What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-07 compared with 2025-11-06 · 58 added, 86 removed, 145 unchanged (50% of the section changed)

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included in this Quarterly Report on Form 10-Q (this Quarterly Report), 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 (our Annual Report), our unaudited condensed consolidated financial statements and related notes thereto as of and for the quarter ended March 31, 2025 included with our Quarterly Report on Form 10-Q, filed with the SEC on May 8, 2025, and our unaudited condensed consolidated financial statements and related notes thereto as of and for the quarter ended June 30, 2025 included with our Quarterly Report on Form 10-Q, filed with the SEC on August 7, 2025.

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

3 unchanged sentences

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 based upon information available to us as of the date of this Quarterly 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.

5 unchanged sentences

We are a biopharmaceutical company focused on turning scientific promise into meaningful innovation that makes the difference for underserved neurological and rare disease communities around the world.

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 $787.5 million for the nine months ended September 30, 2025, compared with $698.2 million for the nine months ended September 30, 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.

We have two core franchises in neurological and rare diseases.

Our neurological 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 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 $268.1 million for the three months ended March 31, 2026, compared with $244.3 million for the three months ended March 31, 2025.

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 neurological 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.

Until September 2025 we had been developing the product candidate ACP-101 (intranasal carbetocin) for the treatment of hyperphagia in Prader-Willi syndrome (PWS), a neuro rare disease.

In September 2025, we announced top-line results from our COMPASS PWS study, a Phase 3 study evaluating the efficacy and safety of ACP-101 for the treatment of hyperphagia in PWS.

In the study, ACP-101 did not demonstrate a statistically significant improvement over placebo on the study’s primary endpoint, change from baseline to Week 12 on the Hyperphagia Questionnaire for Clinical Trials (HQ-CT), nor was there separation from placebo on any secondary endpoint.

The safety and tolerability profile of ACP-101 was consistent with previous clinical trials, showing a low rate of adverse events.

As a result, we do not intend to investigate ACP-101 any further.

Our most advanced current product candidate is ACP-204 for the treatment of Alzheimer’s disease psychosis (ADP) and Lewy Body Dementia with Psychosis (LBDP).

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.

We initiated an additional Phase 2 study of ACP-204 in LBDP in September 2025.

We have several product candidates in earlier stages of development for the treatment of CNS disorders and rare diseases.

Our most advanced current product candidate is remlifanserin for the treatment of Alzheimer’s disease psychosis (ADP) and Lewy Body Dementia Psychosis (LBDP).

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

We initiated an additional Phase 2 study of remlifanserin in LBDP in September 2025.

In the fourth quarter of 2025, we initiated a Phase 2 study of ACP-211 for the treatment of major depressive disorder.

We have several product candidates in earlier stages of development for the treatment of neurological and rare diseases.

These include ACP-711 for the treatment of essential tremor, with a Phase 2 study expected to begin in 2026;

ACP-211 for the treatment of major depressive disorder, for which a Phase 2 study is anticipated to start in the fourth quarter of 2025;

and ACP-271, a GPR88 agonist, with a first-in-human study in healthy volunteers planned for the fourth quarter of 2025.

and ACP-271, a GPR88 agonist, with a first-in-human study in healthy volunteers that initiated in the first quarter of 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, 2025, we had an accumulated deficit of $2.1 billion.

As of March 31, 2026, we had an accumulated deficit of approximately $1.8 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.

9 unchanged sentences

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.

The Ministry of Health in Israel approved DAYBUE for the treatment of Rett syndrome in adults and pediatric patients 2 years of age and older and weighing at least 9 kg in December 2025.

The FDA approved DAYBUE STIX in December 2025 for the treatment of Rett syndrome and we made the product available on a limited basis in the first quarter of 2026 followed by a broader launch in early Q2 2026.

In addition, we currently have contracts with multiple distributors outside the United States that distribute DAYBUE for limited named patient/compassionate use.

Cost of Product Sales

4 unchanged sentences

License fees and royalties also include royalties of tiered, escalating, double-digit percentages due to Neuren based upon net sales of DAYBUE.

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, 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.

Research and Development Expenses

1 unchanged sentence

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

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

Our research and development activities have focused on pimavanserin, trofinetide, remlifanserin 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.

7 unchanged sentences

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, 2025 and 2024 (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, 2026 and 2025 (in thousands):

Three Months Ended March 31,

Costs of external service providers:

1 unchanged sentence

DAYBUE (trofinetide)

Remlifanserin

Early-stage programs

3 unchanged sentences

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 product candidates.

_____________________

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

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 or DAYBUE STIX, as well as the further development of our early-stage product candidates.

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 across our development programs.

While our current development efforts are primarily focused on advancing the development of 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.

While our current development efforts are primarily focused on advancing the development of remlifanserin 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-204 and other early-stage product candidates.

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 remlifanserin and other early-stage product candidates.

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.

5 unchanged sentences

Income Tax Expense

Because we maintain a full valuation allowance against our net deferred tax assets, income tax expense is expected to primarily consist of current federal and state tax expense as a result of taxable income anticipated or incurred in certain jurisdictions.

Income tax expense may fluctuate from quarter to quarter due to adjustments related to non-recurring transactions, timing of revenue and expense across different tax jurisdictions and changes in certain tax assessments.

On July 4, 2025, President Trump signed into law the OBBBA.

The OBBBA made permanent key elements of the Tax Cuts and Jobs Act, including domestic research cost expensing, the business interest limitation, and 100% bonus depreciation.

We evaluated the enacted effects of the legislation on our estimated annual effective tax rate and cash tax position.

We expect to realize significant cash tax savings in tax year 2025 as we are no longer required to capitalize our domestic research and experimental costs under Section 174 of the Internal Revenue Code beginning with the tax year ending December 31, 2025.

As a result of the full valuation allowance against the U.S.

deferred tax assets, the U.S.

current tax savings from the OBBBA impacted our tax expense recorded in the three and nine months ended September 30, 2025.

Our provision for income taxes, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect our best assessment of estimated future taxes to be paid.

Judgments and estimates based on interpretations of existing tax laws or regulations are required in determining our provision for income taxes.

Changes in tax laws, regulations, or statutory tax rates, and estimates of our future taxable income could impact the deferred tax assets and liabilities provided for in the consolidated financial statements and would require an adjustment to the provision for income taxes.

Prior to fiscal year 2025, we maintained a full valuation allowance against our net deferred tax assets (DTAs) due to a history of cumulative losses.

However, during the fiscal year ended December 31, 2025, we achieved cumulative three-year profitability.

Management determined there is sufficient positive evidence to conclude it is “more likely than not” that deferred taxes are realizable.

We therefore reduced the valuation allowance accordingly.

Critical Accounting Policies and Estimates

11 unchanged sentences

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, 2025 and 2024

Product Sales, Net

Net product sales, comprised of NUPLAZID and DAYBUE, were $278.6 million and $250.4 million for the three months ended September 30, 2025 and 2024, respectively.

Net product sales of NUPLAZID were $177.5 million and $159.2 million for the three months ended September 30, 2025 and 2024, respectively.

The increase in net product sales of NUPLAZID of $18.3 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 $101.1 million and $91.2 million for the three months ended September 30, 2025 and 2024, respectively.

The increase in net product sales of DAYBUE of $9.9 million was due to the growth in DAYBUE unit sales as well as a higher average net selling price of DAYBUE in 2025 compared to 2024.

Cost of Product Sales

Cost of product sales was $21.6 million and $18.9 million for the three months ended September 30, 2025 and 2024, respectively, or approximately 8% and 8% of net product sales, respectively.

Cost of product sales as a percentage of net product sales remained relatively flat during the three months ended September 30, 2025 as compared to the same period of 2024.

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, 2025 would have increased by approximately $0.4 million.

Research and Development Expenses

Research and development expenses increased to $87.8 million for the three months ended September 30, 2025 from $66.6 million for the three months ended September 30, 2024.

The increase in research and development expenses was primarily related to increased expenditures for ACP-204 and ACP-101 as well as increased personnel expenses, offset by reduced expenditures for ending studies that took place in 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $133.4 million for the three months ended September 30, 2025 from $133.3 million for the three months ended September 30, 2024.

Selling, general and administrative remained relatively flat during the three months ended September 30, 2025 as compared to the same period of 2024.

Comparison of the Nine Months Ended September 30, 2025 and 2024

Comparison of the Three Months Ended March 31, 2026 and 2025

Product Sales, Net

Net product sales, comprised of NUPLAZID and DAYBUE, were $787.5 million and $698.2 million for the nine months ended September 30, 2025 and 2024, respectively.

Net product sales of NUPLAZID were $505.7 million and $446.5 million for the nine months ended September 30, 2025 and 2024, respectively.

The increase in net product sales of NUPLAZID of $59.2 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 $281.8 million and $251.7 million for the nine months ended September 30, 2025 and 2024, respectively.

Net product sales, comprised of NUPLAZID and DAYBUE, were $268.1 million and $244.3 million for the three months ended March 31, 2026 and 2025, respectively.

Net product sales of NUPLAZID were $166.9 million and $159.7 million for the three months ended March 31, 2026 and 2025, respectively.

The increase in net product sales of NUPLAZID of $7.2 million was mainly due to the growth in NUPLAZID unit sales in 2026 compared to 2025.

Net product sales of DAYBUE were $101.2 million and $84.6 million for the three months ended March 31, 2026 and 2025, respectively.

The increase in net product sales of DAYBUE of $16.6 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, 2025 (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, 2026 (in thousands):

Distribution Fees,

4 unchanged sentences

Credits/payments for prior period sales

Balance as of September 30, 2025

Balance as of March 31, 2026

Cost of Product Sales

Cost of product sales was $62.8 million and $60.0 million for the nine months ended September 30, 2025 and 2024, respectively, or approximately 8% and 9% of net product sales, respectively.

Cost of product sales as a percentage of net product sales remained relatively flat during the nine months ended September 30, 2025 as compared to the same period of 2024.

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, 2025 would have increased by approximately $4.7 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.

We expect to finish selling the zero cost inventories of DAYBUE in 2025.

Subsequent to using our entire zero cost inventories, we estimate our overall cost of product sales as a percentage of total net product sales will be in the range of a mid-single digit to high single digit percentage.

Cost of product sales was $24.8 million and $20.4 million for the three months ended March 31, 2026 and 2025, respectively, or approximately 9% and 8% of net product sales, respectively.

Cost of product sales as a percentage of net product sales remained relatively flat during the three months ended March 31, 2026 as compared to the same period of 2025.

Research and Development Expenses

Research and development expenses increased to $244.0 million for the nine months ended September 30, 2025 from $202.5 million for the nine months ended September 30, 2024.

The increase in research and development expenses was mainly related to increased expenditures for ACP-204 and ACP-101 as well as increased personnel expenses, offset by reduced expenditures for ending studies that took place in 2024.

Research and development expenses was $76.9 million and $78.3 million for the three months ended March 31, 2026 and 2025, respectively.

The research and development expenses remained relatively flat as compared to the same period of 2025.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $393.3 million for the nine months ended September 30, 2025 from $358.3 million for the nine months ended September 30, 2024.

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

Selling, general and administrative expenses increased to $171.0 million for the three months ended March 31, 2026 from $126.4 million for the three months ended March 31, 2025.

The increase in selling, general and administrative expenses was primarily driven by increased investments to support continued growth of NUPLAZID and DAYBUE.

Liquidity and Capital Resources

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-204 as a treatment for ADP and LBDP, 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 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 remlifanserin as a treatment for ADP and LBDP, 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.

37 unchanged sentences

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

We expect to receive the invoice for rebates under the Inflation Reduction Act of 2022 (IRA) from Medicare Part D unit sales for the period of October 1, 2024 to September 30, 2025 in June 2026.

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 September 30, 2025, we had $847.0 million in cash, cash equivalents, and investment securities, compared to $756.0 million at December 31, 2024.

This $91.0 million increase was due to cash provided by operating activities offset by 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 $158.6 million for the nine months ended September 30, 2025 compared to $117.3 million for the nine months ended September 30, 2024.

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

Net cash used in investing activities increased to $246.7 million for the nine months ended September 30, 2025 compared to $152.7 million for the nine months ended September 30, 2024.

The increase in net cash used in investing activities for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was primarily due to $98.8 million in payments made to Neuren for our sale of the PRV and an annual net sales milestone as described above.

Net cash provided by financing activities increased to $27.2 million for the nine months ended September 30, 2025 compared to $4.9 million for the nine months ended September 30, 2024.

This increase in net cash provided by financing activities for the nine months ended September 30, 2025 was attributable primarily to an increase in proceeds resulting from the exercise of employee stock options and awards.

At March 31, 2026, we had $851.5 million in cash, cash equivalents, and investment securities, compared to $819.7 million at December 31, 2025.

This $31.8 million increase was due to cash provided by operating activities.

Net cash provided by operating activities totaled $34.0 million for the three months ended March 31, 2026 compared to $20.3 million for the three months ended March 31, 2025.

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

Net cash provided by investing activities totaled $66.3 million for the three months ended March 31, 2026 compared to $124.0 million of net cash used in investing activities for the three months ended March 31, 2025.

The increase in net cash provided by investing activities for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to increased net sales and maturity of investment securities.

Also during the three months ended March 31, 2025, there was a net payment of $98.8 million made to Neuren for the sale of the PRV and an annual net sales milestone which we did not have during the same period of 2026.

Net cash provided by financing activities increased to $4.2 million for the three months ended March 31, 2026 compared to $1.8 million for the three months ended March 31, 2025.

This increase in net cash provided by financing activities for the three months ended March 31, 2026 was attributable primarily to an increase in proceeds resulting from the exercise of employee stock options and awards.

Off-Balance Sheet Arrangements

11 unchanged sentences

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, 2025, 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, 2026, 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