What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-02-28 compared with 2022-03-01 · 119 added, 86 removed, 233 unchanged (47% of the section changed)

Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock is traded on the Nasdaq Global Select Market under the symbol “ACAD”.

As of February 21, 2023, there were 162,230,184 shares of common stock outstanding held by approximately 32 stockholders of record.

Many stockholders hold their shares in street name and we believe that there are approximately 61,000 beneficial owners of our common stock.

Many stockholders hold their shares in street name and thus, the actual number of beneficial owners of such shares is not known or included in the foregoing number;

however, we believe that there are approximately 49,000 beneficial owners of our common stock.

To date, we have not paid any cash dividends on our common stock, and we do not intend to pay any dividends in the foreseeable future.

Instead, we intend to retain any future earnings to fund the development and growth of our business.

Securities Authorized for Issuance Under Equity Compensation Plans

The information required by this Item regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Recent Sales of Unregistered Securities

Not applicable.

Performance Graph

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This discussion contains forward-looking statements, which involve a number of risks and uncertainties.

Such forward-looking statements include statements about the benefits to be derived from NUPLAZID ® (pimavanserin), trofinetide and from our drug candidates, the potential market opportunities for pimavanserin and our drug candidates, our strategy for the commercialization of NUPLAZID, our plans for exploring and developing pimavanserin for indications other than Parkinson’s disease psychosis, our plans and timing with respect to seeking regulatory approvals, the potential commercialization of any of our drug candidates that receive regulatory approval, the progress, timing, results or implications of clinical trials and other development activities involving pimavanserin and our drug candidates, our strategy for discovering, developing and, if approved, commercializing drug candidates, our existing and potential future collaborations, our estimates of future payments, revenues and profitability, our estimates regarding our capital requirements, future expenses and need for additional financing, possible changes in legislation, and other statements that are not historical facts, including statements which may be preceded by the words “believes,”

Such forward-looking statements include statements about the benefits to be derived from NUPLAZID ® (pimavanserin), trofinetide and from our other drug candidates, the potential market opportunities for pimavanserin and our drug candidates, our strategy for the commercialization of NUPLAZID, our plans for exploring and developing pimavanserin for indications other than Parkinson’s disease psychosis, trofinetide as a treatment for Rett syndrome, ACP-204 as a treatment for ADP and our ASO programs, our plans and timing with respect to seeking regulatory approvals, the potential commercialization of any of our drug candidates that receive regulatory approval, the progress, timing, results or implications of clinical trials and other development activities involving pimavanserin, trofinetide and our other drug candidates, our strategy for discovering, developing and, if approved, commercializing drug candidates, our existing and potential future collaborations, our estimates of future payments, revenues and profitability, our estimates regarding our capital requirements, future expenses and need for additional financing, the potential or expected impacts of geopolitical and macroeconomic developments, possible changes in legislation, and other statements that are not historical facts, including statements which may be preceded by the words “believes,”

“expects,”

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and similar statements reflect our beliefs and opinions on the relevant subject.

These statements are based upon

information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These statements are inherently uncertain.

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Information in the following discussion for a yearly period means for the year ended December 31 of the indicated year.

We are a biopharmaceutical company focused on the development and commercialization of innovative medicines to address unmet medical needs in central nervous system disorders.

We have a portfolio of product opportunities led by our novel drug, NUPLAZID (pimavanserin), which was approved by the FDA, in April 2016 for the treatment of hallucinations and delusions associated with PDP.

We are a biopharmaceutical company focused on the development and commercialization of innovative medicines that address unmet medical needs in CNS disorders and rare diseases.

We have a portfolio of commercial stage products, in-development product opportunities, and research programs that are designed to address significant unmet needs in CNS disorders and rare diseases.

In order to achieve significant long-term growth, we will develop our current portfolio, expand our pipeline of early and late-stage programs through strategic business development, and invest in targeted internal research efforts.

We developed and successfully commercialized NUPLAZID (pimavanserin), which was approved by the FDA, in April 2016 for the treatment of hallucinations and delusions associated with PDP, and is the first and only drug approved in the United States for this condition.

NUPLAZID is a selective serotonin inverse agonist/antagonist, preferentially targeting 5-HT 2A receptors with no appreciable affinity for dopaminergic, histaminergic, or muscarinic receptors.

Through this novel mechanism, NUPLAZID demonstrated significant efficacy in reducing the hallucinations and delusions associated with PDP without negatively impacting motor function in our Phase 3 pivotal trial.

NUPLAZID has the potential to avoid many of the debilitating side effects of existing antipsychotics, none of which are approved by the FDA for the treatment of PDP.

We hold worldwide commercialization rights to pimavanserin.

NUPLAZID is available in 34 mg capsules and 10 mg tablets dosage forms.

Since 2021, we have advanced our business and clinical studies through the following events:

In March 2021, we initiated a Phase 2 study evaluating ACP-044 for the treatment of postoperative pain following bunionectomy surgery.

In June 2021, we announced publication of open-label extension (OLE) data from patients experiencing hallucinations and delusions associated with PDP.

The OLE efficacy analysis showed that patients previously on NUPLAZID 34 mg had a sustained efficacy response, and that patients who had been treated with investigational doses of 8.5 mg and 17 mg or placebo also showed an improvement in the symptoms of psychosis when switched to NUPLAZID 34 mg during OLE.

In June 2021, we initiated an additional Phase 2 study evaluating ACP-044 for the treatment of pain associated with osteoarthritis.

In December 2021, we announced positive top-line results from the pivotal Phase 3 LAVENDER study of trofinetide in Rett Syndrome.

The study demonstrated a statistically significant improvement over placebo for both co-primary endpoints as well as key secondary endpoint.

We are currently in registration for trofinetide, an investigational new drug for the treatment of Rett syndrome, a rare genetic neurodevelopmental disorder.

If approved, trofinetide would be the first and only drug approved in the United States for this condition.

We acquired an exclusive North American license to develop and commercialize trofinetide for Rett syndrome and other indications from Neuren in August of 2018.

We submitted to the FDA an NDA for trofinetide for the

treatment of Rett syndrome in July 2022 based on the positive results from our pivotal Phase 3 Lavender study which demonstrated statistically significant improvement over placebo for both co-primary endpoints as well as the key secondary endpoint.

The FDA filed the NDA in September 2022 and assigned a PDUFA target action date of March 12, 2023.

Through its unique mechanism and the clinical studies conducted to date, we believe that pimavanserin has the potential to address important unmet medical needs in neurological and psychiatric disorders in addition to PDP.

Today we are evaluating pimavanserin for the treatment of the negative symptoms of schizophrenia in a Phase 3 clinical development program.

The negative symptoms of schizophrenia have been associated with poor long-term outcomes and disability even when the positive symptoms are well-controlled, and today there are no FDA-approved therapies.

In the fourth quarter of 2019 we announced positive results from our pivotal ADVANCE study and in the third quarter of 2020, we initiated a second pivotal study, ADVANCE-2.

The Phase 3 program is evaluating the efficacy of pimavanserin in patients with predominantly negative symptoms of schizophrenia who have achieved adequate control of positive symptoms with their existing antipsychotic treatment.

We project completing the enrollment this year with top-line results in early 2024.

In addition, we recently announced that we are developing an internally discovered new molecule, ACP-204, which builds upon the learnings of pimavanserin in the treatment of neuropsychiatric symptoms, and is currently being evaluated in a Phase 1 clinical program.

Upon completion of our Phase 1 work, we plan to initiate studies evaluating various doses of ACP-204 in patients with Alzheimer’s disease psychosis.

ACP-204 is a new chemical entity for which we hold the worldwide rights.

In January 2022, we entered into a license and collaboration agreement with Stoke to discover, develop and commercialize novel RNA-based medicines for the potential treatment of severe and rare genetic neurodevelopmental diseases of the CNS.

In February 2022, we resubmitted to the FDA an sNDA for NUPLAZID for the treatment of hallucinations and delusions associated with ADP.

In addition, based on the positive results from the Phase 3 LAVENDER study, we plan to submit to the FDA an NDA for trofinetide for the treatment of Rett syndrome around mid-year 2022.

We have incurred substantial operating losses since our inception due in large part to expenditures for our research and development activities and more recently for our sales and marketing activities related to the commercialization of NUPLAZID.

The collaboration includes SYNGAP1 syndrome, Rett syndrome (MECP2), and an undisclosed neurodevelopmental target.

For the SYNGAP1 program, the two companies will jointly share global research, development and commercialization responsibilities and share 50/50 in all worldwide costs and future profits.

For the Rett syndrome (MECP2) and the undisclosed neurodevelopmental program, Stoke will lead research and pre-clinical development activities, while we will lead clinical development and commercialization activities.

We have incurred substantial operating losses since our inception due in large part to expenditures for our research and development activities.

As of December 31, 2022, we had an accumulated deficit of $2.4 billion.

We expect to continue to incur operating losses for the next few years as we advance our programs and incur significant development and commercialization costs.

Contingent on the level of business development activities we may complete as well as pipeline programs we may advance, we may continue to incur operating losses for the next few years as we incur significant research and development costs and costs for potential approval and commercialization of trofinetide for the treatment of Rett syndrome.

Impact of COVID-19 on our Business

On March 11, 2020, the World Health Organization declared a pandemic resulting from the disease known as COVID-19 caused by a novel strain of coronavirus, SARS-CoV-2.

As a result of the pandemic, there have been changes in the practice of medical care and medical education.

As a result of the COVID-19 pandemic, there have been changes in the practice of medical care and medical education.

For example, many health care providers initially expanded their utilization of telemedicine to conduct patient visits, and in many regions within the United States the ability of our commercial and medical field teams to call upon medical clinics, hospitals, long-term care facilities and skilled nursing facilities was restricted or converted to virtual access.

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Most medical congresses, an important means for medical education, are being conducted both in person and virtually and enrollment in clinical trials is being assessed based on local COVID-19 conditions and regional regulation and public health guidance.

In an effort to protect the health and safety of our employees and our stakeholders, we adopted recommended policies applicable to office-based employees such as working from home, limiting the number of employees on site, and reducing business travel.

For our field-based commercial and medical affairs personnel, we have instituted a protocol to assess the safety of employees to conduct in-person interactions on a localized basis in accordance with applicable regulatory guidance and local policies.

In an effort to protect the health and safety of our employees, our community, and our stakeholders, we have developed dynamic pandemic and workplace health policies applicable to all of our employees.

These policies are localized based on current COVID-19 conditions, regulatory guidance, public health and scientific recommendations, and federal, state, and local laws.

Some examples of these policies include a mandatory COVID-19 vaccination policy and increasing systemic precautions in our offices.

In addition, we have expanded our wellness programs to support the overall health and wellbeing of our employees.

Since the beginning of the pandemic, we have been able to provide an uninterrupted supply of NUPLAZID to patients.

We are monitoring our supply chain closely and do not anticipate disruptions in our ability to continue delivering NUPLAZID to patients.

During 2021, sales of NUPLAZID were negatively impacted by ongoing conditions related to the pandemic, including a reduction in patient office visits, continuing reduced occupancy rates at long-term care facilities, and reduced access to healthcare professionals.

While we observed incremental improvements in some of these factors during the second half of the year, their levels are still meaningfully below where they were pre-pandemic.

Since the beginning of the pandemic the growth of sales of NUPLAZID have been negatively impacted by ongoing conditions related to the pandemic, including a reduction in patient office visits, continuing reduced occupancy rates at long-term care facilities, and reduced access to healthcare professionals.

While we observed incremental improvements in some of these factors since 2021, their levels are still meaningfully below where they were pre-pandemic.

It remains difficult to predict the duration of the pandemic’s impact and the pace of recovery, and no assurances can be given that the pandemic will not continue to have additional negative impacts on our business, results of operations, financial condition and prospects.

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Product and Collaborative Revenues

Net product sales consist of sales of NUPLAZID, our first and only commercial product to date.

The FDA approved NUPLAZID in April 2016 and we launched the product in the United States in May 2016.

Product sales, net consist of sales of NUPLAZID, our first and only commercial product to date.

The FDA approved NUPLAZID in April 2016 for the treatment of hallucinations and delusions associated with PDP, and we launched the product in the United States in May 2016.

Cost of Product Sales

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We charge all research and development expenses to operations as incurred.

Our research and development activities have primarily focused on NUPLAZID (pimavanserin) which was approved by the FDA for the treatment of hallucinations and delusions associated with PDP in April 2016.

We currently are responsible for all costs incurred in the ongoing development of pimavanserin and we expect to continue to make substantial investments in clinical studies of pimavanserin for indications other than PDP, including schizophrenia.

In April 2021, the FDA issued a CRL in response to our sNDA seeking approval of pimavanserin for the treatment of hallucinations and delusions associated with DRP.

While we have resubmitted our sNDA to the FDA for pimavanserin for the treatment of ADP, at this time, due to the risks in the regulatory and approval processes, it is difficult to estimate the costs we would incur for any additionally required development activities of pimavanserin in ADP and other subgroups of dementia-related psychosis, including work necessary to support the review of the sNDA.

Additionally, in connection with the FDA approval of NUPLAZID, we committed to conduct post-marketing studies, including a randomized, placebo-controlled withdrawal study in patients treated with NUPLAZID and a randomized, placebo-controlled eight-week study or studies in predominantly frail and elderly patients that would add to the NUPLAZID safety database by exposing an aggregate of at least 500 patients to NUPLAZID.

We will be responsible for all costs incurred for these post-marketing studies.

While we intend to submit a NDA to the FDA for trofinetide for the treatment of Rett syndrome in mid-year 2022, at this time, due to the risks in the regulatory and approval processes, it is difficult to estimate with the costs we would incur for any additionally required development activities to support the submission and review of the NDA.

We expect to incur increased research and development expenses as a result of our exclusive worldwide license agreement for the M1 PAM program, including ACP-319, and the research collaboration with Vanderbilt University, as well as our acquisition of CerSci and its ACP-044 product candidate and preclinical programs.

We currently are responsible for all costs incurred in the development of trofinetide, ACP-044, ACP-319, the M1 PAM program and other preclinical programs, as well as milestone payments subject to achievement of development milestones .

We use external service providers to manufacture our product candidates and for the majority of the services performed in connection with the preclinical and clinical development of pimavanserin, trofinetide, ACP-044 and ACP-319 .

Our research and development activities have focused on pimavanserin, trofinetide, ACP-204 and other early-stage programs.

We currently are responsible for all costs incurred in the ongoing development of pimavanserin and we expect to continue to make substantial investments in clinical studies of pimavanserin for the treatment of the negative symptoms of schizophrenia.

In connection with the FDA approval of NUPLAZID, we committed to conduct four post-marketing studies.

The fourth commitment, a randomized, placebo-controlled eight-week study or studies in predominantly frail and elderly patients that would add to the NUPLAZID safety database by exposing an aggregate of at least 500 patients to NUPLAZID, remains ongoing.

We are responsible for all costs incurred for these post-marketing studies.

While we submitted an NDA to the FDA for trofinetide for the treatment of Rett syndrome in July 2022, at this time, due to the risks in the regulatory and approval processes, it is difficult to estimate the costs we might incur for any additionally required development activities to support the review and potential approval of the NDA.

In addition, we expect to incur increased research and development expenses as a result of advancement of our early-stage development pipeline programs.

Historically, we have used our internal research and development resources, including our employees and discovery infrastructure, across several projects and many of our costs have not been attributable to a specific project.

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* Includes upfront and milestone consideration as well as transaction costs associated with acquired in-process research and development.

Although NUPLAZID was approved by the FDA for the treatment of hallucinations and delusions associated with PDP, at this time, due to the risks inherent in regulatory requirements and clinical development, we are unable to estimate with certainty the costs we will incur for the ongoing or additional development of pimavanserin in additional indications, including ADP and schizophrenia, and the development of trofinetide, ACP-044, ACP-319 and the M1 PAM program.

Although NUPLAZID was approved by the FDA for the treatment of hallucinations and delusions associated with PDP, at this time, due to the risks inherent in regulatory requirements and clinical development, we are unable to estimate with certainty the costs we will incur for the ongoing or additional development of pimavanserin for the negative symptoms of schizophrenia, to support the potential approval and commercialization of trofinetide for the treatment of Rett syndrome, as well as the further development of our early-stage pipeline programs.

Due to these same factors, we are unable to determine with any certainty the anticipated completion dates for our current research and development programs.

Clinical development and regulatory approval timelines, probability of success, and development costs vary widely.

While our current development efforts are primarily focused on advancing the development of pimavanserin in additional indications other than PDP, we anticipate that we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the scientific and clinical success of each product candidate, as well as an ongoing assessment of the commercial potential of each opportunity and our financial position.

While our current development efforts are primarily focused on advancing the development of pimavanserin for the treatment of the negative symptoms of schizophrenia and the development of ACP-204, we anticipate that we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the scientific and clinical success of each product candidate, as well as an ongoing assessment of the commercial potential of each opportunity and our financial position.

We cannot forecast with any degree of certainty which product opportunities will be subject to future collaborative or licensing arrangements, when such arrangements will be secured, if at all, and to what degree any such arrangements would affect our development plans and capital requirements.

Similarly, we are unable to estimate with certainty the costs we will incur for post-marketing studies that we committed to conduct in connection with FDA approval of NUPLAZID.

We expect our research and development expenses to increase and continue to be substantial as we conduct studies pursuant to our post-marketing commitments and pursue the development of pimavanserin in additional indications other than PDP, including our studies within schizophrenia, the development of ACP-044 for pain management, and the development of ACP-319.

We expect our research and development expenses continue to be substantial as we conduct studies pursuant to our post-marketing commitments and pursue the development of pimavanserin for the negative symptoms of schizophrenia and trofinetide for the treatment of Rett syndrome as well as the further development of ACP-204 and other early-stage pipeline programs.

The lengthy process of completing clinical trials and supporting development activities and seeking regulatory approval for our product opportunities requires the expenditure of substantial resources.

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Also included in selling, general and administrative expenses are fees paid to external service providers to support our commercial activities associated with NUPLAZID, professional fees associated with legal and accounting services, costs associated with patents and patent applications for our intellectual property and charitable donations to independent charitable foundations that support Parkinson’s disease patients generally.

We expect our selling, general and administrative expenses to increase in future periods to support commercial activities associated with NUPLAZID and our further development of pimavanserin in additional indications other than PDP.

Changes in selling, general and administrative expenses in future periods are subject to the evolving PDP market dynamics, the regulatory and approval processes of trofinetide and our further development of pimavanserin in additional indications other than PDP.

Critical Accounting Policies and Estimates

A summary of the significant accounting policies is provided in Note 2 to our Consolidated Financial Statements.

The preparation of financial statements in accordance with U.S.

generally accepted accounting principles (GAAP) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period .

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

We evaluate our estimates on an ongoing basis.

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Product Sales, Net

We sale our product through SPs and SDs.

We sell our product through SPs and SDs.

SPs dispense product to a patient based on the fulfillment of a prescription and SDs sell product to government facilities, long-term care pharmacies, or in-patient hospital pharmacies.

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unpaid rebates still estimated to be incurred.

Allowances for rebates also include amounts due under the Inflation Reduction act of 2022 for Medicare Part D unit sales with applicable period AMP increases that outpace inflation over the benchmark period.

The applicable period will be twelve months on October 1 of each year, with the initial applicable period beginning on October 1, 2022.

The benchmark period AMP price is January 1, 2021 through September 30, 2021.

Our estimates are based Medicare Part D sales as a percentage of gross sales and the rate AMP for the current period will be in excess the benchmark period.

We regularly monitor our estimates and record adjustments when rebate trends, rebate programs and contract terms, legislative changes, or other significant events indicate that a change in the estimates is appropriate.

To date, our estimates have not differed materially from actual rebates.

However, subsequent changes in estimates may result in a material change in our accruals, which could also materially affect our balance sheet and results of operations.

Chargebacks :

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We estimate sales with these entities and accrue for anticipated chargebacks and organization fees, based on the applicable contractual terms.

To date, our estimates have not differed

materially from the actual chargebacks and organization fees.

However, subsequent changes in estimates may result in a material change in our accruals, which could also materially affect our balance sheet and results of operations.

Research and Development Accruals

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The fair value of restricted stock units is estimated based on the market price of our common stock on the date of grant.

The estimated fair values of stock options, purchase plan rights, and regular restricted stock units are then expen sed over the vesting period.

The estimated fair values of stock options, purchase plan rights, and regular restricted stock units are then expensed over the vesting period.

For restricted stock units requiring satisfaction of both market and service conditions, the estimated fair values are generally expensed over the longest of the explicit, implicit and derived service periods.

Performance-based stock awards vest upon the achievement of certain pre-defined company-specific performance-based criteria.

Expense related t o these performance-based stock awards is generally recognized ratably over the expected performance period once the pre-defined performance-based criteria for vesting becomes probable.

Expense related to these performance-based stock awards is generally recognized ratably over the expected performance period once the pre-defined performance-based criteria for vesting becomes probable.

See also Item 15 of Part IV, “Notes to Consolidated Financial Statements—Note 2—Summary of Significant Accounting Policies”

for further discussion of our assumptions and estimates related to our stock-based compensation.

Results of Operations

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Our results of operations have fluctuated significantly from period to period in the past and are likely to continue to do so in the future.

We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the progress and timing of expenditures related to our commercial activities associated with NUPLAZID and the extent to which we generate revenue from product sales, our development of pimavanserin in additional indications other than PDP, our development of trofinetide, ACP-044, ACP-319 , and the M1 PAM program, and the progress and timing of expenditures related to studies of NUPLAZID in PDP pursuant to our post-marketing commitments.

We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the progress and timing of expenditures related to our commercial activities associated with NUPLAZID and the extent to which we generate revenue from product sales, our potential approval and commercialization of trofinetide for the treatment of Rett syndrome, our development of pimavanserin for the negative symptoms of schizophrenia, our further development of the early-stage pipeline programs and the progress and timing of expenditures related to studies of NUPLAZID in PDP pursuant to our post-marketing commitments.

Further, we expect our sales allowances to vary from quarter to quarter due to fluctuations in our Medicare Part D Coverage Gap liability and the volume of purchases eligible for government mandated discounts and rebates, as well as changes in discount percentages that may be impacted by potential future price increases and other factors.

We cannot predict with certainty what the full impact of the COVID-19 pandemic may have on our business, results of operations, financial condition and prospects.

We cannot predict with certainty what the full impact that macroeconomic developments, including the ongoing conflict between Ukraine and Russia and the COVID-19 pandemic, may have on our business, results of operations, financial condition and prospects.

Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance.

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Product Sales, Net

Net product sales, comprised of NUPLAZID, were $484.1 million and $441.8 million in 2021 and 2020, respectively.

Net product sales for the year ended December 31, 2021 increased as compared to the year ended December 31, 2020 primarily due to a higher average gross selling price of NUPLAZID in 2021 as compared to 2020 as well as the growth in NUPLAZID unit sales of approximately 3% in 2021 as compared to 2020.

Product sales, net, comprised of NUPLAZID, were $517.2 million and $484.1 million in 2022 and 2021, respectively.

Product sales, net for the year ended December 31, 2022 increased as compared to the year ended December 31, 2021 primarily due to a higher average gross selling price of NUPLAZID in 2022 as compared to 2021.

The following table provides a summary of activity with respect to our sales allowances and accruals for the year ended December 31, 2022 (in thousands):

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Cost of Product Sales

Cost of product sales was $10.8 million and $10.2 million in 2021 and 2020, respectively, or approximately 2% of net product sales, respectively.

The cost of product sales as a percentage of net sales stayed flat during 2021 as compared to 2020.

Cost of product sales was $10.2 million and $10.8 million in 2022 and 2021, respectively, or approximately 2% of product sales, net in both years.

The cost of product sales as a percentage of product sales, net stayed flat during 2022 as compared to 2021.

License Fees and Royalties

License fees and royalties were $8.3 million and $10.3 million in 2021 and 2020, respectively, and include royalties due to the Ipsen Group of two percent of net sales of NUPLAZID and amortization related to the milestone paid to the Ipsen Group upon FDA approval of NUPLAZID in 2016.

License fees and royalties were $0 and $8.3 million in 2022 and 2021, respectively, and in 2021 include royalties due to the Ipsen Group of two percent of net sales of NUPLAZID and amortization related to the milestone paid to the Ipsen Group upon FDA approval of NUPLAZID in 2016.

The royalty obligation terminated in October 2021 which was the primary reason for the decrease in license fees and royalties during 2022 as compared to 2021.

Research and Development Expenses

Research and development expenses decreased to $239.4 million in 2021, including $22.0 million in stock-based compensation, from $319.1 million in 2020, including $31.3 million in stock-based compensation.

The decrease in research and development expenses was due to a decrease of $71.2 million in external costs and a decrease of $8.4 million in personnel and related costs resulting from attrition.

The decrease in external costs was primarily due to the $52.8 million in upfront consideration and transaction costs paid for the acquisition of CerSci and $10.0 million upfront payment to Vanderbilt University for the M1 PAM program in 2020 .

Research and development expenses increased to $361.6 million in 2022, including $22.6 million in stock-based compensation, from $239.4 million in 2021, including $22.0 million in stock-based compensation.

The increase in research and development expenses was mainly due to the $60 million upfront payment made to Stoke for the license and collaboration agreement and the $10 million milestone to Neuren in 2022 upon acceptance of the trofinetide NDA filing, as well as increased costs of our development activities for trofinetide, ACP-204 and other early-stage programs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $396.0 million in 2021, including $40.4 million in stock-based compensation, from $388.7 million in 2020, including $50.5 million in stock-based compensation.

The increase in selling, general and administrative expenses was primarily due to an increase of $16.4 million in personnel and related costs, partially offset by a decrease of $10.1 million in stock compensation expense.

Selling, general and administrative expenses decreased to $369.1 million in 2022, including $44.5 million in stock-based compensation expense, from $396.0 million in 2021, including $40.4 million in stock-based compensation expense.

The decrease in selling, general and administrative expenses was primarily related to the continued reduction and optimization of commercial spend related to NUPLAZID, leading to a reduction in overall advertising and promotional costs, offset by investments in preparing for the launch of trofinetide.

Comparison of the Years Ended December 31, 2021 and 2020

Product Sales, Net

Net product sales, comprised of NUPLAZID, were $441.8 million and $339.1 million in 2020 and 2019, respectively.

Net product sales for the year ended December 31, 2020 increased as compared to the year ended December 31, 2019 primarily due to growth in NUPLAZID unit sales of approximately 18% in 2020 as compared to 2019.

Also contributing to the increase was a higher average gross selling price of NUPLAZID in 2020 as compared to 2019.

Product sales, net, comprised of NUPLAZID, were $484.1 million and $441.8 million in 2021 and 2020, respectively.

Product sales, net for the year ended December 31, 2021 increased as compared to the year ended December 31, 2020 primarily due to a higher average gross selling price of NUPLAZID in 2021 as compared to 2020 as well as the growth in NUPLAZID unit sales of approximately 3% in 2021 as compared to 2020.

The following table provides a summary of activity with respect to our sales allowances and accruals for the year ended December 31, 2021 (in thousands):

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Cost of Product Sales

Cost of product sales was $10.2 million and $11.3 million in 2020 and 2019, respectively, or approximately 2% and 3% of net product sales.

The cost of product sales as a percentage of net sales decreased during 2020 as compared to 2019 due to higher manufacturing levels, resulting in higher inventory cost absorption and increased sales volume at a higher average gross selling price in 2020 .

Cost of product sales was $10.8 million and $10.2 million in 2021 and 2020, respectively, or approximately 2% of product sales, net in both years.

The cost of product sales as a percentage of product sales, net stayed flat during 2021 as compared to 2020.

License Fees and Royalties

The increase in license fees and royalties was primary due to the increase in sales volume during 2020 .

The royalty obligation terminated in October 2021 which was the primary reason for the decrease in license fees and royalties during 2021 as compared to 2020.

Research and Development Expenses

Research and development expenses increased to $319.1 million in 2020, including $31.3 million in stock-based compensation, from $240.4 million in 2019, including $32.5 million in stock-based compensation.

The increase in research and development expenses was due to an increase of $72.9 million in external costs and an increase of $5.8 million in personnel and related costs.

The increase in external costs was primarily due to the $52.8 million in upfront consideration and transaction costs paid for the acquisition of CerSci and $10.0 million upfront payment to Vanderbilt University for the M1 PAM program .

Research and development expenses decreased to $239.4 million in 2021, including $22.0 million in stock-based compensation expense, from $319.1 million in 2020, including $31.3 million in stock-based compensation expense.

The decrease in research and development expenses was due to a decrease of $71.2 million in external costs and a decrease of $8.4 million in personnel and related costs resulting from attrition.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $388.7 million in 2020, including $50.5 million in stock-based compensation, from $325.6 million in 2019, including $46.8 million in stock-based compensation.

The increase in selling, general and administrative expenses was due to an increase of $38.0 million in external costs and an increase of $25.1 million in personnel and related costs, including an increase of $3.7 million in stock compensation expense.

The increase during the year end December 31, 2020 as compared to 2019 was primarily due to increased advertising and promotional costs, dementia-related psychosis launch preparation expenses, as well as an increase in personnel and related costs .

Selling, general and administrative expenses increased to $396.0 million in 2021, including $40.4 million in stock-based compensation expense, from $388.7 million in 2020, including $50.5 million in stock-based compensation expense.

Liquidity and Capital Resources

We have funded our operations primarily through sales of our equity securities, payments received under our collaboration agreements, debt financings, interest income, and, since 2016, with revenues from sales of NUPLAZID.

We anticipate that the level of cash used in our operations will increase in future periods in order to fund our ongoing and planned commercial activities for NUPLAZID, our ongoing and planned development activities for pimavanserin in additional indications other than PDP, studies to be conducted pursuant to our post-marketing commitments and our ongoing and planned development activities for trofinetide for the treatment of Rett syndrome, ACP-044 for pain management, and for various M1 PAM compounds, including ACP-319, under the agreement with Vanderbilt University.

We anticipate that the level of cash used in our operations will fluctuate in future periods depending on the levels of spend for our ongoing and planned commercial activities for NUPLAZID, our potential approval and commercialization of trofinetide for the treatment of Rett syndrome, our ongoing and planned development activities for pimavanserin for the negative symptoms of schizophrenia, studies to be conducted pursuant to our post-marketing commitments, our ongoing and planned development activities for the early-stage pipeline programs and any potential future business development activities.

We expect that our cash, cash equivalents, and investment securities will be sufficient to fund our planned operations through at least the next 12 months.

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Our future capital requirements will depend on, and could increase significantly as a result of, many factors, including:

the p rogress in, and the costs of, our ongoing and planned development activities for pimavanserin, post-marketing studies for NUPLAZID to be conducted over the next several years, and ongoing and planned commercial activities for NUPLAZID ;

the costs of our development activities for trofinetide;

the costs of our development activities for ACP-044;

the costs of our development activities for ACP-319

the costs of our development activities for the M1 PAM program;

the progress in, and the costs of, our ongoing and planned development activities for pimavanserin, post-marketing studies for NUPLAZID to be conducted over the next several years, and ongoing and planned commercial activities for NUPLAZID;

the costs of our development activities for trofinetide for the treatment of Rett syndrome;

the costs of our development activities for ACP-204 and our other early-stage pipeline programs;

the costs of commercializing NUPLAZID, including the maintenance and development of our sales and marketing capabilities;

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product sales from NUPLAZID;

the costs of preparing applications for regulatory approvals for NUPLAZID in jurisdictions other than the U.S., and in additional indications other than PDP and for other product candidates, as well as the costs required to support review of such applications;

the costs of preparing applications for regulatory approvals for NUPLAZID in additional indications other than PDP and for other product candidates, as well as the costs required to support review of such applications;

the costs of manufacturing and distributing NUPLAZID for commercial use in the U.S.;

our ability to obtain regulatory approval for, and subsequently generate product sales from, NUPLAZID in jurisdictions other than the U.S.

or in additional indications other than PDP, or from trofinetide, ACP-044, ACP-319 and other product candidates ;

the costs of manufacturing and distributing trofinetide for potential commercial use in the U.S.;

our ability to obtain regulatory approval for, and subsequently generate product sales from, pimavanserin for the negative symptoms of schizophrenia, from trofinetide for the treatment of Rett syndrome, from ACP-204 and from our other product candidates;

the costs of acquiring additional product candidates or research and development programs;

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the costs associated with litigation, including the costs incurred in defending against any product liability claims that may be brought against us related to NUPLAZID.

Unless and until we can generate significant cash from our operations, we expect to satisfy our future cash needs through our existing cash, cash equivalents and investment securities, public or private sales of our securities, debt financings, strategic collaborations, or by licensing all or a portion of our product candidates or technology.

In the past, periods of turmoil and volatility in the financial markets have adversely affected the market capitalizations of many biotechnology companies, and generally made equity and debt financing more difficult to obtain.

For example, due to the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability.

For example, due to macroeconomic developments, including the Ukraine-Russia conflict, the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability.

These events, coupled with other factors, may limit our access to additional financing in the future.

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Additional funding, if obtained, may significantly dilute existing stockholders and could negatively impact the price of our stock.

We have invested a substantial portion of our available cash in money market funds, U.S.

treasury notes, and high quality, marketable debt instruments of corporations and government sponsored enterprises in accordance with our investment policy.

Our investment policy defines allowable investments and establishes guidelines relating to credit quality, diversification, and maturities of our investments to preserve principal and maintain liquidity.

All investment securities have a credit rating of at least Aa3/AA- or better, or P-1/A-1 or better, as determined by Moody’s Investors Service or Standard & Poor’s.

Our investment portfolio has not been adversely impacted by the disruptions in the credit markets that have occurred in the past.

However, if there are future disruptions in the credit markets, there can be no assurance that our investment portfolio will not be adversely affected .

Material Cash Requirements

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In such event, we would not be liable for the full amount of the agreement and therefore these amounts are not reflected in the above table.

W e have entered into various collaboration, licensing and merger agreements which generally include upfront license fees, development and commercial milestone payments upon achievement of certain clinical and commercial development and annual net sales milestones, as well as royalties calculated as a percentage of product revenues, with rates that vary by agreement.

We have entered into various collaboration, licensing and merger agreements which generally include upfront license fees, development and commercial milestone payments upon achievement of certain clinical and commercial development and annual net sales milestones, as well as royalties calculated as a percentage of product revenues, with rates that vary by agreement.

As of December 31, 2022, we may be required to make milestone payments up to $1.6 billion in the aggregate.

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Net cash used in operating activities decreased to $114.0 million in 2022 compared to $125.7 million in 2021 and $136.2 million in 2020.

The decrease in net cash used in operating activities in 2022 relative to 2021 was primarily due to an increase in our net revenues as well as decreased sales and marketing costs, partially offset by increased research and development costs.

The decrease in net cash used in operating activities in 2021 relative to 2020 was due to an increase in our net revenues as well as decreased research and development costs and sales and marketing costs .

The decrease in net cash used in operating activities in 2020 relative to 2019 was due to an increase in our net revenues, partially offset by additional research and development costs, including the upfront license fees and payments and upfront and closing costs paid for the acquisition of CerSci, and sales and marketing costs.

Net cash used in investing activities totaled $71.1 million in 2021 compared to net cash provided by investing activities of $192.5 million in 2020 and net cash used in investing activities of $165.8 million in 2019.

The increase in net cash used in investing activities in 2021 compared to 2020 was primarily due to increased net purchases of investment securities.

Net cash provided by investing activities totaled $73.2 million in 2022 compared to net cash used in investing activities of $71.1 million in 2021 and net cash provided by investing activities of $192.5 million in 2020.

The increase in net cash provided by investing activities in 2022 compared to 2021 was primarily due to increased net maturities of investment securities.

The increase in net cash used in investing activities in 2021 compared to 2020 was primarily due to increased net purchases of investment securities.

Net cash provided by financing activities decreased to $8.2 million in 2022 compared to $18.2 million in 2021 and $81.0 million in 2020.

The decrease in net cash provided by financing activities in 2021 relative to 2020 was primarily due to a decrease in proceeds resulting from the exercise of employee stock options.

The decrease in net cash provided by financing activities in 2020 relative to 2019 was attributable primarily to the follow-on public offering in September 2019, which resulted in net proceeds of $271.5 million.

The decrease in net cash provided by financing activities in 2022 relative to 2021 and in 2021 relative to 2020 was primarily due to a decrease in proceeds resulting from the exercise of employee stock options.

Off-Balance Sheet Arrangements

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We do not have any direct investments in auction-rate securities or securities that are collateralized by assets that include mortgages or subprime debt.

If a 10 percent change in interest rates were to have occurred on December 31, 2021, this change would not have had a material effect on the fair value of our investment portfolio as of that date.

If a 10 percent change in interest rates were to have occurred on December 31, 2022 and 2021, this change would not have had a material effect on the fair value of our investment portfolio as of each such date.

Although we are seeing, and expect to continue to see, increased interest rates, due to our investment in investment-grade, interest-bearing securities, as of the date of this Annual Report on Form 10-K, we do not expect anticipated changes in interest rates to have a material effect on our interest rate risk in future reporting periods.

Financial Statemen ts and Supplementary Data.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity