What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-09 compared with 2020-08-03 · 157 added, 195 removed, 380 unchanged (48% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share data) June 30,

(in millions, except per share data) September 30,

2020 December 31,

1 unchanged sentence

Cash and cash equivalents $ 425.3 $ 112.3

Debt securities available-for-sale, at fair value (amortized cost $ 530.3 million at June 30, 2020 and $ 557.3 million at December 31, 2019)

Debt securities available-for-sale, at fair value (amortized cost $ 517.3 million at September 30, 2020 and $ 557.3 million at December 31, 2019)

Accounts receivable 156.9 126.6

2 unchanged sentences

Total current assets 1,156.9 831.0

Debt securities available-for-sale, at fair value (amortized cost $ 193.5 million at June 30, 2020 and $ 299.3 million at December 31, 2019)

Debt securities available-for-sale, at fair value (amortized cost $ 180.3 million at September 30, 2020 and $ 299.3 million at December 31, 2019)

Right-of-use assets 71.0 74.3

16 unchanged sentences

5.0 shares authorized;

no shares issued and outstanding at June 30, 2020 and December 31, 2019

no shares issued and outstanding at September 30, 2020 and December 31, 2019

Common stock, $ 0.001 par value;

220.0 shares authorized;

issued and outstanding shares were 93.2 at June 30, 2020 and 92.3 at December 31, 2019

issued and outstanding shares were 93.4 at September 30, 2020 and 92.3 at December 31, 2019

Additional paid-in capital 1,874.3 1,768.1

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

AND COMPREHENSIVE (LOSS) INCOME

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions, except per share data) 2020 2019 2020 2019

8 unchanged sentences

Total operating expenses 302.8 132.0 706.8 520.5

Operating income (loss) 76.6 34.4 135.5 ( 66.6 )

Other income (expense):

Operating (loss) income ( 44.3 ) 90.1 91.2 23.5

Other (expense) income:

Interest expense ( 8.5 ) ( 8.0 ) ( 25.0 ) ( 23.8 )

Unrealized gain (loss) on equity securities 11.3 21.0 ( 5.2 ) 22.7

Unrealized loss on equity securities ( 7.0 ) ( 28.5 ) ( 12.2 ) ( 5.8 )

Investment income and other, net 2.7 4.8 11.0 14.0

Total other income (expense), net 6.6 17.7 ( 13.4 ) 16.1

Income (loss) before provision for income taxes 83.2 52.1 122.1 ( 50.5 )

Total other expense, net ( 12.8 ) ( 31.7 ) ( 26.2 ) ( 15.6 )

(Loss) income before provision for income taxes ( 57.1 ) 58.4 65.0 7.9

Provision for income taxes 0.5 4.6 5.6 4.9

Net income (loss) 79.6 51.3 117.0 ( 50.8 )

Unrealized gain on debt securities available-for-sale, net of tax 6.0 0.9 3.2 2.6

Comprehensive income (loss) $ 85.6 $ 52.2 $ 120.2 $ ( 48.2 )

Net income (loss) per share, basic $ 0.86 $ 0.56 $ 1.26 $ ( 0.56 )

Net income (loss) per share, diluted $ 0.81 $ 0.54 $ 1.20 $ ( 0.56 )

Net (loss) income ( 57.6 ) 53.8 59.4 3.0

Unrealized (loss) gain on debt securities available-for-sale, net of tax ( 1.4 ) 1.0 1.8 3.6

Comprehensive (loss) income $ ( 59.0 ) $ 54.8 $ 61.2 $ 6.6

Net (loss) income per share, basic $ ( 0.62 ) $ 0.59 $ 0.64 $ 0.03

Net (loss) income per share, diluted $ ( 0.62 ) $ 0.56 $ 0.61 $ 0.03

Weighted average common shares outstanding, basic 93.3 91.9 93.0 91.4

5 unchanged sentences

Common Stock Additional Paid-In Capital Accumulated Deficit

(in millions) Shares Amount Total

Balances at March 31, 2020 92.8 $ 0.1 $ 1,796.9 $ ( 1.4 ) $ ( 1,095.3 ) $ 700.3

Net income — — — — 79.6 79.6

Unrealized gain on debt securities available-for-sale, net of tax — — — 6.0 — 6.0

(in millions) Shares $ Total

Balances at June 30, 2020

93.2 $ 0.1 $ 1,842.2 $ 4.6 $ ( 1,015.7 ) $ 831.2

Net loss — — — — ( 57.6 ) ( 57.6 )

Unrealized loss on debt securities available-for-sale, net of tax — — — ( 1.4 ) — ( 1.4 )

Share-based compensation expense — — 26.7 — — 26.7

Issuance of common stock for vested restricted stock options 0.1 — — — — —

Issuance of common stock for stock options 0.1 — 2.5 — — 2.5

Issuance of common stock for employee stock purchase plan 0.1 — 2.9 — — 2.9

Balances at September 30, 2020

93.4 $ 0.1 $ 1,874.3 $ 3.2 $ ( 1,073.3 ) $ 804.3

Balances at June 30, 2019

Balances at March 31, 2019 91.3 $ 0.1 $ 1,681.3 $ ( 0.3 ) $ ( 1,271.8 ) $ 409.3

91.5 $ 0.1 $ 1,703.5 $ 0.6 $ ( 1,220.5 ) $ 483.7

Net income — — — — 53.8 53.8

2 unchanged sentences

Issuance of common stock for stock options 0.5 — 13.1 — — 13.1

Balances at June 30, 2019 91.5 $ 0.1 $ 1,703.5 $ 0.6 $ ( 1,220.5 ) $ 483.7

Issuance of common stock for employee stock purchase plan 0.1 — 2.6 — — 2.6

Balances at September 30, 2019

92.1 $ 0.1 $ 1,739.5 $ 1.6 $ ( 1,166.7 ) $ 574.5

Balance at December 31, 2019

92.3 $ 0.1 $ 1,768.1 $ 1.4 $ ( 1,132.7 ) $ 636.9

Net income — — — — 59.4 59.4

4 unchanged sentences

Issuance of common stock for employee stock purchase plan 0.1 — 5.6 — — 5.6

Balances at June 30, 2020 93.2 $ 0.1 $ 1,842.2 $ 4.6 $ ( 1,015.7 ) $ 831.2

Balances at September 30, 2020

93.4 $ 0.1 $ 1,874.3 $ 3.2 $ ( 1,073.3 ) $ 804.3

Balance at December 31, 2018

Net loss — — — — ( 50.8 ) ( 50.8 )

90.8 $ 0.1 $ 1,660.4 $ ( 2.0 ) $ ( 1,177.7 ) $ 480.8

Net income — — — — 3.0 3.0

Unrealized gain on debt securities available-for-sale, net of tax — — — 3.6 — 3.6

4 unchanged sentences

Cumulative-effect adjustment to equity due to adoption of ASU 2016-02 — — — — 8.0 8.0

Balance at June 30, 2019 91.5 $ 0.1 $ 1,703.5 $ 0.6 $ ( 1,220.5 ) $ 483.7

Balance at September 30, 2019

92.1 $ 0.1 $ 1,739.5 $ 1.6 $ ( 1,166.7 ) $ 574.5

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(in millions) 2020 2019

Cash Flows from Operating Activities:

Net income (loss) $ 117.0 $ ( 50.8 )

Reconciliation of net income (loss) to net cash provided by (used in) operating activities:

Net income $ 59.4 $ 3.0

Reconciliation of net income to net cash provided by operating activities:

Share-based compensation expense 79.0 54.0

6 unchanged sentences

Accounts receivable ( 30.3 ) ( 57.9 )

Inventory ( 4.7 ) ( 1.2 )

Inventories ( 3.4 ) 0.1

Accounts payable and accrued liabilities 28.1 12.3

Other assets and liabilities, net ( 29.7 ) 12.4

Net cash provided by (used in) operating activities 157.1 ( 48.3 )

Net cash provided by operating activities 139.6 49.5

Cash Flows from Investing Activities:

3 unchanged sentences

Purchases of property and equipment ( 6.4 ) ( 11.9 )

Net cash provided by investing activities 126.6 40.7

Net cash provided by (used in) investing activities 151.8 ( 44.9 )

Cash Flows from Financing Activities:

1 unchanged sentence

Net cash provided by financing activities 21.6 20.0

Change in cash and cash equivalents and restricted cash 302.8 ( 0.7 )

Cash and cash equivalents and restricted cash at beginning of period 115.5 147.2

Cash and cash equivalents and restricted cash at end of period $ 418.3 $ 146.5

Change in cash, cash equivalents and restricted cash 313.0 24.6

Cash, cash equivalents and restricted cash at beginning of period 115.5 147.2

Cash, cash equivalents and restricted cash at end of period $ 428.5 $ 171.8

Supplemental Disclosure:

14 unchanged sentences

Currently, we are primarily focused on the commercialization of INGREZZA ® (valbenazine) in the United States, or US, our first US Food and Drug Administration, or FDA, approved product.

In April 2017, we received FDA approval of our first marketed product, INGREZZA, for the treatment of adults with tardive dyskinesia, or TD.

Shortly after receiving FDA approval, we began commercializing INGREZZA in the US using a specialty sales force primarily focused on educating physicians who treat patients with TD, including psychiatrists and neurologists.

In addition to our first marketed product, our collaboration partner, AbbVie Inc., or AbbVie, received approval of ORILISSA ® (elagolix) for the management of moderate to severe endometriosis pain in women from the FDA in July 2018 and Health Canada in October 2018.

We receive royalties at tiered percentage rates on any net sales of ORILISSA.

In April 2020, we received FDA approval for ONGENTYS ® (opicapone) as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients.

FDA approval for ONGENTYS for Parkinson’s disease triggered a milestone payment of $ 20.0 million, which was expensed as research and development, or R&D, in the second quarter of 2020.

In May 2020, AbbVie received approval from the FDA for ORIAHNN TM (elagolix) for the management of heavy menstrual bleeding associated with uterine fibroids in pre-menopausal women.

FDA approval for ORIAHNN for uterine fibroids resulted in the achievement of a $ 30.0 million regulatory milestone, which was recognized as collaboration revenue in the second quarter of 2020.

We are entitled to receive royalties at tiered percentage rates on any net sales of ORIAHNN.

Our late-stage pipeline includes crinecerfont (NBI-74788) for the treatment of congenital adrenal hyperplasia, or CAH, in adult patients, valbenazine for the treatment of chorea in adult patients with Huntington’s disease, or HD, and NBIb-1817 (VY-AADC) for the treatment of advanced Parkinson’s disease patients with motor fluctuations that are refractory to medical management.

Our product candidate for advanced Parkinson’s disease is partnered with Voyager Therapeutics, Inc., or Voyager.

Our early-stage clinical pipeline includes crinecerfont for the treatment of CAH in pediatric patients, elagolix for the treatment of polycystic ovary syndrome, or PCOS, in women, NBI-921352 (XEN901), a clinical-stage candidate with potential in epilepsy, and NBI-827104 (ACT-709478), a T-type calcium channel blocker in clinical development for the treatment of a rare pediatric epilepsy.

Our product candidate for PCOS is partnered with AbbVie.

In May 2020, we entered into a collaboration and licensing agreement with Idorsia Pharmaceuticals Ltd, or Idorsia.

In connection with the agreement, we paid Idorsia $ 45.0 million upfront to gain a license to NBI-827104 (ACT-709478), a potent, selective, orally active and brain penetrating T-type calcium channel blocker, in clinical development for the treatment of a rare pediatric epilepsy.

The agreement includes a research collaboration to discover and identify up to two additional novel T-type calcium channel blockers as development candidates.

In June 2020, we entered into an exclusive license agreement with Takeda Pharmaceutical Company Limited, or Takeda, to develop and commercialize certain compounds in Takeda’s early to mid-stage psychiatry pipeline.

The agreement became effective in July 2020, upon expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

In connection with the agreement, we paid Takeda $ 120.0 million upfront (less an earnest money deposit paid by us to Takeda in the first quarter of 2020) to gain an exclusive license to seven of Takeda’s pipeline programs, including three clinical-stage assets for schizophrenia, treatment-resistant depression, and anhedonia.

The collaboration also includes a cost-sharing arrangement for associated collaboration activities.

Basis of Presentation .

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial information

and with the instructions of the Securities and Exchange Commission, or SEC, on Form 10-Q and Rule 10-01 of Regulation S-X.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the US, or GAAP, for interim financial information and with the instructions of the Securities and Exchange Commission, or SEC, on Form 10-Q and Rule 10-01 of Regulation S-X.

Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements.

24 unchanged sentences

Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income or loss, as applicable.

Accrued interest receivables on debt securities available-for-sale totaled $ 3.7 million at June 30, 2020.

Accrued interest receivables on debt securities available-for-sale totaled $ 3.5 million at September 30, 2020.

We do not measure an allowance for credit losses for accrued interest receivables.

1 unchanged sentence

Uncollectible accrued interest receivables associated with an impaired debt security are reversed against interest income upon identification of the impairment.

No accrued interest receivables were written off during the six months ended June 30, 2020.

No accrued interest receivables were written off during the nine months ended September 30, 2020.

Fair Value of Financial Instruments.

6 unchanged sentences

We estimate the fair value of debt securities available-for-sale by utilizing third-party pricing services.

These pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either

directly or indirectly, to estimate fair value.

These pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value.

Such inputs include market pricing based on real-time trade data for similar instruments, issuer credit spreads, benchmark yields, broker/dealer quotes and other observable inputs.

15 unchanged sentences

Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application of Topic 740.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted in any interim period for which financial statements have not yet been made available for issuance.

We are currently evaluating the effect that ASU 2019-12 will have on our condensed consolidated financial statements and related disclosures.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, with early adoption permitted in any interim period for which financial statements have not yet been made available for issuance.

We are currently evaluating the effect ASU 2019-12 will have on our condensed consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity , which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments, and amends existing earnings-per-share, or EPS, guidance by requiring that an entity use the if-converted method when calculating diluted EPS for convertible instruments.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal

years, with early adoption permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

We are currently evaluating the effect ASU 2020-06 will have on our condensed consolidated financial statements and related disclosures.

Significant Collaboration and Licensing Agreements

In June 2010, we entered into an exclusive worldwide collaboration with AbbVie to develop and commercialize elagolix and all next-generation gonadotropin-releasing factor antagonists for women’s and men’s health.

AbbVie received approval of ORILISSA for the management of moderate to severe endometriosis pain in women from the FDA in July 2018 and Health Canada in October 2018.

In May 2020, AbbVie received approval from the FDA for ORIAHNN for the management of heavy menstrual bleeding associated with uterine fibroids in pre-menopausal women.

FDA approval for ORIAHNN for uterine fibroids resulted in the achievement of a $ 30.0 million regulatory milestone, which was recognized as collaboration revenue in the second quarter of 2020.

Since inception of the agreement, we have recognized revenue of $ 75.0 million associated with the delivery of a technology license and existing know-how and $ 165.0 million associated with the achievement of certain development and regulatory milestones.

Pursuant to the terms of the agreement, we may also be entitled to receive payments of up to $ 366.0 million upon the achievement of certain development, regulatory and commercial milestones.

Under the terms of the agreement, AbbVie is responsible for all third-party development, marketing, and commercialization costs.

We will be entitled to a percentage of worldwide sales of GnRH Compounds for the longer of ten years or the life of the related patent rights.

AbbVie may terminate the collaboration at its discretion upon 180 days’ written notice to us.

We evaluated the terms of this agreement under Topic 606, Revenue from Contracts with Customers , and determined that there is one performance obligation, the exclusive worldwide license with rights to develop, manufacture, and commercialize elagolix.

At execution, the transaction price included only the $ 75.0 million up-front consideration received.

None of the development or regulatory milestones were included in the transaction price, as all milestone amounts were fully constrained.

As part of our evaluation of the constraint, we considered numerous factors, including that achievement of the milestones is outside of our control and contingent upon success in future clinical trials and the licensee’s efforts.

Any consideration

related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to AbbVie and therefore have also been excluded from the transaction price.

We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

In June 2020, we entered into an exclusive license agreement with Takeda, which became effective in July 2020, to develop and commercialize certain compounds in Takeda’s early to mid-stage psychiatry pipeline.

Specifically, Takeda granted us an exclusive license to the following seven assets:

(i) NBI-1065844 (TAK-831) for schizophrenia, (ii) NBI-1065845 (TAK-653) for treatment-resistant depression, (iii) NBI-1065846 (TAK-041) for anhedonia (which together with the NBI-1065845 are referred to as the Phase II Ready Assets), and (iv) four non-clinical stage assets, or the Non-Clinical Assets.

NBI-1065844 is deemed a royalty-bearing product under the license agreement pursuant to which we will be responsible for all costs and expenses associated with the development, manufacture, and commercialization of such asset, subject to certain exceptions, and Takeda will be eligible to receive development and commercial milestones and royalties with respect to such asset, or a Royalty-Bearing Product, and Takeda will retain the right to opt-in to a profit sharing arrangement pursuant to which we and Takeda will equally share in the operating profits and losses related to such asset, subject to certain exceptions, in lieu of receiving milestones and royalties, or a Profit-Share Product.

Subject to specified conditions, Takeda may elect to exercise such opt-in right for NBI-1065844 before we initiate a Phase III clinical trial.

Each of the Phase II Ready Assets is deemed a Profit-Share Product and Takeda will retain the right to opt-out of the profit-sharing arrangement for such asset pursuant to which such asset would become a Royalty-Bearing Product.

Takeda may elect to exercise such opt-out rights with respect to a Phase II Ready Asset immediately following the completion of the second Phase II clinical trial for such Phase II Ready Asset.

In addition, under certain circumstances related to the development and commercialization activities to be performed by us, Takeda may elect to opt-out of the profit-sharing arrangement for a Profit-Share Product before the initiation of a Phase III clinical trial for such product.

Each of the Non-Clinical Assets will be Royalty-Bearing Products pursuant to which we will be responsible for all costs and expenses associated with the development, manufacture, and commercialization of such assets, subject to certain exceptions.

In connection with the agreement, we paid Takeda $ 120.0 million upfront , which, including certain transaction related costs, was expensed as IPR&D in the third quarter of 2020 .

Pursuant to the terms of the agreement, Takeda may also be entitled to receive payments of up to $ 1.9 billion upon the achievement of certain development and commercial milestones associated with Royalty-Bearing Products, as well as receive royalties on future net sales of Royalty-Bearing Products.

On a country-by-country and product-by-product basis, royalty payments would commence on the first commercial sale of a Royalty-Bearing Product and terminate on the later of (i) the expiration of the last patent covering such Royalty-Bearing Product in such country, (ii) a number of years from the first commercial sale of such Royalty-Bearing Product in such country and (iii) the expiration of regulatory exclusivity for Royalty-Bearing Product in such country.

Unless earlier terminated, the license agreement will continue on a licensed product-by-licensed product and country-by-country basis until the date on which, (i) for any Royalty-Bearing Product, the royalty term has expired in such country;

and (ii) for any Profit-Share Product, for so long as we continue to develop, manufacture, or commercialize such licensed product.

We may terminate the license agreement for convenience in its entirety or in one or more (but not all) of the United States, Japan, the European Union, and the United Kingdom, or the Major Markets, on 6 months’ written notice to Takeda (i) with respect to all licensed products prior to the first commercial sale of the first licensed product for which first commercial sale occurs, or (ii) with respect to all licensed products in one or more given target classes, as defined in the agreement, prior to the first commercial sale of the first licensed product in such target class(es) for which first commercial sale occurs.

We may terminate the license agreement for convenience in its entirety or in one or more (but not all) of the Major Markets on 12 months’ written notice to Takeda (i) with respect to all licensed products following the first commercial sale of the first licensed product for which first commercial sale occurs, or (ii) with respect to all licensed products in one or more given target classes following the first commercial sale of the first licensed product in such target class(es) for which first commercial sale.

Takeda may terminate the license agreement, subject to specified conditions, (i) if we challenge the validity or enforceability of certain Takeda intellectual property rights or (ii) on a target class-by-target class basis, in the event that we do not conduct any material development or commercialization activities with respect to any licensed product within such target class for a specified continuous period.

Subject to a cure period, either party may terminate the license agreement in the event of any material breach, solely with respect to the target class of a licensed product to which such material breach relates, or in its entirety in the event of any material breach that relates to all licensed products.

In May 2020, we entered a collaboration and licensing agreement with Idorsia to license the global rights to NBI-827104, a potent, selective, orally active and brain penetrating T-type calcium channel blocker, in clinical development for the treatment of a rare pediatric epilepsy.

The agreement also included a research collaboration to discover and identify additional novel T-type calcium channel blockers as development candidates.

In connection with the exercise of the option, we paid Idorsia $ 45.0 million upfront, which was expensed as IPR&D in the second quarter of 2020.

Further, as part of the research collaboration, we provided Idorsia with an incremental $ 7.2 million in funding, which was recorded as a prepaid asset to be expensed over the two-year research collaboration term.

Pursuant to the terms of the agreement, upon the achievement of certain development and regulatory milestones, Idorsia may be entitled to receive payments of up to $ 365.0 million with respect to NBI-827104 and up to $ 620.0 million with respect to the development candidates.

In addition, Idorsia may also be entitled to receive payments of up to $ 750.0 million upon the achievement of certain commercial milestones, as well as receive royalties on the net sales of any collaboration product.

Further, we will be responsible for all manufacturing, development and commercialization costs of any collaboration product.

We may terminate the collaboration and licensing agreement, in its entirety or with respect to a particular compound or development candidate, by providing 90 days’ written notice to Idorsia.

Further, in the event a party commits a material breach and fails to cure such material breach within 90 days after receiving written notice thereof, the non-breaching party may terminate the agreement in its entirety immediately upon written notice to the breaching party.

In December 2019, we entered into a license and collaboration agreement with Xenon Pharmaceuticals Inc., or Xenon, to identify, research, and develop sodium channel inhibitors, including clinical candidate NBI-921352 and three preclinical candidates, which compounds we will have the exclusive right to further develop and commercialize under the terms and conditions set forth in the agreement.

We will be solely responsible, at our sole cost and expense, for all development and manufacturing of the compounds and any pharmaceutical product that contains a compound, subject to Xenon’s right to elect to co-fund the development of one product in a major indication and thus receive a mid-single digit percentage increase in royalties owed on the net sales of such product in the US.

If Xenon exercises such option, the parties will share equally all reasonable and documented costs and expenses incurred in connection with the development of such product in the applicable indication, except costs and expenses that are solely related to the development of such product for regulatory approval outside the US.

Unless earlier terminated, the term of the license and collaboration agreement will continue on a product-by-product and country-by-country basis until the expiration of the royalty term for such product in such country.

Upon the expiration of the royalty term for a particular product and country, the exclusive license granted by Xenon to us with respect to such product and country will become fully paid, royalty free, perpetual, and irrevocable.

We may terminate the license and collaboration agreement by providing at least 90 days’ written notice, provided that such unilateral termination will not be effective for certain products until we have used commercially reasonable efforts to complete certain specified clinical studies.

Either party may terminate the agreement in the event of a material breach in whole or in part, subject to specified conditions.

In the first quarter of 2019, we entered into a collaboration and license agreement with Voyager, a clinical-stage gene therapy company.

The agreement is focused on the development and commercialization of four programs using Voyager’s proprietary gene therapy platform.

The four programs consist of the NBIb-1817 program for Parkinson’s disease, the Friedreich’s ataxia program and the rights to two undisclosed programs.

Pursuant to development plans agreed to by us and Voyager, unless Voyager exercises its co-development and co-commerci alization rights as provided for in the agreement, we will be responsible for all development costs.

Further, upon the occurrence of a specified event for each program, we will assume responsibility for the development, manufacturing, and commercialization activit ies of such program.

We may terminate the collaboration and license agreement with Voyager upon 180 days’ written notice to Voyager prior to the first commercial sale of any collaboration product or upon one year after the date of notice if such notice is provided after the first commercial sale of any collaboration product.

Unless terminated earlier, the agreement will continue in effect until the expiration of the last to expire royalty term with respect to any collaboration product or the last expiration or termination of any exercised co-development and co-commercialization rights by Voyager as provided for in the agreement.

BIAL – Portela & Ca, S.A.

In the first quarter of 2017, we entered into an exclusive license agreement with BIAL – Portela & Ca, S.A., or BIAL, for the development and commercialization of ONGENTYS for the treatment of human diseases and conditions, including Parkinson’s disease, in the US and Canada.

In April 2020, we received FDA approval for ONGENTYS as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients.

FDA approval for ONGENTYS for Parkinson’s disease triggered a milestone payment of $ 20.0 million, which was expensed as R&D in the second quarter of 2020.

In April 2020, we received FDA approval for ONGENTYS as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients, which was commercialized by our commercial team in late September 2020.

FDA approval for ONGENTYS for Parkinson’s disease triggered a milestone payment of $ 20.0 million, which was expensed

as R&D in the second quarter of 2020.

Pursuant to the terms of the agreement, BIAL may also be entitled to receive up to $ 75.0 million upon the achievement of certain commercial milestones.

Under the terms of the agreement, we are responsible for the commercialization of ONGENTYS in the US and Canada.

Further, we will rely on BIAL for the commercial supply of ONGENTYS.

Further, we rely on BIAL for the commercial supply of ONGENTYS.

Upon our written request prior to the estimated expiration of the term of a licensed product, the parties shall negotiate a good faith continuation of BIAL’s supply of such licensed product after the term.

After the term, and if BIAL is not supplying a certain licensed product, we shall pay BIAL a trademark royalty based on the net sales of such licensed product.

Upon commercialization of ONGENTYS, we will determine certain annual sales forecasts.

Upon commercialization of ONGENTYS, we determined certain annual sales forecasts.

In the event we fail to meet the minimum sales requirements for a particular year, we would be obligated to pay BIAL an amount equal to the difference between the actual net sales and minimum sales requirements for such year.

4 unchanged sentences

We may terminate the agreement at any time for any reason upon nine months’ written notice to BIAL.

In the first quarter of 2019, we entered into a collaboration and license agreement with Voyager, a clinical-stage gene therapy company.

The agreement is focused on the development and commercialization of four programs using Voyager’s proprietary gene therapy platform.

The four programs consist of the NBIb-1817 program for Parkinson’s disease, the Friedreich’s ataxia program and the rights to two undisclosed programs.

In connection with the agreement, we paid Voyager $ 115.0 million upfront and purchased $ 50.0 million of Voyager’s common stock at $ 11.9625 per share, representing approximately 4.2 million shares.

Pursuant to the terms of the agreement, Voyager may also be entitled to receive payments of up to $ 1.7 billion upon the achievement of certain development, regulatory and commercial milestones, as well as receive royalties on the net sales of any collaboration product.

We accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business.

Our equity investment in Voyager was recorded at a fair value of $ 54.7 million after considering Voyager’s stock price on the date of closing and certain lock-up and voting provisions applicable to the acquired shares.

The remaining $ 113.1 million of the purchase price, which includes the applicable transaction costs, was expensed as in-process research and development, or IPR&D, in the second quarter of 2019.

In June 2019, we entered into an amendment to the collaboration and license agreement with Voyager.

Under the terms of the amendment, we paid Voyager $ 5.0 million upfront to obtain rights outside the US to the Friedreich’s ataxia program in connection with the early return of those rights to Voyager pursuant to a restructuring of Voyager’s gene therapy relationship with Sanofi Genzyme.

The upfront payment was expensed as IPR&D in the second quarter of 2019.

Pursuant to development plans agreed to by us and Voyager, unless Voyager exercises its co-development and co-commercialization rights as provided for in the agreement, we will be responsible for all development costs.

Further, upon the occurrence of a specified event for each program, we will assume responsibility for the development, manufacturing, and commercialization activities of such program.

the first commercial sale of any collaboration product.

In connection with the agreement, we paid Xenon $ 30.0 million upfront and purchased $ 20.0 million of Xenon’s common stock at $ 14.196 per share, representing approximately 1.4 million shares.

Pursuant to the terms of the agreement, Xenon may also be entitled to receive payments of up to $ 1.7 billion upon the achievement of certain development, regulatory and commercial milestones, as well as receive royalties on the net sales of any collaboration product.

We accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business.

Our equity investment in Xenon was recorded at a fair value of $ 14.1 million after considering Xenon’s stock price on the date of closing and certain lock-up and voting provisions applicable to the acquired shares.

The remaining $ 36.2 million of the purchase price, which includes the applicable transaction costs, was expensed as IPR&D in the fourth quarter of 2019.

Either party may terminate the agreement in the event of a material breach in whole or in part, subject to specified conditions.

Mitsubishi Tanabe Pharma Corporation .

In March 2015, we entered into a collaboration and license agreement with Mitsubishi Tanabe Pharma Corporation, or MTPC, for the development and commercialization of INGREZZA for movement disorders in Japan and other select Asian markets.

In the first six months of 2020, we recognized revenue of $ 1.3 million in connection with the ongoing KINECT-HD study, a placebo-controlled Phase III study of valbenazine in adult Huntington’s disease patients with chorea.

In accordance with our continuing performance obligations, $ 8.1 million of the $ 30.0 million upfront payment received from MTPC in connection with the agreement is being deferred and will be recognized as revenue over the study period using an input method according to costs incurred to-date relative to estimated total costs associated with the study.

For the three and nine months ended September 30, 2020, we recognized revenue of $ 0.5 million and $ 1.8 million, respectively, in connection with the ongoing KINECT-HD study, a placebo-controlled Phase III study of valbenazine in adult Huntington’s disease patients with chorea.

In accordance with our continuing performance obligations, $ 7.6 million of the $ 30.0 million upfront payment received from MTPC in connection with the agreement is being deferred and will be recognized as revenue over the KINECT-HD study period using an input method according to costs incurred to-date relative to estimated total costs associated with the study.

Since inception of the agreement, we have recognized revenue of $ 19.8 million associated with the delivery of a technology license and existing know-how, $ 15.0 million associated with the achievement of a certain development milestones, and $ 2.6 million associated with our performance of the ongoing KINECT-HD study.

6 unchanged sentences

In such event, all INGREZZA product rights for Japan and other select Asian markets would revert to us.

We assessed this arrangement in accordance with Topic 606 and identified the following performance obligations:

(i) INGREZZA technology license and existing know-how;

and (ii) development activities to initiate a clinical study of INGREZZA for Huntington’s chorea.

We have the option to participate on the joint steering committee, but since participation is at our option it was deemed to not be a performance obligation.

The option for MTPC to engage us to manufacture and supply pharmaceutical products, not at a discount, was not considered a material right and therefore not a performance obligation.

Based on these assessments, we identified the license and the development activities as the only performance obligations at the inception of the agreement, which were both deemed to be distinct.

To evaluate the appropriate transaction price, we determined that the up-front payment received constituted the entirety of the consideration to be included in the transaction price and to be allocated to the performance obligations based on our best estimate of their relative stand-alone selling prices.

For the license, the stand-alone selling price was calculated using an income approach model and included the following key assumptions:

the development timeline, revenue forecast, discount rate and probabilities of technical and regulatory success.

The relative selling price of our development activities to initiate a clinical study of INGREZZA for Huntington’s chorea was based on an assessment of costs to perform the study, based upon a peer company analysis for similar studies.

We believe a change in the assumptions used to determine our stand-alone selling price for the license most likely would not have a significant effect on the allocation of consideration received (or receivable) to the performance obligations.

At execution, the transaction price included only the $ 30.0 million up-front consideration received.

None of the development or regulatory milestones have been included in the transaction price, as all milestone amounts were fully constrained.

Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to MTPC and therefore have also been excluded from the transaction price.

We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

Under the terms of the agreement, any payment we receive is generally non-refundable.

In January 2020, we announced a collaboration and optional licensing agreement with Idorsia, granting us an option to license NBI-827104, a potent, selective, orally active and brain penetrating T-type calcium channel blocker, in clinical development for the treatment of a rare pediatric epilepsy.

The option also included a research collaboration to discover and identify up to two additional novel T-type calcium channel blockers as development candidates.

In May 2020, we exercised the option to license the global rights to NBI-827104.

In connection with the exercise of the option, we paid Idorsia $ 45.0 million upfront, which was expensed as IPR&D in the second quarter of 2020.

Further, we will be responsible for all manufacturing, development and commercialization costs of any collaboration product.

We may terminate the collaboration and licensing agreement, in its entirety or with respect to a particular compound or development candidate, by providing 90 days’ written notice to Idorsia.

AbbVie received approval of ORILISSA for the management of moderate to severe endometriosis pain in women from the FDA in July 2018 and Health Canada in October 2018.

In May 2020, AbbVie received approval from the FDA for ORIAHNN for the management of heavy menstrual bleeding associated with uterine fibroids in pre-menopausal women.

FDA approval for ORIAHNN for uterine fibroids resulted in the achievement of a $ 30.0 million regulatory milestone, which was recognized as collaboration revenue in the second quarter of 2020.

Pursuant to the terms of the agreement, we may also be entitled to receive additional payments of up to $ 366.0 million upon the achievement of certain development, regulatory and commercial milestones.

Under the terms of the agreement, AbbVie is responsible for all third-party development, marketing, and commercialization costs.

We will be entitled to a percentage of worldwide sales of GnRH Compounds for the longer of ten years or the life of the related patent rights.

AbbVie may terminate the collaboration at its discretion upon 180 days’ written notice to us.

Debt Securities

The following table summarizes the amortized cost, unrealized gain and loss recognized in accumulated other comprehensive loss, allowance for credit losses, and fair value of debt securities available-for-sale at June 30, 2020, aggregated by major security type and contractual maturity:

The following table summarizes the amortized cost, unrealized gain and loss recognized in accumulated other comprehensive income (loss), allowance for credit losses, and fair value of debt securities available-for-sale at September 30, 2020, aggregated by major security type and contractual maturity:

(in millions) Contractual

24 unchanged sentences

$ 299.3 $ 0.5 $ ( 0.1 ) $ 299.7

At June 30, 2020, debt securities available-for-sale in an unrealized loss position for which an allowance for credit losses had not been recorded were not significant.

Further, at June 30, 2020, our security portfolio consisted of 158 securities related to investments in debt securities available-for-sale, of which 17 securities were in an unrealized loss position.

Our investments in commercial paper, corporate debt securities and securities of government-sponsored entities are of high credit quality (rated A1, A- and AA+ or higher, respectively).

The following table summarizes debt securities available-for-sale in an unrealized loss position for which an allowance for credit losses has not been recorded at September 30, 2020, aggregated by major security type and length of time in a continuous unrealized loss position:

Less Than 12 Months 12 Months or Longer Total

(in millions) Fair

Value Unrealized

Corporate Debt Securities $ 39.8 $ ( 0.1 ) $ — $ — $ 39.8 $ ( 0.1 )

At September 30, 2020, our security portfolio consisted of 143 securities related to investments in debt securities available-for-sale, of which 14 securities were in an unrealized loss position.

Our investments in corporate debt securities in an unrealized loss position at September 30, 2020 are of high credit quality (rated A- or higher).

Unrealized losses on these investments were primarily due to changes in interest rates.

We do not intend to sell these investments and it is not more likely than not that we will be required to sell these investments before recovery of their amortized cost basis.

We do not intend

to sell these investments and it is not more likely than not that we will be required to sell these investments before recovery of their amortized cost basis.

The following table summarizes debt securities available-for-sale in an unrealized loss position at December 31, 2019, aggregated by major security type and length of time in a continuous unrealized loss position:

6 unchanged sentences

Fair Value Measurements

Investments at June 30, 2020, which were measured at fair value on a recurring basis, consisted of the following:

Investments at September 30, 2020, which were measured at fair value on a recurring basis, consisted of the following:

Fair Value Measurements Using

35 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2020 2019 2020 2019

1 unchanged sentence

Purchases — — — 54.7

Unrealized gains (losses) included in earnings 11.3 21.0 ( 5.2 ) 22.7

Unrealized loss included in earnings ( 7.0 ) ( 28.5 ) ( 12.2 ) ( 5.8 )

Balance at end of period $ 43.7 $ 48.9 $ 43.7 $ 48.9

At June 30, 2020, the discount for lack of marketability used in the valuation analysis of equity securities ranged from 17.5 % to 31.5 % (weighted average of 27.5 %).

The discount for lack of marketability was weighted by the relative fair value of the

At September 30, 2020, the discount for lack of marketability used in the valuation analysis of equity securities ranged from 16.0 % to 31.5 % (weighted average of 26.8 %).

The discount for lack of marketability was weighted by the relative fair value of the instruments.

A significant increase (decrease) in the discount for lack of marketability in isolation would result in a significantly lower (higher) fair value measurement.

1 unchanged sentence

Inventories consisted of the following:

(in millions) June 30,

(in millions) September 30,

2020 December 31, 2019

3 unchanged sentences

Total inventories $ 20.6 $ 17.3

Restricted Cash

Cash, Cash Equivalents and Restricted Cash

The following table presents a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows.

(in millions) June 30,

(in millions) September 30,

2020 December 31,

1 unchanged sentence

Restricted cash 3.2 3.2

Total cash and cash equivalents and restricted cash $ 418.3 $ 115.5

At June 30, 2020, our operating leases consisted of the following:

Total cash, cash equivalents and restricted cash $ 428.5 $ 115.5

Operating leases consisted of the following:

Address Type Square Feet Commencement Date Expiration Date

17 unchanged sentences

In connection with our operating leases, in lieu of cash security deposits, Wells Fargo Bank, N.A., issued letters of credit on our behalf, which are secured by deposits totaling $ 3.2 million.

Our operating lease cost was $ 5.0 million and $ 3.9 million for the six months ended June 30, 2020 and 2019, respectively.

Cash paid for amounts in the measurement of lease liabilities for operating cash flows from operating leases was $ 4.3 million and $ 3.3 million for the six months ended June 30, 2020 and 2019, respectively.

Our operating leases had a weighted average remaining lease term of approximately 11 years and 10 years at June 30, 2020 and December 31, 2019, respectively, and a weighted average discount rate of 5.8 % at June 30, 2020 and December 31, 2019, respectively.

Our operating lease cost was $ 7.4 million and $ 5.9 million for the nine months ended September 30, 2020 and 2019, respectively.

Cash paid for amounts in the measurement of lease liabilities for operating cash flows from operating leases was $ 6.4 million and $ 5.5 million for the nine months ended September 30, 2020 and 2019, respectively.

Our operating leases had a weighted average remaining lease term of approximately 10.5 years and 11.2 years at September 30, 2020 and December 31, 2019, respectively, and a weighted average discount rate of 5.8 % at September 30, 2020 and December 31, 2019, respectively.

Approximate future minimum lease payments under operating leases were as follows:

(in millions) June 30,

(in millions) September 30,

Year ending December 31, 2020 (3 months remaining)

22 unchanged sentences

On or after January 15, 2024, until the close of business on the scheduled trading day immediately preceding May 15, 2024, holders may convert their 2024 Notes at any time.

As the conditional conversion feature described under (i) above had been triggered as of June 30, 2020, holders of the 2024 Notes may convert the 2024 Notes at any time during the period beginning on July 1, 2020 and ending at the close of business on September 30, 2020.

Accordingly, the 2024 Notes have been classified as a current liability as of June 30, 2020.

As the conditional conversion feature described under (i) above had been triggered as of September 30, 2020, holders of the 2024 Notes may convert the 2024 Notes at any time during the period beginning on October 1, 2020 and ending at the close of business on December 31, 2020.

Accordingly, the 2024 Notes have been classified as a current liability as of September 30, 2020.

The future conditional convertibility of the 2024 Notes will be monitored at each quarterly reporting date and analyzed dependent upon market prices of our common stock during the prescribed measurement periods.

1 unchanged sentence

For both the principal and excess conversion value, holders may receive cash, shares of our common stock or a combination of cash and shares of our common stock, at our option.

It is our intent and policy to settle conversions through combination settlement, which essentially involves repayment of an amount of cash equal to the “principal portion” and delivery of the “share amount” in excess of the principal portion in shares

of common stock or cash.

In general, for each $ 1,000 in principal, the “principal portion” of cash upon settlement is defined as the lesser of $ 1,000 , and the conversion value during the 25 -day observation period as described in the 2024 Indenture.

21 unchanged sentences

The equity component is not re-measured as long as it continues to meet the conditions for equity classification.

At June 30, 2020, the remaining period over which the discount on the liability component will be amortized was approximately 4 years.

At September 30, 2020, the remaining period over which the discount on the liability component will be amortized was approximately 3.6 years.

We allocated the total transaction costs of approximately $ 14.7 million related to the issuance of the 2024 Notes to the liability and equity components of the 2024 Notes based on their relative values.

Transaction costs attributable to the liability component are amortized to interest expense over the seven-year term of the 2024 Notes, and transaction costs attributable to the equity component are netted with the equity component in stockholders’ equity.

Transaction costs attributable to the liability

component are amortized to interest expense over the seven-year term of the 2024 Notes, and transaction costs attributable to the equity component are netted with the equity component in stockholders’ equity.

The 2024 Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness or the issuance or repurchase of securities by us.

1 unchanged sentence

The 2024 Notes, net of discounts and deferred financing costs, consisted of the following:

(in millions) June 30,

(in millions) September 30,

2020 December 31,

4 unchanged sentences

The 2024 Notes were recorded at the estimated value of a similar non-convertible instrument on the date of issuance and accretes to the face value of the 2024 Notes over their seven-year term.

The fair value of the 2024 Notes, which was estimated utilizing market quotations from an over-the-counter trading market (Level 2), was $ 845.3 million at June 30, 2020 and $ 596.8 million at December 31, 2019.

Net Income (Loss) Per Share

Net income (loss) per share was calculated as follows:

The fair value of the 2024 Notes, which was estimated utilizing market quotations from an over-the-counter trading market (Level 2), was $ 713.0 million at September 30, 2020 and $ 596.8 million at December 31, 2019.

Net (Loss) Income Per Share

Net (loss) income per share was calculated as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions, except per share data) 2020 2019 2020 2019

Net income (loss) - basic and diluted $ 79.6 $ 51.3 $ 117.0 $ ( 50.8 )

Net (loss) income - basic and diluted $ ( 57.6 ) $ 53.8 $ 59.4 $ 3.0

Weighted-average common shares outstanding:

5 unchanged sentences

Diluted 93.3 96.1 98.0 95.2

Net income (loss) per share:

Net (loss) income per share:

Basic $ ( 0.62 ) $ 0.59 $ 0.64 $ 0.03

3 unchanged sentences

As a result, of the approximately 6.8 million shares underlying the 2024 Notes, only the shares required to settle the excess of the principal portion are considered under the treasury stock method.

Shares which have been excluded from diluted per share amounts because their effect would have been anti-dilutive were 2.2 million and 1.4 million for the three and six months ended June 30, 2020, respectively, and 2.3 million and 8.5 million for the three and six months ended June 30, 2019, respectively.

Subsequent Events

In June 2020, we entered into an exclusive license agreement with Takeda to develop and commercialize certain compounds in Takeda’s early to mid-stage psychiatry pipeline.

Specifically, Takeda granted us an exclusive license to the following seven assets:

(i) NBI-1065844 (TAK-831) for schizophrenia, or the Phase II Asset, (ii) NBI-1065845 (TAK-653) for treatment-resistant depression, (iii) NBI-1065846 (TAK-041) for anhedonia (which together with the NBI-1065845 are referred to as the Phase II Ready Assets), and (iv) four non-clinical stage assets, or the Non-Clinical Assets.

The agreement became effective in July 2020, upon expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

The Phase II Asset is deemed a royalty-bearing product under the license agreement pursuant to which we will be responsible for all costs and expenses associated with the development, manufacture, and commercialization of such asset, subject to certain exceptions, and Takeda will be eligible to receive development and commercial milestones and royalties with respect to such asset, or a Royalty-Bearing Product, and Takeda will retain the right to opt-in to a profit sharing arrangement pursuant

to which we and Takeda will equally share in the operating profits and losses related to such asset, subject to certain exceptions, in lieu of receiving milestones and royalties, or a Profit-Share Product.

Subject to specified conditions, Takeda may elect to exercise such opt-in right for the Phase II Asset before we initiate a Phase III clinical trial for such Phase II Asset.

Takeda may elect to exercise such opt-out rights with respect to a Phase II Ready Asset immediately following the completion of the second Phase II clinical trial for such Phase II Ready Asset.

In connection with the agreement, we paid Takeda $ 120.0 million upfront (less an earnest money deposit paid by us to Takeda in the first quarter of 2020) .

and (ii) for any Profit-Share Product, for so long as we continue to develop, manufacture, or commercialize such licensed product.

Shares which have been excluded from diluted per share amounts because their effect would have been anti-dilutive were 10.9 million and 1.8 million for the three and nine months ended September 30, 2020, respectively, and 2.3 million and 2.2 million for the three and nine months ended September 30, 2019, respectively.

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 1. Financial Statements