What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-10 compared with 2024-02-09 · 389 added, 386 removed, 571 unchanged (58% of the section changed)

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Reserves for government rebates related to product sales

Description of the Matter The Company sells product to specialty pharmacies and specialty distributors in the US (collectively, “customers”).

Description of the Matter The Company sells product to specialty pharmacies and specialty distributors in the U.S.

(collectively, “customers”).

As described in Note 1 to the consolidated financial statements, the Company recognizes revenues for sales of INGREZZA to its customers after deducting management’s estimates of reserves, including drug coverage gap rebates, it will provide under government rebate programs (“government rebates”).

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Auditing the estimates of government rebates was complex and judgmental due to the level of uncertainty involved in management’s assumptions used in the measurement process.

In particular, management was required to estimate at December 31, 2023, the portion of product that is expected to be subject to a government rebate, the applicable contractual government rebate percentage by payor type underlying the revenue and the applicable rebate amount applicable for the payor type.

How We Addressed the Matter in Our Audit We tested the Company’s internal controls over management’s process for estimating the portion of product that is expected to be subject to a government rebate at December 31, 2023.

In particular, management was required to estimate the portion of product that is expected to be subject to a government rebate and the applicable contractual government rebate percentage by payor type underlying the revenue and the applicable rebate amount applicable for the payor type.

This included controls over management’s review of significant assumptions and other inputs into the estimation of government rebates including the accuracy of data used in the calculation.

To test management’s estimate of government rebate reserves our audit procedures included, among others, evaluating the methodologies used, testing the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by the Company in its analyses.

Specifically, we compared the significant assumptions to third-party reports used by the Company to estimate government rebate reserves at December 31, 2023.

Specifically, we compared the significant assumptions to third-party reports used by the Company to estimate product remaining in the distribution channel at December 31, 2024.

In addition, we compared the underlying government rebate percentages used in the Company’s analyses to those published by the applicable government entity.

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Cash and cash equivalents $ 233.0 $ 251.1

Debt securities available-for-sale 780.5 726.4

Accounts receivable, net

Inventory, net

Available-for-sale debt securities 843.1 780.5

Accounts receivable

Other current assets 112.1 97.8

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Deferred tax assets 485.7 362.6

Debt securities available-for-sale 687.5 299.4

Available-for-sale debt securities 739.5 687.5

Right-of-use assets 509.4 276.5

Equity securities 161.9 102.1

Equity investments 124.8 161.9

Property and equipment, net 82.6 70.8

Intangible assets, net 36.5 35.5

Other assets 49.6 25.0

Other noncurrent assets 15.5 49.6

Total assets $ 3,718.7 $ 3,251.4

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Noncurrent operating lease liabilities 455.1 258.3

Other long-term liabilities 106.3 29.7

Other noncurrent liabilities 166.2 106.3

Total liabilities 1,129.0 1,019.4

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Additional paid-in capital 2,554.6 2,382.0

Accumulated other comprehensive income (loss)

Accumulated deficit ( 157.1 ) ( 406.8 )

Accumulated other comprehensive income 5.8 7.0

Retained earnings (accumulated deficit)

29.2 ( 157.1 )

Total stockholders’ equity 2,589.7 2,232.0

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Collaboration revenue

24.7 26.5 47.8

Total revenues

2,355.3 1,887.1 1,488.7

Operating expenses:

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Operating income 570.5 250.9 249.0

Other income (expense):

Interest expense ( 4.6 ) ( 7.1 ) ( 25.8 )

Unrealized gain on equity securities

28.4 30.8 20.9

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

Investment income and other, net 57.4 11.2 3.8

Total other income (expense), net

81.2 ( 35.1 ) ( 1.1 )

Other (expense) income:

Unrealized (loss) gain on equity investments ( 37.1 ) 28.4 30.8

Charges associated with convertible senior notes ( 138.4 ) — ( 70.0 )

Interest income and other, net 91.0 52.8 4.1

Total other (expense) income, net ( 84.5 ) 81.2 ( 35.1 )

Income before provision for income taxes 486.0 332.1 213.9

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Foreign currency translation adjustments, net of tax

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

( 1.1 ) 2.4 2.9

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

( 0.1 ) 12.5 ( 9.1 )

Comprehensive income $ 340.1 $ 264.6 $ 148.3

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Paid-In Capital Accumulated

Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity

Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit)

Total Stockholders’ Equity

(in millions) Shares $

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Other comprehensive loss, net of tax — — — ( 6.2 ) — ( 6.2 )

Cumulative-effect adjustment due to adoption of ASU 2020-06 — — ( 106.8 ) — 74.5 ( 32.3 )

Stock-based compensation expense — — 173.1 — — 173.1

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Net income — — — — 249.7 249.7

Other comprehensive loss, net of tax — — — ( 6.2 ) — ( 6.2 )

Cumulative-effect adjustment due to adoption of ASU 2020-06 — — ( 106.8 ) — 74.5 ( 32.3 )

Other comprehensive income, net of tax — — — 14.9 — 14.9

Stock-based compensation expense — — 194.3 — — 194.3

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Issuances of common stock under stock plans 2.7 — 122.1 — — 122.1

Repurchases of common stock under accelerated buyback agreements ( 2.0 ) — ( 145.0 ) — ( 155.0 ) ( 300.0 )

Balances at December 31, 2024 99.4 $ 0.1 $ 2,554.6 $ 5.8 $ 29.2 $ 2,589.7

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Stock-based compensation expense 195.5 194.3 173.1

Charges associated with convertible senior notes 138.4 — 70.0

Depreciation 23.5 17.8 15.1

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( 26.2 ) ( 18.3 ) 3.7

Amortization of debt discount — — 16.2

Amortization of debt issuance costs 0.7 1.2 1.1

Amortization of intangible assets 3.6 3.5 0.5

Changes in fair value of equity securities

( 28.4 ) ( 30.8 ) ( 20.9 )

Changes in fair values of equity investments 37.1 ( 28.4 ) ( 30.8 )

Deferred income taxes

( 123.1 ) ( 56.7 ) 19.1

Loss on extinguishment of convertible senior notes — 70.0 —

Other 24.5 ( 0.2 ) 1.6

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Cash flows from investing activities:

Purchases of debt securities available-for-sale ( 1,379.9 ) ( 621.2 ) ( 800.1 )

Sales and maturities of debt securities available-for-sale 972.4 511.0 697.9

Purchases of available-for-sale debt securities ( 1,056.1 ) ( 1,379.9 ) ( 621.2 )

Sales and maturities of available-for-sale debt securities 967.5 972.4 511.0

Acquisition of business, net of cash acquired — — ( 42.7 )

Purchases of equity securities ( 31.3 ) ( 7.7 ) ( 4.6 )

Purchases of equity investments — ( 31.3 ) ( 7.7 )

Capital expenditures ( 38.2 ) ( 28.3 ) ( 16.5 )

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Issuances of common stock under benefit plans 122.1 65.3 44.7

Repurchases of convertible senior notes — ( 279.0 ) ( 0.1 )

Repurchases of common stock under accelerated buyback agreements ( 300.0 ) — —

Payments associated with convertible senior notes ( 308.8 ) — ( 279.0 )

Cash flows from financing activities ( 486.7 ) 65.3 ( 234.3 )

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Supplemental Disclosure:

Non-cash capital expenditures $ 2.5 $ 0.7 $ 1.9

Right-of-use assets obtained in exchange for new operating lease liabilities

$ 200.8 $ — $ 23.4

Accrued capital expenditures $ 2.2 $ 2.5 $ 0.7

Right-of-use assets acquired through operating leases $ 271.6 $ 200.8 $ —

Cash paid for interest $ 1.6 $ 3.8 $ 6.6

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Organization and Summary of Significant Accounting Policies

Organization and Business.

Business Overview and Summary of Significant Accounting Policies

Nature of Operations

Neurocrine Biosciences, Inc.

and its subsidiaries (Neurocrine Biosciences, the Company, we, our or us) is a neuroscience-focused biopharmaceutical company focused on discovering, developing and delivering innovative therapies to help ease the burden of debilitating disorders and diseases.

We operate in a single business segment, which includes all activities related to the research, development and commercialization of pharmaceuticals for the treatment of neurological, neuroendocrine and neuropsychiatric disorders and reflects the way in which internally-reported financial information is regularly reviewed by our chief operating decision maker to analyze performance, make decisions and allocate resources.

Principles of Consolidation.

The consolidated financial statements include the accounts of Neurocrine Biosciences as well as our wholly owned subsidiaries.

All intercompany transactions and balances have been eliminated in consolidation.

and its subsidiaries (Neurocrine Biosciences, the Company, we, our, or us) is a neuroscience-focused global biopharmaceutical company focused on discovering, developing, and delivering innovative therapies to help ease the burden of debilitating disorders and diseases.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), which requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements.

Actual results could differ from those estimates.

Basis of Consolidation

The consolidated financial statements include the accounts of Neurocrine Biosciences as well as our wholly owned subsidiaries.

All intercompany transactions and balances have been eliminated in consolidation.

Revenue Recognition

We recognize revenue when the customer obtains control of promised goods or services in an amount that reflects the consideration which we expect to receive in exchange for such goods or services.

Revenue is recognized using a five-step model:

(i) identify contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenues when (or as) we satisfy the performance obligation.

Product Revenue

We sell INGREZZA ® (valbenazine) in the U.S.

primarily to specialty pharmacy providers and distributors and CRENESSITY TM (crinecerfont) in the U.S.

to a specialty pharmacy provider.

Net product sales of INGREZZA totaled $ 2.3 billion for 2024, $ 1.8 billion for 2023, and $ 1.4 billion for 2022 and accounted for substantially all of our total net product sales during each of these years.

Product revenue is recorded net of reserves for variable consideration, including discounts and allowances offered within contracts with our customers, payors, and other third parties.

These reserves, classified as reductions of accounts receivable or liabilities, are based on estimates and include the following categories:

• Product discounts represent estimated obligations for trade term discounts and other incentives offered to our customers.

We accrue for product discounts based on actual historical discounts, including the timing of customer payments.

• Distributor and other fees represent fees for inventory management, data, and distribution services and are generally recorded as a reduction of revenue or expensed as selling, general, and administrative to the extent we can demonstrate a separable benefit and fair value for these services.

• Government rebates represent estimated obligations to government agencies under the Medicaid Drug Rebate Program and Medicare Part D and are recorded as a reduction of revenue in the period the related revenue is recognized.

We accrue for government rebates based on estimated claims for the current quarter, estimated claims for prior quarters for which an invoice has not been received, and claims for prior quarters for which an invoice has been received but not paid.

• Chargebacks represent estimated obligations to our customers for differences between list and contract prices.

We accrue for chargebacks as a reduction of revenue based on estimated contractual discounts on product inventory levels on-hand in our distribution channel.

• Payor and pharmacy rebates represent estimated obligations to payors and pharmacies for contract discounts on product sales and are recorded as a reduction of revenue in the period the related revenue is recognized.

We accrue for payor and pharmacy rebates based on actual historical rebates, contractual rebate percentages, sales made through the payor channel, and purchases made by pharmacies.

• Copay assistance represents financial assistance to qualified patients with prescription drug copay requirements.

We accrue for copay assistance as a reduction of revenue based on estimated claims and the cost per claim we expect to receive in connection with inventory that exists in the distribution channel at period end.

• Product returns represent estimated obligations for return rights offered to our customers due to shipment errors and damaged product and are recorded as a reduction of revenue in the period the related revenue is recognized.

We accrue for product returns based on actual historical returns, benchmarking data, and industry experience.

Collaboration Revenues

We have entered into collaboration and license agreements under which we out-license certain rights to our product candidates to third parties.

For arrangements that include sales-based royalties, and under which the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Each quarterly period, sales-based royalties are recorded based on estimated quarterly net sales of the associated collaboration products.

Differences between actual results and estimated amounts are adjusted for in the period in which they become known, which typically follows the quarterly period in which the estimate was made.

To date, actual royalties received have not differed materially from our estimates.

Cash Equivalents

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Our exposure to credit losses may increase if our customers are adversely affected by changes in healthcare laws, coverage and reimbursement, economic pressures or uncertainty associated with local or global economic recessions, or other customer-specific factors.

Inventory is valued at the lower of cost or net realizable value.

We determine the cost of inventory using the standard-cost method, which approximates actual cost based on the first-in, first-out method.

We perform an assessment of the recoverability of our inventory on a quarterly basis and write down any excess and obsolete inventory to its net realizable value in the period in which the impairment is first identified.

When future commercialization is considered probable and the future economic benefit is expected to be realized, based on management’s judgment, we capitalize pre-launch inventory costs prior to regulatory approval.

Debt Securities

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We classify debt securities as available-for-sale.

Debt securities available-for-sale are recorded at fair value, with unrealized gains and losses included in other comprehensive income or loss, net of tax.

Available-for-sale debt securities are recorded at fair value, with unrealized gains and losses included in other comprehensive income or loss, net of tax.

We exclude accrued interest from both the fair value and amortized cost basis of debt securities.

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Interest accrued but not received for a debt security placed on nonaccrual status is reversed against interest income.

Interest income includes amortization of purchase premium or discount.

Premiums and discounts on debt securities are amortized using the effective interest rate method.

Interest income includes amortization (accretion) of purchase premiums (discounts).

Premiums (discounts) on debt securities are amortized (accreted) using the effective interest rate method.

Gains and losses on sales of debt securities are recorded on the trade date in investment income and other, net, and determined using the specific identification method.

Allowance for Credit Losses

For debt securities available-for-sale in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell, the security before recovery of its amortized cost basis.

For available-for-sale debt securities in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell, the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through earnings.

For debt securities available-for-sale that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors.

For available-for-sale debt securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes in interest rates, and any changes to the rating of the security by a rating agency, among other factors.

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Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income or loss, as applicable.

Accrued interest receivables on debt securities available-for-sale were $ 11.2 million and $ 4.7 million, respectively, as of December 31, 2023 and 2022.

Accrued interest receivables on available-for-sale debt securities were $ 14.4 million and $ 11.2 million, respectively, as of December 31, 2024 and 2023.

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

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No accrued interest receivables were written off during 2024, 2023, or 2022.

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk include cash and cash equivalents, investments in debt securities, and accounts receivable.

To minimize the risks related to cash and cash equivalents and investments in debt securities, we have established guidelines related to credit ratings and maturities intended to safeguard principal balances and maintain liquidity.

Our investment portfolio is maintained in accordance with our investment policy, which defines allowable investments, specifies credit quality standards, and limits the credit exposure of any single issuer.

To minimize the risks related to accounts receivable, which are typically unsecured, we monitor the financial performance and creditworthiness of our customers so that we can properly assess and respond to changes in their credit profiles.

The following table presents the percent of total gross product sales and total accounts receivable for each of our customers who individually accounted for 10% or more of total gross product sales and/or 10% or more of total accounts receivable.

Percent of Percent of

Total Gross Product Revenues Accounts Receivable

Year Ended December 31, December 31,

(in millions) 2024 2023 2022 2024 2023

Customer A 43 % 36 % 14 % 41 % 46 %

Customer B 28 % 28 % 29 % 37 % 32 %

Customer C 13 % 15 % 18 % 11 % 12 %

Customer D < 10 % 12 % 29 % < 10 % < 10 %

Equity Investments

We account for certain equity investments subject to the equity method of accounting, or through which we have the ability to exercise significant influence (but not control) over the operating and financial policies of an investee, under the fair value option.

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 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.

Fair Value of Financial Instruments

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We deem transfers between levels of the fair value hierarchy to have occurred at the end of the reporting period during which the event or change in circumstances that caused the transfer occurred.

Equity Investments.

Inventory is valued at the lower of cost or net realizable value.

We determine the cost of inventory using the standard-cost method, which approximates actual cost based on the first-in, first-out method.

Prior to U.S.

Food and Drug Administration (FDA) approval of CRENESSITY in December 2024, all costs related to its manufacturing were expensed as research and development (R&D) in the period incurred.

As a result, our physical inventory as of December 31, 2024 included active pharmaceutical product with no cost basis.

Costs related to the manufacturing of bulk drug product, finished bottling, and other labeling activities that occurred post-FDA approval are included in the inventory value as of December 31, 2024.

We determine if an arrangement is a lease at contract inception.

Right-of-use (ROU) assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

When determining the lease term, we include options to extend or terminate the lease when it is reasonably certain that such options will be exercised.

As none of our operating leases provide an implicit rate, we use our incremental borrowing rate based on the inform ation available at commencement date in determining the present value of lease payments.

Our incremental borrowing rate is determined using a secured borrowing rate for the same currency and term as the associated lease.

The lease payments used to determine our ROU assets may include prepaid or accrued lease payments and any lease incentives received and are recognized in ROU assets on our consolidated balance sheets.

Our lease agreements may include both lease and non-lease components, which we account for as a single lease component when the payments are fixed.

Variable payments included in lease agreements are expensed as incurred.

Our operating leases are reflected in ROU assets, noncurrent operating lease liabilities, and other current liabilities on our consolidated balance sheets.

Lease expense for minimum lease paymen ts is recognized on a straight-line basis over the lease term.

Impairment of ROU Assets

ROU assets are reviewed for impairment when indicators of impairment are present.

ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities.

An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

Corporate ROU assets that are actively being marketed for sublease in connection with excess leased capacity are tested for impairment individually when the cash flows related to the ROU asset are determined to be independent from the cash flows of other assets and liabilities.

Corporate ROU assets are otherwise tested for impairment on a consolidated level with consideration given to all cash flows of the company as corporate functions do not generate cash flows and are funded by revenue-producing activities at lower levels of the entity.

Property and Equipment

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Depreciation expense was $ 23.5 million for 2024, $ 17.8 million for 2023, and $ 15.1 million for 2022.

Business Combinations.

Under the acquisition method of accounting, we allocate the fair value of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition.

These valuations require us to make estimates and assumptions, especially with respect to intangible assets.

We record the excess consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, as goodwill.

In addition, costs that we incur to complete the business combination, such as legal and other professional fees, are expensed as selling, general and administrative when incurred.

Goodwill, Intangible Assets, and Other Long-Lived Assets

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Factors that may indicate potential impairment include a significant decline in our stock price and market capitalization compared to the net book value, significant changes in the ability of a particular asset to generate positive cash flows for our strategic business objectives, and the pattern of utilization of a particular asset.

We determine if an arrangement is a lease at contract inception.

Right-of-use (ROU) assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

When determining the lease term, we include options to extend or terminate the lease when it is reasonably certain that such options will be exercised.

As none of our operating leases provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Our incremental borrowing rate is determined using a secured borrowing rate for the same currency and term as the associated lease.

The lease payments used to determine our ROU assets may include prepaid or accrued lease payments and any lease incentives received and are recognized in ROU assets in our consolidated balance sheets.

Our lease agreements may include both lease and non-lease components, which we account for as a single lease component when the payments are fixed.

Variable payments included in lease agreements are expensed as incurred.

Our operating leases are reflected in ROU assets, noncurrent operating lease liabilities, and other current liabilities in our consolidated balance sheets.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Foreign currency.

Assets and liabilities are translated into the reporting currency using the exchange rates in effect on the consolidated balance sheet dates.

Equity accounts are translated at historical rates, except for the change in retained earnings during the period, which is the result of the income statement translation process.

Revenue and expense accounts are translated using the weighted average exchange rate during the period.

The cumulative translation adjustments associated with the net assets of foreign subsidiaries are recorded in accumulated other comprehensive income (loss) in the accompanying consolidated statements of stockholders’ equity.

Revenue Recognition.

We recognize revenue when the customer obtains control of promised goods or services in an amount that reflects the consideration which we expect to receive in exchange for such goods or services.

Revenue is recognized using a five-step model:

(i) identify contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenues when (or as) we satisfy the performance obligation.

We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

Net Product Sales.

In the U.S., we sell INGREZZA ® (valbenazine) primarily to specialty pharmacy providers and distributors.

We recognize net product sales when the customer obtains control of our product, which occurs at a point in time, typically upon delivery of our product to the customer.

Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, payors, and other third parties.

Such estimates are based on information received from external sources (such as written or oral information obtained from our customers with respect to their period-end inventory levels and sales to end-users during the reporting period), as supplemented by management’s judgement.

Our process for estimating reserves established for these variable consideration components does not differ materially from historical practices.

The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenue recognized will not occur in a future period.

Actual amounts may ultimately differ from our estimates.

If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.

Our significant categories of sales discounts and allowances are as follows:

Product Discounts.

Product discounts are based on payment terms extended to our customers at the time of sale, which include incentives offered for prompt payment.

We maintain a reserve for product discounts based on our historical experience, including the timing of customer payments.

To date, actual product discounts have not differed materially from our estimates.

Government Rebates.

We are obligated to pay rebates for discounts including under the Medicaid Drug Rebate Program and Medicare Part D.

The liability for such rebates consists of invoices received for claims from prior quarters that remain unpaid, or for which an invoice has not been received, and estimated rebates for the current applicable reporting period.

Such estimates are based on actual historical rebates by state, estimated payor mix, state and federal regulations, and relevant contractual terms, as supplemented by management’s judgement.

Our rebate accrual calculations require us to project the magnitude of our sales that will be subject to these rebates.

There is a significant time-lag in our receiving rebate notices from each state (generally, several months or longer after a sale is recognized).

Estimated rebates are recorded as a reduction of revenue in the period the related sale is recognized.

To date, actual government rebates have not differed materially from our estimates.

The difference between the list price, or the price at which we sell our products to our customers, and the contracted price, or the price at which our customers sell our products to qualified healthcare professionals, is charged back to us by our customers.

In addition to actual chargebacks received, we maintain a reserve for chargebacks based on estimated contractual discounts on product inventory levels on-hand in our distribution channel.

To date, actual chargebacks have not differed materially from our estimates.

Payor and Pharmacy Rebates.

We are obligated to pay rebates as a percentage of sales under payor and pharmacy contracts.

We estimate these rebates based on actual historical rebates, contractual rebate percentages, sales made through the payor channel, and purchases made by pharmacies.

To date, actual payor and pharmacy rebates have not differed materially from our estimates.

Patient Financial Assistance.

To help patients afford our products, we offer financial assistance to qualified patients with prescription drug copay requirements.

We accrue for patient financial assistance based on estimated claims and the cost per claim we expect to receive in connection with inventory that remains in the distribution channel at period end.

To date, actual patient financial assistance has not differed materially from our estimates.

Distributor and Other Fees.

In connection with the sales of our products, we pay distributor and other fees, which are generally recorded as a reduction of revenue, to certain customers that provide us with inventory management, data, and/or distribution services.

Costs associated with such services are expensed as selling, general and administrative to the extent we can demonstrate a separable benefit and fair value for such services.

To date, actual distributor and other fees have not differed materially from our estimates.

Product Returns.

We offer our customers product return rights primarily limited to errors in shipment, damaged product, and expiring product, provided it is within a specified period of the product expiration date, as set forth in the associated distribution agreement.

Where actual returns history is not available, we estimate a returns allowance based on benchmarking data for similar products and industry experience.

Such estimates are recorded as a reduction of revenue in the period the related sale is recognized.

Once product is returned, it is destroyed.

To date, actual product returns have not differed materially from our estimates.

Collaboration Revenues.

We have entered into collaboration and license agreements under which we out-license certain rights to our product candidates to third parties.

The terms of these arrangements typically include payment to us for one or more of the following:

non-refundable, up-front license fees;

development, regulatory, and/or commercial milestone payments;

and royalties on net sales of the out-licensed products.

Licenses of Intellectual Property.

If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use, and benefit from, the license.

For licenses that are bundled with other promises, we assess the nature of the combined performance obligation to determine whether it is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees.

We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

At the inception of each arrangement that includes development, regulatory, and/or commercial milestones, we evaluate whether achieving the milestones is considered probable and estimate the amount to be included in the transaction price using the most likely amount method.

If it is probable that a significant revenue reversal would not occur, the value of the associated milestone is included in the transaction price.

Amounts for milestones that are not within our control, such as when achievement of a specified event is dependent on the development activities of a third party or approvals from regulators, are not considered probable of being achieved until such specified event occurs.

Revenue is recognized from the satisfaction of performance obligations in the amount billable to the customer.

Each quarterly period, sales-based royalties are recorded based on estimated quarterly net sales of the associated collaboration products.

Differences between actual results and estimated amounts are adjusted for in the period in which they become known, which typically follows the quarterly period in which the estimate was made.

To date, actual royalties received have not differed materially from our estimates.

Concentration of Credit Risk.

Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash and cash equivalents, accounts receivable and debt securities available-for-sale.

We have established guidelines to limit our exposure to credit risk by diversifying our investment portfolio with low-risk investment-grade debt securities with maturities of up to three years and by placing our investments with high-credit-quality financial institutions to maintain liquidity.

To date, we have not experienced any credit losses and do not believe we are exposed to any significant credit risk in connection with these financial instruments.

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 91 % of our total product sales for 2023 and approximately 98 % of our accounts receivable balance as of December 31, 2023.

Share Repurchases

Shares repurchased pursuant to our share repurchase program are immediately retired upon purchase.

Repurchased common stock is reflected as a reduction of stockholders' equity by reducing our common stock for the par value of the shares repurchased and reducing our capital surplus for the excess of the repurchase price over the par value.

The excess over the par value of the shares repurchased is recorded as a reduction to retained earnings to the extent available, with any remainder recorded as a reduction to additional paid-in capital.

Cost of Revenues

Cost of revenues includes third-party manufacturing, transportation, freight, and indirect overhead costs primarily for the manufacture and distribution of INGREZZA drug product sold, manufacturing costs in connection with our supply of valbenazine drug product under our collaboration with Mitsubishi Tanabe Pharma Corporation, royalty fees on net sales of elagolix, amortization of intangible assets, and adjustments for excess and obsolete inventory to the extent management determines that the cost cannot be recovered based on estimates about future demand.

Research and Development, or R&D.

R&D expenses primarily consist of preclinical and clinical trial costs, payroll and benefits costs, including stock-based compensation associated with employees involved in R&D activities, certain facility-based costs, and costs associated with our collaborative arrangements, including event-based milestones.

Cost of revenues includes third-party manufacturing, transportation, freight, and indirect overhead costs primarily for the manufacture and distribution of INGREZZA drug product sold, manufacturing costs in connection with our supply of valbenazine drug product under our collaboration with Mitsubishi Tanabe Pharma Corporation, royalties on net sales of CRENESSITY and elagolix, amortization of intangible assets, and adjustments for excess and obsolete inventory to the extent management determines that the cost cannot be recovered based on estimates about future demand.

Research and Development

R&D expenses primarily consist of preclinical and clinical trial costs, payroll and benefits costs, including stock-based compensation associated with employees involved in R&D activities, certain facility-based costs, and certain costs associated with our collaborative arrangements.

All such costs are expensed as R&D when incurred.

Collaborations and Other Arrangements

We enter into collaborative agreements with third parties to develop and commercialize drug candidates.

Collaborative activities may include joint R&D and commercialization of new products.

We generally receive certain licensing rights under these arrangements.

These collaborations often require upfront payments and may include additional milestone, R&D cost sharing, royalty, or profit share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development and commercialization.

Upfront payments associated with collaborative arrangements are generally expensed as IPR&D.

Amounts paid or payable to the partner in connection with the achievement of development milestones prior to regulatory approval are expensed as R&D when such milestones are achieved.

Regulatory and commercial milestone payments made to the partner subsequent to regulatory approval are capitalized as intangible assets and amortized to cost of revenues over the estimated useful life of the related asset.

Royalties are expensed as cost of revenues when incurred.

Asset Acquisitions

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Intangible assets acquired in an asset acquisition for use in R&D activities which have no alternative future use are expensed as IPR&D on the acquisition date.

Amounts paid to acquire such assets are classified as operating cash outflows on the consolidated statements of cash flows.

Future costs to develop these assets are expensed as R&D when incurred.

Advertising Expense.

Advertising costs are expensed as selling, general and administrative when incurred.

Advertising expense was $ 159.9 million for 2023, $ 149.7 million for 2022 and $ 139.8 million for 2021.

Costs associated with advertising are expensed as incurred and are included in selling, general, and administrative on the consolidated statements of income.

Advertising expenses were $ 191.0 million for 2024, $ 159.9 million for 2023, and $ 149.7 million for 2022.

Stock-Based Compensation

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Expense related to PRSUs is generally recognized ratably over the expected performance period once the predefined performance-based criteria for vesting becomes probable.

Income Taxes.

Our income tax provision is computed under the asset and liability method.

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Diluted earnings per share are computed using the treasury stock and if-converted methods and reflect the weighted average number of common and potentially dilutive shares outstanding during the period, excluding those which effect would be anti-dilutive.

In 2021, we entered into the First Supplemental Indenture to the 2017 Indenture, pursuant to which we irrevocably elected to settle the principal amount of the 2.25 % fixed-rate convertible senior notes due May 15, 2024 in cash upon conversion and to settle any conversion premium in either cash or shares of our common stock.

As a result, only the shares required to settle any conversion premium are considered dilutive under the if-converted method.

Further, PRSUs for which the performance condition has not been achieved are excluded from the calculation of diluted earnings per share.

PRSUs for which the performance condition has not been achieved are excluded from the calculation of diluted earnings per share.

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis.

ASU 2023-07 is effective for annual reporting periods beginning after December 15, 2023, and for interim reporting periods beginning January 1, 2025.

We adopted ASU 2023-07 for our annual reporting period beginning on January 1, 2024.

The adoption of ASU 2023-07 had no significant impact on our financial statement disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction.

ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted.

We are currently evaluating the impact that adoption of ASU 2023-09 will have on our financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, which requires public entities to disclose specified information about certain costs and expenses on an interim and annual basis.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

We are currently evaluating the impact that adoption of ASU 2024-03 will have on our financial statement disclosures.

Collaboration and License Agreements

Heptares Therapeutics Limited, or Heptares.

We entered into a collaboration and license agreement with Heptares, which became effective in December 2021, to develop and commercialize certain compounds containing sub-type selective muscarinic M1, M4, or dual M1/M4 receptor agonists, for which we have the exclusive rights to develop, manufacture and commercialize worldwide, excluding in Japan, where Heptares retains the rights to develop, manufacture, and commercialize all compounds comprised of M1 receptor agonists, subject to certain exceptions.

With respect to such rights retained by Heptares, we retain the rights to opt in to profit sharing arrangements, pursuant to which we and Heptares will equally share in the operating profits and losses for such compounds in Japan.

Subject to specified conditions, we may elect to exercise such opt-in rights with respect to each such compound either before initiation of the first proof of concept Phase 2 clinical trial for such compound or following our receipt from Heptares of the top-line data from such clinical trial for such compound.

Nxera Pharma UK Limited, or Nxera.

In 2021, we entered into a collaboration and license agreement with Nxera (formerly Sosei Heptares) to develop and commercialize certain compounds containing sub-type selective muscarinic M1, M4, or dual M1/M4 receptor agonists, which we have the exclusive rights to develop, manufacture and commercialize worldwide, excluding in Japan, where Nxera retains the rights to develop, manufacture, and commercialize all compounds comprised of M1 receptor agonists, subject to certain exceptions.

With respect to such rights retained by Nxera, we retain the rights to opt in to profit sharing arrangements, pursuant to which we and Nxera will equally share in the operating profits and losses for such compounds in Japan.

Subject to specified conditions, we may elect to exercise such opt-in rights with respect to each such compound either before initiation of the first proof of concept Phase 2 clinical trial for such compound or following our receipt from Nxera of the top-line data from such clinical trial for such compound.

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

In connection with the agreement, we paid Heptares $ 100.0 million upfront, which, including certain transaction-related costs, was expensed as IPR&D in 2021 as the license had no foreseeable alternative future use.

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

In connection with the FDA's acceptance of our investigational new drug application for NBI-1117568 for the treatment of schizophrenia in June 2022, we paid Heptares a milestone of $ 30.0 million, which was expensed as R&D in 2022.

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

In connection with the FDA's acceptance of our investigational new drug application for NBI-1117568 for the treatment of schizophrenia in 2022, we expensed a milestone payment of $ 30.0 million to Nxera as R&D in 2022.

In connection with the successful completions of a long-term toxicity program for NBI-1117568 and a Phase 2 clinical study for NBI-1117568 in schizophrenia in 2024, we expensed milestone payments totaling $ 50.0 million to Nxera as R&D in 2024.

We expect to advance NBI-1117568 into Phase 3 development in the first half of 2025, which would trigger a milestone of $ 15.0 million payable to Nxera upon initiation of the Phase 3 clinical study.

Under the terms of the agreement, Nxera may be entitled to receive potential future payments of up to $ 2.5 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.

Unless earlier terminated, the agreement will continue on a licensed product-by-licensed product and country-by-country basis until the date on which the royalty term for such licensed product has expired in such country.

On a licensed product-by-licensed product and country-by-country basis, royalty payments would commence on the first commercial sale of a licensed product and terminate on the later of (i) the expiration of the last patent covering such licensed product in such country, (ii) a number of years from the first commercial sale of such licensed product in such country and (iii) the expiration of regulatory exclusivity for such licensed product in such country.

We may terminate the agreement in its entirety or with respect to one or more targets upon 180 days’ written notice to Heptares during the research collaboration term and upon 90 days’ written notice to Heptares following the expiration of the research collaboration term.

Following the expiration of the research collaboration term, Heptares may terminate the agreement on a target-by-target basis in the event that we do not conduct any material development activities outside of Japan with respect to a certain compound or licensed product within the applicable target class for a continuous period of not less than 365 days and do not commence any such activities within 120 days of receiving written notice.

We may terminate the agreement in its entirety or with respect to one or more targets upon 180 days’ written notice to Heptares during the research collaboration term and upon 90 days’ written notice to Nxera following the expiration of the research collaboration term.

Following the expiration of the research collaboration term, Nxera may terminate the agreement on a target-by-target basis in the event that we do not conduct any material development activities outside of Japan with respect to a certain compound or licensed product within the applicable target class for a continuous period of not less than 365 days and do not commence any such activities within 120 days of receiving written notice.

Either party may terminate the agreement, subject to specified conditions, (i) in the event of material breach by the other party, subject to a cure period, (ii) if the other party challenges the validity or enforceability of certain intellectual property rights, subject to a cure period, or (iii) if the other party becomes insolvent or takes certain actions related to insolvency.

Takeda Pharmaceutical Company Limited, or Takeda.

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 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.

We are responsible for all manufacturing, development, and commercialization costs of any royalty-bearing product.

With respect to NBI-1065845 and NBI-1065846, we and Takeda will equally share in the operating profits and losses.

Takeda retains the rights to opt-out of the profit-sharing arrangements, pursuant to which Takeda would be entitled to receive potential future payments upon the achievement of certain event-based milestones with respect to such compounds and receive royalties on the future net sales of such compounds (in lieu of equally sharing in the operating profits and losses).

Takeda may elect to exercise such opt-out right for such compound immediately following the completion of a second Phase 2 clinical trial for such compound, or, under certain circumstances related to the development and commercialization activities to be performed by us, before the initiation of a Phase 3 clinical trial for such compound.

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

Under the terms of the agreement, Takeda may be entitled to receive potential future payments of up to $ 1.9 billion upon the achievement of certain event-based milestones and would be entitled to receive royalties on the future net sales of any royalty-bearing product.

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

In 2020, we entered into an exclusive license agreement with Takeda (the 2020 Takeda Agreement) , pursuant to which we acquired the exclusive rights to develop and commercialize certain early to mid-stage psychiatry compounds, including luvadaxistat, NBI-1070770, osavampator (formerly NBI-1065845), NBI-1065846, and three non-clinical stage compounds.

Pursuant to the 2020 Takeda Agreement, osavampator was designated as a profit-share product, meaning we and Takeda would equally share in the operating profits and losses.

Takeda also retained the right to opt-out of the profit-sharing arrangement, pursuant to which Takeda would be entitled to receive potential future payments upon the achievement of certain event-based milestones with respect to osavampator and receive royalties on the future net sales of osavampator (in lieu of equally sharing in the operating profits and losses).

In 2024, we provided Takeda with written notice of termination of the license under the 2020 Takeda Agreement to develop and commercialize luvadaxistat and NBI-1065846.

The termination is anticipated to be effective in April 2025.

In January 2025, we and Takeda amended and restated the exclusive license agreement (the Restated Takeda Agreement) to, among other things, reflect the conversion from sharing operating profits and losses with respect to the development and commercialization of osavampator to a royalty-bearing license, the return of rights to osavampator in Japan to Takeda, and our previous termination of DAAO inhibitors under the 2020 Takeda Agreement, including luvadaxistat, and GPR139 agonists, including NBI-1065846.

Under the Restated Takeda Agreement, we will retain exclusive rights to develop and commercialize osavampator for all indications in all territories worldwide except Japan, where Takeda will reacquire exclusive development and commercialization rights.

In addition, each party is responsible for development costs for osavampator in its respective territory, and each party is eligible to receive royalty payments based on the other party’s net sales of osavampator in the other party’s territory.

Pursuant to the Restated Takeda Agreement and upon the successful development and commercialization of osavampator, we expect tiered based royalties payable to Takeda to be in the mid-to-upper teens in the U.S.

and low double-digits outside of the U.S.

on a blended basis as a percentage of net sales.

Additionally, we are entitled to receive royalties from Takeda on the future net sales of osavampator in Japan.

In connection with the approval of our clinical trial application for NBI-1070770 for the treatment of major depressive disorder in 2022, we expensed a milestone payment of $ 5.0 million to Takeda as R&D in 2022.

In connection with the initiation of a Phase 2 clinical study for NBI-1070770 in major depressive disorder in 2024, we expensed a milestone payment of $ 7.5 million to Takeda as R&D in 2024.

Takeda may be entitled to receive potential future payments upon the achievement of certain event-based milestones.

As of December 31, 2024, the aggregate amount of these potential future payments was up to $ 1.9 billion, excluding the effects of the Restated Takeda Agreement and any pending terminations.

Takeda is also entitled to receive royalties on the future net sales of any royalty-bearing product.

In January 2025, we advanced osavampator into Phase 3 development to evaluate the efficacy and safety of osavampator in adults with major depressive disorder.

The initiation of the Phase 3 study, as defined, will trigger a $ 35.0 million milestone payable to Takeda.

No expense was recognized in connection with this milestone in 2024.

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

and (ii) for any profit-share product, for so long as we continue to develop, manufacture, or commercialize such licensed product.

On a licensed product-by-licensed product and country-by-country basis, royalty payments would commence on the first commercial sale of a royalty-bearing product and terminate on the later of (i) the expiration of the last patent covering such royalty-bearing product in such country, (ii) a number of years from the first commercial sale of such royalty-bearing product in such country and (iii) the expiration of regulatory exclusivity for such royalty-bearing product in such country.

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

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

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

Subject to a cure period, either party may terminate the agreement in the event of any material breach, solely with respect to the target class of a licensed product to which such material breach relates, or in its entirety in the event of any material breach that relates to all licensed products.

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

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

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

Subject to a cure period, either party may terminate the Restated Takeda Agreement in the event of any material breach, solely with respect to the target class of a licensed product to which such material breach relates, or in its entirety in the event of any material breach that relates to all licensed products, or if either party challenges the validity or enforceability of certain intellectual property rights.

Idorsia Pharmaceuticals Ltd., or Idorsia.

In 2020, we entered into a collaboration and license agreement with Idorsia, pursuant to which we acquired the global rights to NBI-827104, a potent, selective, orally active and brain penetrating T-type calcium channel blocker in clinical development for the treatment of a rare pediatric epilepsy and other potential indications, including essential tremor.

In 2020, we entered into a collaboration and license agreement with Idorsia, pursuant to which we acquired the exclusive rights to develop and commercialize NBI-827104, a potent, selective, orally active and brain penetrating T-type calcium channel blocker in clinical development for the treatment of a rare pediatric epilepsy and other potential indications, including essential tremor.

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

Under the terms of the agreement, Idorsia may be entitled to receive potential future payments of up to $ 1.7 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.

We may terminate the agreement, in its entirety or with respect to a particular compound or development candidate, upon 90 days’ written notice to Idorsia.

Further, in the event a party commits a material breach and fails to cure such material breach within 90 days after receiving written notice thereof, the non-breaching party may terminate the agreement in its entirety immediately upon written notice to the breaching party.

In the fourth quarter of 2024, we provided Idorsia with written notice of termination of the license agreement to develop and commercialize NBI-827104.

The termination became effective in January 2025.

Xenon Pharmaceuticals Inc., or Xenon.

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We are responsible for all development and manufacturing costs of any collaboration product, subject to certain exceptions.

In connection with the agreement, we purchased approximately 1.4 million shares (at $ 14.196 per share) of Xenon common stock in 2019.

The purchased shares were recorded at a fair value of $ 14.1 million after considering Xenon’s stock price and certain transfer restrictions that were applicable to the shares on the measurement date.

In connection with the regulatory approval of our clinical trial application in Europe for NBI-921352 for the treatment of focal onset seizures in adults in 2021, we paid Xenon a regulatory milestone of $ 10.0 million, including a purchase of approximately 0.3 million shares (at $ 19.9755 per share) of Xenon common stock.

The purchased shares were recorded at a fair value of $ 4.6 million after considering Xenon’s stock price and certain transfer restrictions that were applicable to the shares on the measurement date.

The remaining $ 5.4 million of the milestone payment was expensed as R&D in 2021.

In connection with the FDA's acceptance of our amended KAYAK TM study protocol in 2022, we paid Xenon a regulatory milestone of $ 15.0 million, including a purchase of approximately 0.3 million shares (at $ 31.855 per share) of Xenon common stock.

The purchased shares were recorded at a fair value of $ 7.7 million after considering Xenon’s stock price on the measurement date.

In connection with the achievement of a development milestone in 2022, we paid Xenon $ 15.0 million, including a purchase of 0.3 million shares (at $ 31.855 per share) of Xenon common stock (the 2022 Xenon Shares).

The 2022 Xenon Shares were recorded at a fair value of $ 7.7 million after considering Xenon’s stock price on the measurement date.

The remaining $ 7.3 million of the milestone payment was expensed as R&D in 2022.

Under the terms of the agreement, Xenon may be entitled to receive potential future payments of up to $ 1.7 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.

and we and Xenon would equally share in the development costs of such product in the applicable indication, except where such development costs relate solely to the regulatory approval of such product outside the U.S.

Under the terms of the agreement, Xenon may be entitled to receive potential future payments of up to $ 1.7 billion upon the achievement of certain event-based milestones and is entitled to receive royalties on the future net sales of any collaboration product.

Xenon retains the right to elect to co-develop one product in a major indication, pursuant to which Xenon would receive a mid-single digit percentage increase in royalties earned on the future net sales of such product in the United States and we and Xenon would equally share in the development costs of such product in the applicable indication, except where such development costs relate solely to the regulatory approval of such product outside the United States.

Unless earlier terminated, the agreement will continue on a licensed product-by-licensed product and country-by-country basis until the expiration of the royalty term for such product in such country.

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2019 Voyager Agreement

In 2019, we entered into a collaboration and license agreement with Voyager (the 2019 Voyager Agreement), pursuant to which we retain certain rights to develop and commercialize the Friedreich’s ataxia program and two undisclosed programs.

We are responsible for all development and commercialization costs of any collaboration product under the 2019 Voyager Agreement, subject to certain co-development and co-commercialization rights retained by Voyager.

In connection with the 2019 Voyager Agreement, we purchased approximately 4.2 million shares (at $ 11.9625 per share) of Voyager common stock (the 2019 Purchased Shares), which are subject to certain transfer, beneficial ownership, and voting restrictions for a period of up to three years from the effective date of the 2023 Voyager Agreement (defined below).

The 2019 Purchased Shares were recorded at a fair value of $ 54.7 million after considering Voyager’s stock price and certain transfer restrictions that were applicable to the shares on the measurement date.

Under the terms of the 2019 Voyager Agreement, Voyager may be entitled to receive potential future payments of up to $ 1.3 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.

In connection with the 2019 Voyager Agreement, we purchased 4.2 million shares (at $ 11.9625 per share) of Voyager common stock (the 2019 Voyager Shares), which are subject to certain transfer, beneficial ownership, and voting restrictions for a period of up to three years from the effective date of the 2023 Voyager Agreement (defined below).

The 2019 Voyager Shares were recorded at a fair value of $ 54.7 million after considering Voyager’s stock price and certain transfer restrictions that were applicable to the shares on the measurement date.

In connection with the selection of a development candidate under the FA program pursuant to our collaboration with Voyager, we expensed a milestone payment of $ 5.0 million to Voyager as R&D in 2024.

Under the terms of the 2019 Voyager Agreement, Voyager may be entitled to receive potential future payments of up to $ 1.3 billion upon the achievement of certain event-based milestones and is 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.

Unless terminated earlier, the 2019 Voyager Agreement will continue in effect until the expiration of the last to expire royalty term with respect to any collaboration product under the agreement or the last expiration or termination of any exercised co-development and co-commercialization rights by Voyager as provided for in the 2019 Voyager Agreement.

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2023 Voyager Agreement

In 2023, we entered into a collaboration and license agreement with Voyager (the 2023 Voyager Agreement), pursuant to which we acquired the global rights to the gene therapy products directed to the gene that encodes glucosylceramidase beta 1 (GBA1) for the treatment of Parkinson's disease and other diseases associated with GBA1 (the GBA1 Program), and three gene therapy programs directed to rare central nervous system (CNS) targets, each enabled by Voyager's next-generation TRACER TM capsids.

In 2023, we entered into a collaboration and license agreement with Voyager which we amended in April 2024 (as amended, the 2023 Voyager Agreement), pursuant to which we acquired the global rights to the gene therapy products directed to the gene that encodes glucosylceramidase beta 1 (GBA1) for the treatment of Parkinson's disease and other diseases associated with GBA1 (the GBA1 Program), and three gene therapy programs directed to rare central nervous system (CNS) targets, each enabled by Voyager's next-generation TRACER TM capsids.

With respect to collaboration products subject to the GBA1 Program, we are responsible for all development and commercialization costs of any such products, including in the U.S., where Voyager retains certain co-development and co-commercialization rights.

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(in lieu of Voyager being entitled to receive potential future payments of certain event-based milestones upon their achievement in the U.S.

and receive royalties on the future net sales of such products in the U.S.), following Voyager’s receipt of the top-line data from a first Phase 1 clinical trial for each such product.

and receive royalties on the future net sales of such products in the U.S.), following Voyager’s receipt of the top-line data from a first clinical trial Parkinson’s disease.

However, if we and Voyager elect to focus on an indication other than Parkinson’s disease prior to Voyager’s receipt of top-line data from a first clinical trial for Parkinson’s disease, then Voyager may elect to exercise such co-development and co-commercialization rights after the later of:

(i) Voyager’s receipt of top-line data from the first clinical trial of a product that is the subject of the GBA1 Program or (ii) the date we and Voyager decide not to pursue Parkinson’s disease as an indication for development under the GBA1 Program.

Irrespective of Voyager’s election to exercise such rights, Voyager may be entitled to receive potential future payments upon the achievement of certain event-based milestones outside the U.S.

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With respect to collaboration products subject to the three gene therapy programs directed to rare CNS targets, we are responsible for all development and commercialization costs for any such products.

In connection with the 2023 Voyager Agreement, we paid Voyager $ 175.0 million upfront, including a purchase of approximately 4.4 million shares (at $ 8.88 per share) of Voyager common stock (the 2023 Purchased Shares), which are subject to certain transfer, beneficial ownership, and voting restrictions for a period of up to three years from the effective date of the 2023 Voyager Agreement.

In addition, as part of the collaboration, Jude Onyia, Ph.D., Chief Scientific Officer of Neurocrine, was appointed to Voyager's board of directors with an initial term expiring in 2024.

Onyia (or another individual designated by us) will be nominated for election to Voyager's board of directors annually for a maximum duration of 10 years from the effective date of the 2023 Voyager Agreement.

As a result, our strategic investment in Voyager became subject to the equity method of accounting, and Voyager became a related party under ASC 850, following our purchase of the 2023 Purchased Shares, after which, together with the 2019 Purchased Shares, we owned approximately 19.9 % of the voting stock of Voyager.

We elected the fair value option to account for our strategic investment in Voyager as we believe it creates greater transparency regarding the investment's fair value at future reporting dates.

The 2023 Purchased Shares were recorded at a fair value of $ 31.3 million after considering Voyager’s stock price on the measurement date.

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

In connection with the 2023 Voyager Agreement, we paid Voyager $ 175.0 million upfront, including a purchase of 4.4 million shares (at $ 8.88 per share) of Voyager common stock (the 2023 Voyager Shares), which are subject to certain transfer, beneficial ownership, and voting restrictions for a period of up to three years from the effective date of the 2023 Voyager Agreement.

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

We recognized unrealized gains of $ 15.5 million for 2023 and $ 14.5 million for 2022 and an unrealized loss of $ 8.7 million for 2021 on our strategic investment in Voyager.

As of December 31, 2023, the fair value (Level 1) of our strategic investment in Voyager was $ 72.4 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.

In addition, as part of the collaboration, Jude Onyia, Ph.D., Chief Scientific Officer of Neurocrine Biosciences, was appointed to Voyager's board of directors.

As a result, our equity investment in Voyager became subject to the equity method of accounting, and Voyager became a related party, following our purchase of the 2023 Voyager Shares, after which, together with the 2019 Voyager Shares, we owned approximately 19.9 % of the voting stock of Voyager.

We elected the fair value option to account for our equity investment in Voyager as we believe it creates greater transparency regarding the investment's fair value at future reporting dates.

The 2023 Voyager Shares were recorded at a fair value of $ 31.3 million after considering Voyager’s stock price on the measurement date.

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

In connection with the selection of two development candidates under the GBA1 program pursuant to our collaboration with Voyager, we expensed milestone payments totaling $ 6.0 million to Voyager as R&D in 2024.

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 is 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.

Unless terminated earlier, the 2023 Voyager Agreement will continue in effect until the expiration of the last to expire royalty term with respect to any collaboration product under the 2023 Voyager Agreement or the last expiration or termination of any exercised co-development and co-commercialization rights by Voyager as provided for in the 2023 Voyager Agreement.

We may terminate the 2023 Voyager Agreement upon 180 days’ written notice to Voyager prior to the first commercial sale of any collaboration product under the 2023 Voyager Agreement or upon one year after the date of notice if such notice is provided after the first commercial sale of any collaboration product under the 2023 Voyager Agreement.

BIAL – Portela & Ca, S.A., or BIAL.

In 2017, we received from BIAL a license to commercialize and market ONGENTYS ® (opicapone) in the U.S.

We launched ONGENTYS in the U.S.

as an FDA-approved add-on treatment to levodopa/carbidopa in patients with Parkinson's disease experiencing motor fluctuations in 2020.

In 2023, we provided BIAL with written notice of termination of the license agreement to commercialize and market ONGENTYS in the U.S.

and Canada, and recognized reserves for ONGENTYS inventory obsolescence totaling $ 5.2 million in cost of revenues in connection with the termination, which became effective in December 2023, as management determined the cost cannot be recovered.

Sanofi S.A., or Sanofi.

In 2014, we entered into a license agreement with Sanofi, pursuant to which we acquired the global rights to develop and commercialize certain corticotropin-releasing factor type 1 receptor (CRF1) antagonists, including crinecerfont.

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

In connection with FDA approval of CRENESSITY capsules and oral solution as an adjunctive treatment of classic congenital adrenal hyperplasia (CAH) in December 2024, we paid a $ 5.0 million milestone to Sanofi in January 2025, which we accrued to other current liabilities and recorded within intangible assets, net on the consolidated balance sheet as of December 31, 2024.

Under the terms of the agreement, Sanofi may be entitled to receive potential future payments of up to $ 10.0 million upon the achievement of certain event-based milestones and is entitled to receive royalties at tiered percentage rates ranging from 3.0 % to 5.0 % on our future net sales of CRENESSITY in the U.S.

for the longer of 16 years or the life of the related patent rights.

Mitsubishi Tanabe Pharma Corporation, or MTPC.

We out-licensed the rights to valbenazine in Japan and other select Asian markets to MTPC in 2015.

In 2015, we out-licensed the rights to valbenazine in Japan and other select Asian markets to MTPC.

In 2020, we entered into a commercial supply agreement with MTPC, pursuant to which we supply MTPC with valbenazine drug product for commercial use in such markets.

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AbbVie Inc., or AbbVie.

We out-licensed the global rights to elagolix to AbbVie in 2010.

In 2010, we out-licensed the global rights to elagolix to AbbVie.

AbbVie is responsible for all development and commercialization costs of elagolix.

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In such event, all out-licensed product rights would revert to us.

Debt Securities

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.

Available-for-Sale Debt Securities

The following table presents a summary of available-for-sale debt securities, aggregated by major security type and contractual maturity.

2024 December 31,

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$ 738.8 $ 2.3 $ ( 1.6 ) $ 739.5 $ 684.6 $ 3.4 $ ( 0.5 ) $ 687.5

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

Unrealized losses on available-for-sale debt securities 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 December 31, 2023 or 2022.

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

No allowance for credit losses was recognized as of December 31, 2024 or December 31, 2023.

The following table presents available-for-sale debt securities that were in an unrealized loss position as of December 31, 2024, aggregated by major security type and length of time in a continuous loss position.

Less Than 12 Months 12 Months or Longer Total

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Securities of government-sponsored entities $ 123.8 $ ( 0.6 ) $ — $ — $ 123.8 $ ( 0.6 )

The following table presents debt securities available-for-sale that were in an unrealized loss position as of December 31, 2022, aggregated by major security type and length of time in a continuous loss position.

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

Less Than 12 Months 12 Months or Longer Total

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Value Unrealized

Commercial paper

$ 32.1 $ ( 0.2 ) $ — $ — $ 32.1 $ ( 0.2 )

Corporate debt securities $ 265.1 $ ( 0.4 ) $ 183.8 $ ( 1.0 ) $ 448.9 $ ( 1.4 )

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Fair Value Measurements

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

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

2024 December 31,

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

Cash and money market funds $ 251.1 $ 251.1 $ — $ 262.9 $ 262.9 $ —

Restricted cash 8.0 8.0 — 7.8 7.8 —

Commercial paper 53.5 — 53.5 156.0 — 156.0

Corporate debt securities 867.2 — 867.2 548.4 — 548.4

Securities of government-sponsored entities 547.3 — 547.3 321.4 — 321.4

Equity securities

161.9 161.9 — 102.1 102.1 —

$ 1,889.0 $ 421.0 $ 1,468.0 $ 1,398.6 $ 372.8 $ 1,025.8

Convertible Senior Notes

On May 2, 2017, we completed a private placement of $ 517.5 million in aggregate principal amount of 2.25 % fixed-rate convertible senior notes due May 15, 2024 (the 2024 Notes) and entered into the 2017 Indenture with respect to the 2024 Notes.

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, which resulted in the recognition of a $ 70.0 million loss on extinguishment.

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

Amount Unamortized Issuance Costs Net Carrying

Amount Fair Value

(in millions) Amount Leveling

2024 Notes $ 170.4 $ ( 0.3 ) $ 170.1 $ 295.7 Level 2

The following table presents a summary of the 2024 Notes as of December 31, 2022.

Amount Unamortized Issuance Costs Net Carrying

Amount Fair Value

(in millions) Amount Leveling

2024 Notes $ 170.4 $ ( 1.0 ) $ 169.4 $ 268.0 Level 2

The following table presents a summary of the interest expense of the 2024 Notes.

Year Ended December 31,

(in millions) 2023 2022 2021

Coupon interest $ 3.9 $ 5.9 $ 8.5

Amortization of debt discount and issuance costs 0.7 1.2 17.3

Total interest expense

$ 4.6 $ 7.1 $ 25.8

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 December 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.

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 December 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;

(iii) upon the occurrence of specified corporate events, including a merger or a sale of all or substantially all of our assets;

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

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.

On January 4, 2024, we provided notice to the holders of the 2024 Notes electing to settle all conversions of the 2024 Notes in cash.

As such, upon conversion, holders will receive the principal amount of their 2024 Notes and any conversion premium, calculated based on the per share volume-weighted average price for each of the 30 consecutive trading days during the observation period (as more fully described in the 2017 Indenture), in cash.

If we undergo a fundamental change (as defined in the 2017 Indenture), subject to certain conditions, holders of the 2024 Notes may require us to repurchase for cash all or part of their 2024 Notes at a repurchase price equal to 100 % of the principal amount of the 2024 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

In addition, if a make-whole fundamental change (as defined in the 2017 Indenture) occurs prior to January 15, 2024, we would, in certain circumstances, increase the conversion rate for a holder who elects to convert their notes in connection with the make-whole fundamental change.

The 2024 Notes are our general unsecured obligations that rank senior in right of payment to all of our indebtedness that is expressly subordinated in right of payment to the 2024 Notes, and equal in right of payment to our unsecured indebtedness.

The 2024 Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness or the issuance or repurchase of securities by us.

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.

Goodwill and Intangible Assets

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

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

(in millions) Amount

Balance as of December 31, 2021 $ —

Goodwill recognized in connection with business combination 5.2

Foreign currency translation adjustments 0.2

Balance as of December 31, 2022 5.4

Foreign currency translation adjustments 0.4

Balance as of December 31, 2023 $ 5.8

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

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

Carrying Amount

Developed product rights 10 years $ 35.9 $ 4.0 $ 31.9

Acquired IPR&D Indefinite $ 3.6 $ — 3.6

Total intangible assets, net $ 35.5

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

(in millions) Amount

Year ending December 31, 2024

Year ending December 31, 2025

Year ending December 31, 2026

Year ending December 31, 2027

Year ending December 31, 2028

Thereafter $ 13.9

Other Balance Sheet Details

Inventory, net, consisted of the following:

(in millions) 2023 2022

Raw materials $ 21.5 $ 12.0

Work in process 9.7 5.6

Finished goods 12.3 17.5

Less inventory reserves

Total inventory, net

$ 38.3 $ 35.1

Property and equipment, net, consisted of the following:

(in millions) 2023 2022

Tenant improvements $ 38.1 $ 37.9

Scientific equipment 79.6 58.8

Computer equipment 25.2 21.5

Furniture and fixtures 10.9 6.7

Less accumulated depreciation ( 83.0 ) ( 66.3 )

Total property and equipment, net $ 70.8 $ 58.6

Accounts payable and accrued liabilities consisted of the following:

(in millions) 2023 2022

Sales rebates and reserves $ 139.3 $ 131.9

Accrued employee related costs 86.2 72.8

Current branded prescription drug fee 45.7 27.5

Accrued development costs 44.3 39.1

Current income taxes payable

Accounts payable and other accrued liabilities 108.9 67.3

Total accounts payable and accrued liabilities $ 448.8 $ 347.6

Other long-term liabilities consisted of the following:

(in millions) 2023 2022

Noncurrent income taxes payable

$ 96.0 $ 19.8

Noncurrent branded prescription drug fee

Total other long-term liabilities

$ 106.3 $ 29.7

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

(in millions) 2023 2022

Cash and cash equivalents $ 233.0 $ 233.0 $ — $ 251.1 $ 251.1 $ —

Restricted cash 8.0 7.8

Total cash, cash equivalents and restricted cash $ 259.1 $ 270.7

Available-for-sale debt securities 1,582.6 — 1,582.6 1,468.0 — 1,468.0

Equity investments 124.8 124.8 — 161.9 161.9 —

$ 1,940.4 $ 357.8 $ 1,582.6 $ 1,881.0 $ 413.0 $ 1,468.0

Earnings Per Share

11 unchanged sentences

Shares which have been excluded from diluted per share amounts because their effect would have been anti-dilutive were 2.4 million for 2024, 4.7 million for 2023, and 4.6 million for 2022.

Stockholders’ Equity

Share Repurchases

During 2024, we entered into an accelerated share repurchase (ASR) transaction with a third-party financial institution to repurchase an aggregate of $ 300.0 million of shares of the Company’s common stock.

The transaction was accounted for as a treasury stock transaction and a forward stock purchase contract, which was considered indexed to the Company’s own stock and classified as an equity instrument.

At inception, we paid the financial institution $ 300.0 million using cash on hand and took initial delivery of 2.0 million shares, which resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares for both basic and diluted earnings per share.

The fair market value of the 2.0 million initial shares received was $ 240.5 million, with the par value of the initial shares received recorded as a reduction to common stock, the excess of the fair market value over the par value of the initial shares received recorded as a reduction to retained earnings to the extent available, and the remainder recorded as a reduction to additional paid-in capital.

The remaining $ 59.5 million of the repurchase price was recorded to additional paid-in capital.

The ASR transaction terminated in February 2025, at which time we became contractually entitled to receive an additional 0.3 million shares upon settlement.

Stock-Based Compensation

2020 Equity Incentive Plan

In May 2022, our stockholders approved an amendment of the 2020 Equity Incentive Plan (as so amended, the Amended 2020 Plan).

In May 2022, 2023, and 2024, our stockholders approved amendments of the 2020 Equity Incentive Plan (as so amended, the Amended 2020 Plan).

The Amended 2020 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards, and other awards.

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Stock-Based Compensation Expense

The effect of stock-based compensation expense on our consolidated statements of income and comprehensive income by line-item follows:

The effect of stock-based compensation expense on the consolidated statements of income and comprehensive income by line-item follows:

Year Ended December 31,

(in millions) 2024 2023 2022

Selling, general and administrative expense $ 126.3 $ 115.4 $ 85.8

Research and development expense 68.0 57.7 48.4

Selling, general, and administrative

$ 126.7 $ 126.3 $ 115.4

Research and development

68.8 68.0 57.7

Total stock-based compensation expense $ 195.5 $ 194.3 $ 173.1

62 unchanged sentences

The fair value of PRSUs is estimated based on the closing sale price of our common stock on the date of grant.

The fair value of PRSUs that vested during 2023 was $ 34.4 million.

The fair value of PRSUs that vested was $ 34.4 million during 2023.

No PRSUs vested during 2024 or 2022.

5 unchanged sentences

Granted 0.1 $ 138.90

Released ( 0.3 ) $ 98.43

Canceled ( 0.2 ) $ 115.60

Unvested at December 31, 2024

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Income before provision for income taxes $ 486.0 $ 332.1 $ 213.9

The following table presents the components of income tax expense (benefit) for continuing operations.

The following table presents the components of income tax expense for continuing operations.

Year Ended December 31,

18 unchanged sentences

Officer compensation 3.3 9.6 9.2

Foreign rate differential

7.2 3.4 ( 0.2 )

Change in tax rate ( 0.6 ) ( 5.5 ) ( 1.1 )

Expired tax attributes — — 0.6

Research credits ( 49.2 ) ( 42.2 ) ( 29.9 )

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Net deferred tax assets $ 485.7 $ 362.6

As of December 31, 2023, our deferred tax assets were primarily the result of net operating loss carry forwards, capitalized research costs, acquired intangible assets and tax credit carryforwards.

As of December 31, 2024 and 2023, we recorded a valuation allowance of $ 112.2 million and $ 88.9 million, respectively, against our gross deferred tax asset balance.

14 unchanged sentences

We recognize interest and penalties related to income tax matters in income tax expense.

We had accruals for interest related to income tax matters of $ 3.1 million and $ 1.2 million, respectively, as of December 31, 2023 and 2022.

We had accruals for penalties relates to income tax matters of $ 2.2 million and $ 0.4 million, respectively, as of December 31, 2023 and 2022.

Accruals for interest and penalties related to income tax matters were not material as of December 31, 2021.

We had accruals for interest related to income tax matters of $ 10.9 million as of December 31, 2024 and $ 3.1 million as of December 31, 2023.

We had accruals for penalties related to income tax matters of $ 2.2 million as of December 31, 2024 and 2023.

We are subject to taxation in the U.S.

and various state and foreign jurisdictions.

Tax years for 2020 for federal, inception for California, 2016 to 2020 for other significant state jurisdictions, and 2021 and forward for foreign are subject to examination by tax authorities due to the carryforward of unutilized net operating losses and R&D tax credits.

Our tax years for 2002 for federal, 2000 for California, 2015 for other significant state jurisdictions, and 2019 and forward for foreign jurisdictions are subject to examination by tax authorities due to the carryforward of unutilized net operating losses and R&D tax credits.

The following table presents a summary of activity related to unrecognized tax benefits.

5 unchanged sentences

Decrease related to prior year tax positions

Expiration of the statute of limitations for the assessment of taxes — — ( 1.7 )

Balance at December 31 $ 179.8 $ 121.0 $ 84.5

1 unchanged sentence

We do not expect a significant change in our unrecognized tax benefits in the next 12 months.

In 2021, the OECD announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%.

Subsequently, multiple sets of administrative guidance have been issued.

Many non-U.S.

tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including EU Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years.

We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-U.S.

tax jurisdictions we operate in.

Our operating leases that have commenced have terms that expire beginning 2025 through 2036 and consist of office space and research and development laboratories, including our corporate headquarters.

Our operating leases have terms that expire beginning 2025 through 2036 and consist of office space and research and development laboratories, including our corporate headquarters.

Certain of these lease agreements contain clauses for renewal at our option.

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Noncurrent operating lease liabilities $ 455.1

_________________________

(1) Amounts presented in the table above exclude $ 15.4 million for 2025, $ 23.6 million for 2026, $ 24.3 million for 2027, $ 25.1 million for 2028 and $ 223.5 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 four-building campus facility to be constructed in San Diego, California, including a six-year option for the construction of a fifth building.

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

The construction of the campus facility is phased.

We recognized ROU assets of $ 199.0 million and operating lease liabilities of $ 189.8 million in association with the commencement of operating leases following the completion of the first phase of construction relating to office space in December 2023.

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

This campus facility, comprised of office space and research and development laboratories, now serves as our new corporate headquarters.

The construction of the new campus facility was phased.

In connection with the completion of the first phase of construction relating to office space, we recognized ROU assets of $ 199.0 million and operating lease liabilities of $ 189.8 million in December 2023.

In connection with the completion of the second phase of construction relating to laboratory space, we recognized ROU assets of $ 258.9 million and operating lease liabilities of $ 211.7 million in October 2024.

As we continue to occupy our new campus facility, certain of our existing leased properties will be marketed for sublease when we determine there is excess leased capacity.

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

1 unchanged sentence

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

Impairment of ROU Assets

During 2024, we reassessed the asset groupings for corporate ROU assets that are actively being marketed for sublease in connection with leased office space that has been vacated as we continue to occupy our new campus facility.

For asset groups where impairment was triggered, we used discounted cash flow models (an income approach) with Level 3 inputs to estimate the fair values of the asset groups and recognized corresponding impairment charges totaling $ 14.0 million in 2024, of which $ 11.3 million and $ 2.7 million, respectively, was related to the ROU assets and tenant improvements associated with the underlying leased properties.

The significant assumptions used in the discounted cash flows models included projected sublease income over the remaining lease term, expected downtime prior to the commencement of executed or future subleases, and discount rates that reflected a market participant's assumptions in valuing the asset groups.

Convertible Senior Notes

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

In 2020, we repurchased $ 136.2 million in 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 in 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.

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

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.

Consequently, the embedded conversion option of the 2024 Notes (the conversion feature) required bifurcation and separate accounting from the 2024 Notes as it no longer qualified for the equity scope exception under ASC 815, Derivatives and Hedging.

Upon bifurcation of the conversion feature, we recorded a derivative liability at a fair value of $ 126.6 million (Level 3) and a corresponding debt discount that was accreted over the remaining term of the 2024 Notes using the straight-line method.

Subsequent changes in the fair value of the derivative liability and accretion of the associated debt discount were recorded in other income (expense), net on the consolidated statements of income.

During 2024, holders of the 2024 Notes converted $ 169.8 million in aggregate principal amount of the 2024 Notes for $ 308.2 million in cash, reflecting a conversion premium of $ 138.4 million calculated based on the per share volume-weighted average price (VWAP) for each of the 30 consecutive trading days during the observation period (as more fully described in the 2017 Indenture).

The 2024 Notes were settled in full upon maturity on May 15, 2024.

The following table presents a summary of charges recognized in connection with the bifurcation of the conversion feature of the 2024 Notes and conversions of the 2024 Notes by holders during 2024.

(in millions) Amount

Accretion of debt discount associated with derivative liability $ 126.6

Change in fair value of derivative liability 9.6

Loss on extinguishment of convertible senior notes 2.2

Charges associated with convertible senior notes $ 138.4

Goodwill and Intangible Assets

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

Goodwill is included in other noncurrent assets in the consolidated balance sheets.

(in millions) Amount

Balance as of December 31, 2022 $ 5.4

Foreign currency translation adjustments 0.4

Balance as of December 31, 2023 5.8

Foreign currency translation adjustments ( 0.1 )

Balance as of December 31, 2024 $ 5.7

The following table presents information relating to our recognized intangible assets.

2024 December 31,

(dollars in millions) Gross Carrying Amount Accumulated Amortization Net

Carrying Amount Gross Carrying Amount Accumulated Amortization Net

Carrying Amount

Developed product rights (1)

$ 40.5 $ 7.7 $ 32.8 $ 35.9 $ 4.0 $ 31.9

Acquired IPR&D $ 3.7 $ — 3.7 $ 3.6 $ — 3.6

Total intangible assets, net $ 36.5 $ 35.5

_________________________

(1) Developed product rights have a useful life of 10 to 16 years.

(2) Acquired IPR&D is considered indefinite lived until the completion or abandonment of the associated research and development efforts.

The following table presents approximate future annual amortization expense for our finite-lived intangible assets as of December 31, 2024.

(in millions) Amount

Year ending December 31, 2025

Year ending December 31, 2026

Year ending December 31, 2027

Year ending December 31, 2028

Year ending December 31, 2029

Thereafter $ 13.3

Other Balance Sheet Details

Inventory consisted of the following:

(in millions) 2024 2023

Raw materials $ 33.7 $ 21.5

Work in process 10.9 9.7

Finished goods 12.8 12.3

Less inventory reserves

Total inventory $ 57.4 $ 38.3

Property and equipment, net, consisted of the following:

(in millions) 2024 2023

Tenant improvements $ 35.9 $ 38.1

Scientific equipment 95.7 79.6

Computer equipment 38.9 25.2

Furniture and fixtures 18.6 10.9

Less accumulated depreciation ( 106.5 ) ( 83.0 )

Total property and equipment, net $ 82.6 $ 70.8

Accounts payable and accrued liabilities consisted of the following:

(in millions) 2024 2023

Sales rebates and reserves $ 144.2 $ 139.3

Accrued employee related costs 107.5 86.2

Accrued development costs 50.8 44.3

Current branded prescription drug fee 49.2 45.7

Accounts payable and other accrued liabilities 110.0 133.3

Total accounts payable and accrued liabilities $ 461.6 $ 448.8

Other noncurrent liabilities consisted of the following:

(in millions) 2024 2023

Noncurrent income taxes payable

$ 160.7 $ 96.0

Other noncurrent liabilities 5.5 10.3

Total other noncurrent liabilities $ 166.2 $ 106.3

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

(in millions) 2024 2023

Cash and cash equivalents $ 233.0 $ 251.1

Restricted cash included in other noncurrent assets

Total cash, cash equivalents, and restricted cash $ 241.0 $ 259.1

Retirement Plan

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Employer contributions were $ 15.5 million for 2024, $ 12.5 million for 2023, and $ 10.3 million for 2022.

Segment Reporting and Disaggregation of Relevant Expense Captions

Neurocrine Biosciences operates as a single global business segment dedicated to the research and development, commercialization, and sale of pharmaceuticals primarily in the U.S.

for the treatment of neurological, neuroendocrine, and neuropsychiatric disorders.

Net product sales from external customers attributed to foreign countries, intra-entity sales, and long-lived assets located outside the U.S.

were not significant for 2024, 2023, or 2022.

The accounting policies of the segment are the same as those described in the summary of significant accounting policies.

The determination of a single business segment is consistent with the consolidated financial information regularly reviewed by the Chief Executive Officer as chief operating decision maker (CODM) in assessing segment performance and deciding how to allocate resources on a consolidated basis.

The CODM assesses performance for the segment and decides how to allocate resources based on net income that also is reported on the consolidated statements of income as consolidated net income.

The CODM uses net income to monitor budget and forecast versus actual results in assessing segment performance and to evaluate income generated from segment assets in deciding how to allocate resources.

The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets.

The following table presents information about reported segment revenues, segment profit, and significant segment expenses.

Year Ended December 31,

(in millions) 2024 2023 2022

$ 2,355.3 $ 1,887.1 $ 1,488.7

Cost of revenues 34.0 39.7 23.2

Research and development:

External research and development 343.5 310.0 213.5

Payroll and benefits 236.7 206.7 163.8

Milestones 71.7 0.8 42.7

Other research and development (1)

79.2 47.5 43.8

Total research and development 731.1 565.0 463.8

Acquired in-process research and development 12.5 143.9 —

Selling, general, and administrative 1,007.2 887.6 752.7

Unrealized loss (gain) on equity investments 37.1 ( 28.4 ) ( 30.8 )

Charges associated with convertible senior notes 138.4 — 70.0

Interest income and other, net ( 91.0 ) ( 52.8 ) ( 4.1 )

Provision for income taxes 144.7 82.4 59.4

$ 341.3 $ 249.7 $ 154.5

_________________________

(1) Other research and development consists of indirect costs incurred for the benefit of multiple research and development programs, including depreciation, information technology, and other facility-based expenses, such as rent expense.

Legal Proceedings

During 2021, 2022, and 2023, we received notices from (i) Teva Pharmaceuticals Development, Inc., (ii) Lupin Limited, (iii) Crystal Pharmaceutical (Suzhou) Co.

Ltd., (iv) Sandoz Inc.

and (v) Zydus Pharmaceuticals (USA) Inc.

that each company had filed an abbreviated new drug application (ANDA) with the FDA seeking approval of a generic version of INGREZZA.

These companies represented that their respective ANDAs each contained a Paragraph IV Patent Certification alleging that certain of our patents covering INGREZZA are invalid and/or will not be infringed by the manufacture, use or sale of the medicine for which the ANDA was submitted.

We filed suit in the U.S.

District Court for the District of Delaware during 2021, 2022 and 2023, against (i) Teva Pharmaceuticals, Inc., Teva Pharmaceuticals Development, Inc., Teva Pharmaceuticals USA, Inc.

and Teva Pharmaceutical Industries Ltd.

(entity dismissed), collectively, "Teva", (ii) Lupin Limited, Lupin Pharmaceuticals, Inc., Lupin Inc.

and Lupin Atlantis Holdings S.A., collectively, “Lupin”, (iii) Crystal Pharmaceutical (Suzhou) Co., Ltd., Crystal Pharmatech Co., Ltd., collectively, “Crystal”, (iv) Sandoz Inc., Sandoz International GmbH (entity dismissed) and Sandoz AG (entity dismissed), collectively, “Sandoz” and (v) Zydus Pharmaceuticals (USA) Inc., Zydus Worldwide DMCC, Zydus Lifesciences Limited (formerly known as Cadila Healthcare Limited d/b/a Zydus Cadila) and Zydus Healthcare (USA) LLC (entity dismissed), collectively, “Zydus”.

We also filed suit in the U.S.

District Court for the District of New Jersey during 2021, 2022 and 2023 against Zydus.

In 2023 we entered into settlement agreements resolving the foregoing litigation with each of (i) Sandoz and Crystal, collectively, the “Sandoz Parties”, (ii) Teva, (iii) Lupin and (iv) Zydus.

Pursuant to the terms of the respective agreements with the Sandoz Parties, Teva, Lupin, and Zydus, each of Teva, the Sandoz Parties, Lupin, and Zydus has the right to sell generic versions of INGREZZA in the United States beginning March 1, 2038, or earlier under certain circumstances.

The settlements with Teva, the Sandoz Parties, Lupin and Zydus resolve all patent litigation brought by us against the companies that filed ANDAs seeking approval to market generic INGREZZA, and all cases have been dismissed.

In January 2025, we filed suit in the United States District Court for the District of Delaware against Spruce Biosciences, Inc.

(Spruce), seeking to invalidate one of Spruce’s patents.

In addition, we have initiated (1) administrative proceedings against other Spruce patents in the U.S.

Patent Office, and (2) both judicial and administrative proceedings against Spruce patents in other jurisdictions.

From time to time, we may also become subject to other legal proceedings or claims arising in the ordinary course of our business.

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What changed 10-K

Item 8. Financial Statements and Supplementary Data