ACADIA PHARMACEUTICALS INC 10-Q

ITEM 2. 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, 2025 included with our Annual Report on Form 10-K, filed with the SEC on February 26, 2026 (our Annual Report), and our unaudited condensed consolidated financial statements and related notes thereto as of and for the quarter ended March 31, 2026 included with our Quarterly Report on Form 10-Q, filed with the SEC on May 7, 2026. Past operating results are not necessarily indicative of results that may occur in future periods. This Quarterly Report contains forward-looking statements. These forward-looking statements involve a number of risks and uncertainties. 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 products 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 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. For forward-looking statements, we claim the protection of the Private Securities Litigation Reform Act of 1995. Readers of this Quarterly Report are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise publicly any forward-looking statements except as required by law. Actual events or results may differ materially from our expectations. Important factors that could cause actual results to differ materially from those stated or implied by our forward-looking statements include, but are not limited to, the risk factors set forth under the section captioned “Risk Factors” in this Quarterly Report. Overview Background 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 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 DAYBUE products, which are the first and only drug approved for the treatment of Rett syndrome. Net product sales from these two commercial products totaled $576.0 million for the six months ended June 30, 2026, compared with $508.9 million for the six months ended June 30, 2025. In June 2026, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) adopted a positive opinion following a re-examination procedure and recommended the granting of a marketing authorization for trofinetide, known as DAYBU ® in the European Union (EU) for the treatment of neurobehavioral symptoms of Rett syndrome in adults and pediatric patients aged five years and older. If the marketing authorization is granted by the European Commission, DAYBU ® would be the first therapy approved for this indication in the EU. 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. 19 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 our RADIANT Phase 2 study evaluating the efficacy and safety of remlifanserin for the treatment of hallucinations and delusions associated with ADP. We have completed enrollment in the Phase 2 portion of the RADIANT program, initiated screening and enrollment in the Phase 3 portion and expect topline results for the Phase 2 portion between September and October 2026. 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. In July 2026, the FDA granted Fast Track designation for remlifanserin for the treatment of hallucinations and delusions associated with ADP. 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 2027 following the completion of a successful Phase 1 study; 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 June 30, 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. 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. Our filings with the SEC are available free of charge through our website as soon as reasonably practicable after being electronically filed with or furnished to the SEC. Interested persons can subscribe on our website to email alerts that are sent automatically when we issue press releases, file our reports with the SEC or post certain other information to our website. Information contained in our website does not constitute a part of this Quarterly Report or our other filings with the SEC. Financial Operations Overview Product Revenues 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. 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 the second quarter of 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 Cost of product sales consists of third-party manufacturing costs, freight, duties, 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. In addition, cost of product sales may include license fees and royalties. License fees and royalties currently consist of milestone payments capitalized and subsequently amortized under our license agreement with Neuren. License fees and royalties also include royalties of tiered, escalating, double-digit percentages due to Neuren based upon net sales of DAYBUE products. Research and Development Expenses Our research and development expenses have consisted primarily of fees paid to external service providers, salaries and related personnel expenses, facilities and equipment expenses, and other costs incurred related to pre-commercial product candidates. We charge all research and development expenses to operations as incurred. 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. The FDA has released us from one of the five post-marketing requirements (PMRs). In addition, we have fulfilled three of the five PMRs. 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 product candidates. 20 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 our 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. Accordingly, we have not reported our internal research and development costs on a project-by-project basis. 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 six months ended June 30, 2026 and 2025 (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Costs of external service providers: NUPLAZID (pimavanserin) $ — $ 602 $ — $ 3,706 DAYBUE (trofinetide) products 3,305 9,442 8,051 21,224 ACP-101 2,180 13,365 4,088 23,421 Remlifanserin 27,886 18,021 53,965 35,571 Early-stage programs 22,024 12,889 38,114 25,382 Upfront and milestone payments* — — 2,501 — Subtotal 55,395 54,319 106,719 109,304 Internal costs 21,414 19,155 42,816 39,002 Stock-based compensation 4,746 4,477 8,888 7,910 Total research and development expenses $ 81,555 $ 77,951 $ 158,423 $ 156,216 _____________________ * 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 products, 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 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 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. Any failure by us or delay in completing clinical trials, or in obtaining regulatory approvals, could cause our research and development expenses to increase and, in turn, have a material adverse effect on our results of operations. Selling, General and Administrative Expenses 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 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. 21 Income Tax Expense 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 Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements. We have identified the accounting policies that we believe require application of management’s most subjective judgments, often requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our actual results may differ substantially from these estimates under different assumptions or conditions. There have been no significant changes to our critical accounting policies and estimates since December 31, 2025. For a description of our critical accounting policies that affect our significant judgments and estimates used in the preparation of our unaudited consolidated financial statements, refer to our Annual Report. Results of Operations Fluctuations in Operating Results 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 our products and the extent to which we generate revenue from product sales, our further development of our 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 June 30, 2026 and 2025 Product Sales, Net Net product sales, comprised of NUPLAZID and DAYBUE products, were $308.0 million and $264.6 million for the three months ended June 30, 2026 and 2025, respectively. Net product sales of NUPLAZID were $183.2 million and $168.5 million for the three months ended June 30, 2026 and 2025, respectively. The increase in net product sales of NUPLAZID of $14.7 million was due to the growth in NUPLAZID unit sales in 2026 compared to 2025. Net product sales of DAYBUE products were $124.8 million and $96.1 million for the three months ended June 30, 2026 and 2025, respectively. The increase in net product sales of DAYBUE products of $28.7 million was due to the growth in DAYBUE unit sales as well as a higher average net selling price of DAYBUE products in 2026 compared to 2025. Cost of Product Sales Cost of product sales was $28.3 million and $20.7 million for the three months ended June 30, 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 June 30, 2026 as compared to the same period of 2025 22 Research and Development Expenses Research and development expenses increased to $81.6 million for the three months ended June 30, 2026 from $78.0 million for the three months ended June 30, 2025. The increase in research and development expenses was primarily related to increased expenditures for remlifanserin and ACP-211, offset by reduced expenditures for ending studies that took place in 2025. Selling, General and Administrative Expenses Selling, general and administrative expenses increased to $160.3 million for the three months ended June 30, 2026 from $133.5 million for the three months ended June 30, 2025. The increase in selling, general and administrative expenses was primarily driven by increased expenditures for DAYBUE products and NUPLAZID in the U.S., including the recent expansion of the DAYBUE and NUPLAZID teams. Comparison of the Six Months Ended June 30, 2026 and 2025 Product Sales, Net Net product sales, comprised of NUPLAZID and DAYBUE products, were $576.0 million and $508.9 million for the six months ended June 30, 2026 and 2025, respectively. Net product sales of NUPLAZID were $350.1 million and $328.2 million for the six months ended June 30, 2026 and 2025, respectively. The increase in net product sales of NUPLAZID of $21.9 million was mainly due to the growth in NUPLAZID unit sales in 2026 compared to 2025. Net product sales of DAYBUE products were $226.0 million and $180.7 million for the six months ended June 30, 2026 and 2025, respectively. The increase in net product sales of DAYBUE products of $45.3 million was primarily due to the growth in DAYBUE products unit sales. The following table provides a summary of activity with respect to our sales allowances and accruals for the six months ended June 30, 2026 (in thousands): Distribution Fees, Discounts & Chargebacks Co-Pay Assistance Rebates, Data Fees & Returns Total Balance as of December 31, 2025 $ 16,457 $ (37 ) $ 140,440 $ 156,860 Provision related to current period sales 75,301 2,809 102,399 180,509 Credits/payments for current period sales (59,709 ) (3,495 ) 51,048 (12,156 ) Credits/payments for prior period sales (16,457 ) 37 (106,613 ) (123,033 ) Balance as of June 30, 2026 $ 15,592 $ (686 ) $ 187,274 $ 202,180 Cost of Product Sales Cost of product sales was $53.1 million and $41.1 million for the six months ended June 30, 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 six months ended June 30, 2026 as compared to the same period of 2025. Research and Development Expenses Research and development expenses was $158.4 million and $156.2 million for the six months ended June 30, 2026 and 2025, respectively. The increase in research and development expenses was primarily related to increased expenditures for remlifanserin and ACP-211, offset by reduced expenditures for ending studies that took place in 2025. Selling, General and Administrative Expenses Selling, general and administrative expenses increased to $331.3 million for the six months ended June 30, 2026 from $259.9 million for the six months ended June 30, 2025. The increase in selling, general and administrative expenses was primarily driven by increased investments to support continued growth of NUPLAZID and DAYBUE products. 23 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 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. We may require additional financing in the future to fund our operations. Our future capital requirements will depend on, and could increase significantly as a result of, many factors, including: • the costs of acquiring additional product candidates or research and development programs; • the scope, prioritization and number of our research and development programs; • the ability of our collaborators and us to reach the milestones and other events or developments triggering payments under our collaboration or license agreements, or our collaborators’ ability to make payments under these agreements; • our ability to enter into new collaboration and license agreements; • 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 product sales from our products; • the costs of preparing applications for regulatory approvals for DAYBUE products 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; • 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; • the costs involved in filing, prosecuting, enforcing, and defending patent claims and other intellectual property rights; • the costs of maintaining or securing manufacturing arrangements for clinical or commercial production of pimavanserin, trofinetide or other product candidates; and • 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, 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. We cannot be certain that additional funding will be available to us on acceptable terms, or at all. If adequate funds are not available when needed, we will be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or our commercialization efforts. We also may be required to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. Additional funding, if obtained, may significantly dilute existing stockholders and could negatively impact the price of our stock. 24 We have invested a substantial portion of our available cash in money market funds, U.S. treasury notes, and government sponsored enterprises in accordance with our investment policy. Our investment policy defines allowable investments and establishes guidelines relating to credit quality, diversification, and maturities of our investments to preserve principal and maintain liquidity. All investment securities have a credit rating of at least Aa3/AA- or better, or P-1/A-1 or better, as determined by Moody’s Investors Service or Standard & Poor’s. Our investment portfolio has not been adversely impacted by the disruptions in the credit markets that have occurred in the past. However, if there are future disruptions in the credit markets, there can be no assurance that our investment portfolio will not be adversely affected. Material Cash Requirements Our material cash requirements in the short and long term consist of the operational, manufacturing, and capital expenditures, a portion of which contain contractual or other obligations. We plan to fund our material cash requirements with our current financial resources together with our anticipated receipts from product sales. On a long-term basis, we manage future cash requirements relative to our long-term business plans. Our primary uses of cash and operating expenses relate to paying employees and consultants, administering clinical trials, marketing our products, and providing technology and facility infrastructure to support our operations. We also make investments in our office and laboratory facilities to enable continued expansion of our business. 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 the invoice for rebates under the Inflation Reduction Act of 2022 (IRA) from Medicare Part D unit sales for the period of October 1, 2025 to September 30, 2026 in June 2027. 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. Cash Flows At June 30, 2026, we had $956.5 million in cash, cash equivalents, and investment securities, compared to $819.7 million at December 31, 2025. This $136.8 million increase was due to cash provided by operating activities. Net cash provided by operating activities totaled $134.8 million for the six months ended June 30, 2026 compared to $84.3 million for the six months ended June 30, 2025. This increase in cash provided by operations primarily resulted from the increase in product revenue partially offset by the increases in our research and development cost and selling, general and administrative cost. Net cash provided by investing activities totaled $57.8 million for the six months ended June 30, 2026 compared to $167.3 million of net cash used in investing activities for the six months ended June 30, 2025. The increase in net cash provided by investing activities for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily due to increased net sales and maturity of investment securities. Also during the six months ended June 30, 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 decreased to $14.7 million for the six months ended June 30, 2026 compared to $17.8 million for the six months ended June 30, 2025. This decrease in net cash provided by financing activities for the six months ended June 30, 2026 was attributable primarily to a decrease in proceeds resulting from the exercise of employee stock options and awards. Off-Balance Sheet Arrangements To date, we have not had any relationships with unconsolidated entities or financial partnerships, such as entities referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in these relationships. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, refer to Note 2, Summary of Significant Accounting Policies , to our consolidated financial statements in our Annual Report. 25 ITEM 3. QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We invest our excess cash in investment-grade, interest-bearing securities. The primary objective of our investment activities is to preserve principal and liquidity. To achieve this objective, we invest in money market funds. U.S. treasury notes, and high quality marketable debt instruments of corporations and government sponsored enterprises with contractual maturity dates of generally less than one year. 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. 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 June 30, 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.