What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-07 · 76 added, 127 removed, 127 unchanged (62% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our condensed consolidated financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report and the audited financial statements and notes thereto as of and for the year ended December 31, 2023 included with our Annual Report, filed with the SEC.

The following discussion and analysis of our condensed consolidated financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q (this Quarterly Report) and the audited financial statements and notes thereto as of and for the year ended December 31, 2024 included with our Annual Report on Form 10-K, filed with the SEC on February 27, 2025 (the Annual Report).

Past operating results are not necessarily indicative of results that may occur in future periods.

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These forward-looking statements involve a number of risks and uncertainties.

Such forward-looking statements include statements about the benefits to be derived from NUPLAZID, DAYBUE and our drug candidates, the potential market opportunities for NUPLAZID and DAYBUE and our drug candidates, our strategy for the commercialization of NUPLAZID and DAYBUE, our plans for exploring and developing DAYBUE for indications other than in Rett syndrome, and the commercialization of DAYBUE in jurisdictions other than the U.S., 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 DAYBUE 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, the closing of the transactions contemplated by the PRV Transfer Agreement (as defined in Part II, Item 5 of this Quarterly Report), our receipt of the payment for the PRV, payment of certain proceeds under the PRV Transfer Agreement to Neuren, and other statements that are not historical facts, including statements which may be preceded by the words “believes,” “expects,” “hopes,” “may,” “will,” “plans,” “intends,” “estimates,” “could,” “should,” “would,” “continues,” “seeks,” “aims,” “projects,” “predicts,” “pro forma,” “anticipates,” “potential” or similar words.

Such forward-looking statements include statements about the benefits to be derived from our products and our product candidates, the potential market opportunities for our products and our product candidates, our strategy for the commercialization of our products, our plans for exploring and developing our products for additional indications, the commercialization of DAYBUE or trofinetide in jurisdictions other than the U.S., our plans and timing with respect to seeking regulatory approvals, the potential commercialization of any of our product candidates that receive regulatory approval, the progress, timing, results or implications of clinical trials and other development milestones and activities involving our products and our product candidates, our strategy for discovering, developing and, if approved, commercializing our product 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 “aims,” “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential” “predicts,” “pro forma,” “projects,” “seeks,” “should,” “will,” “would” or similar words.

In addition, statements that “we believe” 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 inherently uncertain.

For forward-looking statements, we claim the protection of the Private Securities Litigation Reform Act of 1995.

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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, product candidates, 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.

Our commercial portfolio includes two products.

In April 2016, the FDA approved NUPLAZID for the treatment of hallucinations and delusions associated with PDP, which is the first and only drug approved in the United States for this condition.

In September 2023, we announced that the FDA made two changes to the NUPLAZID label clarifying its use in patients with Parkinson’s disease-related hallucinations and delusions, with or without dementia, which is consistent with the current indication.

In March 2023, the FDA approved DAYBUE for the treatment of Rett syndrome, which is the first and only drug approved for this condition.

DAYBUE became available by prescription in the United States in April 2023.

NUPLAZID is a selective serotonin inverse agonist/antagonist, preferentially targeting 5-HT2A 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.

A Phase 2 trial to evaluate the efficacy and safety of pimavanserin for the treatment of irritability associated with autism spectrum disorder in pediatric populations was completed in October 2024.

The trial did not meet either of its primary or secondary endpoints.

With the completion of the trial, we believe we now have completed the FDA’s requirements to qualify for a pediatric exclusivity for pimavanserin.

If the period exclusivity is granted, exclusivity of the NUPLAZID franchise would be extended by six months.

In August 2018, we acquired an exclusive North American license to develop and commercialize DAYBUE for Rett syndrome and other indications from Neuren.

Rett syndrome is a debilitating neurological disorder that occurs predominantly in females following apparently normal development for the first six months of life.

Rett syndrome also occurs in boys, albeit far less frequently, and these males are also eligible for treatment within the scope of DAYBUE’s package label.

Typically, between six to eighteen months of age, patients experience a period of rapid decline with loss of purposeful hand use and spoken communication and inability to independently conduct activities of daily living.

Symptoms also include seizures, hand movements or stereotypies, disorganized breathing patterns, scoliosis and sleep disturbances, among others.

The FDA approval of DAYBUE for the treatment of Rett syndrome was 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.

Under the terms of the 2018 agreement, Neuren received an upfront payment of $10.0 million and is eligible to receive milestone payments of up to $400.0 million based on the achievement of certain development and sales milestones for Rett syndrome in North America, of which, $50 million has been paid to date.

Neuren is also eligible to receive up to $55.0 million in development and sales milestone for Fragile X syndrome in North America.

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

In July 2023, we expanded our current licensing agreement for trofinetide with Neuren to acquire rights to the drug outside of North America as well as global rights in Rett syndrome and Fragile X syndrome to Neuren’s development candidate NNZ-2591.

Under the terms of the expanded agreement, Neuren received an upfront payment of $100.0 million and is eligible to receive up to an additional $426.3 million in milestone payments based on the achievement of certain commercial and sales milestones for trofinetide outside of North America and up to $831.3 million in milestone payments based on the achievement of certain development and sales milestones for NNZ-2591.

In addition, we will be required to pay Neuren tiered royalties from the mid-teens to low-twenties percent based on net sales of trofinetide and NNZ-2591.

Looking beyond the U.S., we are advancing efforts to make trofinetide available in additional markets.

Our pediatric investigation plan (PIP) has been agreed to with the pediatric committee of the European Medicines Agency (EMA), paving the way for an anticipated filing in the first quarter of 2025.

In Japan, we held our first formal meeting with the Pharmaceuticals and Medical Devices Agency (PMDA) in the second quarter of 2024 to discuss our proposed clinical plan.

And in Canada, we announced in October 2024 that Health Canada granted marketing authorization of DAYBUE (trofinetide) for the treatment of Rett syndrome in adult and pediatric patients two years of age and older, making DAYBUE (trofinetide) the first and only drug approved in Canada for the treatment of Rett syndrome.

In June 2023, we announced that we added a new Phase 3 development candidate to our rare disease portfolio, ACP-101 (intranasal carbetocin), for the treatment of hyperphagia (an intense persistent sensation of hunger accompanied by food preoccupations, an extreme drive to consume food, food-related behavior problems, and a lack of normal satiety) in Prader-Willi syndrome (PWS).

We acquired worldwide rights to develop and commercialize ACP-101 with the acquisition of Levo Therapeutics in June 2022.

We have two core franchises in neuroscience and neuro-rare diseases.

Our neuroscience franchise is anchored by the commercial product NUPLAZID (pimavanserin), which is the first and only drug approved by the FDA for the treatment of hallucinations and delusions associated with PDP.

Our neuro-rare disease franchise is anchored by the commercial product DAYBUE, which is the first and only drug approved for the treatment of Rett syndrome.

Net product sales from these two commercial products totaled $244.3 million for the three months ended March 31, 2025, compared with $205.8 million for the three months ended March 31, 2024.

In addition to these commercial products, we have a portfolio of product candidates and research programs that are designed to address significant unmet medical needs in CNS disorders and rare diseases.

In order to achieve significant long-term growth, we plan to develop our current portfolio, expand our pipeline of early- and late-stage product candidates and expand into areas of rare disease that are adjacent to our existing franchises, including through strategic business development, and make use of our internal capabilities and knowledge.

Our most advanced product candidate is ACP-101 (intranasal carbetocin) for the treatment of hyperphagia in Prader-Willi syndrome (PWS), a neuro rare disease.

Hyperphagia is an intense persistent sensation of hunger accompanied by food preoccupations, an extreme drive to consume food, food-related behavior problems, and a lack of normal satiety.

In November 2023, we initiated the Phase 3 COMPASS PWS study evaluating the efficacy and safety of ACP-101 for the treatment of hyperphagia in PWS.

In addition, in August 2022 we 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.

We completed a Phase 1 study of ACP-204 which demonstrated a favorable safety and tolerability profile, and supports its target product profile as a potential treatment for Alzheimer’s disease psychosis (ADP).

Our next most advanced product candidate is ACP-204 for the treatment of Alzheimer’s disease psychosis (ADP).

In November 2023, we initiated a Phase 2 study evaluating the efficacy and safety of ACP-204 for the treatment of hallucinations and delusions associated with ADP.

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.

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 plan to initiate an additional Phase 2 study of ACP-204 in Lewy Body Dementia with Psychosis (LBDP) in the third quarter of 2025.

We have several product candidates in earlier stages of development for the treatment of CNS disorders and rare diseases, including ACP-711 for the treatment of essential tremor, for which we expect to initiate a Phase 2 study in 2026.

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

As of September 30, 2024, we had an accumulated deficit of $2.3 billion.

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 continued commercialization of NUPLAZID and DAYBUE.

As of March 31, 2025, we had an accumulated deficit of $2.2 billion.

Contingent on the level of business development activities we may complete as well as pipeline programs we may advance, we may incur operating losses as we incur significant research and development costs and costs for continued commercialization of our products.

We maintain a website at www.acadia.com to which we regularly post copies of our press releases as well as additional information about us.

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Product Revenues

Net product sales consist of sales of NUPLAZID and DAYBUE.

Net product sales consist of sales of our products.

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.

The FDA approved DAYBUE in March 2023 for the treatment of Rett syndrome and we launched the product in the United States in April 2023.

Health Canada granted marketing authorization of DAYBUE for the treatment of Rett syndrome in adult and pediatric patients 2 years of age and older in October 2024.

Cost of Product Sales

Cost of product sales consists of third-party manufacturing costs, freight, and indirect overhead costs associated with sales of NUPLAZID and DAYBUE.

Cost of product sales consists of third-party manufacturing costs, freight, and indirect overhead costs associated with sales of our products.

Cost of product sales may also include period costs related to certain inventory manufacturing services, excess or obsolete inventory adjustment charges, unabsorbed manufacturing and overhead costs, and manufacturing variances.

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Cost of sales for a newly launched product does not include the full cost of manufacturing until the initial pre-launch inventory is depleted, and additional inventory is manufactured and sold.

Thus, the cost of sales as a percentage of net sales of DAYBUE for the three and nine months ended September 30, 2024 was affected by use of the initial pre-launch inventory, which was previously expensed as research and development expense, and is referred to as zero cost inventories.

Thus, the cost of sales as a percentage of net sales of DAYBUE for the three months ended March 31, 2025 was affected by use of the initial pre-launch inventory, which was previously expensed as research and development expense, and is referred to as zero cost inventories.

However, we do not expect that the cost of sales as a percentage of net sales of DAYBUE will increase significantly once we commence the sales of full cost inventories.

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

Our research and development activities have focused on pimavanserin, trofinetide, ACP-101, ACP-204 and other early-stage programs.

Our research and development activities have focused on pimavanserin, trofinetide, ACP-101, ACP-204 and other earlier-stage product candidates.

In connection with the FDA approval of DAYBUE, we are required to conduct post-marketing work, including a clinical study of renal impairment in healthy volunteers, nonclinical carcinogenicity studies, and nonclinical in vitro and clinical in vivo drug interaction studies.

FDA has released us from one of the five post-marketing requirements (PMRs).

The FDA has released us from one of the five post-marketing requirements (PMRs).

In addition, we have fulfilled one of the five PMRs.

Of the remaining three PMRs, we have also completed one and we are awaiting FDA’s acknowledgement and acceptance of that completed PMR.

Of the remaining three PMRs, we have also completed one and we are awaiting the FDA’s acknowledgement and acceptance of that completed PMR.

We will be responsible for all costs incurred for these PMRs.

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

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, and our early-stage programs.

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

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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To the extent that external expenses are not attributable to a specific project, they are allocated proportionally to each of the projects.

The following table summarizes our research and development expenses for the three and nine months ended September 30, 2024 and 2023 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table summarizes our research and development expenses for the three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended March 31,

Costs of external service providers:

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Early-stage programs

Upfront and milestone payments

Internal costs

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Total research and development expenses

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 to support the commercialization of DAYBUE, as well as the further development of our early-stage pipeline programs.

Likewise, we are unable to determine with 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 ACP-101, ACP-204 and other early-stage programs, 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 candidate and our financial position.

While our current development efforts are primarily focused on advancing the development of ACP-101, ACP-204 and other early-stage product candidates, 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 candidate and our financial position.

We cannot forecast with any degree of certainty which product candidates 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 DAYBUE.

We expect our research and development expenses will continue to be substantial as we conduct studies pursuant to our PMRs and pursue the further development of ACP-101, 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 candidates requires the expenditure of substantial resources.

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Our selling, general and administrative expenses consist of salaries and other related costs, including stock-based compensation expense, for our commercial personnel, including our specialty sales forces, our medical education professionals, and our personnel serving in executive, finance, business development, and business operations functions.

Also included in selling, general and administrative expenses are fees paid to external service providers to support our commercial activities associated with NUPLAZID and DAYBUE, 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.

Also included in selling, general and administrative expenses are fees paid to external service providers to support our commercial activities associated with our products, 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.

Changes in selling, general and administrative expenses in future periods are subject to the evolving PDP market dynamics and the Rett syndrome market.

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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 DAYBUE and the extent to which we generate revenue from product sales, our further development of our early-stage pipeline programs and the progress and timing of expenditures related to studies of DAYBUE pursuant to our PMRs.

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 that geopolitical and macroeconomic developments may have on our business, results of operations, financial condition and prospects.

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 our products and the extent to which we generate revenue from product sales, our further development of our early-stage product candidates and the progress and timing of expenditures related to studies of DAYBUE pursuant to our PMRs.

Further, we expect our sales allowances to vary from quarter to quarter due to fluctuations in 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 that geopolitical and macroeconomic developments, including the ongoing military conflict between Ukraine and Russia and in the Middle East, and tariffs and trade tensions 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.

Comparison of the Three Months Ended September 30, 2024 and 2023

Product Sales, Net

Net product sales, comprised of NUPLAZID and DAYBUE, were $250.4 million and $211.7 million for the three months ended September 30, 2024 and 2023, respectively.

Net product sales of NUPLAZID were $159.2 million and $144.8 million for the three months ended September 30, 2024 and 2023, respectively.

The increase in net product sales of NUPLAZID of $14.4 million was due to the growth in NUPLAZID unit sales as well as a higher average net selling price of NUPLAZID in 2024 compared to 2023.

Net product sales of DAYBUE were $91.2 million and $66.9 million for the three months ended September 30, 2024 and 2023, respectively.

The increase in net product sales of DAYBUE of $24.3 million was due to the growth in DAYBUE unit sales as well as a higher average net selling price of DAYBUE.

Cost of Product Sales

Cost of product sales was $18.9 million and $14.6 million for the three months ended September 30, 2024 and 2023, respectively, or approximately 8% and 7% of net product sales, respectively.

Cost of product sales as a percentage of net product sales for NUPLAZID remained relatively flat during the three months ended September 30, 2024 as compared to the same period of 2023.

The increase in cost of product sales was primarily due to the increase in license fees and royalties expensed for DAYBUE, including royalties due to Neuren based on net sales of DAYBUE and the amortization of the milestone payments capitalized under our 2018 license agreement with Neuren.

The license fees and royalties expensed during the three months ended September 30, 2024 were $11.5 million as compared to $8.1 million in the same period of 2023.

We are required to pay Neuren tiered and escalating royalties between 10% to 15% based on annual net sales of DAYBUE in North America.

Since our aggregate net sales of DAYBUE in North America exceeded $250.0 million in September 2024, we are required to pay 10% of royalties to Neuren on net sales less than or equal to $250.0 million and 12% of royalties on net sales that exceed $250.0 million.

Certain manufacturing related expenses incurred prior to DAYBUE receiving FDA approval were classified as research and development expenses, resulting in zero cost inventory.

If cost of product sales included previously expensed inventories, the total cost of sales with these manufacturing costs included for the three months ended September 30, 2024 would have increased by approximately $3.9 million.

Research and Development Expenses

Research and development expenses decreased to $66.6 million for the three months ended September 30, 2024, including $3.9 million in stock-based compensation expense, from $157.0 million for the three months ended September 30, 2023, including $5.1 million in stock-based compensation expense.

The decrease in research and development expenses was mainly due to decreased business development payments, which in the period ending September 30, 2023 included the $100.0 million payment to Neuren under the expanded license agreement for trofinetide.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $133.3 million for the three months ended September 30, 2024, including $21.9 million in stock-based compensation expense, from $97.9 million for the three months ended September 30, 2023, including $13.2 million in stock-based compensation expense.

The increase in selling, general and administrative expenses was primarily driven by costs related to a consumer activation program to support the NUPLAZID franchise and the transition costs of approximately $14.9 million as a result of the departure of our former CEO and appointment of our new CEO.

Comparison of the Nine Months Ended September 30, 2024 and 2023

Comparison of the Three Months Ended March 31, 2025 and 2024

Product Sales, Net

Net product sales, comprised of NUPLAZID and DAYBUE, were $698.2 million and $495.4 million for the nine months ended September 30, 2024 and 2023, respectively.

Net product sales of NUPLAZID were $446.5 million and $405.3 million for the nine months ended September 30, 2024 and 2023, respectively.

Net product sales, comprised of NUPLAZID and DAYBUE, were $244.3 million and $205.8 million for the three months ended March 31, 2025 and 2024, respectively.

Net product sales of NUPLAZID were $159.7 million and $129.9 million for the three months ended March 31, 2025 and 2024, respectively.

The increase in net product sales of NUPLAZID of $29.8 million was due to the growth in NUPLAZID unit sales as well as a higher average net selling price of NUPLAZID in 2025 compared to 2024.

Net product sales of DAYBUE were $251.7 million and $90.1 million for the nine months ended September 30, 2024 and 2023, respectively.

Net product sales of DAYBUE were $84.6 million and $75.9 million for the three months ended March 31, 2025 and 2024, respectively.

The increase in net product sales of DAYBUE of $8.7 million was primarily due to the growth in DAYBUE unit sales.

The following table provides a summary of activity with respect to our sales allowances and accruals for the nine months ended September 30, 2024 (in thousands):

The following table provides a summary of activity with respect to our sales allowances and accruals for the three months ended March 31, 2025 (in thousands):

Distribution Fees,

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Credits/payments for prior period sales

Balance as of September 30, 2024

Balance as of March 31, 2025

Cost of Product Sales

Cost of product sales was $60.0 million and $23.7 million for the nine months ended September 30, 2024 and 2023, respectively, or approximately 9% and 5% of net product sales, respectively.

Cost of product sales as a percentage of net product sales for NUPLAZID remained relatively flat during the nine months ended September 30, 2024 as compared to the same period of 2023.

The license fees and royalties expensed during the nine months ended September 30, 2024 were $35.2 million as compared to $11.7 million in the same period of 2023.

Cost of product sales was $20.4 million and $23.0 million for the three months ended March 31, 2025 and 2024, respectively, or approximately 8% and 11% of net product sales, respectively.

Cost of product sales as a percentage of net product sales for NUPLAZID remained relatively flat during the three months ended March 31, 2025 as compared to the same period of 2024.

The decrease in cost of product sales was primarily due to the decreased license fees and royalties expensed for DAYBUE, including royalties due to Neuren based on net sales of DAYBUE and the amortization of the milestone payments capitalized under our 2018 license agreement with Neuren.

The license fees and royalties expensed during the three months ended March 31, 2025 were $11.2 million as compared to $12.9 million in the same period of 2024.

During the three months ended March 31, 2024, we had a one-time cumulative catch-up of $3.9 million of expense for the capitalization and amortization of the $50.0 million sales milestone to Neuren.

Certain manufacturing related expenses incurred prior to DAYBUE receiving FDA approval were classified as research and development expenses, resulting in zero cost inventory.

Prior to receiving FDA approval for DAYBUE in March 2023, we manufactured inventory and recorded approximately $29.9 million related to the zero cost inventory as research and development expense.

Utilizing the actual direct costs to manufacture DAYBUE prior to receiving FDA approval, had the previously expensed inventory been capitalized and recognized when sold, the total cost of sales with these manufacturing costs included for the nine months ended September 30, 2024 would have increased by approximately $11.2 million.

Utilizing the actual direct costs to manufacture DAYBUE prior to receiving FDA approval, had the previously expensed inventory been capitalized and recognized when sold, the total cost of sales with these manufacturing costs included for the three months ended March 31, 2025 would have increased by approximately $2.8 million.

We do not expect our cost of product sales for DAYBUE to increase significantly as a percentage of net product sales in future periods as we continue to produce inventory for future sales.

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Research and Development Expenses

Research and development expenses decreased to $202.5 million for the nine months ended September 30, 2024, including $11.7 million in stock-based compensation expense, from $284.9 million for the nine months ended September 30, 2023, including $12.7 million in stock-based compensation expense.

Research and development expenses increased to $78.3 million for the three months ended March 31, 2025, including $3.4 million in stock-based compensation expense, from $59.7 million for the three months ended March 31, 2024, including $4.1 million in stock-based compensation expense.

The increase in research and development expenses was mainly due to increased costs from clinical-stage programs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $358.3 million for the nine months ended September 30, 2024, including $44.0 million in stock-based compensation expense, from $295.1 million for the nine months ended September 30, 2023, including $35.1 million in stock-based compensation expense.

The increase in selling, general and administrative expenses was primarily driven by the costs related to the consumer activation program to support the NUPLAZID franchise, the transition costs as a result of the departure of our former CEO and appointment of our new CEO, increased marketing costs in the U.S.

to support DAYBUE and investments to support commercialization of DAYBUE outside the U.S.

Selling, general and administrative expenses increased to $126.4 million for the three months ended March 31, 2025, including $7.6 million in stock-based compensation expense, from $108.0 million for the three months ended March 31, 2024, including $10.5 million in stock-based compensation expense.

The increase in selling, general and administrative expenses was primarily driven by the costs related to the consumer activation program to support the NUPLAZID franchise and higher commercial operation expenses for the planned expansion of the DAYBUE team.

Liquidity and Capital Resources

We have funded our operations primarily with revenues from sales of NUPLAZID and DAYBUE since their approvals, and through sales of our equity securities and interest income.

We anticipate that the level of cash used in our operations will fluctuate in future periods depending on the levels of spending required for our ongoing and planned commercial activities for NUPLAZID and DAYBUE, our ongoing and planned development activities for ACP-101 as a treatment for PWS and ACP-204 as a treatment for ADP, studies to be conducted pursuant to our PMRs, our ongoing and planned development activities for other early-stage pipeline programs and strategic business development to further expand our portfolio.

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

We have funded our operations primarily with revenues from sales of our products since their approvals, and through sales of our equity securities and interest income.

We anticipate that the level of cash used in our operations will fluctuate in future periods depending on the levels of spending required for our ongoing and planned commercial activities for our products, our ongoing and planned development activities for ACP-101 as a treatment for PWS and ACP-204 as a treatment for ADP, studies to be conducted pursuant to our PMRs, our ongoing and planned development activities for other early- and late-stage product candidates and strategic business development to further expand our portfolio.

We expect that our cash, cash equivalents and investment securities, as well as funds generated by anticipated sales of our products, will be sufficient to fund our planned operations through and beyond the next 12 months.

We may require additional financing in the future to fund our operations.

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• our ability to enter into new collaboration and license agreements;

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

• the costs of our development activities for our early-stage pipeline programs and product candidates;

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

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

• the costs of our development activities for our product candidates;

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

• the costs of establishing, or contracting for, sales and marketing capabilities for our product candidates;

• the amount of U.S.

product sales from NUPLAZID and DAYBUE, and the amount of non-U.S.

product sales from DAYBYUE;

• the costs of preparing applications for regulatory approvals for DAYBUE in jurisdictions outside of North America and for other product candidates, as well as the costs required to support review of such applications;

• the costs of manufacturing and distributing NUPLAZID and DAYBUE for commercial use in the U.S., and the costs of manufacturing and distributing DAYBUE for commercial use outside the U.S.;

• our ability to obtain regulatory approval for, and subsequently generate product sales from DAYBUE in jurisdictions outside of North America and our product candidates;

product sales from our products;

• the costs of preparing applications for regulatory approvals for DAYBUE in jurisdictions other than the U.S., 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 our products for commercial use in the U.S.;

• our ability to obtain regulatory approval for, and subsequently generate product sales from, our product candidates;

• the extent to which we are obligated to reimburse collaborators or collaborators are obligated to reimburse us for costs under collaboration agreements;

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• the costs of maintaining or securing manufacturing arrangements for clinical or commercial production of pimavanserin, trofinetide or other product candidates;

• 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 or DAYBUE.

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, or strategic collaborations.

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

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 geopolitical and macroeconomic developments, 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 geopolitical and macroeconomic developments, including the Ukraine-Russia military conflict and related sanctions, the ongoing conflicts in the Middle East, tariffs and trade tensions, 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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As discussed above, 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 net product sales, with rates that vary by agreement.

We are required to make milestone payments of $50.0 million within 60 days following Neuren’s invoice delivery after December 31, 2024 as our aggregate net revenue of trofinetide in North America for the treatment of Rett syndrome exceeded $250.0 million in September 2024.

We are also required to make royalty payments in connection with the product sales for DAYBUE under the agreements.

At September 30, 2024, we had $565.3 million in cash, cash equivalents, and investment securities, compared to $438.9 million at December 31, 2023.

This $126.4 million increase was primarily due to cash provided by operating activities.

Net cash provided by operating activities increased to $117.3 million for the nine months ended September 30, 2024 compared to $68.7 million of net cash used in operating activities for the nine months ended September 30, 2023.

This increase in cash provided by operations primarily resulted from an increase in our net revenues partially offset by the increase cost of product sales and selling, general and administrative cost.

Net cash used in investing activities totaled $152.7 million for the nine months ended September 30, 2024 compared to $32.3 million of net cash provided by investing activities for the nine months ended September 30, 2023.

The increase in net cash used in investing activities for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily due to increased net purchases of investment securities.

Net cash provided by financing activities decreased to $4.9 million for the nine months ended September 30, 2024 compared to $19.7 million for the nine months ended September 30, 2023.

This decrease in net cash provided by financing activities for the nine months ended September 30, 2024 was attributable primarily to a decrease in proceeds resulting from the exercise of employee stock options.

We expect to receive our first invoice for rebates under the Inflation Reduction Act of 2022 (IRA) from Medicare Part D unit sales in 2025.

Payment is due 30 days after receiving such invoice;

the payment will be set off against the allowance for such rebate that we have accrued up to the date of payment.

At March 31, 2025, we had $681.6 million in cash, cash equivalents, and investment securities, compared to $756.0 million at December 31, 2024.

This $74.4 million decrease was due to cash used in operating activities and material cash payments made to Neuren, including for one third of the net proceeds ($48.8 million) from our sale of the PRV and the annual net sales milestone ($50 million) as our aggregate net revenue of trofinetide in North America for the treatment of Rett syndrome exceeded $250.0 million in 2024.

Net cash provided by operating activities totaled $20.3 million for the three months ended March 31, 2025 compared to $29.1 million for the three months ended March 31, 2024.

This decrease in cash provided by operations primarily resulted from an increase in our research and development cost and selling, general and administrative cost partially offset by the increase in product revenue.

Net cash used in investing activities increased to $124.0 million for the three months ended March 31, 2025 compared to $14.0 million for the three months ended March 31, 2024.

The increase in net cash used in investing activities for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily due to increased net purchases of investment securities.

Net cash provided by financing activities increased to $1.8 million for the three months ended March 31, 2025 compared to $1.0 million for the three months ended March 31, 2024.

This increase in net cash provided by financing activities for the three months ended March 31, 2025 was attributable primarily to an increase 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 September 30, 2024, 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 March 31, 2025, this change would not have had a material effect on the fair value of our investment portfolio as of that date.

Due to our investment in investment-grade, interest-bearing securities, as of the date of this Quarterly Report on Form 10-Q, we do not expect anticipated changes in interest rates to have a material effect on our interest rate risk in future reporting periods.

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-Q

Item 2. Management’s Discussion and Analysis