What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-28 compared with 2022-03-01 · 163 added, 209 removed, 920 unchanged (29% of the section changed)

11 unchanged sentences

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

As of December 31, 2021, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

Internal control over financial reporting is a process designed by, or under the supervision and with the participation of, our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

As of December 31, 2022, our management assessed the effectiveness of our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act of 1934, as amended, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

Based on this assessment, management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2022, our internal control over financial reporting was effective based on those criteria.

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Changes in Internal Control Over Financial Reporting

An evaluation was also performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of any changes in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

An evaluation was also performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer(our principal executive officer and principal financial officer, respectively), of any changes in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

That evaluation did not identify any change in our internal control over financial reporting that occurred during our latest fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Directors, Executive Off icers and Corporate Governance .

The information required by this Item and not set forth below will be set forth in the section headed “—Election of Directors,”

and “Information Regarding the Board of Directors and Corporate Governance”

in our definitive Proxy Statement for our 2022 Annual Meeting of Stockholders to be filed with the SEC by April 30, 2022 (our “Proxy Statement”) and is incorporated in this report by reference.

“Information Regarding the Board of Directors and Corporate Governance”

and “Delinquent Section 16(a) Reports,”

if any, in our definitive Proxy Statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC by May 1, 2023 (our “Proxy Statement”) and is incorporated in this report by reference.

We have adopted a code of ethics for directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees, known as the Code of Business Conduct and Ethics.

The Code of Business Conduct and Ethics is available on our website at http://www.acadia-pharm.com under the Corporate Governance section of our Investors page.

The Code of Business Conduct and Ethics is available on our website at http://www.acadia.com under the Corporate Governance section of our Investors page.

We will promptly disclose on our website (i) the nature of any amendment to the policy that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy that is granted to one of these specified individuals, the name of such person who is granted the waiver and the date of the waiver.

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2004 Equity Incentive Plan and forms of agreement thereunder (incorporated by reference to Exhibit 10.3 to Registration Statement No.

2010 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K, filed June 28, 2019).

2010 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-K, filed August 9, 2022).

Forms of agreement under the 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K, filed February 29, 2016).

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Employment Offer Letter, dated October 28, 2015, between the Registrant and Srdjan Stankovic (incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K, filed February 29, 2016).

Employment Offer Letter, dated June 26, 2018, between the Registrant and Brendan Teehan.

Employment Offer Letter, dated June 26, 2018, between the Registrant and Brendan Teehan (incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K, filed March 1, 2022).

Employment Offer Letter, dated July 2, 2018, between the Registrant and Austin D.

Kim (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed November 6, 2018).

Employment Offer Letter, dated April 28, 2020, between the Registrant and Mark Schneyer.

Employment Offer Letter, dated April 28, 2020, between the Registrant and Mark Schneyer (incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K, filed March 1, 2022).

Employment Offer Letter, dated December 19, 2022, between the Registrant and Doug Williamson.

Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K, filed June 29, 2020).

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Third Amendment to Product Agreement, dated December 11, 2017, by and between the Registrant and Patheon Pharmaceuticals Inc (incorporated by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K, filed February 27, 2018 .

Master Services Agreement, dated December 15, 2016, by and between Acadia Pharmaceuticals GmbH and Siegfried AG and its affiliates, and Attachment #1, Attachment #2 and Attachment #3 (incorporated by reference to Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K, filed February 28, 2017).

Change Order #1 to Master Services Agreement Attachment #1, dated January 3, 2017, by and between Acadia Pharmaceuticals GmbH and Siegfried AG (incorporated by reference to Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K, filed February 28, 2017).

Attachment #4, Attachment #5 and Attachment #6, each dated May 12, 2017, to the Master Services Agreement, dated December 15, 2016, by and between Acadia Pharmaceuticals GmbH and Siegfried AG and its affiliates (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q, filed August 8, 2017).

Master Services Agreement, dated December 15, 2016, by and between Acadia Pharmaceuticals GmbH and Siegfried AG and its affiliates, and Attachment #1, Attachment #2 and Attachment #3 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed November 3, 2022).

Change Order #1 to Master Services Agreement Attachment #1, dated January 3, 2017, by and between Acadia Pharmaceuticals GmbH and Siegfried AG (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, filed November 3, 2022).

Attachment #7, dated September 30, 2020, to the Master Services Agreement, dated December 15, 2016, by and between Acadia Pharmaceuticals GmbH and Siegfried AG and its affiliates (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly report on Form 10-Q, filed November 4, 2020).

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(incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly report on Form 10-Q, filed May 8, 2020).

Acadia Pharmaceuticals Inc.

2023 Inducement Plan (incorporated by reference to Exhibit 99.1 to Registration Statement No.

Forms of Stock Option Grant Notice and Stock Option Agreement under Acadia Pharmaceuticals Inc.

2023 Inducement Plan (incorporated by reference to Exhibit 99.2 to Registration Statement No.

Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under Acadia Pharmaceuticals Inc.

2023 Inducement Plan (incorporated by reference to Exhibit 99.3 to Registration Statement No.

Lease Agreement, effective May 15, 2018, by and between the Registrant and Boston Properties Limited Partnership.

List of subsidiaries of the Registrant.

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b We have requested or received confidential treatment of certain portions of this agreement, which have been omitted and filed separately with the SEC pursuant to Rule 406 under the Securities Act of 1933, as amended, or Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

c Certain portions of this exhibit (indicated by “[***]”) have been omitted pursuant to confidential treatment.

c Pursuant to Item 601(b)(10) of Regulation S-K, certain portions of this exhibit have been omitted (indicated by “[***]”

or “[***]”) because the Company has determined that the information is both not material and is the type that the Company treats as private or confidential.

Form 10-K Summary

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February 27, 2023

/ S / A DORA N DU

February 27, 2023

/ S / D ANIEL B.

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Basis for Opinion

These financial statements are the responsibility of the Company's management.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

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Description of the Matter

As more fully described in Note 2 to the consolidated financial statements, the Company recognizes revenue from product sales at the net sales price (the “transaction price”) which includes estimates of variable consideration for which reserves for sales discounts and allowances are established.

Estimated sales discounts and allowances were $24.0 million as of December 31, 2021.

The product sales, adjusted for the sales discounts and allowances, reflect the Company’s best estimates of the amount of consideration to which the Company is entitled based on the terms of the contract.

The most significant category within the Company’s sales discounts and allowances are rebates for Medicare Part D.

The Medicare Part D rebates are mandated discounts under the Medicare Part D prescription drug benefit, owed after the final dispensing of the product to a benefit plan participant and are based upon statutory requirements.

The estimate for the Medicare Part D rebates is based on expected utilization and estimated payor mix of the Company’s gross sales.

The Company’s estimates of payor mix and expected utilization of Medicare Part D rebates are based on historical data received from the specialty pharmacies (SPs) and specialty distributors (SDs) since product launch.

Auditing the Company’s estimate for Medicare Part D rebates is complex, requires significant judgment, uses subjective assumptions, and the amounts involved are material to the financial statements.

The subjective assumptions include estimates of expected utilization of rebates by benefit plan participants and payor mix of the Company’s gross sales.

As described in Note 2 to the consolidated financial statements under the caption “Revenue Recognition”, the Company establishes provisions for sales rebates in the same period the related product is sold.

At December 31, 2022, the Company had $24.2 million in sales rebates accrued, which includes rebates provided for Medicare Part D drug plan.

In order to establish these sales rebate accruals, the Company estimated its rebates based upon the identification of the products subject to a rebate, the applicable price, rebate terms and the estimated lag time between the sale and payment of the rebate.

Auditing the Medicare Part D sales rebate accruals was complex and required significant auditor judgment because the accruals consider multiple subjective estimates and assumptions.

These estimates and assumptions included the estimated inventory in the distribution channel, which impacts the lag time between the sale to the customer and payment of the rebate, and the final payer related to product sales, which impacts the applicable price and rebate terms.

In deriving these estimates and assumptions, the Company used both internal and external sources of information to estimate product in the distribution channels, payer mix, prescription volumes and historical experience.

Management supplemented its historical data analysis with qualitative adjustments based upon changes in rebate trends, rebate programs and contract terms, legislative changes, or other significant events which indicate a change in the reserve is appropriate.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s estimate for Medicare Part D rebates including management’s review of the significant assumptions described above and inputs into the rebate calculation.

For example, we tested controls over actual sales and the accuracy of forecasting expected utilization and payor mix.

To test the estimate for Medicare Part D rebates, we obtained management’s calculation and performed the following audit procedures, among others.

We performed a lookback analysis comparing historical Medicare Part D rebate estimates to the amounts invoiced and paid for the same period, performed sensitivity analyses over certain of the subjective assumptions to the calculation to evaluate the impact on the Medicare Part D rebate estimate, performed procedures over the completeness and accuracy of the data used in management’s estimates, and tested management’s calculation of expected rebate utilization for in-channel inventory.

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s sales rebate accruals for Medicare Part D rebates.

This included testing controls over management’s review of the significant assumptions described above and inputs into the rebate calculation.

For example, we tested controls over actual sales and the accuracy of forecasting expected utilization and payer mix.

The testing was inclusive of management’s controls to evaluate the accuracy of its reserve judgments to actual rebates paid, rebate validation and processing, and controls to ensure that the data used to evaluate and support the significant assumptions was complete, accurate and, where applicable, verified to external data sources.

To test the sales rebate accruals for Medicare Part D, our audit procedures included, among others, understanding and evaluating the significant assumptions and underlying data used in management’s calculations.

Our testing of significant assumptions included a lookback analysis to evaluate the historical accuracy of management’s estimates by comparing actual activity to previous estimates and performed sensitivity analyses over the subjective assumptions to evaluate the completeness of the reserves.

As a part of our procedures, we evaluated the reasonableness of the Company’s assumptions considering recent sales trends and regulatory factors.

/s/ Ernst & Young LLP

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Operating lease right-of-use assets

Intangible assets, net

Restricted cash

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Accumulated deficit

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Total stockholders’

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Other comprehensive (loss) income :

Unrealized (loss) gain on investment securities

Unrealized loss on investment securities

Foreign currency translation adjustments

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Net purchases of property and equipment

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities

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Comprehensive

Stockholders'

Stockholders’

Income (Loss)

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Balances at December 31, 2020

Issuance of common stock in

connection with asset acquisition

Issuance of common stock from

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Acadia Pharmaceuticals Inc.

(the Company), based in San Diego, California, is a biopharmaceutical company focused on the development and commercialization of innovative medicines to address unmet medical needs in central nervous system disorders.

(the Company), based in San Diego, California, is a biopharmaceutical company focused on the development and commercialization of innovative medicines that address unmet medical needs in CNS disorders and rare disease.

The Company is incorporated in Delaware.

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Food and Drug Administration (FDA) approved the Company’s first drug, NUPLAZID ® (pimavanserin), for the treatment of hallucinations and delusions associated with Parkinson’s disease psychosis (PDP).

NUPLAZID became available for prescription in the United States on May 31, 2016.

NUPLAZID became available for prescription in the United States in May 2016.

Summary of Significant Accounting Policies

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Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries located in Europe.

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

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

GAAP requires management 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 conformity with GAAP requires management 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.

Actual results could differ from these estimates.

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As disclosed in Note 4, the Company classifies its cash equivalents and available-for-sale investment securities within the fair value hierarchy as defined by authoritative guidance:

Level 1 Inputs

Level 1 Inputs —

Quoted prices for identical instruments in active markets.

Level 2 Inputs

Level 2 Inputs —

Quoted prices for similar instruments in active markets;

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and model-derived valuations in which all significant inputs and significant value drivers are observable.

Level 3 Inputs

Level 3 Inputs —

Valuation derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

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In connection with the FDA approval of NUPLAZID in April 2016, the Company made a one-time milestone payment of $ 8.0 million pursuant to its 2006 license agreement with the Ipsen Group in which the Company licensed certain intellectual property rights that complement its patent portfolio for its serotonin platform, including NUPLAZID.

The Company capitalized the $ 8.0 million payment as an intangible asset and is amortizing the asset on a straight-line basis over the estimated useful life of the licensed patents through the second half of 2021.

The Company recorded amortization expense related to its intangible asset of $ 1.1 million, $ 1.5 million and $ 1.5 million for the years ended December 31, 2021, 2020 and 2019.

The Company capitalized the $ 8.0 million payment as an intangible asset and is amortizing the asset on a straight-line basis over the estimated useful life which ended during the year ended December 31, 2021.

The Company recorded no amortization expense related to its intangible asset for the year ended December 31, 2022 and recorded amortization expense of $ 1.1 million and $ 1.5 million for the years ended December 31, 2021 and 2020.

As of December 31, 2021, the intangible asset was fully amortized.

Royalties incurred in connection with the Company’s license agreement with the Ipsen Group, as disclosed in Note 9, are expensed to license fees and royalties as revenue from product sales is recognized.

The Company accounts for acquisitions of an asset or group of similar identifiable assets that do not meet the definition of a business as asset acquisition using the cost accumulation method, whereby the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of their relative fair values.

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Advertising costs are expensed when services are performed or goods are delivered.

The Company incurred $ 41.8 million, $ 51.1 million and $ 38.3 million in advertising costs during the years ended December 31, 2021, 2020 and 2019 , respectively, related to NUPLAZID.

The Company incurred $ 5.5 mill ion, $4 1.8 million and $ 51.1 million in advertising costs during the years ended December 31, 2022, 2021 and 2020 , respectively, related to NUPLAZID.

No advertising costs were capitalized as prepaid expenses at December 31, 2022 or 2021 .

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Revenue for the Company’s product sales has not been adjusted for the effects of a financing component as the Company expects, at contract inception, that the period between when the Company transfers control of the product and when the Company receives payment will be one year or less.

The Company’s net product sales consist of U.S.

The Company’s product sales, net consist of U.S.

sales of NUPLAZID.

NUPLAZID was approved by the FDA in April 2016 and the Company commenced shipments of NUPLAZID to specialty pharmacies (SPs) and specialty distributors (SDs) in late May 2016.

NUPLAZID was approved by the FDA in April 2016 and the Company commenced shipments of NUPLAZID to SPs and SDs in late May 2016.

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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Distribution fees are recorded as an offset to revenue based on contractual terms at the time revenue from the sale is recognized.

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program and the Medicare Part D prescription drug benefit.

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unpaid rebates still estimated to be incurred.

Allowances for rebates also include amounts due under the Inflation Reduction

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

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.

The Company’s 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.

Chargebacks :

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The Company accrues for costs incurred as the services are being provided by monitoring the status of the trial or services provided and the invoices received from its external service providers.

When the Company makes payments in advance of services being provided, it records those amounts as prepaid expenses on its consolidated balance sheet and expense them as the services are rendered.

When the Company makes payments in advance of services being provided, it records those amounts as prepaid expenses on its consolidated balance sheets and expense them as the services are rendered.

In the case of clinical trials, a portion of the estimated cost normally relates to the projected cost to treat a patient in the trials, and this cost is recognized based on the number of patients enrolled in the trial.

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The Company does not currently have any of its own manufacturing facilities, and therefore it depends on an outsourced manufacturing strategy for the production of NUPLAZID for commercial use and for the production of its product candidates for clinical trials.

The Company has contracts in place with two third-party manufacturers of commercial drug product and one third-party manufacturer of drug substance that is approved for the production of NUPLAZID active pharmaceutical ingredient (API).

Although there are potential sources of supply other than the Company’s existing suppliers, any new supplier would be required to qualify under applicable regulatory requirements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

The fair value of restricted stock units (RSUs) is estimated based on the c losing market price of the Company’s common stock on the date of grant.

The fair value of RSUs is estimated based on the closing market price of the Company’s common stock on the date of grant.

RSUs generally vest over a four-year period.

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

During the year ended December 31, 2021, the Company had a change in estimate related to the achievement of certain performance-based criteria for performance-based stock awards which resulted in a reduction in stock-based compensation expenses by approximatel y $ 6.8 m illion.

During the years ended December 31, 2022 and 2021, the Company had a change in estimate related to the achievement of certain performance-based criteria for performance-based stock awards which resulted in a reduction in stock-based compensation expenses by approximatel y $ 0 and $ 6.8 m illion.

The table below summarizes the total stock-based compensation expense included in the Company’s statements of operations for the periods presented (in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

Recently Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments , which changes the impairment model for most financial assets and certain other instruments.

For trade receivables and other instruments, entities will be required to use a new forward-looking expected loss model that generally will result in the earlier recognition of allowances for losses.

For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities.

This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those years, with early adoption permitted only as of annual reporting periods beginning after December 15, 2018.

The Company adopted this guidance on January 1, 2020.

The adoption of ASU 2016-13 did not have material impact on the Company’s consolidated financial statements.

In April 2019 , the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments , which, among other things, provides entities with practical expedients and policy elections related to the presentation and disclosure of accrued interest and the related allowance for credit losses and clarifies how to disclose line-of-credit arrangements that are converted to term loans in the vintage table disclosure.

ASU 2019-04 has the same effective date as the new credit impairment standard for entities that have not yet adopted the standard.

For entities that early adopted the new credit impairment standard, ASU 2019-04 is effective for fiscal years beginning after December 15, 2019 and interim periods therein.

Entities that early adopted the new credit impairment standard may early adopt ASU 2019-04.

The Company adopted this guidance on January 1, 2020.

There was no significant impact of the adoption of this guidance on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes .

The Board issued this Update as part of its Simplification Initiative to improve areas of GAAP and reduce cost and complexity while maintaining usefulness.

The main provision that impacts the Company is the removal of the exception to the incremental approach of intra-period tax allocation when there is a loss from continuing operations and income or gain from other items (for example, discontinued operations and other comprehensive income).

ASU 2019-12 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020.

Early adoption is permitted, including adoption in an interim period.

The Company has elected to early adopt ASU 2019-12 as of the beginning of 2020, however, there is no cumulative effect to be recognized with the early adoption and no material impact on the Company’s consolidated financial statements.

The carrying value and amortized cost of the Company’s investments, summarized by major security type, consisted of the following (in thousands):

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Commercial paper

_______________________

* Unrealized loss was less than $ 500 .

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

The Company has classified all of its available-for-sale investment securities, including those with maturities beyond one year, as current assets on its consolidated balance sheets based on the highly liquid nature of the investment securities and because these investment securities are considered available for use in current operations.

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Commercial paper

_______________________

* Unrealized loss was less than $ 500 .

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are the result of credit losses.

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Based on its evaluation, the Company determined its year-to-date credit losses related to its available-for-sale securities were immaterial at December 31, 2022.

Although the Company has not historically experienced significant losses on its investments, the Company’s exposure may increase due to uncertainties associated with the global economic recession and other disruptions resulting from the COVID-19 pandemic.

Although the Company has not historically experienced significant losses on its investments, the Company’s exposure may increase due to uncertainties associated with geopolitical and macroeconomic developments, including, without limitation, a global economic recession, the Ukraine-Russia conflict and related sanctions, and the COVID-19 pandemic .

Fair Value Measurements

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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.

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

The Company’s cash equivalents, available-for-sale investment securities, and equity securities are classified within the fair value hierarchy as defined by authoritative guidance.

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After completing the validation procedures, the Company did not adjust or override any fair value measurements provided by these pricing services as of December 31, 2022 and 2021, respectively.

The Company does not hold any securities classified as Level 3, which are securities valued using unobservable inputs.

In November 2021, the Company established a plan whereby substantially all full-time employees excluding executive management are eligible to receive a series of cash bonuses based on achievement of certain conditions as described in more detail in Note 6 to the consolidated financial statements included in this Annual Report.

The Company estimated the fair value of the cash awards using a Monte Carlo simulation, which utilizes level 3 inputs such as volatility, probabilities of success, and other inputs that are not observable in active markets.

The cash awards are required to be measured at fair value on a recurring basis each reporting period, with changes in the fair value recognized as compensation cost over the derived service period of the awards.

The Company has not transferred any investment securities between the classification levels.

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

The recurring fair value measurements of the Company’s cash equivalents, available-for-sale investment securities, and equity securities at December 31, 2022 and 2021 consisted of the following (in thousands):

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Commercial paper

Changes in estimated fair value of contingent cash awards during the twelve months ended December 31, 2022 are as follows (in thousands):

Balance as of December 31, 2021

Vesting of awards

Expense forfeited

Change in fair value

Balance as of December 31, 2022

ACADIA PHARMACEUTICALS INC.

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Long-term inventory

Amount reported as long-term inventory consisted of raw materials as of December 31, 2021.

The Company has raw materials beyond one year production plan that prevent the Company from potential supply interruption.

Those raw materials that beyond one year production plan were classified as long-term inventory.

Amount reported as long-term inventory consisted of raw materials as of December 31, 2022 and 2021.

The Company has raw materials beyond its one-year production plan that prevent the Company from potential supply interruption.

Those raw materials maintained beyond the one-year production plan were classified as long-term inventory.

Property and equipment, net, consisted of the following (in thousands):

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Depreciation of property and equipment was $ 2.0 million, $ 2.2 million, and $ 1.5 million for the years ended December 31, 2022, 2021, and 2020, respectively.

For the year ended December 31, 2022 , the Company retired $ 0.1 million of fully depreciated property and equipment.

For the year ended December 31, 2021 , the Company did no t retire any fully depreciated property and equipment.

During 2020 and 2019 , the Company retired $ 3.1 million and $ 0.2 million, respectively, of fully depreciated property and equipment.

During 2020 , the Company retired $ 3.1 million of fully depreciated property and equipment.

Accrued liabilities consisted of the following (in thousands):

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The Company filed a registration statement on Form S-3 with the SEC to register the resale of the shares of the Company’s common stock issued in connection with its acquisition of CerSci.

In September 2019, the Company raised net proceeds of approximately $ 271.5 million from the sale of 7,187,500 shares of its common stock in a follow-on public offering, including 937,500 shares sold pursuant to the exercise in full of the underwriters’

option to purchase additional shares.

Equity Awards

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The 2010 Plan share reserve also has been, and may be, increased by the number of shares that otherwise would have reverted to the 2004 Plan reserve after June 2010.

In June 2015, June 2016, June 2017, June 2018, and June 2019, the Company’s stockholders approved amendments to its 2010 Plan to, among other things, increase the aggregate number of shares of common stock authorized for issuance under the plan by 5,000,000 shares, 3,000,000 shares, 5,500,000 shares, 6,700,000 shares, and 8,300,000 shares, respectively.

At December 31, 2021 , there were 27,357,064 shares of common stock authorized for issuance, of which 9,590,133 shares were available for new grants under the 2010 Plan.

In June 2015, June 2016, June 2017, June 2018, June 2019 and June 2022, the Company’s stockholders approved amendments to its 2010 Plan to, among other things, increase the aggregate number of shares of common stock authorized for issuance under the plan by 5,000,000 shares, 3,000,000 shares, 5,500,000 shares, 6,700,000 shares, 8,300,000 shares and 6,000,000 shares, respectively.

At December 31, 2022, there were 32,635,412 shar es of common stock authorized for issuance, of wh ich 12,108,840 share s were available for new grants under the 2010 Plan.

Stock Options

12 unchanged sentences

The aggregate intrinsic value of options exercised during the years ended December 31, 2022, 2021, and 2020 was approximately $ 1.7 million, $ 8.0 million, and $ 55.5 million, respectively, determined as of the date of exercise.

The Company received $ 12.9 million and $ 73.8 million in cash from options exercised during the year ended December 31, 2021 and 2020, respectively.

The Company receive d $ 3.7 millio n and $ 12.9 million in cash from options exercised during the year ended December 31, 2022 and 2021, respectively.

ACADIA PHARMACEUTICALS INC.

6 unchanged sentences

RSUs generally vest over a four-year period.

Certain RSUs also has accelerated vesting clause based on specified market condition target and continued employment through the vesting period.

Certain RSUs also have an accelerated vesting clause based on specified market condition target and continued employment through the vesting period.

PSUs for which the number of shares issuable at the end of performance period can reach up to 200% of the shares approved in the award based on the achievement of certain pre-defined Acadia-specific performance criteria and continued employment through the vesting period .

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During the years ended December 31, 2022, 2021, and 2020 , a total of 330,525 , 296,850 , and 377,963 shares of common stock were issued under the Purchase Plan at average per share prices of $ 13.60 , $ 17.89 , and $ 18.94 , respectively.

The weighted average per share fair value of purchase rights granted during the years ended December 31, 2021, 2020, and 2019 wa s $ 23.97 , $ 22.47 , and $ 14.24 , respectively.

The weighted ave rage per share fair value of purchase rights granted during the years ended December 31, 2022, 2021, and 2020 was $ 13.91 , $ 23.97 , and $ 22.47 , respectively.

During the years ended December 31, 2022, 2021, and 2020 , the Company recorded cash received from the exercise of purchase rights of $ 4.5 million, $ 5.3 million, and $ 7.2 million, respectively.

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The maximum potential payout at December 31, 2022 after adjusting for forfeitures was $ 11.8 million.

The fair value of the awards at December 31, 2021 was approximately $ 5.6 million.

During year ended December 31, 2021, the Company recorded a total of $ 0.6 million compensation cost related to the awards.

The total fair value of the awards at December 31, 2022 was approximately $ 1.8 million, compared to $ 5.6 million at December 31, 2021.

The estimated liability included on the December 31, 2022 and 2021 consolidated balance sheet was $ 0.9 million and $ 0.6 million.

During years ended December 31, 2022 and 2021 , the Company recorded a total of $ 0.3 million and $ 0.6 million compensation cost related to the awards.

Effective January 1997, the Company established a deferred compensation plan (the 401(k) Plan) pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended (the Code), whereby substantially all employees are eligible to contribute up to 60 percent of their pretax earnings, not to exceed amounts allowed under the Code.

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The Company recognized foreign income tax in the amount of $ 0.2 million for the year ended December 31, 2020.

These tax liabilities were associated with minimum taxes and a patent box entry tax for Switzerland.

These tax liabilities were associated with minimum taxes and state tax liabilities in excess of net operating losses in the current year and a patent box entry tax for Switzerland.

Utilization of the domestic NOL and research and development (R&D) credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred or that could occur in the future, as required by Section 382 of the Code, as well as similar state and foreign provisions.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

Federal and state NOL carryforwards of $ 6.9 million and less than $ 0.1 million will expire in 2025 unless utilized.

The remaining federal and state NOL carryforwards will begin to expire in 2026 .

At December 31, 2021, the Company had federal and state charitable contribution carryforwards of $ 171.3 million and $ 21.8 million will expire in 2022 unless utilized.

Federal and state NOL carryforwards of $ 19.2 million and $ 143.4 million will expire in 2031 and 2024 respectively unless utilized.

The remaining federal and state NOL carryforwards will begin to expire in 2032 and 2025 , respectively.

At December 31, 2022, the Company had federal and state charitable contribution carryforwards of $ 179.8 million which will begin to expire in 2023 unless utilized.

At December 31, 2022, the Company had $ 74.2 million of federal R&D credit carryforwards, of which $ 0.3 million will expire in 2023 unless utilized, and the remaining federal R&D credit carryforwards will begin to expire in 2024.

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Charitable contributions

Lease liabilities

Capitalized R&D

Lease liabilities

Total deferred tax assets

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Accordingly, the deferred tax assets have been fully offset by a valuation allowance.

The valuation allowance increased by approximately $ 36.1 million in 2021 primarily due to an increase in deferred tax assets generated from net operating losses, R&D credits and stock-based compensation expense, offset in part by the remeasurement of deferred tax balance for changes in state tax rates, and limitations on executive stock compensation.

The valuation allowance increased by approximately $ 64.6 million in 2022 primarily due to an increase in deferred tax assets generated from capitalization of research and development expenses, R&D credits and stock-based compensation and limitation on future executive stock compensation, offset in part by the expiration of Switzerland NOLs, and the remeasurement of deferred tax balance for changes in state tax rates.

An accounting policy may be selected to either (i) treat taxes due on future U.S.

inclusions in taxable income related to global intangible low-taxed income (“GILTI”) as a current-period expense when incurred or (ii) factor such amounts into a company’s measurement of its deferred taxes.

We have elected to account for GILTI as a period cost.

During 2019, Switzerland implemented tax reform that is effective for tax years 2020 and forward.

As a result, the Company has remeasured the deferred tax assets, primarily comprised of net operating loss carryforwards, at the amount and rate in which it is anticipated they will reverse.

The tax reform also allowed the Company to take as a deduction for Cantonal purposes only, a portion of the increase in value of the intellectual property transferred to Switzerland.

This deduction was available as a result of establishing Lucerne as the Cantonal location for the Company.

As a result, during 2019 a deferred tax asset of $ 57.0 million was established which was the estimated amount that would be allowed as a future deduction.

During December 2020, the Company moved to Basel-City from Lucerne.

As a result, the intellectual property deduction is no longer available and has been reversed.

The deferred tax assets and net operating losses were remeasured at the amount and rate in which they are anticipated to reverse as a result of the change in jurisdiction.

As a result, the Company has remeasured the deferred tax assets, primarily comprised of NOL carryforwards, at the amount and rate in which it is anticipated they will reverse.

The adjustments made to the deferred tax assets are offset by a valuation allowance.

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Switzerland tax reform

Expiration of attributes

Income tax expense

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The Company recorded an uncertain tax position reserve of $ 5.1 million, $ 4.1 million and $ 2.9 million for the years ended December 31, 2022, 2021 and 2020 , respectively.

Due to the valuation allowance recorded against the Company’s deferred tax assets, an immaterial amount of the total unrecognized tax benefits as of December 31, 2021 would reduce the annual effective tax rate if recognized.

Due to the valuation allowance recorded against the Company’s deferred tax assets, approximately $ 1.2 million of the total unrecognized tax benefits as of December 31, 2022 would reduce the annual effective tax rate if recognized.

The Company does not anticipate that the amount of unrecognized tax benefits as of December 31, 2022 will significantly change within the next twelve months.

The Company’s practice is to recognize interest and/or penalties related to uncertain income tax positions in income tax expense.

The Company had no interest and/or penalties accrued on the Company’s consolidated balance sheets at December 31, 2021 or 2020 , respectively.

Further, the Company did no t recognize any interest and/or penalties in the statement of operations for the years ended December 31, 2021, 2020 and 2019, respectively, related to uncertain tax positions.

The Company had no material interest and/or penalties accrued on the Company’s consolidated balance sheets at December 31, 2022 or 2021, respectively.

Further, the Company recognized an immaterial amount of interest and/or penalties in the statement of operations for the years ended December 31, 2022, 2021 and 2020, respectively, related to uncertain tax positions.

The following table provides a reconciliation of changes in unrecognized tax benefits (in thousands):

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Balance at end of period

Commitments and Contingencies

Royalty Payments

Pursuant to the terms of its 2006 license agreement with the Ipsen Group, the Company is required to make royalty payments of 2 % of net sales of NUPLAZID.

This obligation terminated in October 2021.

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

Commitments and Contingencies

License and Merger Agreements

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These upfront and license payments were included in the research and development expenses in the consolidated statements of operations as there was no alternative future use associated with the payments.

As of December 31, 2021, the Company may be required to make milestone payments up to $ 2.2 billion in the aggregate, of which, $ 10.0 million may be paid in the next 12 months if the FDA accepts for review of the NDA for trofinetide for the treatment of Rett syndrome.

As of December 31, 2022, the Company may be required to make milestone payments up to $ 1.6 billion in the aggregate, of whi ch, $ 40.0 million may be paid in the next 12 months for the first commercial sale of trofinetide in North America if the FDA approves trofinetide for the treatment of Rett syndrome.

In May 2018, the Company signed an Exclusivity Deed (the Deed) with Neuren that provided for exclusive negotiations for a period of three months from the date of the Deed.

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Publicly held equity securities are measured using quoted prices in their respective active markets with changes recorded through other expense on the statements of operations.

Net gain on the strategic investments recognized in other income in the consolidated statements of operations for the year ended December 31, 2021 was $ 2.3 million, net loss on strategic investments recognized for the year ended December 31, 2020 was $ 1.0 million and net gain on strategic investments recognized for the year ended December 31, 2019 was $ 1.0 million .

Net gain on the strategic investments recognized in other income in the consolidated statements of operations for the year ended December 31, 2022 was $ 3.5 million, net gain on strategic investments recognized for the year ended December 31, 2021 was $ 2.3 million and net loss on strategic investments recognized for the year ended December 31, 2020 was $ 1.0 million .

As of December 31, 2022 and 2021 , the aggregate carrying amount of the Company’s strategic equity investment was $ 7.2 million and $ 3.6 million, respectively, included in other assets on the consolidated balance sheets.

In August 2018, the Company entered into a license agreement with Neuren and obtained exclusive North American rights to develop and commercialize trofinetide for Rett syndrome and other indications.

Under the terms of the agreement, Neuren received an upfront payment of $ 10.0 million and is eligible to receive milestone payments of up to $ 455.0 million, based on the achievement of certain development and annual net sales milestones , including a $ 10.0 million payment upon the FDA’s acceptance of an NDA filing for trofinetide and a $ 40.0 million payment upon the Company’s first commercial sale of trofinetide in North America .

Under the terms of the agreement, Neuren received an upfront payment of $ 10.0 million and is eligible to receive milestone payments of up to $ 455.0 million, based on the achievement of certain development and annual net sales milestones , including a $ 40.0 million payment upon the Company’s first commercial sale of trofinetide in North America .

In addition, Neuren is eligible to receive tiered, escalating, double-digit percentage royalties based on net sales.

The license agreement was accounted for as an asset acquisition and the upfront cash payment of $ 10.0 million was recorded in research and development expenses in the consolidated statements of operations in the third quarter of 2018, as there is no alternative use for the asset.

Under the license agreement, Neuren and its non-Acadia licensees and sublicensees are prohibited from developing or commercializing any other product (including Neuren’s other existing compounds) for Rett syndrome, or for any other indication being developed pursuant to the agreement, in North America.

Under the license agreement, Neuren and its non-Company licensees and sublicensees are prohibited from developing or commercializing any other product (including Neuren’s other existing compounds) for Rett syndrome, or for any other indication being developed pursuant to the agreement, in North America.

Furthermore, with respect to Neuren’s development or commercial activities outside North America, (i) if Neuren is developing trofinetide for the same indication as the Company, Neuren is obligated to use commercially reasonable efforts to conduct such activities in a manner that minimizes any adverse impact on trofinetide in North America, and (ii) if Neuren is developing trofinetide for a different indication, Neuren may not undertake such activities if the Company believes, and the joint steering committee determines, they would be reasonably likely to materially adversely affect the development and commercialization of trofinetide in North America.

In March 2020, the Company entered into a license agreement and research collaboration with Vanderbilt University and obtained exclusive worldwide rights to develop and commercialize novel drug candidates targeting positive allosteric modulators of the muscarinic M1 receptor (the M1 PAM program) with the potential to treat a range of central nervous system disorders.

Under the terms of the agreement, the Company paid Vanderbilt University an upfront license fee of $ 10.0 million and may be required to pay up to $ 515.0 million in milestone payments based on the achievement of certain clinical and commercial development and annual net sales milestones.

In addition, the Company may be required to pay Vanderbilt University tiered royalties based on net sales.

Furthermore, the Company is required to spend a minimum annual amount in development and the pursuit of regulatory approval for the M1 PAM compounds over the first three years of the license agreement.

Such amounts are not material to the Company.

The license agreement was accounted for as an asset acquisition and the upfront cash payment of $ 10.0 million was expensed to research and development in the first quarter of 2020 as there is no future alternative use for the assets.

In January 2022, the Company 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.

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.

In addition, Stoke is eligible to receive potential development, regulatory, first commercial sales and sales milestones.

For the MECP2 program and the undisclosed neurodevelopmental program, the Company acquired an exclusive worldwide license to develop and commercialize MECP2 program and the undisclosed neurodevelopmental program.

Stoke will lead research and pre-clinical development activities, while the Company will lead clinical development and commercialization activities.

The Company will fund research and pre-clinical development activities related to these two targets and Stoke is eligible to receive potential development, regulatory, first commercial sales and sales milestones as well as tiered royalty payments on worldwide sales

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

In August 2020, the Company entered into the Merger Agreement with CerSci, with CerSci remaining as the surviving corporation and the Company’s wholly owned subsidiary.

CerSci’s lead development program is a unique Reactive Species Decomposition Accelerant, a non-opioid, mechanism focused on interrupting pathways that sensitize neurons to pain.

The portfolio contains additional preclinical stage programs, including brain penetrant compounds, with potential for symptomatic and disease modifying treatment utility in neurodegenerative diseases.

The Company incurred an aggregate of $ 52.8 million in upfront consideration and transaction costs, of which, $ 44.3 million was paid through the issuance of approximately 1.2 million shares of the Company’s common stock.

In addition, under the terms of the Merger Agreement, the Company may be required to pay CerSci’s former equity holders up to $ 887.0 million in cash upon the achievement of certain development, commercialization and sales milestones, in addition to tiered cash royalties in the mid-single digits based on annual net sales.

As substantially all of the fair value of the gross assets acquired was concentrated in the in-process research and development intangible assets acquired, the Company concluded that this transaction did not meet the definition of a business combination pursuant to FASB Accounting Standard Codification Topic 805, Business Combinations.

As such, the transaction was accounted for as an asset acquisition and the upfront consideration of $ 45.7 million was expensed to research and development in the third quarter of 2020 as there is no future alternative use for the assets.

starting in the mid-single digit range and escalating to the mid-teens based on revenue levels.

Under the terms of the agreement, the Company paid Stoke a $ 60.0 million upfront payment which was accounted for as an asset acquisition and was expensed to research and development in the first quarter of 2022 as there is no alternative use for the asset.

The Company may be required to pay up to an additional $ 907.5 million in milestones as well as royalties on future sales.

Corporate Credit Card Program

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Legal Proceedings

Between July 19 and August 3, 2018, following negative publicity about NUPLAZID, three purported company stockholders filed putative securities class action complaints (captioned Staublein v.

Acadia Pharmaceuticals, Inc., Case No.

18-cv-01647, Stone v.

Acadia Pharmaceuticals Inc., Case No.

18-cv-01672, and Barglow v.

Acadia Pharmaceuticals Inc., Case No.

18-cv-01812) in the U.S.

District Court for the Southern District of California against the Company and certain of its current and former executive officers.

Thereafter, several putative lead plaintiffs filed motions to consolidate the cases and to appoint a lead plaintiff.

On January 3, 2019, the Court consolidated the cases under the caption In re Acadia Pharmaceuticals Inc.

Securities Litigation, Case No.

18-cv-01647, and took the lead plaintiff motions under submission.

On February 26, 2019, the Court appointed a lead plaintiff and lead counsel.

Lead plaintiff filed a consolidated complaint on April 15, 2019.

The consolidated complaint generally alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially false and misleading statements regarding the Company’s business, operations, and prospects by failing to disclose that adverse events and safety concerns regarding NUPLAZID threatened initial and continuing FDA approval, and by failing to disclose that the Company engaged in business practices likely to attract regulatory scrutiny.

The consolidated complaint seeks unspecified monetary damages and other relief.

Defendants filed a motion to dismiss the consolidated complaint on June 7, 2019.

On June 1, 2020, the Court granted the motion in part and gave lead plaintiff leave to file an amended complaint.

On July 16, 2020, lead plaintiff filed the amended complaint.

Defendants filed a motion to dismiss the amended complaint on August 28, 2020.

Lead plaintiff opposed the motion on September 15, 2020.

Defendants’

reply in support of the motion to dismiss was filed on November 11, 2020.

On March 29, 2021, the Court granted the defendants’

motion to dismiss with leave to amend.

On April 16, 2021, lead plaintiff filed a third amended complaint.

Defendants filed a motion to dismiss the third amended complaint on May 31, 2021.

The lead plaintiff opposed the motion on July 12, 2021 and Defendants filed their reply in support of their motion on August 11, 2021.

On January 3, 2022, the Court issued an order and judgment dismissing lead plaintiff’s third amended complaint without leave to amend and closing the case.

The deadline to appeal the order and judgment expired on February 2, 2022.

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

On February 7, 2020, a purported stockholder of the Company filed a derivative complaint (captioned Barney v.

Davis et al., Case No.

20-cv-0238) in the U.S.

District Court for the Southern District of California against the Company’s directors and certain of the Company’s current and former executive officers.

The complaint asserts claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment arising from allegations similar to those in the federal securities class action described above.

On September 9, 2020, the Court substituted plaintiffs and re-captioned the case Shumacher v.

Davis et al., Case No.

On June 23, 2020, a second derivative complaint (captioned Lazarus v.

Davis et al., Case No.

20-cv-0843) was filed in the U.S.

District Court for the District of Delaware.

On September 9, 2020, the Court transferred the Lazarus case to the U.S.

District Court for the Southern District of California and re-captioned the case Lazarus v.

Davis et al., Case No.

On January 15, 2021, the Court consolidated the cases under the name In re ACADIA Pharmaceuticals Inc.

Stockholder Derivative Litigation, Case No.

20-cv-0238, appointed lead counsel for the plaintiffs, and designated the complaint in the Shumacher case as the operative complaint.

The consolidated case is stayed until the defendants in the federal securities class action answer, or the federal securities class action is dismissed with prejudice and all appeals are exhausted, or any party to the stipulation to stay gives 15 days’

written notice that it no longer consents to the voluntary stay.

As discussed above, the federal securities class action was dismissed with prejudice on January 3, 2022, and the deadline to appeal that dismissal expired on February 2, 2022.

On July 24, 2020, the Company filed complaints against (i) Aurobindo Pharma Limited and its affiliate Aurobindo Pharma USA, Inc.

22 unchanged sentences

On April 20, 2021, MSN filed its answer, affirmative defenses, and counterclaims to the Company’s second amended complaint, seeking declaratory judgments of noninfringement and invalidity regarding certain of the Company’s Orange Book-listed patents covering NUPLAZID.

On April 21, 2021, Teva filed its answer, affirmative defenses, and counterclaims to Company ’s first amended complaint, seeking declaratory judgments of noninfringement and invalidity.

On April 22, 2021, Zydus filed its answer, affirmative defenses, and counterclaims to Company ’s first amended complaint, seeking declaratory judgments of noninfringement and invalidity .

On April 21, 2021, Teva filed its answer, affirmative defenses, and counterclaims to the Company’s first amended complaint, seeking declaratory judgments of noninfringement and invalidity.

On April 22, 2021, Zydus filed its answer, affirmative defenses, and counterclaims to the Company’s first amended complaint, seeking declaratory judgments of noninfringement and invalidity.

On April 22, 2021, Aurobindo filed its answer, affirmative defenses, and counterclaims to the Company’s first amended complaint, seeking declaratory judgments of noninfringement and invalidity.

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On January 28, 2022, the parties filed their Joint Claim Construction Brief and Appendix.

On January 31, 2022, a joint motion for claim construction was ordered by the Court, setting a claim construction hearing on February 23, 2022.

A ruling is expected in the near future.

On February 23, 2022, the Court heard oral argument on claim construction.

On April 6, 2022, the Court issued a Memorandum Opinion construing several terms at issue, adopting the Company’s construction on two terms, Defendants’

construction on two terms, and one agreed-upon construction.

On February 28, 2022, the Company filed a stipulation and proposed order to dismiss one patent against MSN, which was ordered by the Court on March 1, 2022.

On March 10, 2022, the Company filed a stipulation and proposed order to dismiss one patent against Teva, which was ordered by the Court on March 10, 2022.

On March 22, 2022, the Company filed a stipulation and proposed order to dismiss seven patents against Aurobindo, which was ordered by the Court on March 22, 2022.

On March 30, 2022, the Company filed a stipulation and proposed order to dismiss two patents against Zydus, which was ordered by the Court on March 31, 2022.

On April 22, 2022, the Company filed a stipulation and proposed order of non-infringement against Aurobindo regarding certain of the Company’s Orange Book-listed patents covering NUPLAZID, which was ordered by the Court on April 22, 2022.

On April 26, 2022, the Company filed a stipulation and proposed order of non-infringement against MSN regarding certain of the Company’s Orange Book-listed patents covering NUPLAZID, which was ordered by the Court on April 26, 2022.

On April 26, 2022, the Company filed a stipulation and proposed order of non-infringement against Teva regarding certain of the Company’s Orange Book-listed patents covering NUPLAZID, which was ordered by the Court on April 27, 2022.

On May 10, 2022, the Company filed its second amended complaint against Teva to include an additional Orange Book-listed patent covering NUPLAZID.

On May 18, 2022, the Company filed a stipulation and proposed order of non-infringement against Zydus regarding certain of the Company’s Orange Book-listed patents covering NUPLAZID, which was ordered by the Court on May 19, 2022.

On May 24, 2022, Teva filed its answer, affirmative defenses, and counterclaims to the Company’s second amended complaint, seeking declaratory judgments of noninfringement and invalidity regarding certain of the Company’s Orange Book-listed patents covering NUPLAZID.

On June 1, 2022, the Company filed its second amended complaint against Aurobindo alleging infringement of certain of the Company’s Orange Book-listed patents covering NUPLAZID.

On June 2, 2022, the Company filed its third amended complaint against Zydus alleging infringement of certain of the Company’s Orange Book-listed patents covering NUPLAZID.

On June 14, 2022, the Company filed its answer to Teva’s counterclaims.

June 15, 2022, Aurobindo filed its answer, affirmative defenses, and counterclaims to the Company’s second amended complaint, seeking declaratory judgments of noninfringement and invalidity regarding certain of the Company’s Orange Book-listed patents covering NUPLAZID.

On June 16, 2022, Zydus filed its answer, affirmative defenses, and counterclaims to the Company’s third amended complaint, seeking declaratory judgments of noninfringement and invalidity regarding certain of the Company’s Orange Book-listed patents covering NUPLAZID.

On July 6, 2022, the Company filed its answer to Aurobindo’s counterclaims.

On September 7, 2022, the consolidated cases were reassigned to the Honorable Judge Gregory B.

On September 30, 2022, the Company filed a stipulation and proposed order to stay the claims currently asserted against Teva and for Teva to be bound by the result of the litigation rendered against the remaining Defendants, which was ordered by the Court on October 4, 2022.

On October 21, 2021, the Company filed complaints against Aurobindo, MSN and Zydus in the United States District Court for the District of Delaware alleging infringement of an additional Orange Book-listed patent covering NUPLAZID.

On April 19, 2021, a purported stockholder of the Company filed a putative securities class action complaint (captioned Marechal v.

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District Court for the Southern District of California against the Company and certain of the Company’s current executive officers.

The complaint generally alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially false and misleading statements regarding the Company’s business, operations, and prospects by failing to disclose that the materials submitted in support of its sNDA seeking approval of pimavanserin for the treatment of hallucinations and delusions associated with dementia-related psychosis contained statistical and design deficiencies and that the FDA was unlikely to approve the sNDA in its current form.

The complaint generally alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by failing to disclose that the materials submitted in support of its sNDA seeking approval of pimavanserin for the treatment of hallucinations and delusions associated with dementia-related psychosis contained statistical and design deficiencies and that the FDA was unlikely to approve the sNDA in its current form.

The complaint seeks unspecified monetary damages and other relief.

On June 21, 2021, five motions for lead plaintiff and lead counsel were filed.

Thereafter, four of the five movants either withdrew their motions or filed statements of non-opposition.

On September 29, 2021, the Court issued an order designating lead plaintiff and lead counsel.

1 unchanged sentence

Defendants filed a motion to dismiss the amended complaint on February 15, 2022.

Management currently believes that none of the foregoing claims or actions pending against the Company as of December 31, 2021 is likely to have, individually or in the aggregate, a material adverse effect on the Company’s business, liquidity, financial position, or results of operations.

Lead plaintiff filed an opposition to Defendants’

motion to dismiss on April 18, 2022, and Defendants filed a reply on June 2, 2022.

On September 27, 2022, the Court issued an order denying Defendants’

motion to dismiss.

Defendants filed their answer to the amended complaint on October 19, 2022, and filed a motion for reconsideration on October 25, 2022.

On February 3, 2023, the Court issued an order denying the motion for reconsideration.

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

Management currently believes that none of the foregoing claims or other actions pending against the Company as of December 31, 2022 is likely to have, individually or in the aggregate, a material adverse effect on the Company’s business, liquidity, financial position, or results of operations.

Given the unpredictability inherent in litigation, however, the Company cannot predict the outcome of these matters.

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In 2018, the lease agreement was terminated and a new master lease agreement was entered into with a new vendor giving the Company the ability to lease vehicles under operating leases with initial terms ranging from 12 to 50 months from the date of delivery .

In 2021, the Company entered into a new master lease agreement giving the Company the ability to lease vehicles under operating leases with initial terms of 60 months from the date of delivery.

The Company leases facilities and certain equipment under noncancelable operating leases with remaining lease terms of 1.0 year to 8.4 years, some of which include options to extend the lease for up to two five-year terms.

3 unchanged sentences

Operating lease cost

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

Supplemental cash flow information related to the Company’s leases were as follows (in thousands):

10 unchanged sentences

Total operating lease liabilities

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

Maturities of lease liabilities were as follows (in thousands):

13 unchanged sentences

In connection with this lease and the amendment, the Company established a letter of credit for $ 3.1 million, which has automatic annual extensions and is fully secured by restricted cash.

ACADIA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —

Selected Quarterly Financial Data (Unaudited)

8 unchanged sentences

(1) Determined by subtracting cost of product sales from product sales, net.

(2) Net loss per common share, basic and diluted, are computed independently for each quarter and the full year based upon respective average shares outstanding.

(2) Basic and diluted net loss per common share are computed independently for each quarter and the full year based upon respective average shares outstanding.

Therefore, the sum of the quarterly net loss per common share amounts may not equal the annual amounts reported.

Subsequent Event

In January 2022, the Company entered a license and collaboration agreement with Stoke Therapeutics, Inc.

(Stoke) to discover, develop and commercialize novel RNA-based medicines for potential treatment of severe and rare genetic neurodevelopmental diseases of the CNS.

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.

In addition, Stoke is eligible to receive potential development, regulatory, first commercial sales and sales milestones.

Stoke will lead research and pre-clinical development activities, while the Company will lead clinical development and commercialization activities.

Under the terms of the agreement, the Company paid Stoke a $ 60.0 million upfront payment and may be required to pay up to an additional $ 907.5 million in milestones as well as royalties on future sales.

SCHEDULE II –

10 unchanged sentences

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 9A. Controls and Procedures