What changed in this filing

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Item 1. Financial Statements

2021-05-05 compared with 2020-11-09 · 151 added, 261 removed, 276 unchanged (60% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(in millions, except per share data) March 31,

2021 December 31,

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Cash and cash equivalents $ 352.6 $ 187.1

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)

Debt securities available-for-sale, at fair value (amortized cost $ 520.2 million at March 31, 2021 and $ 612.4 million at December 31, 2020)

Accounts receivable 147.8 157.1

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Total current assets 1,085.4 1,016.2

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)

Deferred tax assets 325.6 319.4

Debt securities available-for-sale, at fair value (amortized cost $ 249.6 million at March 31, 2021 and $ 226.7 million at December 31, 2020)

Right-of-use assets 97.0 82.8

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Accounts payable and accrued liabilities $ 171.9 $ 168.7

Convertible senior notes 425.0 408.8

Other current liabilities 18.1 17.8

Total current liabilities 190.0 186.5

Convertible senior notes 322.0 317.9

Operating lease liabilities 107.5 94.4

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5.0 shares authorized;

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

no shares issued and outstanding at March 31, 2021 and December 31, 2020

Common stock, $ 0.001 par value;

220.0 shares authorized;

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

issued and outstanding shares were 94.5 at March 31, 2021 and 93.5 at December 31, 2020

Additional paid-in capital 1,897.8 1,849.7

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NEUROCRINE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE (LOSS) INCOME

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions, except per share data) 2021 2020

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Research and development 73.2 58.3

Acquired in-process research and development 118.5 — 164.5 118.1

Selling, general and administrative 129.0 117.8

Total operating expenses 205.1 178.2

Operating (loss) income ( 44.3 ) 90.1 91.2 23.5

Operating income 31.5 58.9

Other (expense) income:

Interest expense ( 6.4 ) ( 8.2 )

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

Unrealized gain (loss) on restricted equity securities 0.7 ( 16.5 )

Investment income and other, net 1.4 4.7

Total other expense, net ( 4.3 ) ( 20.0 )

(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 (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

Income before (benefit from) provision for income taxes 27.2 38.9

(Benefit from) provision for income taxes ( 4.9 ) 1.5

Net income 32.1 37.4

Unrealized loss on debt securities available-for-sale, net of tax ( 0.8 ) ( 2.8 )

Comprehensive income $ 31.3 $ 34.6

Net income per share, basic $ 0.34 $ 0.40

Net income per share, diluted $ 0.33 $ 0.39

Weighted average common shares outstanding, basic 94.2 92.6

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(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 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

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

Net income — — — — 53.8 53.8

Unrealized gain on debt securities available-for-sale, net of tax — — — 1.0 — 1.0

Share-based compensation expense — — 20.3 — — 20.3

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

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

Balances at December 31, 2020

93.5 $ 0.1 $ 1,849.7 $ 1.8 $ ( 725.4 ) $ 1,126.2

Net income — — — — 32.1 32.1

Unrealized gain on debt securities available-for-sale, net of tax — — — 1.8 — 1.8

Unrealized loss on debt securities available-for-sale, net of tax — — — ( 0.8 ) — ( 0.8 )

Share-based compensation expense — — 32.9 — — 32.9

Issuance of common stock for vested restricted stock options 0.5 — — — — —

Issuance of common stock for stock options 0.5 — 21.6 — — 21.6

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

Balances at September 30, 2020

Issuances of common stock under stock plans 1.0 — 15.2 — — 15.2

Balances at March 31, 2021

94.5 $ 0.1 $ 1,897.8 $ 1.0 $ ( 693.3 ) $ 1,205.6

Balance at December 31, 2018

Balances at December 31, 2019

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

Net income — — — — 37.4 37.4

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

Unrealized loss on debt securities available-for-sale, net of tax — — — ( 2.8 ) — ( 2.8 )

Share-based compensation expense — — 22.8 — — 22.8

Issuance of common stock for vested restricted stock options 0.4 — — — — —

Issuance of common stock for stock options 0.8 — 20.0 — — 20.0

Issuance of common stock for employee stock purchase plan 0.1 — 5.1 — — 5.1

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

Balance at September 30, 2019

Issuances of common stock under stock plans 0.5 — 6.0 — — 6.0

Balances at March 31, 2020

92.8 $ 0.1 $ 1,796.9 $ ( 1.4 ) $ ( 1,095.3 ) $ 700.3

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

(in millions) 2021 2020

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Change in fair value of equity security investments ( 0.7 ) 16.5

Deferred income taxes ( 6.2 ) —

Other 2.6 0.4

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Sales and maturities of debt securities available-for-sale 161.3 206.5

Purchases of equity securities — ( 54.7 )

Purchases of property and equipment ( 4.5 ) ( 1.3 )

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

Net cash provided by investing activities 63.1 33.2

Cash Flows from Financing Activities:

Issuance of common stock 21.6 20.0

Issuances of common stock under benefit plans 15.2 6.0

Partial repurchase of convertible senior notes ( 0.1 ) —

Net cash provided by financing activities 15.1 6.0

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Non-cash capital expenditures $ 0.1 $ 0.8

Cash paid for interest $ 5.8 $ 5.8

Cash paid for income taxes $ 0.4 $ 0.5

Right-of-use assets acquired through operating leases $ 16.0 $ —

See accompanying notes to the condensed consolidated financial statements.

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and Neurocrine Europe, Ltd., both of which were formed in December 2014 and are inactive.

We are a commercial-stage biopharmaceutical company focused on discovering and developing innovative and life-changing treatments for patients with serious, challenging and under-addressed neurological, endocrine and psychiatric disorders.

We specialize in targeting and interrupting disease-causing mechanisms involving the interconnected pathways of the nervous and endocrine systems.

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.

We are a neuroscience-focused, biopharmaceutical company dedicated to discovering, developing and delivering life-changing treatments for people with serious, challenging and under-addressed neurological, endocrine and psychiatric disorders.

Our diverse portfolio includes United States Food and Drug Administration, or FDA, approved treatments for tardive dyskinesia, Parkinson’s disease, endometriosis*, uterine fibroids* and clinical programs in multiple therapeutic areas.

For nearly three decades, we have specialized in targeting and interrupting disease-causing mechanisms involving the interconnected pathways of the nervous and endocrine systems.

(*in collaboration with AbbVie Inc.)

Basis of Presentation .

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.

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.

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

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The condensed consolidated balance sheet at December 31, 2020, has been derived from the audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

There were no significant changes to our significant accounting policies as disclosed in the 2019 Form 10-K, except as set forth below.

Debt Securities.

Debt securities consist of investments in certificates of deposit, corporate debt securities, and securities of government-sponsored entities.

We classify debt securities as available-for-sale.

Debt securities available-for-sale are recorded at fair value, with unrealized gains and losses included in other comprehensive income or loss, net of tax.

We exclude accrued interest from both the fair value and amortized cost basis of debt securities.

A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent.

Interest accrued but not received for a debt security placed on nonaccrual status is reversed against interest income.

Interest income includes amortization of purchase premium or discount.

Premiums and discounts on debt securities are amortized using the effective interest rate method.

Gains and losses on sales of debt securities are recorded on the trade date in investment income and other, net, and determined using the specific identification method.

Allowance for Credit Losses.

For debt securities available-for-sale in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through earnings.

For debt securities available-for-sale that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes in interest rates, and any changes to the rating of the security by a rating agency, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis.

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 $ 3.5 million at September 30, 2020.

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

For the purposes of identifying and measuring an impairment, accrued interest is excluded from both the fair value and amortized cost basis of the debt security.

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 nine months ended September 30, 2020.

Fair Value of Financial Instruments.

We record cash equivalents, debt securities available-for-sale and equity securities at fair value based on a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs).

The fair value hierarchy consists of the following three levels:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs that reflect our own assumptions about the assumptions that market participants would use in pricing the asset or liability when there is little, if any, market activity for the asset or liability at the measurement date.

Investments in debt securities available-for-sale are classified as Level 2 and carried at fair value.

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.

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.

We validate valuations obtained from third-party pricing services by understanding the models used, obtaining market values from other pricing sources, and analyzing data in certain instances.

Investments in equity securities of certain companies that are subject to holding period restrictions longer than one year are classified as Level 3 and carried at fair value using an option pricing valuation model.

The most significant assumptions within the option pricing valuation model are the stock price volatility, which is based on the historical volatility of similar companies, and the discount for lack of marketability related to the term of the restrictions.

The carrying amounts of accounts receivable and accounts payable and accrued liabilities approximate their fair values due to their short-term maturities.

There were no significant changes to our significant accounting policies as disclosed in the 2020 Form 10-K.

Recently Adopted Accounting Pronouncements.

On January 1, 2020, we adopted Accounting Standards Update, or ASU, 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, using the modified retrospective transition method.

For debt securities available-for-sale, the standard requires an investor to determine whether a decline in the fair value below the amortized cost basis of the investment is due to credit-related factors.

Credit-related impairment is recognized as an allowance for credit loss on the balance sheet with a corresponding adjustment to earnings.

Credit losses are limited to the amount by which the investment’s amortized cost basis exceeds its fair value and may be subsequently reversed if conditions change.

Any impairment that is not credit related is recognized in other comprehensive income or loss, as applicable, net of applicable taxes.

ASU 2019-12 .

On January 1, 2021, we adopted Accounting Standards Update, or ASU, 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , using the modified retrospective transition method.

ASU 2019-12 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.

The adoption of ASU 2019-12 did not result in a cumulative-effect adjustment to retained earnings.

The comparative prior period information continues to be reported under the accounting standards in effect during those periods.

The impact of the adoption is expected to be immaterial to our financial position, results of operations, and cash flows on an ongoing basis.

Recently Issued Accounting Pronouncements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

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, 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.

ASU 2020-06 .

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.

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

We plan to adopt ASU 2020-06 effective January 1, 2022 using the modified retrospective transition method.

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

Significant Collaboration and Licensing Agreements

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.

Takeda Pharmaceutical Company Limited.

We entered into an exclusive license agreement with Takeda Pharmaceutical Company Limited, or 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 (i) luvadaxistat (NBI-1065844/TAK-831) for adults with negative symptoms of schizophrenia, (ii) NBI-1065845 (TAK-653) for treatment-resistant depression, (iii) NBI-1065846 (TAK-041) for anhedonia and (iv) four non-clinical stage assets.

With respect to luvadaxistat, 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 associated with luvadaxistat (in lieu of receiving payments for milestones and royalties), subject to certain exceptions.

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

With respect to NBI-1065845 and NBI-1065846, Takeda will retain the rights to opt-out of the profit-sharing arrangements pursuant to which Takeda would be entitled to receive royalties on the future net sales of such asset (in lieu of equally sharing in the operating profits and losses).

Takeda may elect to exercise such opt-out rights immediately following the completion of the associated second Phase II clinical study or, under certain circumstances related to the development and commercialization activities to be performed by us, before the initiation of a Phase III clinical study for such asset.

Under the terms of the agreement, Takeda may be entitled to receive payments of up to $ 1.9 billion upon the achievement of certain milestones associated with luvadaxistat and the four non-clinical stage assets, as well as receive royalties on the future net sales of such assets.

We and Takeda will equally share in the operating profits and losses associated with NBI-1065845 and NBI-1065846.

Idorsia Pharmaceuticals Ltd.

In May 2020, we entered a collaboration and licensing agreement with Idorsia Pharmaceuticals Ltd, or Idorsia, to license the global rights 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.

Under the terms of the agreement, Idorsia may be entitled to receive payments of up to $ 1.7 billion upon the achievement of certain milestones as well as receive royalties on the future net sales of any collaboration product.

Xenon Pharmaceuticals, Inc.

Under the terms of the agreement, Xenon may be entitled to receive payments of up to $ 1.7 billion upon the achievement of certain milestones as well as receive royalties on the future net sales of any collaboration product.

Voyager Therapeutics, Inc.

We entered into a collaboration and license agreement with Voyager Therapeutics, Inc., or Voyager, which became effective in March 2019, to develop and commercialize four programs using Voyager’s proprietary gene therapy platform.

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

In February 2021, we notified Voyager of our termination of the NBIb-1817 for Parkinson’s disease program.

The effective date of this termination will be August 2, 2021.

The termination does not apply to any other development program other than NBIb-1817 for Parkinson’s disease, and our collaboration and license agreement with Voyager will otherwise continue in effect.

Under the terms of the agreement, Voyager may be entitled to receive payments of up to $ 1.3 billion upon the achievement of certain milestones, as well as receive royalties on the future net sales of any collaboration product.

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, 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 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 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.

Unless earlier terminated, the agreement will continue on a licensed product-by-product and country-by-country basis until a generic product in respect of such licensed product under the agreement is sold in a country and sales of such generic product are greater than a specified percentage of total sales of such licensed product in such country.

Either party may terminate the agreement if the other party materially breaches the agreement and does not cure the breach within a specified notice period, or upon the other party’s insolvency.

BIAL may terminate the agreement if we fail to use commercially reasonable efforts to submit an NDA for a licensed product by a specified date, in the event we fail to meet the minimum sales requirements for any two years , or under certain circumstances involving a change of control of Neurocrine Biosciences.

Under certain circumstances where BIAL elects to terminate the agreement in connection with a change of control of Neurocrine Biosciences, BIAL would be obligated to pay us a termination fee.

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

We acquired the United States, or US, and Canada rights to ONGENTYS ® (opicapone) from BIAL in the first quarter of 2017.

We launched ONGENTYS in the US in September 2020, after receiving FDA approval for ONGENTYS as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients in April 2020.

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

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.

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.

Pursuant to the terms of the agreement, we may also be entitled to receive payments of up to $ 70.0 million upon the achievement of certain regulatory and commercial milestones, receive payments for the manufacture of certain pharmaceutical products, as well as receive royalties on the net sales of collaboration products in select territories in Asia.

Under the terms of the agreement, MTPC is responsible for all third-party development, marketing, and commercialization costs in Japan and other select Asian markets and we would be entitled to a percentage of sales of INGREZZA in Japan and other select Asian markets for the longer of ten years or the life of the related patent rights.

Further, the collaboration effort between the parties to advance INGREZZA towards commercialization in Japan and other select Asian markets is governed by joint steering and development committees with representatives from both parties.

There are no performance, cancellation, termination, or refund provisions in the agreement that would have a material financial consequence to us.

We do not directly control when event-based payments will be achieved or when royalty payments will begin.

MTPC may terminate the agreement at its discretion upon 180 days' written notice to us.

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

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 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.

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 ® (valbenazine) for movement disorders in Japan and other select Asian markets.

In February 2021, MTPC reported positive top-line results from the J-KINECT Phase III study, designed to evaluate the efficacy and safety of valbenazine in tardive dyskinesia.

In April 2021, MTPC submitted a Marketing Authorization Application, or MAA, with the Ministry of Health and Welfare in Japan for valbenazine for the treatment of tardive dyskinesia.

MTPC submission of valbenazine triggered a milestone payment of $ 15.0 million, to be paid by MTPC to Neurocrine Biosciences and recognized as collaboration revenue in the second quarter of 2021.

In accordance with our continuing performance obligations, $ 5.7 million of the $ 30.0 million upfront payment received from MTPC is being deferred and will be recognized as collaboration revenue over the ongoing KINECT-HD study period using an input method according to costs incurred to-date relative to estimated total costs associated with the study.

We recognized collaboration revenue of $ 1.1 million and $ 1.3 million for the three months ended March 31, 2021 and 2020, 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.

Under the terms of the agreement, we are entitled to receive royalties on the future worldwide net sales of any collaboration product in select territories in Asia and may also be entitled to receive payments of up to $ 70.0 million upon the achievement of certain milestones, including the $ 15.0 million milestone payment triggered upon MTPC submission of valbenazine in April 2021.

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

AbbVie received approval for ORILISSA ® (elagolix tablets) in the US and Canada in August and November 2018, respectively, after receiving FDA and Health Canada approval for ORILISSA for endometriosis in July and October 2018, respectively.

In June 2020, AbbVie launched ORIAHNN ® (elagolix, estradiol and norethindrone acetate capsules and elagolix capsules) in the US after receiving FDA approval for ORIAHNN for uterine fibroids in May 2020.

We recognized sales-based royalties on AbbVie net sales of ORILISSA and ORIAHNN of $ 4.5 million and $ 4.7 million for the three months ended March 31, 2021 and 2020, respectively.

Under the terms of the agreement, we are entitled to receive royalties on the future worldwide net sales of any collaboration product and may also be entitled to receive payments of up to $ 366.0 million upon the achievement of certain milestones.

Debt Securities

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:

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 March 31, 2021, aggregated by major security type and contractual maturity:

(in millions) Contractual

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$ 249.6 $ 0.2 $ ( 0.2 ) $ — $ 249.6

The following table summarizes the amortized cost, unrealized gain and loss recognized in accumulated other comprehensive income, and fair value of debt securities available-for-sale at December 31, 2019, 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 December 31, 2020, aggregated by major security type and contractual maturity:

(in millions) Contractual

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Gain Unrealized

Loss Allowance for Credit Losses Fair

Commercial paper Within 1 year $ 82.2 $ — $ — — $ 82.2

Corporate debt securities Within 1 year 299.3 1.4 — — 300.7

Securities of government-sponsored entities Within 1 year 142.3 0.4 — 142.7

Securities of government-sponsored entities

Within 1 year 230.9 0.1 — — 231.0

$ 612.4 $ 1.5 $ — $ — $ 613.9

Corporate debt securities 1 to 2 years $ 144.8 $ 0.4 $ — — $ 145.2

Securities of government-sponsored entities 1 to 2 years 48.8 — — 48.8

Securities of government-sponsored entities

1 to 2 years 81.9 0.1 ( 0.1 ) — 81.9

$ 226.7 $ 0.5 $ ( 0.1 ) $ — $ 227.1

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:

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 March 31, 2021 and December 31, 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

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Value Unrealized

March 31, 2021:

Corporate Debt Securities $ 164.6 $ ( 0.2 ) $ — $ — $ 164.6 $ ( 0.2 )

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).

December 31, 2020:

Securities of government-sponsored entities $ 95.0 $ ( 0.1 ) $ — $ — $ 95.0 $ ( 0.1 )

At March 31, 2021, our security portfolio consisted of 126 securities related to investments in debt securities available-for-sale, of which 39 securities were in an unrealized loss position.

Our investments in corporate debt securities in an unrealized loss position at March 31, 2021 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.

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:

Less Than 12 Months 12 Months or Longer Total

(in millions) Fair

Value Unrealized

Corporate debt securities $ 186.1 $ ( 0.1 ) $ — $ — $ 186.1 $ ( 0.1 )

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.

Accrued interest receivables on debt securities available-for-sale totaled $ 3.2 million and $ 3.7 million at March 31, 2021 and December 31, 2020, respectively.

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

For the purposes of identifying and measuring an impairment, accrued interest is excluded from both the fair value and amortized cost basis of the debt security.

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 three months ended March 31, 2021 or 2020.

Fair Value Measurements

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

We record cash equivalents and investments in debt securities available-for-sale and equity securities at fair value based on a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs).

The fair value hierarchy consists of the following three levels:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Investments in debt securities available-for-sale are classified as Level 2 and carried at fair value.

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.

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.

We validate valuations obtained from third-party pricing services by understanding the models used, obtaining market values from other pricing sources, and analyzing data in certain instances.

The carrying amounts of accounts receivable and accounts payable and accrued liabilities approximate their fair values due to their short-term maturities.

Investments at March 31, 2021, which were measured at fair value on a recurring basis, consisted of the following:

Fair Value Measurements Using

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Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2021 2020

Balance at beginning of period $ 38.2 $ 55.9

Purchases — — — 54.7

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

Unrealized gain (loss) included in earnings 0.7 ( 16.5 )

Balance at end of period $ 38.9 $ 39.4

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 %).

At March 31, 2021, the discount for lack of marketability used in the valuation analysis of equity security investments ranged from 12.0 % to 15.0 % (weighted average of 13.3 %).

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.

Unrealized gains and losses on equity securities are included in other income (expense), net.

Unrealized gains and losses on equity security investments are included in other income (expense), net.

Inventories consisted of the following:

(in millions) September 30,

(in millions) March 31,

2021 December 31, 2020

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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) September 30,

2020 December 31,

The following table presents a reconciliation of cash, cash equivalents and restricted cash to amounts shown in the condensed consolidated statements of cash flows.

(in millions) March 31,

2021 March 31,

Cash and cash equivalents $ 352.6 $ 187.0

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Total cash, cash equivalents and restricted cash $ 355.8 $ 190.2

Operating leases consisted of the following:

Address Type Square Feet Commencement Date Expiration Date

12780 El Camino Real (1)

Office/Laboratory 141,000 August 7, 2019 July 31, 2031

12790 El Camino Real, Suite 130 (1)

Office 2,000 December 1, 2019 July 31, 2031

12790 El Camino Real, Suite 150 (1)

Office 8,000 August 7, 2019 July 31, 2031

12790 El Camino Real, Suite 300 (1)

Office 28,000 December 1, 2019 July 31, 2031

12777 High Bluff Drive Office 45,000 July 1, 2018 July 31, 2029

12790 El Camino Real, Suite 200 (1)

Office 28,000 February 1, 2021 July 31, 2031

12790 El Camino Real, Suite 100 (1)

Office 17,000 February 1, 2021 July 31, 2031

______________

(1) Under the terms of the 12780/12790 El Camino Real master lease, we have two options to extend the term of the lease for a period of ten years each.

We were not reasonably certain to exercise either of these options at lease commencement.

As such, neither option was recognized as part of the associated operating lease right-of-use asset or liability.

We have operating leases for our office and laboratory facilities, including our corporate headquarters, with terms that expire from 2025 through 2031.

We have two options to extend the term of the operating lease for our corporate headquarters for a period of ten years each.

However, as we were not reasonably certain to exercise either of those options at lease commencement, neither option was recognized as part of the associated operating lease right-of-use, or ROU, asset or liability.

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 $ 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.

Our operating lease cost was $ 3.4 million and $ 2.5 million for the three months ended March 31, 2021 and 2020, respectively.

Cash paid for amounts included in the measurement of lease liabilities was $ 2.6 million and $ 2.1 million for the three months ended March 31, 2021 and 2020, respectively.

Our operating leases had a weighted average remaining lease term of 9.8 years at March 31, 2021 and 10.3 years at December 31, 2020, and a weighted average discount rate of 5.3 % at March 31, 2021 and 5.6 % at December 31, 2020.

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

(in millions) September 30,

(in millions) March 31,

Year ending December 31, 2021 (9 months remaining)

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Noncurrent operating lease liabilities $ 107.5

______________

(1) Amounts presented in the table above exclude $ 5.8 million of non-cancelable future minimum lease payments for operating leases that have not yet commenced.

(2) Current operating lease liabilities are included in other current liabilities on the condensed consolidated balance sheets.

Convertible Senior Notes

On May 2, 2017, we completed a private placement of $ 517.5 million in aggregate principal amount of 2.25 % convertible senior notes due 2024 and entered into an indenture agreement, or the 2024 Indenture, with respect to the 2024 Notes.

The 2024 Notes accrue interest at a fixed rate of 2.25 % per year, payable semiannually in arrears on May 15 and November 15 of each year, beginning on November 15, 2017.

The 2024 Notes mature on May 15, 2024.

The net proceeds from the issuance of the 2024 Notes were approximately $ 502.8 million, after deducting commissions and the offering expenses payable by us.

On May 2, 2017, we completed a private placement of $ 517.5 million in aggregate principal amount of 2.25 % convertible senior notes due May 15, 2024, or the 2024 Notes, and entered into an indenture agreement, or the 2024 Indenture, with respect to the 2024 Notes.

In November 2020, we entered into separate, privately negotiated transactions with certain holders of the 2024 Notes to repurchase $ 136.2 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $ 186.9 million in cash.

At March 31, 2021, $ 381.2 million aggregate principal amount of the 2024 Notes remained outstanding.

Interest on the 2024 Notes is due semi-annually on May 15 and November 15 of each year.

Holders of the 2024 Notes may convert the 2024 Notes at any time prior to the close of business on the business day immediately preceding May 15, 2024, only under the following circumstances:

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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 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.

Upon conversion, holders will receive the principal amount of their 2024 Notes and any excess conversion value, calculated based on the per share volume-weighted average price for each of the 30 consecutive trading days during the observation period (as more fully described in the 2024 Indenture).

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The conversion value is the sum of the daily conversion value which is the product of the effective conversion rate divided by 25 days and the daily volume weighted average price, or VWAP, of our common stock.

The “share amount” is the cumulative “daily share amount” during the observation period, which is calculated by dividing the daily VWAP into the difference between the daily conversion value (i.e., conversion rate x daily VWAP) and $ 1,000 .

The “share amount” is the

cumulative “daily share amount” during the observation period, which is calculated by dividing the daily VWAP into the difference between the daily conversion value (i.e., conversion rate x daily VWAP) and $ 1,000 .

The initial conversion rate for the 2024 Notes is 13.1711 shares of common stock per $ 1,000 principal amount, which is equivalent to an initial conversion price of approximately $ 75.92 per share of our common stock.

12 unchanged sentences

The 2024 Notes are our general unsecured obligations that rank senior in right of payment to all of our indebtedness that is expressly subordinated in right of payment to the 2024 Notes, and equal in right of payment to our unsecured indebtedness.

While the 2024 Notes are currently classified as a long-term liability, the future convertibility and associated balance sheet classification will be monitored at each quarterly reporting date and analyzed dependent upon market prices of our common stock during the prescribed measurement periods.

In the event that the holders of the 2024 Notes have the election to convert the 2024 Notes at any time during the prescribed measurement period, the 2024 Notes would then be considered a current obligation and classified as such.

We are not aware of any current events or market conditions that would allow holders of the 2024 Notes to convert the 2024 Notes.

We are required to separately account for the liability and equity components of the 2024 Notes as they may be settled entirely or partially in cash upon conversion in a manner that reflects our economic interest cost.

4 unchanged sentences

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

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

At March 31, 2021, the remaining period over which the discount on the liability component will be amortized was approximately 3.1 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) September 30,

(in millions) March 31,

2021 December 31,

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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 $ 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:

The fair value of the 2024 Notes, which was estimated utilizing market quotations from an over-the-counter trading market (Level 2), was $ 511.3 million at March 31, 2021 and $ 514.3 million at December 31, 2020.

Net Income Per Share

Net income per share was calculated as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions, except per share data) 2021 2020

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

Net income - basic and diluted $ 32.1 $ 37.4

Weighted-average common shares outstanding:

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Diluted 98.2 97.0

Net (loss) income per share:

Net income per share:

Basic $ 0.34 $ 0.40

3 unchanged sentences

As a result, of the approximately 5.0 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 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.

Shares which have been excluded from diluted per share amounts because their effect would have been anti-dilutive were 2.7 million and 3.3 million for the three months ended March 31, 2021 and 2020, 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