What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-11-01 compared with 2021-08-03 · 71 added, 80 removed, 656 unchanged (19% of the section changed)

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*We may not be able to continue to successfully commercialize INGREZZA, ONGENTYS, or any of our product candidates if they are approved in the future.

Our ability to produce INGREZZA revenues consistent with expectations ultimately depends on our ability to successfully commercialize INGREZZA and secure adequate third-party reimbursement.

Our ability to produce INGREZZA revenues consistent with expectations ultimately depends on our ability to continue to successfully commercialize INGREZZA and secure adequate third-party reimbursement.

Our experience in marketing and selling pharmaceutical products began with INGREZZA’s approval in 2017, when we hired our sales force and established our distribution and reimbursement capabilities, all of which are necessary to successfully commercialize our current and future products.

We have continued to invest in our commercial infrastructure and distribution capabilities in the past four years, including our sales force expansion in late 2018.

We have continued to invest in our commercial infrastructure and distribution capabilities in the past four years, including our announced sales force expansion in late 2021 and early 2022.

While our team members and consultants have experience marketing and selling pharmaceutical products, we may face difficulties related to managing the rapid growth of our personnel and infrastructure, and there can be no guarantee that we will be able to maintain the personnel, systems, arrangements and capabilities necessary to continue to successfully commercialize INGREZZA, or to successfully commercialize ONGENTYS or any product candidate approved by the FDA in the future.

In addition, our business has been and may continue to be adversely affected by the effects of health pandemics or epidemics, including the ongoing COVID-19 pandemic.

Some hospitals, community mental health facilities, and other healthcare facilities have implemented policies that limit access of our sales representatives, medical affairs personnel, and patients to such facilities.

However, we anticipate these policies may change from time to time as communities or regions grapple with local or regional outbreaks.

In parts of the country where the pandemic is having a greater impact, some hospitals, community mental health facilities, and other healthcare facilities continue to have policies that limit access of our sales representatives, medical affairs personnel, and patients to such facilities.

These policies are likely to change from time to time as communities or regions grapple with local or regional outbreaks.

In addition, many health care practitioners have adopted telehealth for patient interactions, which may impact the ability of the health care practitioner to diagnose tardive dyskinesia.

Further, during the COVID-19 pandemic, the use of physician telehealth services increased, fueled in part by an expansion of coverage and reimbursement from government and other payors.

The limitations that telehealth places on the ability to conduct a thorough physical

examination may impact the ability of providers to screen for movement disorders, leading potentially fewer patients to be diagnosed and referred for treatment.

The limitations that telehealth places on the

ability to conduct a thorough physical examination may impact the ability of providers to screen for movement disorders, leading potentially fewer patients to be diagnosed and referred for treatment.

The ultimate impact of the COVID-19 pandemic, including any lasting effects on the way we conduct our business, is highly uncertain and subject to change.

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The market acceptance of INGREZZA or ONGENTYS could be affected by a number of factors, including:

• the timing of receipt of marketing approvals for indications;

• the timing of receipt of marketing approvals for additional indications;

• the safety and efficacy of the products;

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Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution.

Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable

coverage policies and reimbursement rates may be implemented in the future.

In addition, gene therapy treatments, which we are developing pursuant to our collaboration and license agreement with Voyager, face additional uncertainty related to pricing and reimbursement.

As an example, there are a limited number of gene therapy products currently approved for coverage and reimbursement by the Centers for Medicare & Medicaid Services, or CMS.

Even if favorable coverage

and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize INGREZZA, ONGENTYS or any other product candidate for which we obtain marketing approval.

Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

Further, during the early months of the COVID-19 pandemic, the use of physician telehealth services rapidly increased, fueled by an unprecedented expansion of coverage and reimbursement across insurers.

The limitations that telehealth places on the ability to conduct a thorough physical examination may impact the ability of providers to screen for movement disorders, leading potentially fewer patients to be diagnosed and referred for treatment.

Further, during the COVID-19 pandemic, the use of physician telehealth services has rapidly increased, fueled by an unprecedented expansion of coverage and reimbursement across insurers.

*Our business could be adversely affected by the effects of health pandemics or epidemics, including the COVID-19 pandemic, in regions where we or third parties on which we rely have significant sales and marketing efforts or manufacturing facilities, concentrations of clinical trial sites or other business operations, or materially affect our operations, and at our clinical trial sites, as well as the business or operations of our manufacturers, CROs or other third parties with whom we conduct business.

Our business could be adversely affected by the effects of health pandemics or epidemics in regions where we have concentrations of clinical trial sites or other business operations, and could cause significant disruption in the operations of third-party manufacturers and CROs upon whom we rely.

Our business could be adversely affected by the effects of health pandemics or epidemics in regions where we have customers and/or patients, clinical trial sites or other business operations, and could cause significant disruption in the operations of third-party manufacturers and CROs upon whom we rely.

As a result of the ongoing COVID-19 pandemic, we may experience disruptions that could severely impact our supply chain, ongoing and future clinical trials and commercialization of INGREZZA and ONGENTYS.

For example, the COVID-19 pandemic has resulted in increased travel restrictions and the shutdown or delay of business activities in various regions.

In response the COVID-19 pandemic, we implemented a remote work model in early March 2020 for all employees except certain key essential members involved in business-critical activities.

We have implemented plans to enable our employees to return to work in our corporate offices and the field, which plans take into account applicable public health authority and local government guidelines and which are designed to ensure community and employee safety.

The effects of our remote work model may negatively impact productivity, disrupt our business and delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.

For example, the COVID-19 pandemic has resulted in travel restrictions and the shutdown or delay of business activities in various regions.

In response to the COVID-19 pandemic, we implemented a remote work model for all employees except certain key essential members involved in business-critical activities.

Most of our field-based employees have resumed in-person interactions, and certain of our office-based employees began to return to the office, in each case on a voluntary basis and in accordance with location-specific guidance.

We are planning for a larger-scale return of our workforce to our offices before the end of 2021 and have developed flexible work arrangement guidelines to help balance business needs, employee health, well-being and safety and the evolving work environment.

The effects of our remote and flexible work model may negatively impact productivity, disrupt our business and delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.

Although the immediate impact of the COVID-19 pandemic has subsided, the effects of the pandemic continue to rapidly evolve and we may face several challenges or disruptions upon a return back to the workplace, including re-integration challenges by our employees and distractions to management related to such transition.

These and similar, and perhaps more severe, disruptions in our operations due to the COVID-19 pandemic could negatively impact our business, operating results and financial condition.

Quarantines, stay at home orders and other state and local restrictions, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases, could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain.

Quarantines, stay at home orders, travel restrictions, and other state and local restrictions, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases, could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain.

In addition, clinical site initiation and patient enrollment may be delayed due to concerns for patient safety and prioritization of healthcare resources toward the COVID-19 pandemic.

Some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.

Similarly, our ability to recruit and retain patients, principal investigators and site staff (who as healthcare providers may have heightened exposure to COVID-19) may be hindered, which would adversely impact our clinical trial operations.

However, increases in COVID-19 cases or hospitalizations in the future could cause us to again limit or suspend our patient enrollment and screening activities.

Some patients may not be able to comply with clinical trial protocols if quarantines impede patient travel or interrupt healthcare services.

Similarly, our ability to recruit and retain patients, principal investigators and site staff may be hindered, which would adversely impact our clinical trial operations.

Increases in COVID-19 cases or hospitalizations on a regional basis in the future could cause us or any of our clinical sites to again limit or suspend our patient enrollment and screening activities.

The COVID-19 pandemic, which has caused a broad impact globally, may materially affect us economically.

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The ultimate impact of the COVID-19 pandemic or a similar health pandemic or epidemic is highly uncertain and subject to change.

We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare systems or the global economy as a whole.

We do not yet know the full extent of potential

delays or impacts on our business, our clinical trials, healthcare systems or the global economy as a whole.

These effects could have a material impact on our operations.

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• we may discover that a product candidate may cause harmful side effects or results of required toxicology or other studies may not be acceptable to the FDA;

• clinical trial results may not replicate the results of earlier, smaller trials;

• clinical trial results may not replicate the results of previous trials;

• the FDA or similar foreign regulatory authorities may require use of new or experimental endpoints that may prove insensitive to treatment effects;

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We may encounter difficulties with managing our growth, which could adversely affect our results of operations.

At June 30, 2021, we had approximately 884 full-time employees.

Although we have substantially increased the size of our organization, we may need to add additional qualified personnel and resources, especially now that we have a commercial sales force.

As of September 30, 2021, we had approximately 917 full-time employees.

Although we have substantially increased the size of our organization, we may need to add additional qualified personnel and resources, especially with the planned increase in the size of our sales force.

Our current infrastructure may be inadequate to support our development and commercialization efforts and expected growth.

Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees, and may take time away from running other aspects of our business, including development and commercialization of our product candidates.

Future growth will impose significant added responsibilities on our organization, including the need to identify, recruit, maintain and integrate additional employees, and may take time away from running other aspects of our business, including development and commercialization of our product candidates.

Our future financial performance and our ability to commercialize INGREZZA, ONGENTYS and any other product candidates that receive regulatory approval will depend, in part, on our ability to manage any future growth effectively.

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• further develop our marketing and sales organization;

• compensate our employees on adequate terms in an increasingly competitive, inflationary market;

• maintain sufficient administrative, accounting and management information systems and controls.

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The loss of these suppliers, or delays or problems in the supply of INGREZZA or ONGENTYS, could materially and adversely affect our ability to successfully commercialize INGREZZA or ONGENTYS.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of process controls required to consistently produce the active pharmaceutical ingredients, or API, and the finished product in sufficient quantities while meeting detailed product specifications on a repeated basis.

Manufacturers of pharmaceutical products may encounter difficulties in production, such as difficulties with production costs and yields, process controls, quality control and quality assurance, including testing of stability, impurities and impurity levels and other product specifications by validated test methods, compliance with strictly enforced US, state, and non-US regulations, and disruptions caused by man-made or natural disasters or public health pandemics or epidemics or other business interruptions, including, for example, the COVID-19 pandemic.

We depend on a limited number of suppliers for the production of INGREZZA and its API.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of process controls required to consistently produce the active pharmaceutical ingredients, or API, the finished drug product, and packaging in sufficient quantities while meeting detailed product specifications on a repeated basis.

Manufacturers of pharmaceutical products may encounter difficulties in production, such as difficulties with production costs and yields, process controls, quality control and quality assurance, including testing of stability, impurities and impurity levels and other product specifications by validated test methods, compliance with strictly enforced US, state, and non-US regulations, and disruptions or delays caused by man-made or natural disasters, pandemics or epidemics, or other business interruptions, including, for example, the COVID-19 pandemic.

We depend on a limited number of suppliers for the production and packaging of INGREZZA and its API.

If our third-party suppliers for INGREZZA encounter these or any other manufacturing, quality or compliance difficulties, we may be unable to meet commercial demand for INGREZZA, which could materially and adversely affect our ability to successfully commercialize INGREZZA.

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The loss of a supplier could require us to obtain regulatory clearance and to incur validation and other costs associated with the transfer of the API or product manufacturing processes.

If there are delays in qualifying new suppliers or facilities or a new supplier is unable to meet FDA or a similar international regulatory body’s requirements for approval, there could be a shortage of INGREZZA, which could materially and adversely affect our ability to successfully commercialize INGREZZA.

If there are delays in qualifying new suppliers or facilities or if a new supplier is unable to meet FDA or a similar international regulatory body’s requirements for approval, there could be a shortage of INGREZZA, which could materially and adversely affect our ability to successfully commercialize INGREZZA.

If BIAL is unable or refuses to supply us with ONGENTYS drug product for any reason, or does not meet FDA or international regulators’ requirements for approval, we have limited opportunity to qualify a new supplier.

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In addition, with respect to INGREZZA, and any product candidate that the FDA or a comparable foreign regulatory authority approves, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements.

These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with current Good Manufacturing Practices for any clinical trials that we conduct post-approval.

These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with current Good Clinical Practices for any clinical trials that we conduct post-approval.

Failure to comply with these ongoing regulatory requirements, or later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, may result in, among other things:

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The occurrence of any of these events may adversely affect our business, prospects and ability to achieve or sustain profitability on a sustained basis.

If the market opportunities for our products and product candidates are smaller than we believe they are, our revenues may be adversely affected, and our business may suffer.

If the market opportunities for our products and product candidates are smaller than we believe they are, our expected revenues may be adversely affected, and our business may suffer.

Certain of the diseases that INGREZZA, ONGENTYS and our other product candidates are being developed to address are in underserved and underdiagnosed populations.

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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 not aware of any events or market conditions that would allow us to redeem the 2024 Notes or the holders of the 2024 Notes to convert the 2024 Notes for the quarterly period ended June 30, 2021, or as of the date of this report.

*Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations.

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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.

As of September 30, 2021, $381.2 million aggregate principal amount of the 2024 Notes remained outstanding.

We may also incur additional indebtedness to meet future financing needs.

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Since our inception, we have incurred significant net losses and negative cash flow from operations.

At December 31, 2020, we had an accumulated deficit of $0.7 billion as a result of historical operating losses.

As of September 30, 2021, we had an accumulated deficit of 0.6 billion as a result of historical operating losses.

We received FDA approval for INGREZZA for tardive dyskinesia in April 2017 and for ONGENTYS for Parkinson’s disease in April 2020.

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Thus, small declines in revenue could disproportionately affect financial results in a quarter.

While we were profitable for the quarter ended June 30, 2021, our future operating results and profitability may fluctuate from period to period, and even if we become profitable on a quarterly or annual basis, we may not be able to sustain or increase our profitability.

While we were profitable for the quarter ended September 30, 2021, our future operating results and profitability may fluctuate from period to period, and even if we become profitable on a quarterly or annual basis, we may not be able to sustain or increase our profitability.

Moreover, as our company and our market capitalization have grown, our financial performance has become increasingly subject to quarterly and annual comparisons with the expectations of securities analysts or investors.

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The market price of our common stock may fluctuate in response to many factors, including:

• sales of INGREZZA and ORILISSA;

• impact of the commercial launch of ONGENTYS and ORIAHNN;

• the status and cost of our post-marketing commitments for INGREZZA and ONGENTYS;

• sales of INGREZZA and our other products;

• the status and cost of our post-marketing commitments for INGREZZA;

• the results of our clinical trials;

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• developments in patent or other proprietary rights;

• developments related to the FDA;

• developments related to the FDA and foreign regulatory agencies;

• future sales of our common stock by us or our stockholders;

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• fluctuations in our operating results;

• potential litigation matters;

• potential litigation matters and developments in existing litigation matters, such as the ANDA litigation matters;

• government regulation;

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• failure of any of our product candidates, if approved, to achieve commercial success;

• disruptions caused by man-made or natural disasters or public health pandemics or epidemics or other business interruptions, including, for example, the COVID-19 pandemic;

• disruptions caused by man-made or natural disasters, pandemics or epidemics or other business interruptions, including, for example, the COVID-19 pandemic;

• public concern as to the safety of our drugs.

In addition, we recently became a member of the S&P MidCap 400 index.

In addition, we are a member of the S&P MidCap 400 index.

If we cease to be represented in the S&P MidCap 400 index, or other indexes or indexed products, as a result of our market capitalization falling below the threshold for inclusion in the index, certain institutional shareholders may, due to their internal policies and investment guidelines, be required to sell their shareholdings.

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*Our customers are concentrated and therefore the loss of a significant customer may harm our business.

We have entered into agreements for the distribution of INGREZZA with a limited number of specialty pharmacy providers and a specialty distributor, and all of our product sales of INGREZZA are to these customers.

Two of these customers represented approximately 85% of our total product revenue for the six months ended June 30, 2021 and a significant majority of our accounts receivable balance at June 30, 2021.

We have entered into agreements for the distribution of INGREZZA with a limited number of specialty pharmacy providers and distributors, and all of our product sales of INGREZZA are to these customers.

Two of these customers represented approximately 85% of our total product revenue for the nine months ended September 30, 2021 and a significant majority of our accounts receivable balance as of September 30, 2021.

If any of these significant customers becomes subject to bankruptcy, is unable to pay us for our products or is acquired by a company that wants to terminate the relationship with us, or if we otherwise lose any of these significant customers, our revenue, results of operations and cash flows would be adversely affected.

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At June 30, 2021, $381.2 million aggregate principal amount of the 2024 Notes remained outstanding.

As of September 30, 2021, $381.2 million aggregate principal amount of the 2024 Notes remained outstanding.

Additional equity or debt financing might not be available on reasonable terms, if at all.

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We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, through confidentiality agreements with our commercial collaborators, employees and consultants.

We also have invention or patent assignment

agreements with our employees and some, but not all, of our commercial collaborators and consultants.

However, if our employees, commercial collaborators or consultants breach these agreements, we may not have adequate remedies for any such breach, and our trade secrets may otherwise become known or independently discovered by our competitors.

We also have invention or patent assignment agreements with our employees and some, but not all, of our commercial collaborators and consultants.

However, if our

employees, commercial collaborators or consultants breach these agreements, we may not have adequate remedies for any such breach, and our trade secrets may otherwise become known or independently discovered by our competitors.

In addition, although we own a number of patents, the issuance of a patent is not conclusive as to its validity or enforceability, and third parties may challenge the validity or enforceability of our patents.

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For example, we are currently engaged in various intellectual property litigation matters against potential competitors related to INGREZZA.

For a more detailed description of these matters, see Note 10 to the condensed consolidated financial statements included in this report.

For a more detailed description of these matters, see Part II, Item 1 of this Form 10-Q.

In addition, in an infringement proceeding a court may decide that a patent of ours or a patent of a competitor of ours is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover its technology.

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There have been executive legal and political challenges to certain aspects of the ACA.

Since January 2017, several executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the ACA have been put into place.

Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA.

The Tax Act includes a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”.

In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax.

On December 14, 2018, a US District Court Judge in Texas ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act.

Additionally, on December 18, 2019, the US Court of Appeals for the 5th Circuit ruled that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well.

The US Supreme Court is currently reviewing the constitutionality of the ACA.

Although it is unknown when a decision will be made, on January 28, 2021, June 17, 2021 the U.S.

For example, on June 17, 2021 the U.S.

Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress.

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Supreme Court ruling, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began February 15, 2021 and will remain open through August 15, 2021.

The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.

Further, on February 10, 2021, the Biden administration withdrew the federal government’s support for overturning the ACA.

The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.

It is possible that the ACA will be subject to judicial or Congressional challenges in the future.

It is unclear how any such challenges the Supreme Court ruling, other such litigation, and the healthcare reform measures of the Biden administration will impact the ACA.

It is unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted.

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Also, there has been heightened governmental scrutiny recently over pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics.

the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.

Such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.

At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives.

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The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed by the Biden administration until January 1, 2023.

On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries.

On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-

administered drugs to the lowest price paid in other economically advanced countries.

The Most Favored Nation regulations mandate participation by identified Medicare Part B providers and will apply in all US states and territories for a seven-year period beginning January 1, 2021, and ending December 31, 2027.

On December 28, 2020, the US District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule.

On January 13, 2021, in a separate lawsuit brought by industry groups in the U.S.

District of Maryland, the government defendants entered a joint motion to stay litigation on the condition that the government would not appeal the preliminary injunction granted in the U.S.

District Court for the Northern District of California and that performance for any final regulation stemming from the MFN Model interim final rule shall not commence earlier than 60 days after publication of that regulation in the Federal Register.

It is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives.

As a result of litigation challenging the Most Favored Nation model, on August 10, 2021, CMS published a proposed rule that seeks to rescind the Most Favored Nation interim final rule.

In July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs.

In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue to advance these principles.

In addition, Congress is considering drug pricing as part of the budget reconciliation process.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

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In addition, our management’s attention could be diverted to handle any such alleged violations.

If the FDA or any other governmental agency initiates an enforcement action against us, or if we are the subject of a qui tam suit brought by a private plaintiff on behalf of the government, and it is determined that we violated prohibitions relating to the promotion of products for unapproved uses, we could be subject to substantial civil or criminal fines or damage awards and other sanctions such as consent decrees and corporate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations.

If the FDA or any

other governmental agency initiates an enforcement action against us, or if we are the subject of a qui tam suit brought by a private plaintiff on behalf of the government, and it is determined that we violated prohibitions relating to the promotion of products for unapproved uses, we could be subject to substantial civil or criminal fines or damage awards and other sanctions such as consent decrees and corporate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations.

Any such fines, awards or other sanctions would have an adverse effect on our revenue, business, financial prospects, and reputation.

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As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

While we have implemented security measures to protect our data security and information technology systems, such measures may not

prevent such events.

Although to our knowledge we have not experienced any material incident or disruption to date, we and our vendors have been the target of cybersecurity incidents of this nature and expect them to continue.

While we have implemented security measures to protect our data security and information technology systems, such measures may not prevent such events.

Significant disruptions of our information technology systems or breaches of data security could have a material adverse effect on our business, financial condition and results of operations.

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In the EU, orphan exclusivity may be reduced to six years if the drug no longer satisfies the original designation criteria or can be lost altogether if the marketing authorization holder consents to a second orphan drug application or cannot supply enough drug, or when a second applicant demonstrates its drug is “clinically superior” to the original orphan drug.

We may not be successful obtaining orphan drug designations for any indications and, even if we succeed, such orphan drug designations may fail to result in or maintain orphan drug exclusivity upon approval, which would harm our competitive position.

not be successful obtaining orphan drug designations for any indications and, even if we succeed, such orphan drug designations may fail to result in or maintain orphan drug exclusivity upon approval, which would harm our competitive position.

The technologies we use in our research as well as the drug targets we select may infringe the patents or violate the proprietary rights of third parties.

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We are exposed to the risk of employee fraud or other misconduct.

Misconduct by employees and independent contractors, such as principal investigators, consultants, commercial partners and vendors, or by employees of our commercial partners could include failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and abuse laws, to report financial information or data accurately, to maintain the confidentiality of our trade secrets or the trade secrets of our

commercial partners, or to disclose unauthorized activities to us.

In particular, sales, marketing and other business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, kickbacks, self-dealing and other abusive practices.

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However, our insurance may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may suffer.

Moreover, insurance coverage is becoming increasingly expensive, and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability from any current or future clinical trials or approved products.

Moreover, insurance coverage is becoming increasingly expensive, and we may not be able

to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability from any current or future clinical trials or approved products.

A successful product liability claim, or series of claims, brought against us would decrease our cash reserves and could cause our stock price to fall.

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For example, the CCPA requires covered companies to provide additional disclosures to California consumers, and provides such consumers with new rights, such as the ability to opt out of certain disclosures of personal information.

The CCPA provides for civil penalties for violations, as

well as a private right of action for data breaches that is expected to increase data breach litigation.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

The CCPA may increase our compliance costs and potential liability.

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NEUROCRINE BIOSCIENCES, INC.

August 3, 2021

November 1, 2021

/s/ Matthew C.

2 unchanged sentences

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 1A. Risk Factors