial product is CAPLYTA (lumateperone), approved by the FDA for the treatment of schizophrenia in adults (since December 2019) and bipolar depression in adults (since December 2021)1718 Therapeutic Pipeline Overview | Product Candidate | Indication(s) | Development Stage | | :--- | :--- | :--- | | Lumateperone (CAPLYTA) | Schizophrenia, Bipolar Depression | Approved & Commercialized | | Lumateperone | Major Depressive Disorder (MDD) | Phase 3 | | Lumateperone LAI | Mental Illness | Phase 1 | | ITI-1284-ODT-SL | GAD, Dementia-related Psychosis/Agitation | Phase 2 | | Lenrispodun (ITI-214) | Parkinson's Disease | Phase 2 | | ITI-1020 | Cancer Immunotherapy | Phase 1 | | ITI-333 | Substance Use Disorders, Pain | Phase 1 | | ITI-1549 | Mood/Anxiety Disorders (Non-hallucinogenic psychedelic) | IND-enabling studies | - The company holds exclusive, worldwide commercialization rights to lumateperone from Bristol-Myers Squibb, with remaining milestone payments of $5.0 million and tiered single-digit royalty obligations296162 - The company operates without its own manufacturing facilities, relying on third-party contract manufacturers such as Siegfried and Lonza for the production of CAPLYTA's Active Pharmaceutical Ingredient (API)646566 Risk Factors The company faces substantial risks from its sole product CAPLYTA's commercial success, clinical trial outcomes, competition, manufacturing reliance, reimbursement challenges, and a history of net losses - The company's prospects are highly dependent on the successful commercialization of CAPLYTA, its only approved drug, for schizophrenia and bipolar depression in the U.S125 - There is no guarantee that ongoing clinical trials for lumateperone in other indications, such as Major Depressive Disorder (MDD), will be successful, which could limit future revenue growth122129137 - The company has a history of significant net losses, with an accumulated deficit of approximately $1.6 billion as of December 31, 2023, and expects losses to continue140 - Reliance on third-party manufacturers like Siegfried and Lonza poses risks related to supply chain disruptions, quality control, and compliance with cGMP requirements, which could jeopardize clinical trials and commercial supply175176 - The company's ability to generate revenue is contingent on obtaining adequate coverage and reimbursement from third-party payers, who are implementing increasingly sophisticated cost-control methods179181 Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments262 Cybersecurity The company manages cybersecurity risks using the NIST Framework, with Board oversight, and has reported no material incidents in the last three years - The company's cybersecurity strategy is based on the National Institute of Standards and Technology (NIST) Cybersecurity Framework (CSF) to manage and mitigate risks263 - The Board of Directors' audit committee is responsible for overseeing cybersecurity risks, receiving updates from management at least semi-annually273274 - The company has not experienced any material cybersecurity incidents in the last three years271 Properties The company leases its headquarters and laboratory in New York, NY, and an additional office in Towson, Maryland - The company leases approximately 32,000 square feet for its headquarters and laboratory in New York, NY, with the lease term expiring in March 2029280 - An additional office of approximately 4,000 square feet is leased in Towson, Maryland, with the lease expiring in August 2026280 Legal Proceedings In February 2024, the company received notices from seven generic drug manufacturers challenging CAPLYTA patents, which it intends to defend - In February 2024, the company received notices of ANDA filings from seven generic drug manufacturers seeking approval to market generic versions of CAPLYTA281 - The ANDA filers allege that certain patents covering CAPLYTA are invalid and/or will not be infringed by their proposed generic products281 Mine Safety Disclosures This item is not applicable to the company - Not applicable283 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Global Select Market under "ITCI", with 96,807,191 shares outstanding as of February 20, 2024 - The company's common stock is traded on the Nasdaq Global Select Market under the ticker symbol "ITCI"286 - As of February 20, 2024, there were 96,807,191 shares of common stock outstanding2868 Management's Discussion and Analysis of Financial Condition and Results of Operations In 2023, CAPLYTA net product sales grew significantly to $462.2 million, reducing the net loss to $139.7 million despite increased R&D and SG&A expenses, supported by a strong $499.7 million liquidity position Financial Performance Summary (2023 vs. 2022) | Metric | 2023 (in millions) | 2022 (in millions) | YoY Change | | :--- | :--- | :--- | :--- | | Net Product Sales | $462.2 | $249.1 | +85.5% | | Total Revenues, Net | $464.4 | $250.3 | +85.5% | | Total Operating Expenses | $623.8 | $513.9 | +21.4% | | Loss from Operations | ($159.4) | ($263.6) | +39.5% | | Net Loss | ($139.7) | ($256.3) | +45.5% | - As of December 31, 2023, the company had $499.7 million in cash, cash equivalents, investment securities, and restricted cash, which management believes is sufficient to fund operations for at least the next 12 months317319 - Net cash used in operating activities decreased to $124.2 million in 2023 from $270.2 million in 2022, primarily due to increased cash receipts from higher product sales318 Results of Operations Net product sales of CAPLYTA increased by 85.5% to $462.2 million in 2023, while SG&A and R&D expenses rose due to increased commercialization and clinical program costs Net Product Sales (YoY) | Year | Net Product Sales (in millions) | | :--- | :--- | | 2023 | $462.2 | | 2022 | $249.1 | - Cost of product sales remains favorably impacted by the use of API and drug product that was expensed to R&D prior to CAPLYTA's FDA approval, with this benefit expected to continue in the near term305308309 Operating Expenses Breakdown (2023 vs. 2022) | Expense Category | 2023 (in millions) | 2022 (in millions) | YoY Change | Key Drivers | | :--- | :--- | :--- | :--- | :--- | | SG&A | $409.9 | $358.8 | +14% | Increased salaries, benefits, marketing, and advertising | | R&D | $180.1 | $134.7 | +34% | Increased costs for lumateperone programs and outsourced clinical/manufacturing activities | Liquidity and Capital Resources The company held $499.7 million in liquidity as of December 31, 2023, with net cash used in operations significantly decreasing to $124.2 million, sufficient to fund operations for at least the next 12 months - The company's cash, cash equivalents, available-for-sale investment securities, and restricted cash totaled $499.7 million at December 31, 2023317 Net Cash Used in Operating Activities (YoY) | Year | Net Cash Used in Operating Activities (in millions) | | :--- | :--- | | 2023 | $124.2 | | 2022 | $270.2 | - The company has long-term contractual commitments including operating leases, licensing and royalty payments to BMS, and minimum purchase obligations under manufacturing service agreements through 2029327328329 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks including interest rate sensitivity, inflation, capital market access, and foreign currency fluctuations, though inflation and currency have not had a material impact to date - The company's primary market risks are interest rate sensitivity, inflation, capital market access, and foreign currency fluctuations337338339340 - The investment portfolio consists of high-grade corporate bonds, commercial paper, and U.S. Treasury securities, and the company does not believe it has material exposure to interest rate changes as it intends to hold investments to maturity337 - Inflation has not had a material impact to date, but future increases could raise clinical trial, labor, and other operating costs338 Financial Statements and Supplementary Data This section presents the company's audited financial statements and the independent auditor's report, highlighting critical audit matters related to clinical trial expense estimation and variable consideration reserves - The independent auditor's report identified the estimation of clinical trial expenses as a critical audit matter, noting the high degree of subjectivity required by management to determine costs incurred at period end for active Phase 3 studies391392 - A second critical audit matter identified was the estimation of reserves for variable consideration, specifically for Medicaid and Managed Care payer rebates, which requires significant judgment regarding inventory in the distribution channel, payer mix, and complex government pricing calculations394395396 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This item is not applicable to the company - Not applicable343 Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with an unqualified audit opinion and no material changes reported - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023344 - Management's assessment concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework347 - The independent registered public accounting firm, Ernst & Young LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2023352 Other Information This item is not applicable to the company - Not applicable359 Part III Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the company's 2024 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the Registrant's Proxy Statement for the 2024 Annual Meeting of Stockholders363 Executive Compensation Information for this item is incorporated by reference from the company's 2024 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the Registrant's Proxy Statement for the 2024 Annual Meeting of Stockholders364 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item is incorporated by reference from the company's 2024 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the Registrant's Proxy Statement for the 2024 Annual Meeting of Stockholders365 Certain Relationships and Related Transactions, and Director Independence Information for this item is incorporated by reference from the company's 2024 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the Registrant's Proxy Statement for the 2024 Annual Meeting of Stockholders366 Principal Accountant Fees and Services Information for this item is incorporated by reference from the company's 2024 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the Registrant's Proxy Statement for the 2024 Annual Meeting of Stockholders367 Part IV Exhibits and Financial Statement Schedules This section provides an index to the financial statements, schedules, and exhibits filed with the Form 10-K, including key agreements - This section contains the index to financial statements and a list of all exhibits filed with the Form 10-K370371 Form 10-K Summary This item is not applicable to the company - Not applicable377