What changed in this filing

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Item 1A. Risk Factors

2022-11-01 compared with 2022-08-04 · 33 added, 48 removed, 731 unchanged (10% of the section changed)

34 unchanged sentences

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 salesforce 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 the expansion of our specialty salesforce, which we announced in the third quarter of 2021 and completed in April 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.

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 the expansion of our specialty sales force, which we announced in the third quarter of 2021 and completed in April 2022.

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.

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If we are unable to effectively train our employees and equip them with effective materials, including medical and sales literature to help them inform and educate health care practitioners about the benefits of ONGENTYS and its proper administration, our commercialization of ONGENTYS may not be successful.

Even if we are successful in effectively training and equipping our salesforce, there are many factors that could cause the commercialization of ONGENTYS to be unsuccessful, including a number of factors that are outside our control.

Even if we are successful in effectively training and equipping our sales force, there are many factors that could cause the commercialization of ONGENTYS to be unsuccessful, including a number of factors that are outside our control.

Health care practitioners may not prescribe ONGENTYS and patients may be unwilling to use ONGENTYS if insurance coverage is not provided or reimbursement is inadequate.

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

As of June 30, 2022, we had more than 1,100 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 recent increase in the size of our salesforce.

As of September 30, 2022, we had more than 1,150 full-time employees.

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

1 unchanged sentence

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.

In particular, as we commercialize INGREZZA and ONGENTYS, we will need to support the training and ongoing activities of our salesforce and will likely need to continue to expand the size of our employee base for managerial, operational, financial and other resources.

In particular, as we commercialize INGREZZA and ONGENTYS, we will need to support the training and ongoing activities of our sales force and will likely need to continue to expand the size of our employee base for managerial, operational, financial and other resources.

To that end, we must be able to successfully:

92 unchanged sentences

*The conditional conversion feature of the 2024 Notes, if triggered, may adversely affect our financial condition, operating results, or liquidity.

In the event the conditional conversion feature of the 2.25% convertible senior notes due May 15, 2024, or the 2024 Notes, is triggered, holders of 2024 Notes will be entitled to convert their 2024 Notes at any time during specified periods at their option.

If one or more of the holders of the 2024 Notes elects to convert their notes, unless we satisfy our conversion obligation by delivering only shares of our common stock with respect to any conversion premium, we would be required to settle all or a portion of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

The 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.

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, 2022, or as of the date of this report.

As of September 30, 2022, the conditional conversion feature of the 2024 Notes had been triggered, allowing holders of 2024 Notes to convert their 2024 Notes at any time during the period beginning on October 3, 2022 and ending at the close of business on December 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, and as a result, it is possible that holders of 2024 Notes will continue to be entitled to convert their 2024 Notes at any time during specified periods at their option.

If one or more of the holders of the 2024 Notes elects to convert their 2024 Notes, we would be required to settle the principal amount of our conversion obligation in cash, which could adversely affect our liquidity.

*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 the second quarter of 2022, we entered into separate, privately negotiated transactions with certain holders of the 2024 Notes to repurchase $210.8 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $279.0 million in cash.

As of June 30, 2022, $170.4 million aggregate principal amount of the 2024 Notes remained outstanding.

We may also incur

additional indebtedness to meet future financing needs.

As of September 30, 2022, $170.4 million aggregate principal amount of the 2024 Notes remained outstanding.

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

Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:

11 unchanged sentences

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

As of June 30, 2022, we had an accumulated deficit of $564.3 million as a result of historical operating losses.

As of September 30, 2022, we had an accumulated deficit of $495.8 million 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.

31 unchanged sentences

The actual impact of this provision will depend on multiple factors, including the amount of research and development expenses we will incur and whether we conduct our research and development activities inside or outside the United States.

In addition, new income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business and financial condition.

In addition, new income, sales, use, excise or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business and financial condition.

Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.

For example, the Biden administration and Congress have proposed various United States federal tax law changes which, if enacted, could have a material impact on our business, cash flows, financial condition, or results of operations.

In addition, it is uncertain if and to what extent various states will conform to federal tax laws.

For example, Tax Cut and Jobs Act of 2017, the Coronavirus Aid, Relief, and Economic Security Act and the Inflation Reduction Act enacted many significant changes to the U.S.

Future guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects of such legislation could be repealed or modified in future legislation.

Furthermore, it is uncertain if and to what extent various states will conform to federal tax laws.

Future tax reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future United States tax expense.

4 unchanged sentences

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited.

We do not believe we have experienced any previous ownership changes, but the

determination is complex and there can be no assurance we are correct.

We do not believe we have experienced any previous ownership changes, but the determination is complex and there can be no assurance we are correct.

Furthermore, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.

41 unchanged sentences

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.

Four of these customers represented approximately 89% of our total product revenue for the six months ended June 30, 2022 and approximately 94% of our accounts receivable balance as of June 30, 2022.

Four of these customers represented approximately 89% of our total product revenue for the nine months ended September 30, 2022 and approximately 95% of our accounts receivable balance as of September 30, 2022.

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.

24 unchanged sentences

As of June 30, 2022, $170.4 million aggregate principal amount of the 2024 Notes remained outstanding.

As of September 30, 2022, $170.4 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.

23 unchanged sentences

However, we face the risk that we may not obtain any of these patents and that the breadth of claims we obtain, if any, may not provide adequate protection of our proprietary technology or compounds.

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.

32 unchanged sentences

For example, on June 17, 2021 the United States 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.

Thus, the ACA will remain in effect in its current form.

Further, prior to the United States 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 remained open through August 15, 2021.

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.

In addition, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or the IRA, into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025.

The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost through a newly established manufacturer discount program.

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

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

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

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

These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013 and, due to subsequent legislative amendments to the statute, including the Infrastructure Investment and Jobs Act, will remain in effect through 2030, except for a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic, unless additional Congressional action is taken.

These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013 and, due to subsequent legislative amendments to the statute, including the Infrastructure Investment and Jobs Act, will remain in effect until 2031, except for a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic, unless additional Congressional action is taken.

Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequestration.

13 unchanged sentences

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.

No legislation or administrative actions have been finalized to implement these principles.

In addition, Congress is considering additional health reform measures, including proposed legislation that, among other issues, would direct the Secretary of Health and Human Services to negotiate drug

prices covered under Medicare Part D, require drug manufacturers to pay rebates on drugs whose prices increase greater than the rate of inflation, and cap out-of-pocket costs to patients.

It is unclear whether or when these or similar policy initiatives will be implemented.

Additionally, the IRA will, among other things, allow the Secretary of HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare Part B and Medicare Part D, and subject drug manufacturers to civil monetary penalties and a potential excise tax by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law, and (ii) require drug manufacturers to pay rebates on drugs whose prices increase greater than the rate of inflation.

The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years.

These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges.

It is currently unclear how the IRA will be effectuated but is likely to have a significant impact on the pharmaceutical industry.

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.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product.

In particular, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.

We expect that the ACA, the IRA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product.

Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments from private payors.

30 unchanged sentences

Physicians, on the other hand, may prescribe products for off-label uses.

Although the FDA and other regulatory agencies do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications from companies or their salesforce with respect to off-label uses of products for which marketing clearance has not been issued.

Although the FDA and other regulatory agencies do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications from companies or their sales force with respect to off-label uses of products for which marketing clearance has not been issued.

However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling.

3 unchanged sentences

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.

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

140 unchanged sentences

31.1 Description:

Employment Agreement dated November 29, 2021 between the Company and Jude Onyia

10.2+ Description:

Neurocrine Biosciences, Inc.

2020 Equity Incentive Plan, as amended and restated

10.3+ Description:

Neurocrine Biosciences, Inc.

2018 Employee Stock Purchase Plan, as amended and restated

31.1 Description:

Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934

20 unchanged sentences

______________

+ Management contract or compensatory plan or arrangement.

* These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C.

3 unchanged sentences

NEUROCRINE BIOSCIENCES, INC.

August 4, 2022

November 1, 2022

/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