What changed in this filing

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Item 1. Financial Statements

2021-11-01 compared with 2021-08-03 · 132 added, 146 removed, 319 unchanged (47% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

2021 December 31,

1 unchanged sentence

Cash and cash equivalents $ 311.1 $ 187.1

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)

Debt securities available-for-sale, at fair value (amortized cost $ 454.6 million at September 30, 2021 and $ 612.4 million at December 31, 2020)

Accounts receivable 163.8 157.1

3 unchanged sentences

Deferred tax assets 310.4 319.4

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)

Debt securities available-for-sale, at fair value (amortized cost $ 513.8 million at September 30, 2021 and $ 226.7 million at December 31, 2020)

Right-of-use assets 97.9 82.8

15 unchanged sentences

5.0 shares authorized;

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

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

Common stock, $ 0.001 par value;

220.0 shares authorized;

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

issued and outstanding shares were 94.8 at September 30, 2021 and 93.5 at December 31, 2020

Additional paid-in capital 1,974.0 1,849.7

5 unchanged sentences

NEUROCRINE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

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

Product sales, net $ 266.8 $ 267.6 $ 497.8 $ 498.7

Collaboration revenue 22.1 34.8 27.7 40.8

Net product sales $ 288.8 $ 254.1 $ 786.6 $ 752.8

Collaboration revenues 7.2 4.4 34.9 45.2

Total revenues 296.0 258.5 821.5 798.0

5 unchanged sentences

Total operating expenses 251.5 302.8 682.7 706.8

Operating income 62.8 76.6 94.3 135.5

Operating income (loss) 44.5 ( 44.3 ) 138.8 91.2

Other (expense) income:

Interest expense ( 6.6 ) ( 8.5 ) ( 19.2 ) ( 25.0 )

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

Unrealized loss on equity securities ( 8.2 ) ( 7.0 ) ( 7.5 ) ( 12.2 )

Investment income and other, net 0.8 2.7 3.1 11.0

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

Total other expense, net ( 14.0 ) ( 12.8 ) ( 23.6 ) ( 26.2 )

Income (loss) before provision for income taxes 30.5 ( 57.1 ) 115.2 65.0

Provision for income taxes 8.0 0.5 18.3 5.6

Net income 42.3 79.6 74.4 117.0

Net income (loss) 22.5 ( 57.6 ) 96.9 59.4

Unrealized (loss) gain on debt securities available-for-sale, net of tax ( 0.3 ) ( 1.4 ) ( 1.4 ) 1.8

Comprehensive income $ 42.0 $ 85.6 $ 73.3 $ 120.2

Net income per share, basic $ 0.45 $ 0.86 $ 0.79 $ 1.26

Net income per share, diluted $ 0.43 $ 0.81 $ 0.76 $ 1.20

Comprehensive income (loss) $ 22.2 $ ( 59.0 ) $ 95.5 $ 61.2

Net income (loss) per share, basic $ 0.24 $ ( 0.62 ) $ 1.03 $ 0.64

Net income (loss) per share, diluted $ 0.23 $ ( 0.62 ) $ 0.99 $ 0.61

Weighted average common shares outstanding, basic 94.7 93.3 94.5 93.0

6 unchanged sentences

(in millions) Shares $ Total

Balances at March 31, 2021

Balances at June 30, 2021

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

3 unchanged sentences

Issuances of common stock under stock plans 0.2 — 7.5 — — 7.5

Balances at June 30, 2021

Balances at September 30, 2021

94.8 $ 0.1 $ 1,974.0 $ 0.4 $ ( 628.5 ) $ 1,346.0

Balances at March 31, 2020

Balances at June 30, 2020

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

Net income — — — — 79.6 79.6

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

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

Issuances of common stock under stock plans 0.2 — 5.4 — — 5.4

Balances at June 30, 2020

Balances at September 30, 2020

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

5 unchanged sentences

Issuances of common stock under stock plans 1.3 — 25.7 — — 25.7

Balances at June 30, 2021

Balances at September 30, 2021

94.8 $ 0.1 $ 1,974.0 $ 0.4 $ ( 628.5 ) $ 1,346.0

5 unchanged sentences

Issuances of common stock under stock plans 1.1 — 27.2 — — 27.2

Balance at June 30, 2020

Balance at September 30, 2020

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(in millions) 2021 2020

18 unchanged sentences

Sales and maturities of debt securities available-for-sale 523.9 557.4

Purchases of equity securities ( 4.6 ) —

Purchases of property and equipment ( 14.5 ) ( 6.4 )

46 unchanged sentences

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.

Among other changes, ASU 2020-06 removes the separation models for convertible instruments with cash or beneficial conversion features.

Instead, entities will account for convertible debt instruments wholly as debt, unless certain other conditions are met.

The adoption of ASU 2020-06 is expected to prospectively reduce reported interest expense and increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to liabilities as it relates to the 2.25% convertible senior notes due May 15, 2024, or the 2024 Notes.

Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per

share, or EPS, which is expected to result in more dilutive EPS results.

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

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.

Takeda Pharmaceutical Company Limited, or Takeda.

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 (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.

Under the terms of the agreement, Takeda may be entitled to receive potential future 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.

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).

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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.

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 (XEN901) and three preclinical candidates.

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.

Idorsia Pharmaceuticals Ltd., or Idorsia.

In May 2020, we entered a collaboration and licensing agreement with 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 potential future 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., or Xenon.

In December 2019, we entered into a license and collaboration agreement with Xenon to identify, research, and develop sodium channel inhibitors, including clinical candidate NBI-921352 (XEN901) and three preclinical candidates.

Under the terms of the agreement, Xenon may be entitled to receive potential future 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.

In September 2021, we received approval of a clinical trial application, or CTA, submitted in the European Union for NBI-921352 for the treatment of focal-onset seizures in adults.

In connection with the approval of the CTA for NBI-921352, we paid Xenon a regulatory milestone of $ 10.0 million, of which we expensed $ 4.5 million as research and development in the third quarter of 2021, and purchased 0.3 million shares of Xenon’s common stock (at $ 19.9755 per share) for $ 5.5 million.

The purchased shares were recorded at a fair value of $ 4.6 million after considering Xenon’s stock price on the measurement date and certain transfer restrictions applicable to the shares.

Further, we recorded a charge of $ 0.9 million to research and development to reflect the premium paid on our purchase of the shares on the measurement date.

Voyager Therapeutics, Inc., or Voyager.

We entered into a collaboration and license agreement with 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.

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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.

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

Under the terms of the agreement, Voyager may be entitled to receive potential future 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., or BIAL.

In February 2017, we entered into an exclusive license agreement with BIAL to acquire the United States, or US, and Canada rights to ONGENTYS ® (opicapone).

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

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.

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

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.

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.

Mitsubishi Tanabe Pharma Corporation, or MTPC.

In March 2015, we entered into a collaboration and license agreement with MTPC for the development and commercialization of INGREZZA ® (valbenazine) for movement disorders in Japan and other select Asian markets.

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 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 $ 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.

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.

The MTPC submission of the MAA for valbenazine triggered a milestone payment of $ 15.0 million, which we recognized as milestone 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 disease patients with chorea.

In connection with our performance of the study, we recognized non-cash collaboration revenue of $ 0.9 million and $ 3.3 million, respectively, in the three and nine months ended September 30, 2021, and $ 0.5 million and $ 1.8 million, respectively, in the three and nine months ended September 30, 2020.

As of September 30, 2021, $ 3.5 million of revenue is being deferred in connection with our continuing performance obligations under the collaboration and will be recognized as non-cash 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.

AbbVie Inc., or AbbVie.

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.

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.

AbbVie launched ORILISSA ® (elagolix tablets) in the US and Canada in August and November 2018, respectively.

In June 2020, AbbVie launched ORIAHNN ® (elagolix, estradiol and norethindrone acetate capsules and elagolix capsules) in the US.

We receive royalties at tiered percentage rates on AbbVie net sales of elagolix.

We recognized elagolix royalty revenue of $ 5.9 million and $ 16.3 million, respectively, in the three and nine months ended September 30, 2021, and $ 3.9 million and $ 13.4 million, respectively, in the three and nine months ended September 30, 2020.

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 June 30, 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), and fair value of debt securities available-for-sale, aggregated by major security type and contractual maturity.

September 30,

2021 December 31,

(in millions) Contractual

Maturity Amortized

Cost Unrealized

Gain Unrealized

Loss Allowance for Credit Losses Fair

Commercial paper Within 1 year $ 168.6 $ — $ — $ — $ 168.6

Corporate debt securities Within 1 year 212.0 0.5 — — 212.5

Securities of government-sponsored entities

Within 1 year 135.7 0.1 — — 135.8

$ 516.3 $ 0.6 $ — $ — $ 516.9

Unrealized Gain

Unrealized Loss Fair

Value Amortized

Cost Unrealized Gain Unrealized Loss Fair

Commercial paper 0 to 1 years $ 208.6 $ — $ — $ 208.6 $ 82.2 $ — $ — $ 82.2

Corporate debt securities 0 to 1 years 170.6 0.2 — 170.8 299.3 1.4 — 300.7

Securities of government-sponsored entities

1 to 2 years 107.6 0.1 ( 0.1 ) — 107.6

$ 337.9 $ 0.2 $ ( 0.3 ) $ — $ 337.8

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

Maturity Amortized

Cost Unrealized

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 230.9 0.1 — — 231.0

Securities of government-sponsored entities 0 to 1 years 75.4 — — 75.4 230.9 0.1 — 231.0

$ 454.6 $ 0.2 $ — $ 454.8 $ 612.4 $ 1.5 $ — $ 613.9

Corporate debt securities 1 to 2 years $ 328.6 $ 0.2 $ ( 0.3 ) $ 328.5 $ 144.8 $ 0.4 $ — $ 145.2

Securities of government-sponsored entities

1 to 2 years 81.9 0.1 ( 0.1 ) — 81.9

Securities of government-sponsored entities 1 to 2 years 185.2 0.1 ( 0.1 ) 185.2 81.9 0.1 ( 0.1 ) 81.9

$ 513.8 $ 0.3 $ ( 0.4 ) $ 513.7 $ 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 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

As of September 30, 2021, our security portfolio consisted of 160 securities related to investments in debt securities available-for-sale, of which 82 securities were in an unrealized loss position.

Our investments in corporate debt securities in an unrealized loss position as of September 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.

We did not recognize an allowance for credit losses as of September 30, 2021 or December 31, 2020.

The following table summarizes debt securities available-for-sale in an unrealized loss position for less than 12 months, aggregated by major security type.

There were no debt securities available-for-sale in an unrealized loss position for longer than 12 months as of September 30, 2021 or December 31, 2020.

September 30,

2021 December 31,

(in millions) Fair

1 unchanged sentence

Value Unrealized

June 30, 2021:

Corporate Debt Securities $ 298.5 $ ( 0.3 ) $ — $ —

1 unchanged sentence

$ 405.8 $ ( 0.4 ) $ 95.0 $ ( 0.1 )

December 31, 2020:

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

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 $ 2.7 million and $ 3.7 million at June 30, 2021 and December 31, 2020, respectively.

Accrued interest receivables on debt securities available-for-sale totaled $ 2.8 million and $ 3.7 million as of September 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 six months ended June 30, 2021 or 2020.

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

Fair Value Measurements

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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.

Investments in equity securities of certain companies that are subject to certain holding period restrictions 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.

Investments at June 30, 2021, which were measured at fair value on a recurring basis, consisted of the following:

Fair Value Measurements Using

(in millions) Fair Value Level 1 Level 2 Level 3

Cash and cash equivalents:

Cash and money market funds $ 368.0 $ 368.0 $ — $ —

Total cash and cash equivalents 368.0 368.0 — —

Restricted cash:

Certificates of deposit 3.2 3.2 — —

Total restricted cash 3.2 3.2 — —

Debt securities available-for-sale:

Commercial paper 168.6 — 168.6 —

Corporate debt securities 442.7 — 442.7 —

Securities of government-sponsored entities 243.4 — 243.4 —

Total debt securities available-for-sale 854.7 — 854.7 —

Equity securities:

Equity securities–biotechnology industry 38.9 — — 38.9

Total equity securities 38.9 — — 38.9

Total recurring fair value measurements $ 1,264.8 $ 371.2 $ 854.7 $ 38.9

Investments at December 31, 2020, which were measured at fair value on a recurring basis, consisted of the following:

Fair Value Measurements Using

(in millions) Fair Value Level 1 Level 2 Level 3

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

September 30,

2021 December 31,

Value Fair Value Measurements Using Fair

Value Fair Value Measurements Using

(in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

Cash and cash equivalents:

Cash and money market funds $ 311.1 $ 311.1 $ — $ — $ 187.1 $ 187.1 $ — $ —

Total cash and cash equivalents 187.1 187.1 — —

Restricted cash:

Certificates of deposit 3.2 3.2 — — 3.2 3.2 — —

Total restricted cash 3.2 3.2 — —

Debt securities available-for-sale:

2 unchanged sentences

Securities of government-sponsored entities 260.6 — 260.6 — 312.9 — 312.9 —

Total debt securities available-for-sale 841.0 — 841.0 —

Equity securities:

Equity securities–biotechnology industry 35.3 — — 35.3 38.2 — — 38.2

Total equity securities 38.2 — — 38.2

Total recurring fair value measurements $ 1,069.5 $ 190.3 $ 841.0 $ 38.2

$ 1,318.1 $ 314.3 $ 968.5 $ 35.3 $ 1,069.5 $ 190.3 $ 841.0 $ 38.2

The following table presents a reconciliation of equity security investments, which were measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2021 2020 2021 2020

Balance at beginning of period $ 38.9 $ 50.7 $ 38.2 $ 55.9

Unrealized gain (loss) included in earnings — 11.3 0.7 ( 5.2 )

Purchases (1)

Unrealized loss included in earnings ( 8.2 ) ( 7.0 ) ( 7.5 ) ( 12.2 )

Balance at end of period $ 35.3 $ 43.7 $ 35.3 $ 43.7

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 %).

_________________________

(1) In September 2021, we purchased 0.3 million shares of Xenon's common stock, valued at $ 4.6 million on the date of purchase, in connection with the approval of the CTA for NBI-921352.

As of September 30, 2021, the discount for lack of marketability used in the valuation analysis of equity security investments ranged from 2.5 % to 7.5 % (weighted average of 3.9 %).

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) June 30,

(in millions) September 30,

2021 December 31,

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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) June 30,

2021 June 30,

(in millions) September 30,

2021 September 30,

Cash and cash equivalents $ 311.1 $ 425.3

6 unchanged sentences

The following table presents supplemental operating lease information.

Six Months Ended

Nine Months Ended

September 30,

(in millions, except weighted average data) 2021 2020

1 unchanged sentence

Cash paid for amounts included in the measurement of operating lease liabilities $ 9.1 $ 6.4

2021 June 30,

September 30,

2021 September 30,

Weighted average remaining lease term

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

(in millions) June 30,

(in millions) September 30,

Year ending December 31, 2021 (3 months remaining)

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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 May 15, 2024 , or the 2024 Notes, and entered into an indenture agreement, or the 2024 Indenture, with respect to the 2024 Notes.

On May 2, 2017, we completed a private placement of $ 517.5 million in aggregate principal amount of 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 June 30, 2021, $ 381.2 million aggregate principal amount of the 2024 Notes remained outstanding.

At September 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.

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 September 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 (equal to $ 98.70 as of June 30, 2021) 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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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.

The liability component of the instrument was valued in a manner that reflects the market interest rate for a similar nonconvertible instrument at the date of issuance.

The liability component of the instrument was valued in a manner that reflects the market interest rate for a similar nonconvertible instrument at the date

The initial carrying value of the liability component of $ 368.3 million was calculated using a 7.5 % assumed borrowing rate.

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

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

At September 30, 2021, the remaining period over which the discount on the liability component will be amortized was approximately 2.6 years.

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

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

(in millions) June 30,

(in millions) September 30,

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 $ 506.6 million at June 30, 2021 and $ 514.3 million at December 31, 2020.

Net Income Per Share

Net 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 $ 497.7 million at September 30, 2021 and $ 514.3 million at December 31, 2020.

Net Income (Loss) Per Share

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

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

Net income - basic and diluted $ 42.3 $ 79.6 $ 74.4 $ 117.0

Net income (loss) - basic and diluted $ 22.5 $ ( 57.6 ) $ 96.9 $ 59.4

Weighted-average common shares outstanding:

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Restricted stock (1)

0.2 — 0.3 0.5

2024 Notes (2)

1.0 — 1.1 2.0

Diluted 97.7 93.3 97.9 98.0

Net income per share:

Net income (loss) per share:

Basic $ 0.24 $ ( 0.62 ) $ 1.03 $ 0.64

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Shares excluded from diluted per share amounts because their effect would have been anti-dilutive 4.5 10.9 4.0 2.3

_________________________

(1) In August 2021, our board of directors approved an equity grant in the form of restricted stock units, or RSUs, to our full-time employees other than our executive officers, consisting of approximately 0.5 million RSUs, which will vest over a period of two years .

(2) 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.

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We also filed suit in the U.S.

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

Zydus Pharmaceuticals (USA) Inc.

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