What changed in this filing

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Item 1. Financial Statements

2023-10-31 compared with 2023-08-01 · 89 added, 59 removed, 410 unchanged (27% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data) June 30,

(in millions, except share data) September 30,

2023 December 31,

3 unchanged sentences

Accounts receivable 417.8 350.0

Inventories, net 31.7 35.1

Other current assets 108.2 79.1

31 unchanged sentences

NEUROCRINE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

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) 2023 2022 2023 2022

8 unchanged sentences

Total operating expenses 357.6 300.1 1,271.3 931.1

Operating income (loss) 73.6 54.7 ( 40.6 ) 57.8

Operating income 141.2 87.8 100.6 145.6

Other income (expense):

Interest expense ( 1.1 ) ( 1.2 ) ( 3.5 ) ( 6.0 )

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

Unrealized (loss) gain on equity security investments ( 40.1 ) 11.1 ( 0.6 ) 23.6

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

Investment income and other, net 15.6 0.2 37.4 2.8

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 )

Total other (expense) income, net

( 25.6 ) 10.1 33.3 ( 49.6 )

Income before provision for income taxes 115.6 97.9 133.9 96.0

Provision for income taxes 32.5 29.4 31.9 30.5

Net income 83.1 68.5 102.0 65.5

Foreign currency translation adjustments, net of tax ( 1.4 ) — 0.7 —

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

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

Earnings (loss) per share:

0.8 ( 1.8 ) 5.5 ( 12.3 )

Comprehensive income $ 82.5 $ 66.7 $ 108.2 $ 53.2

Earnings per share:

Basic $ 0.85 $ 0.72 $ 1.05 $ 0.69

9 unchanged sentences

(in millions) Shares $ Total

Balances at March 31, 2023

Balances at June 30, 2023

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

Net income — — — — 83.1 83.1

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

Other comprehensive loss, net of tax — — — ( 0.6 ) — ( 0.6 )

Stock-based compensation expense — — 47.8 — — 47.8

Issuances of common stock under stock plans 0.6 — 18.8 — — 18.8

Balances at June 30, 2023

Balances at September 30, 2023

98.2 $ 0.1 $ 2,308.5 $ ( 1.7 ) $ ( 304.8 ) $ 2,002.1

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

Other comprehensive loss, 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

5 unchanged sentences

Issuances of common stock under stock plans 1.7 — 29.9 — — 29.9

Balance at June 30, 2023

Balance at September 30, 2023

98.2 $ 0.1 $ 2,308.5 $ ( 1.7 ) $ ( 304.8 ) $ 2,002.1

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

Other comprehensive loss, net of tax — — — ( 12.3 ) — ( 12.3 )

2 unchanged sentences

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

Balance at June 30, 2022

Balance at September 30, 2022

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(in millions) 2023 2022

Cash flows from operating activities:

Net income (loss) $ 18.9 $ ( 3.0 )

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

Net income $ 102.0 $ 65.5

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

Stock-based compensation expense 156.2 129.6

47 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 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.

Such investments in publicly traded companies 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.

90 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 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.

We recognized an unrealized loss of $ 31.7 million for the third quarter of 2023 and an unrealized gain of $ 9.6 million for the first nine months of 2023 on our strategic investment in Voyager.

As of September 30, 2023, the fair value (Level 1) of our strategic investment in Voyager was $ 66.5 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.

21 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 $ 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.

We receive royalties at tiered percentage rates on AbbVie net sales of elagolix and recognized elagolix royalty revenue of $ 4.2 million and $ 6.1 million, respectively, for the third quarter of 2023 and 2022 and $ 12.0 million and $ 15.5 million, respectively, for the first nine 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.

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,

2023 December 31,

15 unchanged sentences

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.

No allowance for credit losses was recognized as of September 30, 2023 or December 31, 2022.

The following table presents debt securities available-for-sale that were in an unrealized loss position as of September 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

14 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 $ 5.6 million and $ 4.7 million, respectively, as of June 30, 2023 and December 31, 2022.

Accrued interest receivables on debt securities available-for-sale totaled $ 8.1 million and $ 4.7 million, respectively, as of September 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 first six months of 2023 or 2022.

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

Fair Value Measurements

3 unchanged sentences

Level 3 – Unobservable inputs that reflect our own assumptions about the assumptions that market participants would use in pricing the asset or liability when there is little, if any, market activity for the asset or liability at the measurement date.

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

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

September 30,

2023 December 31,

1 unchanged sentence

Value Leveling

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

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

Cash and money market funds $ 293.7 $ 293.7 $ — $ 262.9 $ 262.9 $ —

5 unchanged sentences

$ 1,690.6 $ 434.5 $ 1,256.1 $ 1,398.6 $ 372.8 $ 1,025.8

Inventories, net

Inventories, net, consisted of the following:

(in millions) June 30,

Inventories consisted of the following:

(in millions) September 30,

2023 December 31,

2 unchanged sentences

Finished goods 10.4 17.5

Total inventories, net $ 31.7 $ 35.1

Total inventories

$ 28.8 $ 35.1

Goodwill and Intangible Assets

The following table presents the changes in the carrying amount of goodwill.

Goodwill is included in other assets in our condensed consolidated balance sheets.

(in millions) Amount

1 unchanged sentence

Foreign currency translation adjustments 0.1

Balance as of June 30, 2023

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

Balance as of September 30, 2023

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

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

3 unchanged sentences

Total intangible assets, net $ 34.9

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

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

2023 June 30,

(in millions) September 30,

2023 September 30,

Cash and cash equivalents $ 293.7 $ 212.2

1 unchanged sentence

Total cash, cash equivalents and restricted cash $ 301.7 $ 220.0

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following:

(in millions) September 30,

2023 December 31,

Sales rebates and reserves $ 184.0 $ 131.9

Income taxes payable 72.7 9.0

Accrued employee related costs 68.6 72.8

Current branded prescription drug fee 44.5 27.5

Accrued development costs 39.5 39.1

Accounts payable and other accrued liabilities 93.8 67.3

Total accounts payable and accrued liabilities $ 503.0 $ 347.6

Our operating leases that have commenced have terms that expire beginning 2025 through 2031 and consist of office space and research and development laboratories, including our corporate headquarters.

4 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) 2023 2022

Operating lease cost $ 12.3 $ 12.5

Sublease income ( 0.3 ) —

Net operating lease cost $ 12.0 $ 12.5

Cash paid for amounts included in the measurement of operating lease liabilities $ 13.4 $ 12.2

2023 June 30,

September 30,

2023 September 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 June 30, 2023.

(in millions) Amount (1)

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

(in millions) Operating

2023 (3 months remaining)

$ 4.5 $ ( 0.4 )

Thereafter 54.4 ( 6.0 )

Total operating lease payments 130.7

Total operating lease payments (sublease income) 126.1 $ ( 13.2 )

Less accreted interest 22.4

10 unchanged sentences

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.

The construction of the campus facility is phased, with the first phase of construction relating to office space scheduled for completion by the end of 2023.

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.

As we prepare to occupy our new campus facility, we sublease certain of our existing leased premises when we determine there is excess leased capacity.

Certain of these subleases contain both lease and non-lease components.

Sublease income is recognized as an offset to operating expense on a straight-line basis over the lease term.

Income related to non-lease components is recognized in operating expenses as a reduction to costs we incur in relation to the head lease.

Convertible Senior Notes

3 unchanged sentences

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.

The following table presents a summary of the 2024 Notes as of September 30, 2023.

Amount Unamortized Issuance Costs Net Carrying

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(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 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.

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, 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 June 30, 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;

1 unchanged sentence

(iv) if we call the 2024 Notes for redemption, until the close of business on the business day immediately preceding the redemption date.

As the conditional conversion feature described under (i) above was triggered as of September 30, 2023, holders of the 2024 Notes may convert the 2024 Notes at any time during the period beginning on October 1, 2023, and ending at the close of business on December 29, 2023.

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.

5 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.

Earnings (Loss) per Share

Earnings (loss) 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) 2023 2022 2023 2022

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

Net income - basic and diluted $ 83.1 $ 68.5 $ 102.0 $ 65.5

Weighted-average shares outstanding:

5 unchanged sentences

Diluted 101.1 99.0 100.6 98.3

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 )

Earnings per share, basic $ 0.85 $ 0.72 $ 1.05 $ 0.69

Earnings per share, diluted $ 0.82 $ 0.69 $ 1.01 $ 0.67

Shares excluded from diluted per share amounts because their effect would have been anti-dilutive 4.4 4.9 5.2 5.5

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