What changed in this filing

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Item 1. Financial Statements

2023-08-01 compared with 2023-05-03 · 84 added, 63 removed, 385 unchanged (28% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data) March 31,

(in millions, except share data) June 30,

2023 December 31,

3 unchanged sentences

Accounts receivable 387.6 350.0

Inventories 33.4 35.1

Inventories, net 31.7 35.1

Other current assets 100.6 79.1

14 unchanged sentences

Total current liabilities 582.5 537.7

Convertible senior notes 169.5 —

Noncurrent operating lease liabilities 89.1 93.5

16 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE (LOSS) INCOME

AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended

June 30, Six Months Ended

(in millions, except per share data) 2023 2022 2023 2022

8 unchanged sentences

Total operating expenses 379.1 323.5 913.7 631.0

Operating (loss) income ( 114.2 ) 3.1

Operating income (loss) 73.6 54.7 ( 40.6 ) 57.8

Other income (expense):

Interest expense ( 1.3 ) ( 2.2 ) ( 2.4 ) ( 4.8 )

Unrealized gain on equity security investments 2.2 19.9

Unrealized gain (loss) on equity security investments 37.3 ( 7.4 ) 39.5 12.5

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

Investment income and other, net 12.0 1.6 21.8 2.6

Total other income, net 10.9 18.3

(Loss) income before (benefit from) provision for income taxes ( 103.3 ) 21.4

(Benefit from) provision for income taxes ( 26.7 ) 7.5

Net (loss) income ( 76.6 ) 13.9

Total other income (loss), net 48.0 ( 78.0 ) 58.9 ( 59.7 )

Income (loss) before provision for (benefit from) income taxes 121.6 ( 23.3 ) 18.3 ( 1.9 )

Provision for (benefit from) income taxes 26.1 ( 6.4 ) ( 0.6 ) 1.1

Net income (loss) 95.5 ( 16.9 ) 18.9 ( 3.0 )

Foreign currency translation adjustments, net of tax 0.9 — 2.1 —

Unrealized gain (loss) on debt securities available-for-sale, net of tax 0.7 ( 2.9 ) 4.7 ( 10.5 )

Comprehensive (loss) income $ ( 71.4 ) $ 6.3

(Loss) earnings per share:

Comprehensive income (loss) $ 97.1 $ ( 19.8 ) $ 25.7 $ ( 13.5 )

Earnings (loss) per share:

Basic $ 0.98 $ ( 0.18 ) $ 0.19 $ ( 0.03 )

9 unchanged sentences

(in millions) Shares $ Total

Balance at December 31, 2022

Balances at March 31, 2023

97.5 $ 0.1 $ 2,170.5 $ ( 2.7 ) $ ( 483.4 ) $ 1,684.5

Net loss — — — — ( 76.6 ) ( 76.6 )

Net income — — — — 95.5 95.5

Other comprehensive income, net of tax — — — 1.6 — 1.6

1 unchanged sentence

Issuances of common stock under stock plans 0.1 — 2.9 — — 2.9

Balance at March 31, 2023

Balances at June 30, 2023

97.6 $ 0.1 $ 2,241.9 $ ( 1.1 ) $ ( 387.9 ) $ 1,853.0

Balances at March 31, 2022

95.5 $ 0.1 $ 1,947.7 $ ( 9.3 ) $ ( 547.4 ) $ 1,391.1

Net loss — — — — ( 16.9 ) ( 16.9 )

Other comprehensive loss, net of tax — — — ( 2.9 ) — ( 2.9 )

Stock-based compensation expense — — 49.5 — — 49.5

Issuances of common stock under stock plans 0.1 — 2.6 — — 2.6

Balances at June 30, 2022

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

Balance at December 31, 2022

1 unchanged sentence

Net income — — — — 18.9 18.9

Other comprehensive income, net of tax — — — 6.8 — 6.8

Stock-based compensation expense — — 108.4 — — 108.4

Issuances of common stock under stock plans 1.1 — 11.1 — — 11.1

Balance at June 30, 2023

97.6 $ 0.1 $ 2,241.9 $ ( 1.1 ) $ ( 387.9 ) $ 1,853.0

Balance at December 31, 2021

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

Net loss — — — — ( 3.0 ) ( 3.0 )

Other comprehensive loss, net of tax — — — ( 10.5 ) — ( 10.5 )

2 unchanged sentences

Issuances of common stock under stock plans 0.7 — 8.7 — — 8.7

Balance at March 31, 2022

Balance at June 30, 2022

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(in millions) 2023 2022

Cash flows from operating activities:

Net (loss) income $ ( 76.6 ) $ 13.9

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

Net income (loss) $ 18.9 $ ( 3.0 )

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

Stock-based compensation expense 108.4 86.5

4 unchanged sentences

Deferred income taxes ( 73.1 ) ( 3.4 )

Loss on extinguishment of convertible senior notes — 70.0

Other ( 6.7 ) 2.3

13 unchanged sentences

Issuances of common stock under benefit plans 11.1 8.7

Repurchase of convertible senior notes — ( 279.0 )

Cash flows from financing activities 11.1 ( 270.3 )

4 unchanged sentences

Non-cash capital expenditures $ 0.8 $ 0.9

Right-of-use assets acquired through operating leases $ 1.8 $ —

Cash paid for interest $ 1.9 $ 4.6

Cash paid for income taxes $ 3.4 $ 3.1

16 unchanged sentences

In assessing whether we exercise significant influence, we consider the nature and magnitude of such an investment, the voting and protective rights we hold, any participation in the governance of the investee and other relevant factors, such as the presence of a collaborative or other business relationship.

Such investments are classified within Level 1 of the fair value hierarchy and carried at fair value, with any changes in the fair value of such investments recognized in earnings.

Such investments are currently classified within Level 1 of the fair value hierarchy and carried at fair value, with any changes in the fair value of such investments recognized in earnings.

Recently Adopted Accounting Pronouncements.

20 unchanged sentences

In 2020, we entered into an exclusive license agreement with Takeda, pursuant to which we acquired the exclusive rights to develop and commercialize certain early to mid-stage psychiatry compounds, including luvadaxistat, NBI-1065845, NBI-1065846 and four non-clinical stage compounds.

Luvadaxistat and the 4 non-clinical stage compounds have each been designated as a royalty-bearing product.

Luvadaxistat and the four non-clinical stage compounds have each been designated as a royalty-bearing product.

NBI-1065845 and NBI-1065846 are currently each designated as a profit-share product.

67 unchanged sentences

The remaining $ 143.9 million of the purchase price, which includes certain transaction-related costs, was expensed as IPR&D in the first quarter of 2023 as the license had no foreseeable alternative future use.

We recognized an unrealized gain of $ 9.3 million on our strategic investment in Voyager for the first quarter of 2023.

As of March 31, 2023, the fair value (Level 1) of our strategic investment in Voyager was $ 66.1 million.

We recognized unrealized gains of $ 32.1 million and $ 41.3 million, respectively, on our strategic investment in Voyager for the second quarter and first six months of 2023.

As of June 30, 2023, the fair value (Level 1) of our strategic investment in Voyager was $ 98.2 million.

Under the terms of the 2023 Voyager Agreement, Voyager may be entitled to receive potential future payments of up to $ 6.1 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, subject to certain co-development and co-commercialization rights retained by Voyager.

6 unchanged sentences

The termination is anticipated to be effective in December 2023.

Subject to certain conditions set forth in the license agreement, we may be required to continue to fulfill orders of ONGENTYS for a certain period of time following the date of notice of termination, or provide BIAL with the right to purchase our remaining inventory of ONGENTYS.

At BIAL’s discretion, for licensed products sold by us or our affiliates after the effective date of termination, we shall continue to make payments to BIAL in accordance with the terms and conditions of the agreement.

To the extent that BIAL does not intend to purchase such inventory, we will have the ability to sell such inventory subject to certain conditions set forth in the license agreement.

Mitsubishi Tanabe Pharma Corporation, or MTPC.

13 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 $ 3.7 million and $ 4.2 million, respectively, for the three months ended March 31, 2023 and 2022.

We receive royalties at tiered percentage rates on AbbVie net sales of elagolix and recognized elagolix royalty revenue of $ 4.2 million and $ 5.2 million, respectively, for the second quarter of 2023 and 2022 and $ 7.9 million and $ 9.4 million, respectively, for the first six months of 2023 and 2022.

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.

18 unchanged sentences

$ 346.6 $ 0.1 $ ( 4.1 ) $ 342.6 $ 304.5 $ 0.2 $ ( 5.3 ) $ 299.4

As of March 31, 2023, our security portfolio consisted of 251 debt securities available-for-sale, including 177 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 March 31, 2023 or December 31, 2022.

The following table presents debt securities available-for-sale that were in an unrealized loss position as of March 31, 2023, aggregated by major security type and length of time in a continuous loss position.

Unrealized losses on our available-for-sale debt security investments were primarily due to changes in interest rates.

These investments are of high credit quality, and 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, 2023 or December 31, 2022.

The following table presents debt securities available-for-sale that were in an unrealized loss position as of June 30, 2023, aggregated by major security type and length of time in a continuous loss position.

Less Than 12 Months 12 Months or Longer Total

3 unchanged sentences

Value Unrealized

Commercial paper $ 49.5 $ ( 0.1 ) $ — $ — $ 49.5 $ ( 0.1 )

Corporate debt securities $ 248.0 $ ( 2.4 ) $ 225.8 $ ( 2.9 ) $ 473.8 $ ( 5.3 )

9 unchanged sentences

Securities of government-sponsored entities $ 107.7 $ ( 2.5 ) $ 198.4 $ ( 4.5 ) $ 306.1 $ ( 7.0 )

Accrued interest receivables on debt securities available-for-sale totaled $ 4.4 million and $ 4.7 million, respectively, as of March 31, 2023 and December 31, 2022.

Accrued interest receivables on debt securities available-for-sale totaled $ 5.6 million and $ 4.7 million, respectively, as of June 30, 2023 and December 31, 2022.

We do not measure an allowance for credit losses for accrued interest receivables.

1 unchanged sentence

Uncollectible accrued interest receivables associated with an impaired debt security are reversed against interest income upon identification of the impairment.

No accrued interest receivables were written off during the three months ended March 31, 2023 or 2022.

No accrued interest receivables were written off during the first six months of 2023 or 2022.

Fair Value Measurements

15 unchanged sentences

$ 1,500.3 $ 341.2 $ 1,159.1 $ — $ 1,398.6 $ 372.8 $ 1,025.8 $ —

Inventories consisted of the following:

(in millions) March 31,

Inventories, net

Inventories, net, consisted of the following:

(in millions) June 30,

2023 December 31,

2 unchanged sentences

Finished goods 15.0 17.5

Total inventories $ 33.4 $ 35.1

Total inventories, net $ 31.7 $ 35.1

Goodwill and Intangible Assets

3 unchanged sentences

Foreign currency translation adjustments 0.3

Balance as of March 31, 2023

Intangible Assets

The following table presents information relating to our recognized intangible assets as of March 31, 2023.

Balance as of June 30, 2023

The following table presents information relating to our recognized intangible assets as of June 30, 2023.

(dollars in millions) Useful Life Gross Carrying Amount Accumulated Amortization Net

3 unchanged sentences

Total intangible assets, net $ 36.9

The following table presents approximate future annual amortization expense for our finite-lived intangible assets as of March 31, 2023.

The following table presents approximate future annual amortization expense for our finite-lived intangible assets as of June 30, 2023.

(in millions) Amount

3 unchanged sentences

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) March 31,

2023 March 31,

(in millions) June 30,

2023 June 30,

Cash and cash equivalents $ 160.2 $ 163.3

4 unchanged sentences

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

On February 8, 2022, we entered into a lease agreement for a four-building campus facility to be constructed in San Diego, California, pursuant to which we also secured a six-year option for the construction of a fifth building and an option to purchase the entire campus facility, which will consist of office space and research and development laboratories, in the future.

Upon completion of construction, we expect to utilize the campus facility as our new corporate headquarters.

This lease has not commenced for accounting purposes.

Under the terms of the lease, on a building-by-building basis, base rent will be subject to a 10-month rent abatement period following the respective lease commencement date, which dates will be determined in the future based upon achievement of substantial completion of construction with respect to each such building in the condition suitable for the installation of our furniture, fixtures, and equipment, and on which date we will record a lease liability, corresponding right-of-use asset, and begin lease expense recognition with respect to each such building.

After the rent abatement period, monthly base rent will be $ 6 per square foot, subject to annual escalations of 3 % during the initial 13.6-year lease term, which term we have the option to renew for two additional terms of five years each.

In connection with our operating leases, in lieu of a cash security deposits, Wells Fargo Bank, N.A.

1 unchanged sentence

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

Three Months Ended

Six Months Ended

(in millions, except weighted average data) 2023 2022

1 unchanged sentence

Cash paid for amounts included in the measurement of operating lease liabilities $ 8.8 $ 8.2

2023 March 31,

2023 June 30,

Weighted average remaining lease term

1 unchanged sentence

Weighted average discount rate 5.4 % 5.3 %

The following table presents approximate non-cancelable future minimum lease payments under operating leases as of March 31, 2023.

The following table presents approximate non-cancelable future minimum lease payments under operating leases as of June 30, 2023.

(in millions) Amount (1)

7 unchanged sentences

_________________________

(1) Amounts presented in the table above exclude $ 17.2 million for 2024, $ 33.3 million for 2025, $ 41.9 million for 2026, and $ 479.7 million thereafter of approximate non-cancelable future minimum lease payments under operating leases that have not yet commenced.

(1) Amounts presented in the table above exclude $ 17.2 million for 2024, $ 33.3 million for 2025, $ 41.9 million for 2026, $ 43.2 million for 2027 and $ 436.5 million thereafter of approximate non-cancelable future minimum lease payments under operating leases that have not yet commenced.

New Campus Facility.

On February 8, 2022, we entered into a lease agreement for a new four-building campus facility in San Diego, California.

This campus facility, comprised of office space and research and development laboratories, will serve as our new corporate headquarters upon completion of its construction.

Under the terms of the lease, we also secured a six-year option for the construction of a fifth building and an option to purchase the entire campus in the future.

Under the terms of the lease, on a building-by-building basis, base rent will be subject to a 10-month rent abatement period following the respective lease commencement date.

The commencement of this lease for accounting purposes will be determined for each building based upon its readiness for occupancy.

On a building-by-building basis, we will recognize a lease liability, corresponding right-of-use asset, and initiate lease expense recognition when this condition has been met.

Convertible Senior Notes

1 unchanged sentence

Interest on the 2024 Notes is due semi-annually on May 15 and November 15 of each year.

In 2020, we repurchased $ 136.2 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $ 186.9 million in cash.

In 2022, we repurchased $ 210.8 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $ 279.0 million in cash.

The following table presents a summary of the 2024 Notes as of March 31, 2023.

In 2020, we repurchased $ 136.2 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $ 186.9 million in cash, which resulted in the recognition of an $ 18.4 million loss on extinguishment.

In 2022, we repurchased $ 210.8 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $ 279.0 million in cash, 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, 2023.

Amount Unamortized Issuance Costs Net Carrying

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in millions) 2023 2022 2023 2022

3 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 March 31, 2023) 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 June 30, 2023) 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 March 31, 2023) 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;

8 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 (Loss) per Share

Earnings (loss) per share was calculated as follows:

Three Months Ended

June 30, Six Months Ended

(in millions, except per share data) 2023 2022 2023 2022

Net (loss) income - basic and diluted $ ( 76.6 ) $ 13.9

Net income (loss) - basic and diluted $ 95.5 $ ( 16.9 ) $ 18.9 $ ( 3.0 )

Weighted-average shares outstanding:

5 unchanged sentences

Diluted 100.2 95.6 100.3 95.4

(Loss) earnings per share, basic $ ( 0.79 ) $ 0.15

(Loss) earnings per share, diluted $ ( 0.79 ) $ 0.14

Earnings (loss) per share, basic $ 0.98 $ ( 0.18 ) $ 0.19 $ ( 0.03 )

Earnings (loss) per share, diluted $ 0.95 $ ( 0.18 ) $ 0.19 $ ( 0.03 )

Shares excluded from diluted per share amounts because their effect would have been anti-dilutive 6.7 12.5 5.6 12.2

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