What changed in this filing

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Item 1A. Risk Factors

2024-08-01 compared with 2024-05-01 · 40 added, 44 removed, 683 unchanged (11% of the section changed)

18 unchanged sentences

• We currently have no manufacturing capabilities.

If third-party manufacturers of INGREZZA or any of our other products, or any of our product candidates fail to devote sufficient time and resources to our concerns, or if their performance is substandard, our clinical trials and product introductions may be delayed, and our costs may rise.

If third-party manufacturers of INGREZZA or any of our other products, or any of our product candidates fail to devote sufficient time and resources to our concerns, or if their performance is substandard, our ability to commercialize existing products and conduct clinical trials and develop new products could be impaired and our costs may rise.

• We currently depend on a limited number of third-party suppliers.

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• If we are unable to protect our intellectual property, our competitors could develop and market products based on our discoveries, which may reduce demand for our products.

• Government and third-party payors may impose sales and pharmaceutical pricing controls on our products, or limit coverage and/or reimbursement for our products or impose policies and/or make decisions that regarding the status of our products that could limit our product revenues and delay sustained profitability.

• Our indebtedness could expose us to risks that could adversely affect our business, financial condition and results of operations.

• We have a history of losses and expect to increase our expenses for the foreseeable future, and we may not be able to sustain profitability.

• Government and third-party payors may impose sales and pharmaceutical pricing controls on our products, or limit coverage and/or reimbursement for our products or impose policies and/or make decisions regarding the status of our products that could limit our product revenues and delay sustained profitability.

• We expect to increase our expenses for the foreseeable future, and we may not be able to sustain profitability.

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

5 unchanged sentences

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

We have continued to invest in our commercial infrastructure and distribution capabilities since the launch of INGREZZA, including the recent expansion of our psychiatry and long-term care sales teams, which we announced in June 2024.

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 any of our other products, or any product candidate approved by the FDA, or equivalent foreign authorities, in the future.

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however, a number of different anti-seizure medications are currently used in these patient populations.

• Our investigational treatments for potential use in schizophrenia, anhedonia and depression may in the future compete with several development-stage programs being pursued by other companies.

Currently, there are no FDA-approved treatments specifically indicated for anhedonia or cognitive impairment associated with schizophrenia;

• Our investigational treatments for potential use in schizophrenia and depression may in the future compete with several development-stage programs being pursued by other companies.

Currently, there are no FDA-approved treatments specifically indicated for cognitive impairment associated with schizophrenia;

however, there are a number of different anti-psychotic medications currently used in these patient populations.

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• 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;

• we or the FDA or similar foreign regulatory authorities may suspend or vary the trials;

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• the FDA or similar foreign regulatory authorities may not accept the data from any trial or trial site outside of the U.S.;

• patients may drop out of the trials;

• a study is compromised due to patients dropping out and not completing the trials;

• unforeseen disruptions or delays may occur, caused by man-made or natural disasters or public health pandemics or epidemics or other business interruptions, including, for example, the conflict between Russia and Ukraine and the conflict in the Middle East;

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We collaborate with MTPC for the commercialization of DYSVAL in Japan and for the continued development and commercialization of valbenazine for movement disorders in other select Asian markets.

Our additional collaborators include Xenon Pharmaceuticals, Inc., Idorsia Pharmaceuticals Ltd., Takeda Pharmaceutical Company Limited, Nxera Pharma UK Limited (formerly Heptares Therapeutics Limited) and Voyager Therapeutics, Inc.

Our additional collaborators include Idorsia Pharmaceuticals Ltd., Nxera Pharma UK Limited (formerly Heptares Therapeutics Limited), Takeda Pharmaceutical Company Limited, Voyager Therapeutics, Inc., and Xenon Pharmaceuticals, Inc.

Our current and future collaborations and licenses could subject us to a number of risks, including:

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• strategic collaborators could develop, either alone or with others, products or product candidates that may compete with ours;

• our strategic collaborator’s decisions regarding the development and commercialization of a partnered product or product candidate within their territory(ies) could negatively impact us in the territories where we have development and commercialization rights for such product or product candidate.

If any of these issues arise, it may delay and/or negatively impact the development and commercialization of drug candidates and, ultimately, our generation of product revenues.

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

As of March 31, 2024, we had approximately 1,448 full-time employees.

As of June 30, 2024, we had approximately 1,500 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 sales force.

1 unchanged sentence

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

For example, we are in the process of implementing a new company-wide enterprise resource planning (ERP) system to streamline certain existing business, operational, and financial processes.

For example, we recently implemented a new company-wide enterprise resource planning (ERP) system to streamline certain existing business, operational, and financial processes.

This project has required and may continue to require investment of capital and human resources, the re-engineering of processes of our business, and the attention of many employees who would otherwise be focused on other aspects of our business.

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Our consultants may have commitments to, or advisory or consulting agreements with, other entities that may limit their availability to us.

In May 2024, we announced that Kevin Gorman, Ph.D., will retire as the Company's President and Chief Executive Officer on October 11, 2024 and that Kyle Gano, Ph.D., currently our Chief Business Development and Strategy Officer, will succeed Dr.

Gorman in the CEO role.

Gano will also join our Board of Directors effective as of October 11, 2024.

Gorman founded Neurocrine in 1992 and has held numerous positions across the Company, including Chief Operating Officer, Chief Business Officer, and Senior Vice President of Business Development, before being appointed CEO in 2008.

Gano was appointed Neurocrine’s Chief Business Development Officer in 2011, and Chief Business Development and Strategy Officer in 2020, and is responsible for all of Neurocrine’s business and corporate development activities.

Our Board of Directors worked closely with Dr.

Gorman on succession planning and believes Dr.

Gano and the senior leadership team are well-positioned to continue to execute our strategy.

Gorman will continue to serve on our Board of Directors and provide strategic direction to the Company, this leadership transition may be viewed negatively by investors, our strategic partners, or other stakeholders.

Further, if the transition is not managed effectively it could disrupt our operations and impact our financial condition and results.

*We currently have no manufacturing capabilities.

If third-party manufacturers of INGREZZA or any of our other products, or any of our product candidates fail to devote sufficient time and resources to our concerns, or if their performance is substandard, our ability to commercialize existing products and conduct clinical trials and develop new products could be impaired and our costs may rise.

We have in the past utilized, and intend to continue to utilize, third-party manufacturers to produce the drug compounds we use in our clinical trials and for the commercialization of our products.

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Drug Enforcement Administration, equivalent foreign regulatory authorities, and other agencies to ensure strict compliance with cGMP and other government regulations and corresponding foreign standards.

We do not have control over third-party manufacturers’ compliance with these regulations and standards.

Any delay, interruption, or other issue that arises in the manufacture of our products or product candidates as a result of a failure of a third-party manufacturer to pass regulatory inspections or maintain cGMP compliance could significantly impair our ability to develop, obtain approval for, or successfully commercialize our products.

Our current dependence upon third parties for the manufacture of our products may reduce our profit margin, if any, on the sale of INGREZZA or any of our other products, or our future products and our ability to develop and deliver products on a timely and competitive basis.

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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 (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 U.S., state and non-U.S.

Manufacturers of pharmaceutical products may encounter difficulties in production, such as difficulties with production costs and yields, process controls and validation, 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 U.S., state and non-U.S.

regulations, and disruptions or delays caused by man-made or natural disasters, pandemics or epidemics, or other business interruptions.

62 unchanged sentences

Consequently, a downward trend in prices of medicinal products in some countries could contribute to similar downward trends elsewhere.

*Our indebtedness could expose us to risks that could adversely affect our business, financial condition and results of operations.

In May 2017, we sold $517.5 million aggregate principal amount of the 2024 Notes.

In 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.

In 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 March 31, 2024, $170.4 million aggregate principal amount of the 2024 Notes remained outstanding.

In January 2024, we provided notice to the holders of the 2024 Notes electing to settle all conversions of the 2024 Notes which occur on or after January 15, 2024 in cash.

Although we have sufficient cash reserves to fully repay and settle the 2024 Notes at their scheduled maturity on May 15, 2024, we may incur additional indebtedness in the future.

Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay any additional indebtedness that we may incur.

In addition, any future indebtedness that we may incur may contain financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness.

If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full.

*We have a history of losses and expect to increase our expenses for the foreseeable future, and we may not be able to sustain profitability.

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

As of March 31, 2024, we had an accumulated deficit of $113.7 million as a result of historical operating losses.

*We expect to increase our expenses for the foreseeable future, and we may not be able to sustain profitability.

We received FDA approval for INGREZZA for tardive dyskinesia in April 2017 and for chorea associated with Huntington's disease in August 2023.

9 unchanged sentences

• implement additional internal systems and infrastructure;

• hire additional clinical, scientific, sales and marketing personnel.

• hire additional clinical, scientific, sales, marketing and administrative personnel.

We expect to increase our expenses and other investments in the coming years as we fund our operations and capital expenditures.

1 unchanged sentence

We may not be able to generate these revenues, and we may never achieve profitability on a sustained basis in the future.

In addition, there is no guarantee that our prioritization determinations regarding our R&D and clinical development programs, including the acceleration or discontinuation of certain programs and product candidates, will generate their expected benefits and/or meet investor expectations.

Our prioritization decisions may also adversely affect other internal programs and initiatives as well as our ability to recruit and retain skilled and motivated personnel.

Our failure to maintain or increase profitability on a sustained basis could negatively impact the market price of our common stock.

1 unchanged sentence

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 94% of our total product sales for the three months ended March 31, 2024 and approximately 97% of our accounts receivable balance as of March 31, 2024.

Four of these customers represented approximately 93% of our total product sales for the six months ended June 30, 2024 and approximately 97% of our accounts receivable balance as of June 30, 2024.

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.

5 unchanged sentences

• the commercial success of INGREZZA, ORILISSA, ORIAHNN, DYSVAL, and/or any of our other products;

• debt services obligations on the 2024 Notes;

• continued scientific progress in our R&D and clinical development programs;

8 unchanged sentences

• the cost of manufacturing our product candidates;

• the impact of the COVID-19 pandemic or a future pandemic or epidemic on our business;

• the impact of pandemics (such as the COVID-19 pandemic) or epidemics on our business;

• the cost of any strategic alliances, collaborations, product in-licensing, or acquisitions.

We intend to seek additional funding through strategic alliances and may seek additional funding through public or private sales of our securities, including equity securities.

In addition, during the second quarter of 2017, we issued the 2024 Notes and we have previously financed capital purchases and may continue to pursue opportunities to obtain additional debt financing in the future.

As of March 31, 2024, $170.4 million aggregate principal amount of the 2024 Notes remained outstanding.

In addition, we have previously financed capital purchases and may continue to pursue opportunities to obtain debt financing in the future.

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

Any additional equity financings will be dilutive to our stockholders and any additional debt financings may involve operating covenants that restrict our business.

Any additional equity financings will be dilutive to our stockholders and any debt financings may involve operating covenants that restrict our business.

The independent clinical investigators and contract research organizations that we rely upon to conduct our clinical trials may not be diligent, careful or timely, or may make mistakes in the conduct of our trials.

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Regulatory approvals for any of our product candidates, including crinecerfont, may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate.

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.

For 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 GCPs for any clinical trials that we conduct post-approval.

In addition, advertising and promotional materials for approved products must comply with FDA regulations and those of foreign regulatory authorities and may be subject to other potentially applicable federal and state laws.

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:

2 unchanged sentences

• refusal by the FDA or similar foreign regulatory authorities to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals;

• adverse inspection findings or other activities that temporarily delay manufacture and distribution of our products;

• adverse inspection findings, enforcement actions, or other activities that temporarily delay manufacture and distribution of our products;

• product seizure or detention, or refusal to permit the import or export of products;

108 unchanged sentences

HHS has issued and updated and will continue to issue and update guidance as these programs are implemented.

These provisions take effect progressively starting in 2023.

These provisions took effect progressively beginning in 2023.

On August 29, 2023, HHS announced the list of the first 10 drugs that will be subject to price negotiations, although the Medicare drug price negotiation program is currently subject to legal challenges.

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Our designation as a “specified small manufacturer” under the new Medicare Part D manufacturer discount program and our expected qualification under the small biotech exception for purposes of the Medicare drug price negotiation program are subject to various requirements and there is no assurance that we will continue to qualify for these exemptions in the future.

The loss or potential loss of these exemptions, including as a result of a potential acquisition or strategic transaction, could have an adverse impact on our business.

The loss or potential loss of these exemptions, including as a result of a third party acquiring us, could have an adverse impact on our business.

Prior to the IRA’s enactment, the most significant recent federal legislation impacting the pharmaceutical industry occurred in March 2010, when the ACA was signed into law.

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Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs.

While our interactions with healthcare professionals, including our speaker programs and other arrangements have been structured to comply with these laws and related guidance, it is possible that governmental and enforcement authorities will conclude that our business practices, or a rogue employee’s activities, may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws.

While our interactions with healthcare professionals, including our speaker programs and other arrangements have been structured to comply with these laws and related guidance, it is possible that governmental and enforcement authorities will conclude that our business practices, business practices of our vendors or consultants, or a rogue employee’s activities, may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws.

For example, we maintain a patient assistance program to help eligible patients afford our products.

These and other types of programs have become the subject of governmental scrutiny, and numerous organizations, including pharmaceutical manufacturers, have been subject to litigation, enforcement actions and settlements related to their patient assistance programs.

If our operations or activities are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to, without limitation, significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate.

If our operations or activities or those of our vendors are found to be in violation of any of the laws described above or any other applicable governmental regulations, we may be subject to, without limitation, significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate.

In addition, any sales of our product once commercialized outside the U.S.

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This market exclusivity does not, however, pertain to indications other than those for which the drug was specifically designated in the approval, nor does it prevent other types of drugs from receiving orphan designations or approvals in these same indications.

Further, even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the new drug is clinically superior to the orphan product or a market shortage occurs.

Further, even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the product is clinically superior to the orphan product or a market shortage occurs.

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.

109 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