What changed in this filing

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Item 1. Financial Statements

2022-11-01 compared with 2022-08-04 · 78 added, 64 removed, 409 unchanged (26% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(in millions, except share data) September 30,

2022 December 31,

16 unchanged sentences

Accounts payable and accrued liabilities $ 297.8 $ 225.8

Convertible senior notes 169.2 —

Other current liabilities 18.1 20.0

10 unchanged sentences

220.0 million shares authorized;

issued and outstanding shares 95.6 million at June 30, 2022 and 94.9 million at December 31, 2021

96.1 million and 94.9 million shares issued and outstanding, respectively

Additional paid-in capital 2,054.3 2,011.4

5 unchanged sentences

NEUROCRINE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE (LOSS) INCOME

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions, except per share data) 2022 2021 2022 2021

9 unchanged sentences

Operating income 87.8 44.5 145.6 138.8

Other (expense) income:

Other income (expense):

Interest expense ( 1.2 ) ( 6.6 ) ( 6.0 ) ( 19.2 )

Unrealized (loss) gain on equity securities ( 7.4 ) — 12.5 0.7

Unrealized gain (loss) on equity securities 11.1 ( 8.2 ) 23.6 ( 7.5 )

Loss on extinguishment of convertible senior notes — — ( 70.0 ) —

Investment income and other, net 0.2 0.8 2.8 3.1

Total other expense, net ( 78.0 ) ( 5.3 ) ( 59.7 ) ( 9.6 )

(Loss) income before (benefit from) provision for income taxes ( 23.3 ) 57.5 ( 1.9 ) 84.7

(Benefit from) provision for income taxes ( 6.4 ) 15.2 1.1 10.3

Net (loss) income ( 16.9 ) 42.3 ( 3.0 ) 74.4

Total other income (expense), net 10.1 ( 14.0 ) ( 49.6 ) ( 23.6 )

Income before provision for income taxes 97.9 30.5 96.0 115.2

Provision for income taxes 29.4 8.0 30.5 18.3

Net income 68.5 22.5 65.5 96.9

Unrealized loss on debt securities available-for-sale, net of tax ( 1.8 ) ( 0.3 ) ( 12.3 ) ( 1.4 )

Comprehensive (loss) income $ ( 19.8 ) $ 42.0 $ ( 13.5 ) $ 73.3

(Loss) earnings per share:

Comprehensive income $ 66.7 $ 22.2 $ 53.2 $ 95.5

Earnings per share:

Basic $ 0.72 $ 0.24 $ 0.69 $ 1.03

9 unchanged sentences

(in millions) Shares $ Total

Balances at March 31, 2022

Balances at June 30, 2022

95.6 $ 0.1 $ 1,999.8 $ ( 12.2 ) $ ( 564.3 ) $ 1,423.4

Net loss — — — — ( 16.9 ) ( 16.9 )

Net income — — — — 68.5 68.5

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

1 unchanged sentence

Issuances of common stock under stock plans 0.5 — 11.4 — — 11.4

Balances at June 30, 2022

Balances at September 30, 2022

96.1 $ 0.1 $ 2,054.3 $ ( 14.0 ) $ ( 495.8 ) $ 1,544.6

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

1 unchanged sentence

94.9 $ 0.1 $ 2,011.4 $ ( 1.7 ) $ ( 635.8 ) $ 1,374.0

Net loss — — — — ( 3.0 ) ( 3.0 )

Net income — — — — 65.5 65.5

Unrealized loss on debt securities available-for-sale, net of tax — — — ( 12.3 ) — ( 12.3 )

2 unchanged sentences

Issuances of common stock under stock plans 1.2 — 20.1 — — 20.1

Balances at June 30, 2022

Balances at September 30, 2022

96.1 $ 0.1 $ 2,054.3 $ ( 14.0 ) $ ( 495.8 ) $ 1,544.6

5 unchanged sentences

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

Balance at June 30, 2021

Balance at September 30, 2021

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(in millions) 2022 2021

Cash flows from operating activities:

Net (loss) income $ ( 3.0 ) $ 74.4

Adjustments to reconcile net (loss) income to net cash from operating activities:

Net income $ 65.5 $ 96.9

Adjustments to reconcile net income to net cash from operating activities:

Stock-based compensation expense 129.6 98.6

16 unchanged sentences

Purchases of equity securities ( 7.7 ) ( 4.6 )

Purchases of property and equipment ( 16.4 ) ( 8.8 )

Capital expenditures ( 14.7 ) ( 14.5 )

Cash flows from investing activities ( 61.5 ) ( 153.9 )

39 unchanged sentences

We are responsible for all development, manufacturing and commercialization costs of any collaboration product.

In connection with the agreement, we paid Heptares $ 100.0 million upfront, which, including certain transaction-related costs, was expensed as IPR&D in 2021.

In connection with the agreement, we paid Heptares $ 100.0 million upfront, which, including certain transaction-related costs, was expensed as in-process research and development, or IPR&D, in 2021.

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

In the second quarter of 2022, the FDA accepted our submission of an investigational new drug application, or IND, for NBI-1117568 for the treatment of schizophrenia, for which we anticipate initiating a Phase II study during the second half of 2022.

Based upon this progress, a milestone of $ 30.0 million was expensed as R&D in the second quarter of 2022, which we expect to pay to Heptares in the third quarter of 2022.

In connection with the United States Food and Drug Administration's, or FDA's, acceptance of our investigational new drug application for NBI-1117568 for the treatment of schizophrenia in June 2022, we paid Heptares a milestone of $ 30.0 million, which was expensed as research and development, or R&D, in the second quarter of 2022.

Under the terms of the agreement, Heptares may be entitled to receive potential future payments of up to $ 2.6 billion upon the achievement of certain event-based milestones and would be entitled to receive royalties on the future net sales of any collaboration product.

15 unchanged sentences

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 event-based milestones and would be entitled to receive royalties on the future net sales of any royalty-bearing product.

In connection with the approval of our clinical trial application for NBI-1070770 for the treatment of major depressive disorder in July 2022, a milestone of $ 5.0 million was expensed as R&D in the third quarter of 2022, which we expect to pay to Takeda in the fourth quarter of 2022.

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

2 unchanged sentences

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

We may terminate the agreement in its entirety or in one or more (but not all) of the major markets upon 12 months’ written notice to

Takeda (i) with respect to all licensed products following the first commercial sale of the first licensed product for which first commercial sale occurs, or (ii) with respect to all licensed products in one or more given target classes following the first commercial sale of the first licensed product in such target class for which first commercial sale occurs.

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

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

25 unchanged sentences

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

We may terminate the agreement upon 90 days’ written notice to Xenon,

provided that such unilateral termination will not be effective for certain products until we have used commercially reasonable efforts to complete certain specified clinical studies.

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

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

33 unchanged sentences

As the milestone related to a license of intellectual property and was contingent upon MTPC’s first commercial sale of DYSVAL in Japan, the milestone was recognized as revenue in the second quarter of 2022.

In addition, we will receive royalties at tiered percentage rates on MTPC net sales of DYSVAL.

DYSVAL royalty revenue was not significant for the three and six months ended June 30, 2022.

In addition, we receive royalties at tiered percentage rates on MTPC net sales of DYSVAL.

Under the terms of our license agreement with MTPC, we may be entitled to receive potential future payments of up to $ 30.0 million upon the achievement of certain sales-based milestones and are entitled to receive royalties at tiered percentage rates on future MTPC net sales of valbenazine for the longer of 10 years or the life of the related patent rights.

6 unchanged sentences

In June 2020, AbbVie launched ORIAHNN ® (elagolix, estradiol and norethindrone acetate capsules and elagolix capsules) in the United States for the treatment of heavy menstrual bleeding related to uterine fibroids in premenopausal women.

We receive royalties at tiered percentage rates on AbbVie net sales of elagolix and recognized elagolix royalty revenue of $ 5.2 million and $ 9.4 million, respectively, for the three and six months ended June 30, 2022 and $ 5.9 million and $ 10.4 million, respectively, for the three and six months ended June 30, 2021.

We receive royalties at tiered percentage rates on AbbVie net sales of elagolix and recognized elagolix royalty revenue of $ 6.1 million and $ 15.5 million, respectively, for the three and nine months ended September 30, 2022 and $ 5.9 million and $ 16.3 million, respectively, for the three and nine months ended September 30, 2021.

Under the terms of our license agreement with AbbVie, we may be entitled to receive potential future payments of up to $ 366.0 million upon the achievement of certain event-based milestones and are entitled to receive royalties at tiered percentage rates on future AbbVie net sales of elagolix for the longer of 10 years or the life of the related patent rights.

3 unchanged sentences

The following table presents 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,

2022 December 31,

13 unchanged sentences

$ 373.1 $ — $ ( 10.5 ) $ 362.6 $ 563.2 $ — $ ( 2.5 ) $ 560.7

As of June 30, 2022, our security portfolio consisted of 166 debt securities available-for-sale, including 164 such securities that were in an unrealized loss position but of high credit quality.

As of September 30, 2022, our security portfolio consisted of 193 debt securities available-for-sale, including 183 such securities that were in an unrealized loss position but of high credit quality.

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.

No allowance for credit losses was recognized as of June 30, 2022 or December 31, 2021.

The following table presents debt securities available-for-sale that were in an unrealized loss position as of June 30, 2022, aggregated by major security type and length of time in a continuous loss position.

No allowance for credit losses was recognized as of September 30, 2022 or December 31, 2021.

The following table presents debt securities available-for-sale that were in an unrealized loss position as of September 30, 2022, aggregated by major security type and length of time in a continuous loss position.

Less Than 12 Months 12 Months or Longer Total

14 unchanged sentences

Securities of government-sponsored entities $ 230.5 $ ( 1.0 ) $ — $ — $ 230.5 $ ( 1.0 )

Accrued interest receivables on debt securities available-for-sale totaled $ 2.7 million and $ 2.2 million, respectively, as of June 30, 2022 and December 31, 2021.

Accrued interest receivables on debt securities available-for-sale totaled $ 3.9 million and $ 2.2 million, respectively, as of September 30, 2022 and December 31, 2021.

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, 2022 or 2021.

No accrued interest receivables were written off during the nine months ended September 30, 2022 or 2021.

Fair Value Measurements

4 unchanged sentences

The following table presents a summary of investments, which were measured at fair value on a recurring basis.

September 30,

2022 December 31,

15 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2022 2021 2022 2021

Balance at beginning of period $ — $ 38.9 $ 11.0 $ 38.2

Unrealized gain included in earnings (1)

Purchases — 4.6 — 4.6

Unrealized gain (loss) included in earnings (1)

— ( 8.2 ) 20.8 ( 7.5 )

Transfers out of Level 3 (2)

5 unchanged sentences

Inventories consisted of the following:

(in millions) June 30,

(in millions) September 30,

2022 December 31,

4 unchanged sentences

Cash, Cash Equivalents and Restricted Cash

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,

2022 June 30,

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

(in millions) September 30,

2022 September 30,

Cash and cash equivalents $ 212.2 $ 311.1

11 unchanged sentences

The following table presents supplemental operating lease information for operating leases that have commenced.

Six Months Ended

Nine Months Ended

September 30,

(in millions, except weighted average data) 2022 2021

1 unchanged sentence

Cash paid for amounts included in the measurement of operating lease liabilities $ 12.2 $ 9.1

2022 June 30,

September 30,

2022 September 30,

Weighted average remaining lease term

1 unchanged sentence

Weighted average discount rate 5.3 % 5.3 %

The following table presents approximate non-cancelable future minimum lease payments under operating leases as of June 30, 2022.

The following table presents approximate non-cancelable future minimum lease payments under operating leases as of September 30, 2022.

(in millions) Amount (1)

20 unchanged sentences

The fair value of the liability component was calculated at settlement using a discounted cash flow analysis with a discount rate of 3.37 %, which was the market rate for similar notes that have no conversion rights.

The difference of $ 56.3 million between the fair value of the aggregate consideration remitted to certain holders of the 2024 Notes and the fair value of the liability component was attributed to the reacquisition of the equity

component and recorded as a reduction to additional paid-in capital.

The carrying amount of the liability of $ 112.4 million at settlement was recognized as a reduction to the 2024 Notes and resulted in an $ 18.4 million loss on extinguishment, which we recognized in the fourth quarter of 2020.

3 unchanged sentences

We accounted for the partial repurchase of the 2024 Notes as a debt extinguishment, which resulted in the recognition of a $ 70.0 million loss on extinguishment in the second quarter of 2022.

The following table presents a summary of the 2024 Notes as of June 30, 2022.

The following table presents a summary of the 2024 Notes as of September 30, 2022.

Amount Unamortized Debt Net Carrying

Amount Fair Value

(in millions) Discount Issuance Costs Amount Leveling

2024 Notes $ 170.4 $ — $ ( 1.2 ) $ 169.2 $ 238.3 Level 2

_________________________

(1) While the 2024 Notes were classified as a long-term liability as of June 30, 2022, the future convertibility and associated balance sheet classification will be monitored at each quarterly reporting date and determined based on the market prices of our common stock during the prescribed measurement period.

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 be classified as a current obligation.

The following table presents a summary of the 2024 Notes as of December 31, 2021.

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2022 2021 2022 2021

4 unchanged sentences

The initial conversion rate for the 2024 Notes, which is subject to adjustment in some events (as provided for in the 2017 Indenture), is 13.1711 shares of common stock per $ 1,000 principal amount and equivalent to an initial conversion price of approximately $ 75.92 per share, reflecting a conversion premium of approximately 42.5 % above the closing price of $ 53.28 per share of our common stock on April 26, 2017.

We may redeem for cash all or part of the 2024 Notes if the last reported sale price (as defined in the 2017 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, 2022) 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.

We may redeem for cash all or part of the 2024 Notes if the last reported sale price (as defined in the 2017 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, 2022) 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, 2022) 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 2017 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;

2 unchanged sentences

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

As the conditional conversion feature described under (i) above was triggered as of September 30, 2022, holders of the 2024 Notes may convert the 2024 Notes at any time during the period beginning on October 3, 2022, and ending at the close of business on December 30, 2022.

Accordingly, the 2024 Notes have been classified as a current liability as of September 30, 2022.

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

Upon conversion, holders will receive the principal amount of their 2024 Notes in cash and any excess conversion value, calculated based on the per share volume-weighted average price for each of the 30 consecutive trading days during the observation period (as more fully described in the 2017 Indenture), in either cash or shares of our common stock.

If we undergo a fundamental change (as defined in the 2017 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.

3 unchanged sentences

The 2017 Indenture contains customary events of default with respect to the 2024 Notes, including that upon certain events of default, 100 % of the principal and accrued and unpaid interest on the 2024 Notes will automatically become due and payable.

(Loss) Earnings per Share

(Loss) earnings per share was calculated as follows:

Earnings per Share

Earnings 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) 2022 2021 2022 2021

Net (loss) income - basic and diluted $ ( 16.9 ) $ 42.3 $ ( 3.0 ) $ 74.4

Net income - basic and diluted $ 68.5 $ 22.5 $ 65.5 $ 96.9

Weighted-average shares outstanding:

5 unchanged sentences

Diluted 99.0 97.7 98.3 97.9

(Loss) earnings per share, basic $ ( 0.18 ) $ 0.45 $ ( 0.03 ) $ 0.79

(Loss) earnings per share, diluted $ ( 0.18 ) $ 0.43 $ ( 0.03 ) $ 0.76

Earnings per share, basic $ 0.72 $ 0.24 $ 0.69 $ 1.03

Earnings per share, diluted $ 0.69 $ 0.23 $ 0.67 $ 0.99

Shares excluded from diluted per share amounts because their effect would have been anti-dilutive 4.9 4.5 5.5 4.0

Subsequent Events

On November 1, 2022, we acquired Diurnal Group plc in an all-cash transaction, for an aggregate value of approximately £ 48.3 million GBP, or approximately $ 56 million USD.

We believe the transaction presents an opportunity to accelerate the establishment of our clinical development and commercial capabilities in the United Kingdom to the benefit of patient communities and other stakeholders.

We are currently in the process of finalizing the accounting for this transaction.

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