What changed in this filing

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Item 1. Financial Statements

2021-08-03 compared with 2021-05-05 · 109 added, 71 removed, 356 unchanged (34% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

2021 December 31,

1 unchanged sentence

Cash and cash equivalents $ 368.0 $ 187.1

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)

Debt securities available-for-sale, at fair value (amortized cost $ 516.3 million at June 30, 2021 and $ 612.4 million at December 31, 2020)

Accounts receivable 158.5 157.1

3 unchanged sentences

Deferred tax assets 316.1 319.4

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)

Debt securities available-for-sale, at fair value (amortized cost $ 337.9 million at June 30, 2021 and $ 226.7 million at December 31, 2020)

Right-of-use assets 100.3 82.8

1 unchanged sentence

Property and equipment, net 50.0 44.6

Restricted cash 3.2 3.2

Other long-term assets 1.4 3.2

Other assets 3.2 6.4

Total assets $ 1,956.4 $ 1,734.7

11 unchanged sentences

5.0 shares authorized;

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

no shares issued and outstanding at June 30, 2021 and December 31, 2020

Common stock, $ 0.001 par value;

220.0 shares authorized;

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

issued and outstanding shares were 94.6 at June 30, 2021 and 93.5 at December 31, 2020

Additional paid-in capital 1,929.4 1,849.7

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in millions, except per share data) 2021 2020 2021 2020

5 unchanged sentences

Research and development 74.8 80.9 148.0 139.2

Acquired in-process research and development 5.0 46.0 5.0 46.0

Selling, general and administrative 143.2 96.5 272.2 214.3

3 unchanged sentences

Interest expense ( 6.2 ) ( 8.3 ) ( 12.6 ) ( 16.5 )

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

Unrealized gain (loss) on equity securities — 11.3 0.7 ( 5.2 )

Investment income and other, net 0.9 3.6 2.3 8.3

Total other expense, net ( 4.3 ) ( 20.0 )

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

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

Total other (expense) income, net ( 5.3 ) 6.6 ( 9.6 ) ( 13.4 )

Income before provision for income taxes 57.5 83.2 84.7 122.1

Provision for income taxes 15.2 3.6 10.3 5.1

Net income 42.3 79.6 74.4 117.0

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

Unrealized (loss) gain on debt securities available-for-sale, net of tax ( 0.3 ) 6.0 ( 1.1 ) 3.2

Comprehensive income $ 42.0 $ 85.6 $ 73.3 $ 120.2

9 unchanged sentences

(in millions) Shares $ Total

Balances at December 31, 2020

Balances at March 31, 2021

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

3 unchanged sentences

Issuances of common stock under stock plans 0.1 — 3.0 — — 3.0

Balances at June 30, 2021

94.6 $ 0.1 $ 1,929.4 $ 0.7 $ ( 651.0 ) $ 1,279.2

Balances at March 31, 2020

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

Balances at December 31, 2019

Net income — — — — 79.6 79.6

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

Share-based compensation expense — — 29.5 — — 29.5

Issuances of common stock under stock plans 0.4 — 15.8 — — 15.8

Balances at June 30, 2020

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

Balance at December 31, 2020

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

Net income — — — — 74.4 74.4

2 unchanged sentences

Issuances of common stock under stock plans 1.1 — 18.2 — — 18.2

Balances at March 31, 2020

Balances at June 30, 2021

94.6 $ 0.1 $ 1,929.4 $ 0.7 $ ( 651.0 ) $ 1,279.2

Balance at December 31, 2019

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

Net income — — — — 117.0 117.0

Unrealized gain on debt securities available-for-sale, net of tax — — — 3.2 — 3.2

Share-based compensation expense — — 52.3 — — 52.3

Issuances of common stock under stock plans 0.9 — 21.8 — — 21.8

Balance at June 30, 2020

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

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(in millions) 2021 2020

19 unchanged sentences

Purchases of property and equipment ( 8.8 ) ( 6.0 )

Net cash provided by investing activities 63.1 33.2

Net cash (used in) provided by investing activities ( 27.7 ) 126.6

Cash Flows from Financing Activities:

8 unchanged sentences

Right-of-use assets acquired through operating leases $ 21.6 $ —

Cash paid for interest $ 4.3 $ 5.8

Cash paid for income taxes $ 1.6 $ —

See accompanying notes to the condensed consolidated financial statements.

19 unchanged sentences

The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for any other interim period or the full year.

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.

The condensed consolidated balance sheet as of 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 2020 Form 10-K.

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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.

Specifically, Takeda granted us an exclusive license to (i) luvadaxistat (NBI-1065844/TAK-831) which we are studying in cognitive impairment associated with schizophrenia, (ii) NBI-1065845 (TAK-653) which we are studying in inadequate response to treatment in major depressive disorder, (iii) NBI-1065846 (TAK-041) which we are studying in anhedonia in depression and (iv) four non-clinical stage assets.

With respect to luvadaxistat, Takeda declined to opt-in to a profit-sharing arrangement and instead will be entitled to receive royalties on the future net sales of such asset (in lieu of equally sharing in the operating profits and losses).

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).

11 unchanged sentences

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.

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

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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.

ONGENTYS net product sales were $ 2.0 million and $ 3.4 million for the three and six months ended June 30, 2021, respectively.

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.

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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.

The MTPC submission of valbenazine triggered a milestone payment of $ 15.0 million, which we recognized as collaboration revenue in the second quarter of 2021.

We are currently conducting the KINECT-HD study, a placebo-controlled Phase III study of valbenazine in adult Huntington’s disease patients with chorea.

In connection with the ongoing study, we recognized collaboration revenue of $ 1.3 million and $ 2.4 million for the three and six months ended June 30, 2021, respectively, and $ 1.3 million for the six months ended June 30, 2020.

At June 30, 2021, $ 4.4 million of revenue is being deferred in connection with our continuing performance obligations under the collaboration and will be recognized as collaboration revenue over the remaining study period using an input method according to costs incurred to-date relative to estimated total costs associated with the study.

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 potential future payments of up to $ 55.0 million upon the achievement of certain milestones.

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.

AbbVie launched 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.

We recognized sales-based royalties on AbbVie net sales of ORILISSA and ORIAHNN of $ 5.9 million and $ 10.4 million for the three and six months ended June 30, 2021, respectively, and $ 4.8 million and $ 9.5 million for the three and six months ended June 30, 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 potential future 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 March 31, 2021, 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 June 30, 2021, aggregated by major security type and contractual maturity:

(in millions) Contractual

27 unchanged sentences

$ 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 March 31, 2021 and December 31, 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 June 30, 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

3 unchanged sentences

Value Unrealized

March 31, 2021:

June 30, 2021:

Corporate Debt Securities $ 211.0 $ ( 0.2 ) $ — $ — $ 211.0 $ ( 0.2 )

Securities of government-sponsored entities 34.5 ( 0.1 ) — — 34.5 ( 0.1 )

$ 245.5 $ ( 0.3 ) $ — $ — $ 245.5 $ ( 0.3 )

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).

At June 30, 2021, our security portfolio consisted of 142 securities related to investments in debt securities available-for-sale, of which 56 securities were in an unrealized loss position.

Our investments in corporate debt securities in an unrealized loss position at June 30, 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.

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.

Accrued interest receivables on debt securities available-for-sale totaled $ 2.7 million and $ 3.7 million at June 30, 2021 and December 31, 2020, respectively.

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 three months ended March 31, 2021 or 2020.

No accrued interest receivables were written off during the six months ended June 30, 2021 or 2020.

Fair Value Measurements

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.

3 unchanged sentences

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:

Investments at June 30, 2021, 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

(in millions) 2021 2020 2021 2020

2 unchanged sentences

Balance at end of period $ 38.9 $ 50.7 $ 38.9 $ 50.7

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 %).

At June 30, 2021, the discount for lack of marketability used in the valuation analysis of equity security investments ranged from 9.0 % to 13.0 % (weighted average of 10.5 %).

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

2 unchanged sentences

Inventories consisted of the following:

(in millions) March 31,

(in millions) June 30,

2021 December 31, 2020

5 unchanged sentences

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,

(in millions) June 30,

2021 June 30,

Cash and cash equivalents $ 368.0 $ 415.1

Restricted cash 3.2 3.2

Restricted cash included in other assets 3.2 3.2

Total cash, cash equivalents and restricted cash $ 371.2 $ 418.3

We have operating leases for our office and laboratory facilities, including our corporate headquarters, with terms that expire from 2024 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 $ 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) March 31,

Certain of these lease agreements contain clauses for renewal at our option.

As we were not reasonably certain to exercise any of these renewal options at commencement of the associated leases, no such options were recognized as part of our operating lease right-of-use, or ROU, assets or operating lease liabilities.

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

The following table presents supplemental operating lease information.

Six Months Ended

(in millions, except weighted average data) 2021 2020

Operating lease cost $ 7.3 $ 5.0

Cash paid for amounts included in the measurement of operating lease liabilities $ 5.5 $ 4.3

2021 June 30,

Weighted average remaining lease term

9.2 years 11.0 years

Weighted average discount rate 5.3 % 5.8 %

The following table presents approximate future minimum lease payments under operating leases.

(in millions) June 30,

Year ending December 31, 2021 (6 months remaining)

7 unchanged sentences

Total operating lease liabilities 124.0

Less current operating lease liabilities 12.2

Less current operating lease liabilities included in other current liabilities 15.0

Noncurrent operating lease liabilities $ 109.0

(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

1 unchanged sentence

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.

At June 30, 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.

Pursuant to the terms of the 2024 notes, we could not redeem the 2024 Notes prior to May 15, 2021.

On or after May 15, 2021, we may redeem for cash all or part of the 2024 Notes if the last reported sale price (as defined in the 2024 Indenture) of our common stock has been at least 130 % of the conversion price then in effect (equal to $ 98.70 as of June 30, 2021) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending on, and including, the trading day immediately before the date which we provide notice of redemption.

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:

(i) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130 % of the conversion price on each applicable trading day;

(ii) during the five business-day period immediately after any five consecutive trading-day period (the measurement period) in which the trading price (as defined in the 2024 Indenture) per $ 1,000 principal amount of the 2024 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate on each such trading day;

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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.

5 unchanged sentences

In the event that all of the 2024 Notes are converted, we would be required to repay the $ 381.2 million in principal value and any conversion premium in any combination of cash and shares of our common stock, at our option.

We may not redeem the 2024 Notes prior to May 15, 2021.

On or after May 15, 2021, we may redeem for cash all or part of the 2024 Notes if the last reported sale price (as defined in the 2024 Indenture) of our common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending on, and including, the trading day immediately before the date which we provide notice of redemption.

The redemption price will equal the sum of (i) 100 % of the principal amount of the 2024 Notes being redeemed, plus (ii) accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date.

No sinking fund is provided for the 2024 Notes.

If we undergo a fundamental change, as defined in the 2024 Indenture, subject to certain conditions, holders of the 2024 Notes may require us to repurchase for cash all or part of their 2024 Notes at a repurchase price equal to 100 % of the principal amount of the 2024 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

2 unchanged sentences

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.

In the event that we have the election to redeem the 2024 Notes or 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 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 March 31, 2021, the remaining period over which the discount on the liability component will be amortized was approximately 3.1 years.

At June 30, 2021, the remaining period over which the discount on the liability component will be amortized was approximately 2.9 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.

3 unchanged sentences

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

(in millions) March 31,

(in millions) June 30,

2021 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 $ 511.3 million at March 31, 2021 and $ 514.3 million at December 31, 2020.

The fair value of the 2024 Notes, which was estimated utilizing market quotations from an over-the-counter trading market (Level 2), was $ 506.6 million at June 30, 2021 and $ 514.3 million at December 31, 2020.

Net Income Per Share

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

(in millions, except per share data) 2021 2020 2021 2020

10 unchanged sentences

Diluted $ 0.43 $ 0.81 $ 0.76 $ 1.20

Shares excluded from diluted per share amounts because their effect would have been anti-dilutive 4.7 2.2 3.7 1.4

Convertible debt instruments that may be settled entirely or partly in cash (such as the 2024 Notes) may, in certain circumstances where the borrower has the ability and intent to settle in cash, be accounted for under the treasury stock method.

1 unchanged sentence

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 2.7 million and 3.3 million for the three months ended March 31, 2021 and 2020, respectively.

Legal Proceedings

In the second quarter of 2021, we received notices from (i) Teva Pharmaceuticals Development, Inc., (ii) Lupin Limited, (iii) Crystal Pharmaceutical (Suzhou) Co.

Ltd., and (iv) Zydus Pharmaceuticals (USA) Inc.

(each an “ANDA Filer”) that each company had filed an abbreviated new drug application, or ANDA, with the FDA seeking approval of a generic version of INGREZZA.

The ANDAs each contained a Paragraph IV Patent Certification alleging that certain of our patents covering INGREZZA are invalid and/or will not be infringed by each ANDA Filer’s manufacture, use or sale of the medicine for which the ANDA was submitted.

We filed suit in the U.S.

District Court for the District of Delaware in July 2021 against (i) Teva Pharmaceuticals, Inc.

and its affiliates Teva Pharmaceuticals Development, Inc., Teva Pharmaceuticals USA, Inc.

and Teva Pharmaceutical Industries Ltd., (ii) Lupin Limited and its affiliates Lupin Pharmaceuticals, Inc., and Lupin Atlantis Holdings S.A., (iii) Crystal Pharmaceutical (Suzhou) Co., Ltd., and its affiliate Crystal Pharmatech Co., Ltd., and (iv) Zydus Pharmaceuticals (USA) Inc.

and its affiliates Zydus Worldwide DMCC, Cadila Healthcare Limited d/b/a Zydus Cadila and Zydus Healthcare (USA) LLC.

We also filed suit in the U.S.

District Court for the District of New Jersey in July 2021 against

Zydus Pharmaceuticals (USA) Inc.

and its affiliates Zydus Worldwide DMCC, Cadila Healthcare Limited d/b/a Zydus Cadila and Zydus Healthcare (USA) LLC seeking to prevent any ANDA Filer from selling a generic version of INGREZZA.

From time to time, we may also become subject to other legal proceedings or claims arising in the ordinary course of our business.

We currently believe that none of the claims or actions pending against us is likely to have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.

Given the unpredictability inherent in litigation, however, we cannot predict the outcome of these matters.

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