NEUROCRINE BIOSCIENCES INC 10-K

Item 8. Financial Statements and Supplementary Data NEUROCRINE BIOSCIENCES, INC. INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 66 Consolidated Balance Sheets 68 Consolidated Statements of Income and Comprehensive Income 69 Consolidated Statements of Stockholders’ Equity 70 Consolidated Statements of Cash Flows 71 Notes to the Consolidated Financial Statements 72 65 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Neurocrine Biosciences, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Neurocrine Biosciences, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 11, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. 66 Reserves for Medicaid rebates related to product sales 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 product sales to its customers after deducting management’s estimates of reserves for rebates it will provide under Medicaid rebate programs (“Medicaid rebates”). Estimated Medicaid rebates are presented within accounts payable and accrued liabilities on the consolidated balance sheet. Auditing the estimates of Medicaid 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 the portion of product that is expected to be subject to a Medicaid rebate and the applicable contractual rebate percentage underlying the revenue and the applicable rebate amount. How We Addressed the Matter in Our Audit We tested the Company’s internal controls over management’s process for estimating the rebate amounts and the portion of product that is expected to be subject to a Medicaid rebate for product that remains in the distribution channel at December 31, 2025. This included controls over management’s review of significant assumptions and other inputs into the estimation of Medicaid rebates including the completeness and accuracy of data used in the calculation. To test management’s estimate of Medicaid 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 product remaining in the distribution channel at December 31, 2025. We assessed the historical accuracy of management’s rebate estimates, tested payments of rebates and performed a sensitivity analysis of significant assumptions to evaluate the changes in the rebate allowance that would result from changes in the assumptions. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1992. San Diego, California February 11, 2026 67 NEUROCRINE BIOSCIENCES, INC. CONSOLIDATED BALANCE SHEETS December 31, (in millions, except per share data) 2025 2024 Assets Current assets: Cash and cash equivalents $ 713.0 $ 233.0 Available-for-sale debt securities 767.4 843.1 Accounts receivable 686.8 479.1 Inventory 69.0 57.4 Prepaid expenses 170.7 48.5 Other current assets 115.8 63.6 Total current assets 2,522.7 1,724.7 Deferred tax assets 320.3 485.7 Available-for-sale debt securities 1,063.0 739.5 Right-of-use assets 455.4 509.4 Equity investments 120.8 124.8 Property and equipment, net 89.8 82.6 Other noncurrent assets 59.5 52.0 Total assets $ 4,631.5 $ 3,718.7 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and accrued liabilities $ 674.3 $ 461.6 Other current liabilities 69.1 46.1 Total current liabilities 743.4 507.7 Noncurrent operating lease liabilities 415.3 455.1 Other noncurrent liabilities 219.7 166.2 Total liabilities 1,378.4 1,129.0 Stockholders’ equity: Preferred stock, $ 0.001 par value; 5.0 shares authorized; no shares issued and outstanding — — Common stock, $ 0.001 par value; 220.0 shares authorized; 100.1 and 99.4 shares issued and outstanding, respectively 0.1 0.1 Additional paid-in capital 2,792.2 2,554.6 Accumulated other comprehensive income 13.1 5.8 Retained earnings 447.7 29.2 Total stockholders’ equity 3,253.1 2,589.7 Total liabilities and stockholders’ equity $ 4,631.5 $ 3,718.7 See accompanying notes to consolidated financial statements. 68 NEUROCRINE BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Year Ended December 31, (in millions, except per share data) 2025 2024 2023 Revenues: Net product sales $ 2,833.9 $ 2,330.6 $ 1,860.6 Collaboration revenues 26.6 24.7 26.5 Total revenues 2,860.5 2,355.3 1,887.1 Operating expenses: Cost of revenues 52.1 34.0 39.7 Research and development 1,015.7 731.1 565.0 Acquired in-process research and development 17.4 12.5 143.9 Selling, general, and administrative 1,156.2 1,007.2 887.6 Total operating expenses 2,241.4 1,784.8 1,636.2 Operating income 619.1 570.5 250.9 Other income (expense): Unrealized (loss) gain on equity investments ( 4.0 ) ( 37.1 ) 28.4 Charges associated with convertible senior notes — ( 138.4 ) — Investment income and other, net 90.3 91.0 52.8 Total other income (expense), net 86.3 ( 84.5 ) 81.2 Income before provision for income taxes 705.4 486.0 332.1 Provision for income taxes 226.8 144.7 82.4 Net income 478.6 341.3 249.7 Foreign currency translation adjustments, net of tax 3.8 ( 1.1 ) 2.4 Unrealized gain (loss) on available-for-sale debt securities, net of tax 3.5 ( 0.1 ) 12.5 Comprehensive income $ 485.9 $ 340.1 $ 264.6 Earnings per share, basic $ 4.81 $ 3.40 $ 2.56 Earnings per share, diluted $ 4.67 $ 3.29 $ 2.47 Weighted average common shares outstanding, basic 99.5 100.4 97.7 Weighted average common shares outstanding, diluted 102.5 103.7 101.0 See accompanying notes to consolidated financial statements. 69 NEUROCRINE BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity (in millions) Shares $ Balances at December 31, 2022 96.5 $ 0.1 $ 2,122.4 $ ( 7.9 ) $ ( 406.8 ) $ 1,707.8 Net income — — — — 249.7 249.7 Other comprehensive income, net of tax — — — 14.9 — 14.9 Stock-based compensation expense — — 194.3 — — 194.3 Issuances of common stock under benefit plans 2.2 — 65.3 — — 65.3 Balances at December 31, 2023 98.7 $ 0.1 $ 2,382.0 $ 7.0 $ ( 157.1 ) $ 2,232.0 Net income — — — — 341.3 341.3 Other comprehensive loss, net of tax — — — ( 1.2 ) — ( 1.2 ) Stock-based compensation expense — — 195.5 — — 195.5 Issuances of common stock under benefit plans 2.7 — 122.1 — — 122.1 Repurchases of common stock ( 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 Net income — — — — 478.6 478.6 Other comprehensive income, net of tax — — — 7.3 — 7.3 Stock-based compensation expense — — 217.9 — — 217.9 Issuances of common stock under benefit plans 2.5 — 127.3 — — 127.3 Repurchases of common stock ( 1.8 ) — ( 107.6 ) — ( 60.1 ) ( 167.7 ) Balances at December 31, 2025 100.1 $ 0.1 $ 2,792.2 $ 13.1 $ 447.7 $ 3,253.1 See accompanying notes to consolidated financial statements. 70 NEUROCRINE BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (in millions) 2025 2024 2023 Cash flows from operating activities: Net income $ 478.6 $ 341.3 $ 249.7 Adjustments to reconcile net income to net cash from operating activities: Stock-based compensation 217.9 195.5 194.3 Charges associated with convertible senior notes — 138.4 — Impairment charges associated with leased properties 0.7 14.0 — Depreciation 26.0 23.5 17.8 Accretion of discount on available-for-sale debt securities, net ( 12.7 ) ( 26.2 ) ( 18.3 ) Amortization of acquired intangible assets 4.1 3.6 3.5 Changes in fair values of equity investments 4.0 37.1 ( 28.4 ) Deferred tax assets 165.4 ( 123.1 ) ( 56.7 ) Non-cash lease expense 26.8 10.4 ( 0.9 ) Other 0.7 0.1 0.7 Changes in operating assets and liabilities: Accounts receivable ( 210.5 ) ( 39.8 ) ( 89.3 ) Inventory ( 15.3 ) ( 19.1 ) 5.4 Accounts payable and accrued liabilities 160.2 43.4 49.0 Income tax assets and liabilities ( 18.8 ) 50.3 91.6 Other assets and liabilities, net ( 44.4 ) ( 54.0 ) ( 28.5 ) Cash flows from operating activities 782.7 595.4 389.9 Cash flows from investing activities: Purchases of available-for-sale debt securities ( 1,319.8 ) ( 1,056.1 ) ( 1,379.9 ) Sales and maturities of available-for-sale debt securities 1,089.4 967.5 972.4 Purchases of equity investments — — ( 31.3 ) Capital expenditures ( 34.0 ) ( 38.2 ) ( 28.3 ) Cash flows from investing activities ( 264.4 ) ( 126.8 ) ( 467.1 ) Cash flows from financing activities: Issuances of common stock under benefit plans 129.4 122.1 65.3 Repurchases of common stock ( 167.7 ) ( 300.0 ) — Payments to settle convertible senior notes — ( 308.8 ) — Cash flows from financing activities ( 38.3 ) ( 486.7 ) 65.3 Effect of exchange rate changes on cash and cash equivalents — — 0.3 Change in cash and cash equivalents and restricted cash 480.0 ( 18.1 ) ( 11.6 ) Cash, cash equivalents and restricted cash at beginning of period 241.0 259.1 270.7 Cash, cash equivalents and restricted cash at end of period $ 721.0 $ 241.0 $ 259.1 Supplemental Disclosure: Accrued capital expenditures $ 2.2 $ 2.2 $ 2.5 Right-of-use assets acquired through operating leases $ — $ 271.6 $ 200.8 Cash paid for interest $ — $ 1.6 $ 3.8 Cash paid for income taxes $ 81.4 $ 217.5 $ 51.5 See accompanying notes to consolidated financial statements. 71 NEUROCRINE BIOSCIENCES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. 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 global biopharmaceutical company focused on discovering, developing, and commercializing life-changing treatments for patients with under-addressed neurological, psychiatric, endocrine, and immunological disorders. Use of Estimates 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. Certain reclassifications have been made to previously reported amounts to conform to the current period presentation. 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) exclusively in the U.S. through a limited specialty network. Our customers include select specialty pharmacy providers, wholesale distributors, and specialty distributors. In addition, we sell CRENESSITY ® (crinecerfont) in the U.S. through a single specialty pharmacy provider. Net product sales of INGREZZA were $ 2.51 billion for 2025, $ 2.31 billion for 2024, and $ 1.84 billion for 2023 and accounted for a significant portion of our total net product sales during each of these years. Net product sales of CRENESSITY were $ 301.2 million for 2025. 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. 72 • 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 We consider all highly liquid investments that are readily convertible into cash without penalty and have an original maturity of three months or less at the time of purchase to be cash equivalents . Accounts Receivable Accounts receivable are recorded net of customer allowances for prompt payment discounts, chargebacks, and any allowance for credit losses. Our estimate for the allowance for credit losses, which has not been significant to date, is determined based on existing contractual payment terms, actual payment patterns of our customers, and individual customer circumstances. 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. Debt Securities Debt securities consist of investments in certificates of deposit, corporate debt securities, and securities of government-sponsored entities. We classify debt securities as available-for-sale. 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. A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a debt security placed on nonaccrual status is reversed against interest income. 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 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 available-for-sale debt securities that do not meet the aforementioned criteria, we 73 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. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis. 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 available-for-sale debt securities were $ 20.5 million and $ 14.4 million, respectively, as of December 31, 2025 and 2024. We do not measure an allowance for credit losses for accrued interest receivables. For the purposes of identifying and measuring an impairment, accrued interest is excluded from both the fair value and amortized cost basis of the debt security. Uncollectible accrued interest receivables associated with an impaired debt security are reversed against interest income upon identification of the impairment. No accrued interest receivables were written off during 2025, 2024, or 2023. Concentration of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk include cash and cash equivalents, investments in available-for-sale debt securities, and accounts receivable. To minimize the risks related to cash and cash equivalents and investments in available-for-sale 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, 2025 2024 2023 2025 2024 Customer A 39 % 43 % 36 % 41 % 41 % Customer B 28 % 28 % 28 % 31 % 37 % Customer C 19 % 13 % 15 % 16 % < 10 % Customer D < 10 % < 10 % 12 % 10 % 11 % 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 We record cash equivalents, debt securities available-for-sale, and equity security investments at fair value based on a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). The fair value hierarchy consists of the following three levels: Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. 74 Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3 – Unobservable inputs that reflect our own assumptions about the assumptions that market participants would use in pricing the asset or liability when there is little, if any, market activity for the asset or liability at the measurement date. Investments in debt securities available-for-sale are classified as Level 2 and carried at fair value. We estimate the fair value of debt securities available-for-sale by utilizing third-party pricing services. These pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. Such inputs include market pricing based on real-time trade data for similar instruments, issuer credit spreads, benchmark yields, broker/dealer quotes and other observable inputs. We validate valuations obtained from third-party pricing services by understanding the models used, obtaining market values from other pricing sources and analyzing data in certain instances. 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. Inventory 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. 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, 2025 and 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, 2025 and 2024. Leases 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. 75 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 Property and equipment are stated at cost and depreciated over the estimated useful lives of the assets using the straight-line method. Equipment is depreciated over an average estimated useful life of 3 to 7 years. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the remaining lease term. Depreciation expense was $ 26.0 million for 2025, $ 23.5 million for 2024, and $ 17.8 million for 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 primarily consists of third-party manufacturing, transportation, freight, and indirect overhead costs for the manufacture and distribution of INGREZZA and CRENESSITY drug product sold, royalties on net product sales of CRENESSITY, amortization of intangible assets, manufacturing costs in connection with our supply of valbenazine drug product under our collaboration with Tanabe Pharma Corporation (TPC) (formerly Mitsubishi Tanabe Pharma Corporation), and adjustments for excess and obsolete inventory to the extent management determines that the cost cannot be recovered based on estimates about future demand. A portion of the costs associated with the manufacture of CRENESSITY sold to date was expensed as R&D prior to the FDA’s approval of CRENESSITY and is therefore excluded from cost of sales during this period. 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 costs associated with our collaborative arrangements, and certain facility-based expenses (such as rent expense) and other overhead allocations. 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 assets in development and commercialization. Upfront payments associated with collaborative arrangements are generally expensed as in-process research and development (IPR&D) when incurred. Milestone payments that are contingent upon the achievement of specified development, regulatory, or commercial events are recognized when the applicable contingency is resolved and the consideration is paid or becomes payable. Milestone payments that are paid or payable prior to regulatory approval are expensed as R&D, and milestone payments that are paid or payable 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. 76 Asset Acquisitions We account for acquisitions of assets (or groups of assets) that do not meet the definition of a business using the cost accumulation method, whereby the cost of the acquisition, including certain transaction costs, is allocated to the assets (or group of assets) acquired on the basis of their relative fair value(s) on the measurement date. No goodwill is recognized in an asset acquisition. 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 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 $ 226.8 million for 2025, $ 191.0 million for 2024, and $ 159.9 million for 2023. Stock-Based Compensation We grant stock options to purchase our common stock to eligible employees and directors and also grant certain employees restricted stock units (RSUs) and performance-based restricted stock units (PRSUs). Additionally, we allow employees to participate in an employee stock purchase plan (ESPP). We estimate the fair value of stock options and shares to be issued under the ESPP using the Black-Scholes option-pricing model on the date of grant. RSUs are valued based on the closing price of our common stock on the date of grant. The fair value of equity instruments expected to vest is recognized and amortized on a straight-line basis over the requisite service period of the award, which is generally three to four years ; however, certain provisions in our equity compensation plans provide for shorter vesting periods under certain circumstances. The fair value of shares to be issued under the ESPP is recognized and amortized on a straight-line basis over the purchase period, which is generally six months . PRSUs vest upon the achievement of certain predefined company-specific performance-based criteria. 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. Significant estimates are required in determining our income tax provision. Some of these estimates are based on interpretations of existing tax laws or regulations. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (temporary differences) at enacted tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is established for deferred tax assets for which it is more likely than not that some portion or all of the deferred tax assets, including net operating losses and tax credits, will not be realized. We periodically reassess the need for a valuation allowance against our deferred tax assets based on various factors including our historical earnings experience by taxing jurisdiction, and forecasts of future operating results and utilization of net operating losses and tax credits prior to their expiration. Significant judgment is required in making this assessment and, to the extent that a reversal of any portion of our valuation allowance against our deferred tax assets is deemed appropriate, a tax benefit will be recognized against our income tax provision in the period of such reversal. Our income tax provision is also affected by intercompany transfer pricing arrangements, including the allocation of income related to intellectual property held by foreign affiliates. These arrangements are intended to reflect arm’s-length pricing and require management judgment in their application. We have elected to account for Global Intangible Low-Taxed Income (GILTI) as a current period tax expense in the period incurred in accordance with its accounting policy under ASC 740. We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained upon examination by the tax authorities based on the technical merits of the position. An adverse resolution of one or more of these uncertain tax positions in any period could have a material impact on the results of operations for that period. 77 Earnings Per Share Basic earnings per share are computed using the weighted average number of common shares outstanding during the period. 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 whose effect would be anti-dilutive. 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 December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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, and should be applied on a prospective basis. We adopted ASU 2023-09 on January 1, 2025. Our adoption of ASU 2023-09 did not have a material impact on our consolidated financial statements (since the requirements of this ASU are disclosure-specific) and will not affect our quarterly income tax disclosures. Recently Issued Accounting Pronouncements Not Yet Adopted 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. 2. 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. December 31, 2025 December 31, 2024 (dollars in millions) Contractual Maturity Amortized Cost Unrealized Gain Unrealized Loss Fair Value Amortized Cost Unrealized Gain Unrealized Loss Fair Value Commercial paper 0 to 1 years $ 22.6 $ — $ — $ 22.6 $ 37.1 $ — $ — $ 37.1 Corporate debt securities 0 to 1 years 622.6 1.7 — 624.3 527.0 0.6 ( 0.1 ) 527.5 Securities of government-sponsored entities 0 to 1 years 120.2 0.3 — 120.5 278.2 0.3 — 278.5 $ 765.4 $ 2.0 $ — $ 767.4 $ 842.3 $ 0.9 $ ( 0.1 ) $ 843.1 Corporate debt securities 1 to 3 years $ 945.0 $ 4.5 $ ( 0.5 ) $ 949.0 $ 584.4 $ 2.0 $ ( 1.0 ) $ 585.4 Securities of government-sponsored entities 1 to 3 years 113.8 0.3 ( 0.1 ) 114.0 154.4 0.3 ( 0.6 ) 154.1 $ 1,058.8 $ 4.8 $ ( 0.6 ) $ 1,063.0 $ 738.8 $ 2.3 $ ( 1.6 ) $ 739.5 Unrealized losses on available-for-sale debt securities were primarily due to changes in interest rates. Our investments in available-for-sale debt securities 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 their maturity. No allowance for credit losses was recognized as of December 31, 2025 or 2024. The following table presents available-for-sale debt securities that were in an unrealized loss position as of December 31, 2025, aggregated by major security type and length of time in a continuous loss position. Less Than 12 Months 12 Months or Longer Total (in millions) Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Corporate debt securities $ 298.2 $ ( 0.5 ) $ — $ — $ 298.2 $ ( 0.5 ) 78 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 (in millions) Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Corporate debt securities $ 334.9 $ ( 1.1 ) $ — $ — $ 334.9 $ ( 1.1 ) Securities of government-sponsored entities $ 123.8 $ ( 0.6 ) $ — $ — $ 123.8 $ ( 0.6 ) 3. Fair Value Measurements The following table presents a summary of certain financial assets, which were measured at fair value on a recurring basis. December 31, 2025 December 31, 2024 Fair Value Leveling Fair Value Leveling (in millions) Level 1 Level 2 Level 1 Level 2 Cash and cash equivalents $ 713.0 $ 713.0 $ — $ 233.0 $ 233.0 $ — Available-for-sale debt securities 1,830.4 — 1,830.4 1,582.6 — 1,582.6 Equity investments 120.8 120.8 — 124.8 124.8 — $ 2,664.2 $ 833.8 $ 1,830.4 $ 1,940.4 $ 357.8 $ 1,582.6 4. Leases Our operating leases have terms that expire beginning 2027 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. As we were not reasonably certain to exercise any of these renewal options at commencement of the associated leases, no such options were recognized as part of our ROU assets or operating lease liabilities. The following table presents supplemental operating lease information for operating leases that have commenced. Year Ended December 31, (dollars in millions) 2025 2024 2023 Operating lease cost $ 64.6 $ 43.6 $ 17.1 Sublease income ( 3.5 ) ( 2.0 ) ( 0.7 ) Net operating lease cost $ 61.1 $ 41.6 $ 16.4 Cash paid for amounts included in the measurement of operating lease liabilities $ 37.8 $ 33.1 $ 17.9 December 31, 2025 December 31, 2024 Weighted average remaining lease term 9.9 years 10.8 years Weighted average discount rate 4.9 % 4.9 % Restricted cash related to leases $ 7.8 $ 7.8 79 The following table presents approximate future non-cancelable minimum lease payments under operating leases and sublease income as of December 31, 2025. (in millions) Operating Leases Sublease Income Year ending December 31, 2026 $ 56.7 $ ( 3.9 ) Year ending December 31, 2027 59.1 ( 4.0 ) Year ending December 31, 2028 59.7 ( 4.0 ) Year ending December 31, 2029 59.8 ( 3.6 ) Year ending December 31, 2030 60.7 ( 3.5 ) Thereafter 306.9 ( 2.0 ) Total operating lease payments (sublease income) 602.9 $ ( 21.0 ) Less imputed interest 131.6 Total operating lease liabilities 471.3 Less current operating lease liabilities included in other current liabilities 56.0 Noncurrent operating lease liabilities $ 415.3 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 was vacated 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. Impairment charges were not significant for 2025 or 2023. 5. Convertible Senior Notes In May 2017, we issued $ 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 an indenture in May 2017 with U.S. Bank National Association, as trustee, with respect to the 2024 Notes. From 2020 through 2022, we repurchased $ 347.0 million in aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $ 465.9 million in cash. 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 and comprehensive 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. 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 Total charges associated with convertible senior notes $ 138.4 80 6. Supplemental Financial Information Prepaid expenses consisted of the following: December 31, (in millions) 2025 2024 Prepaid income taxes $ 94.0 $ — Prepaid development costs 55.6 32.1 Other prepaid expenses 21.1 16.4 Total prepaid expenses $ 170.7 $ 48.5 Inventory consisted of the following: December 31, (in millions) 2025 2024 Raw materials $ 35.7 $ 33.7 Work in process 19.2 10.9 Finished goods 14.3 12.8 69.2 57.4 Less inventory reserves ( 0.2 ) — Total inventory $ 69.0 $ 57.4 Property and equipment, net, consisted of the following: December 31, (in millions) 2025 2024 Scientific equipment $ 123.3 $ 95.7 Computer equipment 28.9 38.9 Tenant improvements 35.6 35.9 Furniture and fixtures 20.3 18.6 208.1 189.1 Less accumulated depreciation ( 118.3 ) ( 106.5 ) Total property and equipment, net $ 89.8 $ 82.6 Accounts payable and accrued liabilities consisted of the following: December 31, (in millions) 2025 2024 Sales rebates and reserves $ 226.0 $ 144.2 Accrued employee related costs 128.8 107.5 Accrued development costs 101.3 50.8 Current income taxes payable 68.0 10.0 Current branded prescription drug fee 45.3 49.2 Accounts payable and other accrued liabilities 104.9 99.9 Total accounts payable and accrued liabilities $ 674.3 $ 461.6 Other noncurrent liabilities consisted of the following: December 31, (in millions) 2025 2024 Noncurrent income taxes payable $ 214.5 $ 160.7 Other noncurrent liabilities 5.2 5.5 Total other noncurrent liabilities $ 219.7 $ 166.2 81 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. December 31, (in millions) 2025 2024 Cash and cash equivalents $ 713.0 $ 233.0 Restricted cash included in other noncurrent assets 8.0 8.0 Total cash, cash equivalents, and restricted cash $ 721.0 $ 241.0 7. Stockholders’ Equity Share Repurchases In February 2025, our Board of Directors authorized a new share repurchase program (the 2025 Repurchase Program) under which we may repurchase up to $ 500.0 million of our common stock, subject to market conditions. Under the 2025 Repurchase Program, we repurchased 1.5 million shares on the open market for a cost of $ 167.7 million during 2025. As of December 31, 2025, we had $ 332.3 million remaining available for additional repurchases under the 2025 Repurchase Program. Under the 2025 Repurchase Program, share repurchases may be made from time to time at management's discretion through a variety of methods, such as open-market transactions including pre-set trading plans, privately negotiated transactions, accelerated share repurchases, and other transactions in accordance with applicable securities laws. Shares repurchased under the 2025 Repurchase Program are retired immediately, resulting in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares for both basic and diluted earnings per share, and included in the category of authorized but unissued shares. The excess of the purchase price over the par value of the common shares was recorded as reductions to retained earnings and additional paid-in capital. In November 2024, we entered into an accelerated share repurchase transaction (the 2024 Repurchase Program) with a third-party financial institution to repurchase an aggregate of $ 300.0 million of our common stock. Shares repurchased under the 2024 Repurchase Program were retired immediately upon receipt, resulting in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares for both basic and diluted earnings per share in the period received, and included in the category of authorized but unissued shares. At inception, we paid the financial institution $ 300.0 million using cash on hand and took initial delivery of 2.0 million shares in November 2024. The fair market value of the 2.0 million initial shares received was $ 240.5 million, with the excess of the fair market value over the par value of the initial shares received recorded as reductions to retained earnings and additional paid-in capital. The remaining $ 59.5 million of the repurchase price was recorded as a reduction to additional paid-in capital. The 2024 Repurchase Program was completed in February 2025, at which time we received an additional 0.3 million shares upon settlement, with the excess of the fair market value over the par value of the settlement shares received recorded as an increase to additional paid-in capital and a reduction to retained earnings. In total, we repurchased 2.3 million shares under the 2024 Repurchase Program at an average price of $ 131.83 per share, which represents the daily volume-weighted average price of our common stock over the term of the transaction, less a negotiated discount. 82 8. Earnings Per Share Earnings per share were calculated as follows: Year Ended December 31, (in millions, except per share data) 2025 2024 2023 Net income - basic and diluted $ 478.6 $ 341.3 $ 249.7 Weighted-average common shares outstanding: Basic 99.5 100.4 97.7 Effect of dilutive securities 3.0 3.3 3.3 Diluted 102.5 103.7 101.0 Earnings per share: Basic $ 4.81 $ 3.40 $ 2.56 Diluted $ 4.67 $ 3.29 $ 2.47 Shares excluded from diluted per share amounts because their effect would have been anti-dilutive 4.0 2.4 4.7 9. Stock-Based Compensation 2025 Equity Incentive Plan In May 2025, our stockholders approved the 2025 Equity Incentive Plan (the 2025 Plan). The 2025 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards, and other awards. As of December 31, 2025, 7.4 million shares of common stock remain available for future grant under the 2025 Plan. Under the terms of the 2025 Plan, the number of shares of common stock available for issuance will be: (i) reduced by (a) one share for each share issued pursuant to an appreciation award (as defined in the 2025 Plan) and (b) 2.43 shares for each share issued pursuant to a full value award (as defined in the 2025 Plan); and (ii) increased by (a) one share for each share subject to an appreciation award that becomes available again for issuance under the terms of the 2025 Plan and (b) 2.43 shares for each share subject to a full value award that becomes available again for issuance under the terms of the 2025 Plan. 2020 Equity Incentive Plan In May 2020, we adopted the 2020 Equity Incentive Plan (as amended, the Amended 2020 Plan). The Amended 2020 Plan was a stockholder-approved plan pursuant to which no additional awards will be granted following the effective date of the 2025 Plan. Outstanding awards under the Amended 2020 Plan will continue to be governed by its terms. 2011 Equity Incentive Plan In May 2011, we adopted the 2011 Equity Incentive Plan (the 2011 Plan). The 2011 Plan was a stockholder-approved plan pursuant to which outstanding awards have been made, but from which no further awards can or will be made. 2018 Employee Stock Purchase Plan In May 2022 and 2025, our stockholders approved amendments and restatements of the 2018 Employee Stock Purchase Plan (as so amended and restated, the Amended 2018 ESPP). As of December 31, 2025, 1.0 million shares of common stock remain available for future issuance under the Amended 2018 ESPP. 83 Stock-Based Compensation Expense 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) 2025 2024 2023 Selling, general, and administrative $ 126.9 $ 126.7 $ 126.3 Research and development 91.0 68.8 68.0 Total stock-based compensation expense $ 217.9 $ 195.5 $ 194.3 Stock-based compensation expense by award-type follows: Year Ended December 31, (in millions) 2025 2024 2023 Stock options $ 83.8 $ 80.7 $ 91.6 RSUs 107.6 97.7 93.4 PRSUs 19.0 11.5 4.6 ESPP 7.5 5.6 4.7 Total stock-based compensation expense $ 217.9 $ 195.5 $ 194.3 As of December 31, 2025, unrecognized stock-based compensation expense by award-type and the weighted-average period over which such expense is expected to be recognized, as applicable, was as follows: (dollars in millions) Unrecognized Expense Weighted-Average Recognition Period Stock options $ 95.3 2.4 years RSUs $ 213.8 2.3 years PRSUs $ 22.7 Stock Options Typically, stock options have a 10-year term and vest over a three to four-year period. The exercise price of stock options granted is equal to the closing price of our common stock on the date of grant. We estimate the fair value of stock options using the Black-Scholes option-pricing model on the date of grant. The Black-Scholes option-pricing model incorporates various and highly sensitive assumptions including expected volatility, term and interest rates. The weighted-average grant-date fair values of stock options granted were $ 49.66 for 2025, $ 55.74 for 2024, and $ 45.19 for 2023. The fair value of each stock option granted was estimated on the date of grant using the Black-Scholes option-pricing valuation model with the following weighted-average assumptions: Year Ended December 31, 2025 2024 2023 Risk-free interest rate 4.4 % 4.3 % 3.9 % Expected volatility of common stock 37.6 % 37.2 % 40.8 % Dividend yield 0.0 % 0.0 % 0.0 % Expected option term 5.4 years 5.5 years 5.5 years The weighted-average valuation assumptions were determined as follows: • The expected volatility of common stock is estimated based on the historical volatility of our common stock over the most recent period commensurate with the estimated expected term of our stock options. • The expected option term is estimated based on historical experience as well as the status of the employee. For example, directors and officers have a longer expected option term than all other employees. • The risk-free interest rate for periods within the contractual life of a stock option is based upon observed interest rates appropriate for the expected term of our employee stock options. • We have not historically declared or paid dividends and do not intend to do so in the foreseeable future. 84 The following table presents summary of activity related to stock options. (in millions, except weighted average data) Number of Stock Options Weighted Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2024 9.6 $ 95.48 Granted 1.9 $ 118.85 Exercised ( 1.5 ) $ 76.54 Canceled ( 0.2 ) $ 117.03 Outstanding at December 31, 2025 9.8 $ 102.54 6.0 years $ 384.9 Exercisable at December 31, 2025 7.0 $ 95.65 5.1 years $ 324.8 The total intrinsic value of stock options exercised was $ 96.2 million for 2025, $ 122.5 million for 2024, and $ 39.9 million for 2023. Cash received from stock option exercises was $ 115.5 million for 2025, $ 110.8 million for 2024, and $ 55.5 million for 2023. Restricted Stock Units RSUs typically vest over a four-year period and may be subject to a deferred delivery arrangement at the election of eligible employees. The fair value of RSUs is based on the closing sale price of our common stock on the date of issuance. The total fair value of RSUs that vested was $ 116.1 million for 2025, $ 116.7 million for 2024, and $ 101.0 million for 2023. The following table presents a summary of activity related to RSUs. (in millions, except weighted average data) Number of RSUs Weighted-Average Grant Date Fair Value Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Unvested at December 31, 2024 2.4 $ 111.90 Granted 1.3 $ 119.14 Released ( 0.9 ) $ 107.48 Canceled ( 0.2 ) $ 115.53 Unvested at December 31, 2025 2.6 $ 116.79 1.2 years $ 373.4 Performance-Based Restricted Stock Units PRSUs vest based on the achievement of certain predefined Company-specific performance criteria. Any unvested PRSUs will expire if it is determined the related performance criteria has not been met during the applicable three to four-year performance period. 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 was $ 34.4 million during 2023. No PRSUs vested during 2025 or 2024. The following table presents a summary of activity related to PRSUs. (in millions, except weighted average data) Number of PRSUs Weighted-Average Grant Date Fair Value Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Unvested at December 31, 2024 0.4 $ 105.11 Granted 0.1 $ 118.24 Canceled ( 0.1 ) $ 81.19 Unvested at December 31, 2025 0.4 $ 114.70 1.5 years $ 61.2 Employee Stock Purchase Plan Under the Amended 2018 ESPP, eligible employees may purchase shares of our common stock at a discount semi-annually based on a percentage of their annual compensation. The discounted purchase price is equal to the lower of 85 % of (i) the market value per share of the common stock on the first day of the offering period or (ii) the market value per share of common stock on the purchase date. 85 10. Income Taxes The following table presents income from continuing operations before provision for income taxes for domestic and international operations. Year Ended December 31, (in millions) 2025 2024 2023 Domestic $ 845.2 $ 597.5 $ 409.2 Foreign ( 139.8 ) ( 111.5 ) ( 77.1 ) Income before provision for income taxes $ 705.4 $ 486.0 $ 332.1 The following table presents the components of income tax expense for continuing operations. Year Ended December 31, (in millions) 2025 2024 2023 Current: Federal $ 55.5 $ 215.2 $ 115.0 State 50.9 52.5 28.1 Foreign ( 43.8 ) — — Current income taxes 62.6 267.7 143.1 Deferred: Federal 142.5 ( 104.9 ) ( 45.2 ) State 1.9 ( 18.1 ) ( 15.5 ) Foreign 19.8 — — Deferred income taxes 164.2 ( 123.0 ) ( 60.7 ) Provision for income taxes $ 226.8 $ 144.7 $ 82.4 As discussed in Note 1 , we adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on January 1, 2025 on a prospective basis. As a result, our rate reconciliation for 2025 is presented in accordance with the new disclosure requirements, while the reconciliations for 2024 and 2023 continue to be presented under disclosure requirements in effect for those periods. 86 The provision for income taxes on earnings subject to income taxes differed from the statutory federal rate due to the following (after the adoption of ASU 2023-09): Year Ended December 31, 2025 (dollars in millions) Amount % Federal income taxes at 21 % $ 148.1 21.0 % State and local income taxes, net of federal benefit (1) 3.1 0.4 % Foreign tax effects Switzerland Statutory tax rate difference between Switzerland and U.S. 16.4 2.3 % Changes in valuation allowances ( 18.8 ) ( 2.7 ) % Undistributed earnings 19.8 2.8 % Other ( 11.2 ) ( 1.6 ) % Other foreign jurisdictions 3.7 0.5 % Effect of cross-border tax laws Global intangible low-taxed income, net 52.9 7.5 % Foreign tax credits ( 7.9 ) ( 1.1 ) % Other effects of cross-border tax laws total - below 1.05 % ( 0.5 ) ( 0.1 ) % Tax credits Research and development tax credits ( 35.6 ) ( 5.0 ) % Changes in valuation allowance 7.7 1.1 % Nontaxable or nondeductible items Officer compensation 13.6 1.9 % Branded prescription drug fee 7.5 1.1 % Other non-deductible and non-taxable total - below 1.05 % 8.3 1.2 % Other Stock-based compensation expense (windfall/shortfall) ( 13.7 ) ( 1.9 ) % Basis difference in subsidiary held for sale ( 15.7 ) ( 2.2 ) % Changes in unrecognized tax benefits 49.1 7.0 % Provision for income taxes $ 226.8 32.2 % _________________________ (1) 50% or more of our state tax provision relates to the Tennessee and Kentucky state jurisdictions. The provision for income taxes on earnings subject to income taxes differed from the statutory federal rate due to the following (prior to the adoption of ASU 2023-09): Year Ended December 31, (dollars in millions) 2024 2023 Federal income taxes at 21 % $ 102.1 $ 69.7 State income tax, net of federal benefit 34.6 17.5 Branded prescription drug fee 7.5 8.7 Loss on extinguishment of convertible senior notes 29.1 — Stock-based compensation expense ( 20.4 ) ( 3.9 ) Officer compensation 3.3 9.6 Foreign rate differential 7.2 3.4 Change in tax rate ( 0.6 ) ( 5.5 ) Research credits ( 49.2 ) ( 42.2 ) Change in valuation allowance 23.9 22.0 Other 7.2 3.1 Provision for income taxes $ 144.7 $ 82.4 87 The following table presents income taxes paid for 2025: (in millions) Amount U.S. Federal $ 72.7 Aggregated state and local jurisdictions (1) 8.7 Total income taxes paid, net $ 81.4 _________________________ (1) The amount of income taxes paid during 2025 did not meet the 5% disaggregation threshold. The following table presents the significant components of our deferred tax assets: December 31, (in millions) 2025 2024 Deferred tax assets: Net operating losses $ 8.4 $ 50.5 Research and development credits 74.6 62.8 Capitalized research and development 85.7 255.7 Stock-based compensation expense 59.7 61.4 Operating lease assets 111.8 122.7 Intangible assets 117.0 121.4 Accrued payroll 27.2 24.1 Other 55.0 27.6 Total deferred tax assets 539.4 726.2 Deferred tax liabilities: Operating lease liabilities ( 96.9 ) ( 112.8 ) Other ( 24.9 ) ( 15.5 ) Total deferred tax liabilities ( 121.8 ) ( 128.3 ) Net of deferred tax assets and liabilities 417.6 597.9 Valuation allowance ( 97.3 ) ( 112.2 ) Net deferred tax assets $ 320.3 $ 485.7 As of December 31, 2025 and 2024, we recorded a valuation allowance of $ 97.3 million and $ 112.2 million, respectively, against our gross deferred tax asset balance. As of each reporting date, management considers new evidence, both positive and negative, that could affect its assessment of the future realizability of our deferred tax assets. As of December 31, 2025, management determined there was sufficient positive evidence to conclude that it is more likely than not deferred tax assets of $ 320.3 million are realizable. The recorded valuation allowance of $ 97.3 million consisted primarily of unrealized capital losses, state net operating losses, and state research credit carryforwards for which management cannot conclude it is more likely than not to be realized. As of December 31, 2025, we had state income tax net operating loss carryforwards of $ 279.0 million. We had no federal or foreign income tax operating loss carryforwards as of December 31, 2025. California net operating losses and net operating losses related to other states will begin to expire in 2032 and 2041, respectively, unless previously utilized. As of December 31, 2025, we had state R&D tax credit carryforwards of $ 114.7 million. California R&D tax credits carry forward indefinitely, while R&D tax credits related to other states will begin to expire in 2034 unless previously utilized. Additionally, the future utilization of our state net operating loss and R&D tax credit carryforwards to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code Sections 382 and 383, as a result of ownership changes that could occur in the future. No ownership changes have occurred through December 31, 2025. As of December 31, 2025, we have recorded a U.S. deferred income tax liability of $ 12.0 million on the unremitted earnings of certain foreign subsidiaries as we cannot assert these earnings are indefinitely reinvested in foreign operations. 88 The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. We recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2025 and 2024, we had accruals for interest related to income tax matters of $ 24.9 million and $ 10.9 million, respectively. In addition, we had accruals for penalties related to income tax matters of $ 3.8 million and $ 2.2 million, respectively, as of December 31, 2025 and 2024. We are subject to taxation in the U.S. and various state and foreign jurisdictions. 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 net operating losses and R&D tax credits. The IRS is currently examining the 2023 tax year. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the tax audits are resolved in a manner not consistent with management’s expectations, we could be required to adjust the provision for income taxes in the period such resolution occurs. The following table presents a summary of activity related to unrecognized tax benefits: Year Ended December 31, (in millions) 2025 2024 2023 Balance at January 1 $ 179.8 $ 121.0 $ 84.5 (Decrease) increase related to prior year tax positions ( 11.2 ) 4.0 3.4 Increase related to current year tax positions 51.3 54.8 36.7 Decrease related to prior year tax positions — — ( 3.6 ) Balance at December 31 $ 219.9 $ 179.8 $ 121.0 As of December 31, 2025, we had $ 177.6 million of unrecognized tax benefits that, if recognized and realized, would affect the effective tax rate, subject to changes in the valuation allowance. On July 4, 2025, the One Big Beautiful Bill Act (the OBBBA) was signed into law. The OBBBA includes significant changes to U.S. tax and related laws. Some of the provisions of the OBBBA affecting us include the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act (TCJA), changes to the treatment of research and development expenditures under Internal Revenue Code Section 174, modifications to the Global Intangible Low-Taxed Income (GILTI) and Foreign-Derived Intangible Income (FDII) international tax provisions, and reinstatement of 100% bonus depreciation deduction from the TCJA for eligible property acquired after January 19, 2025. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA’s financial reporting implications have been recognized in our income tax provision for 2025. Swiss Cantonal Tax Relief In August 2025, the Company received approval from Swiss tax authorities granting cantonal tax relief to its Swiss subsidiary, Neurocrine Switzerland GmbH. The tax relief applies for a period of 10 tax years beginning with the 2024 tax year through 2033. The Swiss cantonal tax relief had a minimal impact on the Company’s earnings per share for the year ended December 31, 2025. 89 11. Collaboration and License Agreements Nxera Pharma UK Limited (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. Direclidine (NBI-1117568) is a potential first-in-class, orally active, highly selective investigational M4 agonist in development as a potential treatment for schizophrenia. In connection with the initiation of a Phase 3 clinical study for direclidine in schizophrenia in 2025, we expensed a milestone payment of $ 15.0 million to Nxera as R&D in 2025. In connection with the successful completions of a long-term toxicity program for direclidine and Phase 2 clinical study for direclidine in schizophrenia in 2024, we expensed milestone payments totaling $ 50.0 million to Nxera as R&D in 2024. Under the terms of the agreement, Nxera may be entitled to receive potential future payments of up to $ 2.50 billion upon the achievement of certain event-based milestones and is 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. Following the expiration of the research collaboration term, we may terminate the agreement in its entirety or with respect to one or more targets upon 90 days’ written notice to Nxera. 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 (Takeda) 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 (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 October 2024, we provided Takeda with written notice of termination of the license under the 2020 Takeda Agreement with respect to certain DAAO inhibitors, including the license to develop and commercialize luvadaxistat and NBI-1065846, which became effective in April 2025. 90 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 of the license to develop and commercialize certain DAAO inhibitors under the 2020 Takeda Agreement, including luvadaxistat, and GPR139 agonists, including NBI-1065846. Under the Restated Takeda Agreement, we retain exclusive rights to develop and commercialize osavampator for all indications in all territories worldwide except Japan, where Takeda reacquired 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 will incur tiered based royalties payable to Takeda 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. Osavampator is a potential first-in-class alpha-amino-3-hydroxy-5-methyl-4-isoxazole propionic acid (AMPA) positive allosteric modulator (PAM) in development for patients with inadequate response to treatment of major depressive disorder (MDD). In connection with the initiation of a Phase 3 clinical study for osavampator in MDD in 2025, we expensed a milestone payment of $ 37.5 million to Takeda as R&D in 2025. NBI-1070770 is a novel, selective, and orally active, negative allosteric modulator (NAM) of the NR2B subunit-containing N-methyl-D-aspartate (NMDA NR2B) receptor in development as a potential treatment for MDD. In connection with the initiation of a Phase 2 clinical study for NBI-1070770 in MDD in 2024, we expensed a milestone payment of $ 7.5 million to Takeda as R&D in 2024. In November 2025, we announced that the Phase 2 study evaluating the efficacy, safety, and tolerability of NBI-1070770 in adults with MDD did not meet the primary endpoint. Takeda may be entitled to receive potential future payments of up to $ 0.74 billion upon the achievement of certain event-based milestones and is entitled to receive royalties on the future net sales of any royalty-bearing product. 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 Restated Takeda Agreement in its entirety or in one or more (but not all) of the U.S., 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. 91 Xenon Pharmaceuticals Inc. (Xenon) In 2019, we entered into a collaboration and license agreement with Xenon to identify, research, and develop sodium channel inhibitors, including NBI-921352 and three preclinical candidates, which compounds we have the exclusive rights to develop and commercialize. In connection with the agreement, we purchased 1.4 million shares (at $ 14.196 per share) of Xenon common stock in 2019, 0.3 million shares (at $ 19.9755 per share) of Xenon common stock in 2021, and 0.3 million shares (at $ 31.855 per share) of Xenon common stock in 2022. We are responsible for all development and manufacturing costs of any collaboration product, subject to certain exceptions. NBI-921355 is an investigational, selective inhibitor of voltage-gated sodium channels Na v 1.2 and Na v 1.6 in development as a potential treatment of certain types of epilepsy. In connection with the initiation of a Phase 1 clinical study to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of NBI-921355 in healthy adult participants in 2025, we expensed a milestone payment of $ 7.5 million to Xenon as R&D in 2025. Under the terms of the agreement, Xenon may be entitled to receive potential future payments of up to $ 1.70 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 U.S. 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. 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. Upon the expiration of the royalty term for a particular licensed product and country, the license obtained by us with respect to such product and country will become fully paid, royalty free, perpetual and irrevocable. We may terminate the agreement upon 90 days’ written notice to Xenon, provided that such unilateral termination will not be effective for certain products until we have used commercially reasonable efforts to complete certain specified clinical studies. Either party may terminate the agreement in the event of a material breach in whole or in part, subject to specified conditions. Voyager Therapeutics, Inc. (Voyager) 2019 Voyager Agreement In 2019, we entered into a collaboration and license agreement with Voyager (the 2019 Voyager Agreement), pursuant to which we obtained certain rights to develop and commercialize product candidates, including the rights to gene therapy product candidates for the treatment of Friedreich’s ataxia (FA) and two undisclosed programs. In April 2025, we mutually agreed with Voyager to discontinue the two undisclosed programs and the rights to the targets selected under these programs returned to Voyager. 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 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 until February 23, 2026, the third anniversary of the closing date of the share purchase transaction. 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 $ 0.47 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. 92 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. We may terminate the 2019 Voyager Agreement upon 180 days’ written notice to Voyager prior to the first commercial sale of any collaboration product under the 2019 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 2019 Voyager Agreement. 2023 Voyager Agreement 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 ® 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. Voyager may elect to exercise such rights, pursuant to which we and Voyager would equally share in the operating profits and losses of such products in the U.S. (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 clinical trial in 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. and would be entitled to receive royalties on the future net sales of any such product outside the U.S. 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 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 until February 23, 2026, the third anniversary of the closing date of the share purchase transaction. We accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business. 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. Dr. 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 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 2023 as the license had no foreseeable alternative future use. In connection with the selection of development candidates under the GBA1 Program pursuant to our collaboration with Voyager, we expensed milestone payments totaling $ 3.0 million and $ 6.0 million, respectively, to Voyager as R&D in 2025 and 2024. Under the terms of the 2023 Voyager Agreement, Voyager may be entitled to receive potential future payments of up to $ 6.10 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. 93 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. Sanofi S.A. (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 (CRF-1) receptor antagonists, including crinecerfont. We launched CRENESSITY ® (crinecerfont) in the U.S. as a first-in-class FDA-approved treatment of classic congenital adrenal hyperplasia due to 21-hydroxylase deficiency (CAH) in December 2024. 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 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 our license agreement with Sanofi, 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. 12. Assets and Liabilities Held for Sale On December 24, 2025, we committed to a plan to sell the Neurocrine Group Limited (formerly Diurnal Group plc) operating unit, which met the criteria for classification as held for sale under ASC 360. As a result, the assets and liabilities of the disposal group are presented separately as “Assets held for sale” and “Liabilities related to assets held for sale” below, and included in other current assets and other current liabilities, respectively, on the consolidated balance sheet as of December 31, 2025. In connection with the classification of the operating unit as held for sale on December 24, 2025, $ 29.8 million of intangible assets, net of amortization, have been included in the disposal group presented as “Assets held for sale” on the consolidated balance sheet as of December 31, 2025. The disposal group was measured at the lower of the carrying amount or fair value less costs to sell. Based on an estimated fair value (net of selling costs) of $ 62.2 million and a carrying value of $ 34.6 million, no impairment loss was recognized in connection with the held-for-sale classification. In addition, depreciation and amortization associated with the disposal group ceased as of the held-for-sale classification date. The disposal group did not qualify as a discontinued operation under ASC 205, as it does not represent a strategic shift that will have a major effect on our operations or financial results. As required by ASC 360, any potential gain or loss will be recognized upon completion of the sale. The major classes of assets and liabilities classified as held for sale as of December 31, 2025, were as follows: (in millions) Amount Assets held for sale: Intangible assets, net $ 29.8 Other assets 13.0 Total assets held for sale included in other current assets $ 42.8 Liabilities related to assets held for sale: Accounts payable and accrued liabilities $ 6.8 Other liabilities 1.4 Total liabilities related to assets held for sale included in other current liabilities $ 8.2 As of December 31, 2025, the disposal group classified as held for sale excludes certain assets and obligations that will not be transferred to the buyer upon closing. Specifically, cash and cash equivalents of the disposal group are not expected to be conveyed to the buyer. Accordingly, such cash and the related liabilities expected to be settled prior to closing are excluded from the assets and liabilities presented as held for sale as of December 31, 2025. 94 Subsequent to December 31, 2025, on January 21, 2026, we completed the sale of Neurocrine Group Limited to Immedica Pharma AB for $ 65.0 million in cash, and we expect to recognize the related gain in the first quarter of 2026. 13. Retirement Plan We have a 401(k) defined contribution savings plan for the benefit of all qualifying employees and permits voluntary contributions by employees up to 60 % of base salary limited by the IRS-imposed maximum. Employer contributions were $ 19.7 million for 2025, $ 15.5 million for 2024, and $ 12.5 million for 2023. 14. 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 under-addressed neurological, psychiatric, endocrine, and immunological disorders. 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 and comprehensive 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) 2025 2024 2023 Revenues: INGREZZA net product sales $ 2,513.7 $ 2,313.5 $ 1,836.0 CRENESSITY net product sales 301.2 1.7 — Other revenues (1) 45.6 40.1 51.1 Total revenues 2,860.5 2,355.3 1,887.1 Less: Cost of revenues 52.1 34.0 39.7 Research and development: External research and development 507.3 343.5 310.0 Payroll and benefits 306.4 236.7 206.7 Milestones 65.4 71.7 0.8 Other research and development (2) 136.6 79.2 47.5 Total research and development 1,015.7 731.1 565.0 Acquired in-process research and development 17.4 12.5 143.9 Selling, general, and administrative 1,156.2 1,007.2 887.6 Unrealized loss (gain) on equity investments 4.0 37.1 ( 28.4 ) Charges associated with convertible senior notes — 138.4 — Interest income and other, net ( 90.3 ) ( 91.0 ) ( 52.8 ) Provision for income taxes 226.8 144.7 82.4 Net income $ 478.6 $ 341.3 $ 249.7 _________________________ (1) Other revenues primarily consist of net product sales of ALKINDI and EFMODY and royalties earned on AbbVie net sales of elagolix and TPC net sales of valbenazine. (2) Other research and development consists of indirect costs incurred for the benefit of multiple research and development programs, including facility-based expenses (such as rent expense) and other overhead allocations. 95 15. Legal Matters Legal Proceedings In March 2025, we received a notice from Zydus Lifesciences Global FZE (Zydus FZE) that it had filed an abbreviated new drug application, or ANDA, with the FDA seeking approval of a generic version of INGREZZA SPRINKLE (valbenazine). The ANDA contained a Paragraph IV Patent Certification alleging that certain of our patents covering INGREZZA SPRINKLE are invalid and/or will not be infringed by Zydus FZE’s importation, 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 in April 2025 against Zydus Pharmaceuticals (USA) Inc. and its affiliates Zydus FZE, Zydus Worldwide DMCC (entity subsequently dismissed), Zydus Lifesciences Limited, and Zydus Healthcare (USA) LLC (entity subsequently dismissed) (collectively, Zydus). The complaint alleged that by filing their ANDAs, Zydus infringed certain of our patents covering INGREZZA SPRINKLE and sought to prevent Zydus from selling a generic version of INGREZZA SPRINKLE. We also filed suit in the U.S. District Court for the District of New Jersey in April 2025 against Zydus on a similar factual basis seeking to prevent Zydus from selling a generic version of INGREZZA SPRINKLE and this case was dismissed in favor of continued prosecution of the Delaware proceeding against the same entities. From time to time, we may become subject to other legal proceedings or claims arising in the ordinary course of our business. We currently believe that none of the claims or actions pending against us is likely to have, individually or in the aggregate, a material adverse effect on our business, financial condition, or results of operations. Given the unpredictability inherent in litigation, however, we cannot predict the outcome of these matters. U.S. Department of Justice Investigation In August 2025, we received a civil investigative demand from the U.S. Department of Justice (DOJ) requesting certain documents and information related to our sales and marketing of INGREZZA. We are cooperating with the DOJ’s request. No assurance can be given as to the timing or outcome of the DOJ’s investigation. 96 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.