We own or have licensed rights to the following ~~U.S.~~United States patents relating to INGREZZA and our other products and product candidates in our pipeline (in addition to ~~non-U.S.~~non-United States patents and certain patents covering our early-stage product candidates):

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INGREZZA, our highly selective VMAT2 inhibitor for the treatment of TD, is covered by three issued U.S. patents that are listed in the FDA’s Orange Book: U.S. Patent No. 8,039,627, which expires in 2029 (not including a potential patent term extension of up to an additional two years), U.S. Patent No. 8,357,697, which expires in 2027, and U.S. Patent No. 10,065,952, which expires in 2036.

•INGREZZA, our highly selective VMAT2 inhibitor for the treatment of tardive dyskinesia, is covered by 19 issued United States patents that are listed in the FDA’s Orange Book and are set to expire between 2027 and 2040. There is also a potential patent term extension of up to an additional 2 years for United States Patent No. 8,039,627, which is currently set to expire in 2029 and is the earliest patent covering valbenazine, the active pharmaceutical ingredient contained in INGREZZA. In Japan and certain other East Asian markets, we are actively pursuing most of the patents corresponding to those listed in the FDA’s Orange Book entry for INGREZZA.

ORILISSA, our small molecule GnRH antagonist for the treatment of endometriosis, is covered by six issued U.S. patents that are listed in the FDA’s Orange Book: U.S. Patent Nos. 6,872,728, 7,179,815 and 7,462,625 expire in 2021 (not including potential patent term extensions of up to an additional five years) while U.S. Patent Nos. 7,056,927, 7,176,211 and 7,419,983 expire in 2024 (not including potential patent term extensions of up to an additional five years).

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Opicapone, a highly selective COMT inhibitor for Parkinson’s disease, is covered by U.S. Patent No. 8,168,793, among others, which expires in 2029 (not including a potential patent term extension of up to an additional five years)•ONGENTYS, a highly selective COMT inhibitor for Parkinson’s disease, is covered by 9 issued United States patents that are listed in the FDA’s Orange Book and set to expire between 2026 to 2035 (not including a potential patent term extension of up to an additional 4 years for one of these patents).

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Crinecerfont, our CRF1 antagonist for the treatment of CAH, is covered by U.S. Patent No. 6,586,456, which expires in 2020, and U.S. Patent No. 8,420,679, which expires in 2022 (both patents are expected to expire prior to marketing approval for crinecerfont and thus be ineligible for patent term extension)•ORILISSA, our small molecule GnRH antagonist for the treatment of endometriosis pain, is covered by 5 issued United States patents that are listed in the FDA’s Orange Book (the number of patents being dependent on dosage amount) and are set to expire between 2024 to 2036 (not including patent term extension of up to 5 years for patents listed in the Orange Book expiring in 2024).

•ORIAHNN, containing our small molecule GnRH antagonist for the treatment of menstrual bleeding associated with uterine fibroids, is covered by 4issued United States patents that are listed in the FDA’s Orange Book and are set to expire between 2024 to 2034 (not including a potential patent term extension of up to an additional 5 years for one of the patents).

NBIb-1817, our AADC gene therapy for the treatment of Parkinson’s disease, is covered by patent applications that have an earliest priority date in 2017. The terms of any patents that may issue from these patent applications should be capable of continuing until 2038 in most jurisdictions without taking into account any patent term adjustment or extension regime.

•Valbenazine, our highly selective VMAT2 inhibitor under further clinical development for the treatment of chorea in Huntington’s disease, is covered by at least 12 of the issued United States patents that are listed in the FDA’s Orange Book entry for INGREZZA and are set to expire between 2027 and 2038 . There is also a potential patent term extension of up to an additional 2 years for United States Patent No. 8,039,627, which is currently set to expire in 2029.

NBI-921352, an inhibitor of the Nav1.6 voltage-gated sodium channel for the treatment of epilepsy, is covered by U.S. Patent No. US 10,246,453 which expires in 2037 (not including a potential patent term extension of up to an additional five years).

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ACT-709478, an inhibitor of T-type calcium channels for the treatment of epilepsy, is covered by U.S. Patent No. US 9,932,314 which expires in 2035 (not including a potential patent term extension of up to an additional five•Crinecerfont, a CRF1 antagonist for the treatment of congenital adrenal hyperplasia (CAH), is covered by United States Patent No. 10,905,690, which expires in 2035 (not including a potential patent term extension of up to an additional 5 years).

•Luvadaxistat, a DAAO inhibitor for the treatment of cognitive impairment associated with Schizophrenia (CIAS), is covered by United States Patent No. 9,290,456, among others, which expires in 2032 (not including a potential patent term extension of up to an additional 5 years).

Our new VMAT2 inhibitor for the treatment of neurological and psychiatry disorders is covered by a patent application that has an earliest priority date in 2017. The terms of any patent that may issue from this patent application should be capable of continuing until 2038 in most jurisdictions without taking into account any patent term adjustment or extension regime.

•NBI-827104, an inhibitor of T-type calcium channels for the treatment of CSWS epilepsy, is covered by United States Patent No. US 9,932,314, among others, which expires in 2035 (not including a potential patent term extension of up to an additional 5 years).

•NBI-921352, an inhibitor of the Nav1.6 voltage-gated sodium channel for the treatment of SCN8A-DEE epilepsy, is covered by United States Patent No. US 10,246,453, among others, which expires in 2037 (not including a potential patent term extension of up to an additional 5 years).

•NBI-1065845, a positive allosteric modulator of AMPA for the treatment of inadequate response to treatment in major depressive disorder is covered by United States Patent No. 8,778,934, among others, which expires in 2031 (not including a potential patent term extension of up to an additional 5 years).

•NBI-1065846, a GPR139 agonist for the treatment of anhedonia in major depressive disorder, is covered by United States Patent No. 9,556,130, among others, which expires in 2035 (not including a potential patent term extension of up to an additional 5 years).

•NBI-1117568, a selective M4 agonist for the treatment of schizophrenia, is covered by United States Patent No. 10,961,225, among others, which expire in 2035 (not including a potential patent term extension of up to an additional 5 years).

In addition to the potential patent term extensions referenced above, the products and product candidates in our pipeline may be subject to additional terms of exclusivity that we ~~might~~may obtain by ~~virtue of later filed~~future patent ~~applications.~~

issuances.

Separately, the ~~U.S., the~~United States, European Union ~~or EU,~~ and Japan ~~all~~each provide data and marketing exclusivity for new medicinal compounds. If this protection is available, no competitor may use the original applicant’s data as the basis of a generic marketing application during the period of data and marketing exclusivity, which is measured from the date of marketing approval by the FDA or corresponding foreign regulatory authority. This period of exclusivity is generally ~~five~~5 years in the ~~U.S., six~~United States, 6 years in Japan and ~~ten~~10 years in the ~~EU,~~European Union, except that for biologics, ~~such as NBIb-1817, this~~the period of exclusivity in the ~~U.S.~~United States is ~~twelve~~12 years under the Biologics Price Competition and Innovation Act. In addition, if granted orphan drug designation, certain of our product candidates, including crinecerfont, may also be eligible for ~~market~~marketing exclusivity in the ~~U.S. and EU~~United States for ~~seven~~7 years and ~~ten years, respectively.~~

European Union for 10 years.

Refer to Item 1A. Risk Factors for a discussion of the challenges we may face in obtaining or maintaining patent and/or trade secret protection and Item 3. Legal Proceedings for a description of our legal proceedings related to intellectual property matters.

Manufacturing and Supply

We currently rely on, and intend to continue to rely on, third-party manufacturers for the production of INGREZZA and our product candidates. In addition, we rely on third-party service providers to perform a variety of functions related to the packaging, storage and distribution of INGREZZA. We believe our outsource manufacturing strategy enables us to direct our financial resources to the maximization of our opportunity with INGREZZA, investment in our internal R&D programs and expansion of our clinical pipeline through business development opportunities.

Raw materials, active pharmaceutical ingredients, or API, and other supplies required for the production of INGREZZA and our product candidates are ~~procured~~sourced from various third-party manufacturers and suppliers in quantities adequate to meet our needs. Continuing adequate supply of such raw materials and API is assured through our long-term commercial supply and manufacturing agreements with multiple manufacturers and our continued focus on the expansion and diversification of our third-party manufacturing relationships. In addition, we rely on BIAL – Portela & Ca, S.A. for the commercial supply of ONGENTYS.

We believe our outsourced manufacturing strategy enables us to direct our financial resources to the maximization of our opportunities with INGREZZA and ONGENTYS, investment in our internal R&D programs and expansion of our clinical pipeline through business development opportunities.

Our third-party manufacturers, suppliers and service providers may be subject to routine current Good Manufacturing Practice, or cGMP, inspections by the FDA or comparable agencies in other jurisdictions. We depend on our third-party partners and our quality system oversight of them for continued compliance with cGMP requirements and applicable foreign standards.

Marketing, Sales and Distribution

Our experience in marketing and selling pharmaceutical products began with INGREZZA’s approval in 2017, when we hired our salesforce and established our distribution and reimbursement capabilities, all of which are necessary to successfully commercialize our marketed products and products candidates. Our expanded specialty ~~sales force for INGREZZA~~salesforce in the ~~U.S. consists~~United States will consist of approximately ~~250~~350 experienced sales professionals ~~primarily~~divided into three dedicated sales teams focused on ~~educating health care professionals who treat patients with TD, including psychiatrists, neurologists, physician’s assistants~~psychiatry, neurology and ~~nurse practitioners.~~

~~Our~~long-term care. We anticipate completing our salesforce expansion during the second quarter of 2022.

For INGREZZA, our customers in the ~~U.S.~~United States consist of a limited network of specialty pharmacy providers ~~which delivers~~that deliver INGREZZA to patients by mail, wholesale distributors that distribute INGREZZA primarily to certain specialty pharmacies, and a specialty ~~distributor, which distributes~~distributors that distribute INGREZZA primarily to closed-door pharmacies and government facilities. For ~~2019,~~ONGENTYS, our ~~two largest~~ customers ~~accounted for approximately 86%~~in the United States consist primarily of ~~our gross product sales.~~

wholesale distributors. We rely on third-party service providers to perform a variety of functions related to the packaging, storage and distribution of INGREZZA and ONGENTYS.

Government Regulation

Our business activities are subject to extensive regulation by the ~~U.S.~~United States and other countries. Regulation by government authorities in the ~~U.S.~~United States and foreign countries is a significant factor in the development, manufacture, distribution, tracking, marketing and sale of our proposed products and in our ongoing research and product development activities. All of our products in development will require regulatory approval by government agencies prior to commercialization. The process of obtaining these approvals and the subsequent compliance with appropriate federal and state statutes and regulations require the expenditure of substantial time and financial resources.

In addition, federal and state healthcare laws restrict business practices in the pharmaceutical industry. These laws include, without limitation, federal and state fraud and abuse laws, false claims laws, data privacy and security laws, as well as transparency laws regarding payments or other items of value provided to healthcare providers. We have a comprehensive compliance program designed to ensure our business practices remain compliant.

The federal Anti-Kickback Statute makes it illegal for any person or entity to knowingly and willfully, directly or indirectly, solicit, receive, offer, or pay any remuneration that is intended to induce the referral of business, including the purchase, order, lease of any good, facility, item or service for which payment may be made under a federal healthcare program, such as Medicare or Medicaid.

Federal civil and criminal false claims laws and the federal civil monetary penalties law, which prohibit among other things, any person or entity from knowingly presenting, or causing to be presented, for payment to, or approval by, federal programs, including Medicare and Medicaid, claims for items or services, including drugs, that are false or fraudulent or not provided as claimed and knowingly making, or causing to be made, a false record or to avoid or decrease an obligation to pay money to the federal government.

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

In addition, we may be subject to ~~HIPPA~~HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their privacy and security regulations, which ~~require~~impose certain obligations, including the adoption of administrative, physical and technical safeguards to protect individually identifiable health ~~information.~~

information on covered entities subject to HIPAA (i.e., health plans, healthcare clearinghouses and certain healthcare providers) and their business associates that perform certain services for or on their behalf involving the use or disclosure of individually identifiable health information as well as their covered subcontractors.

The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare and Medicaid Services, or CMS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as ~~defined by such law,~~physician assistants and nurse practitioners) and teaching hospitals, ~~and applicable entities to report~~as well as information regarding ownership and investment interests held by ~~the~~ physicians and their immediate family members.

Also, many states have similar healthcare statutes or regulations that may be broader in scope and may apply regardless of payor. Additionally, to the extent that our product is sold in a foreign country, we may be subject to similar foreign laws.

Failure to comply with these laws, where applicable, can result in significant penalties, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, and additional reporting requirements and regulatory oversight, any of which could adversely affect our ability to operate our business and our results of operations.

Development and Marketing Approval for ~~Products~~Products.

Preclinical studies generally are conducted in laboratory animals to evaluate the potential safety and efficacy of a product. Drug developers submit the results of preclinical studies to the FDA as a part of an investigational new drug application, or IND, ~~application~~ before clinical trials can begin in humans. Typically, clinical evaluation involves a time consuming and costly three-phase process.


Phase I			Clinical trials are conducted with a small number of subjects to determine the early safety profile, maximum tolerated dose and pharmacokinetic properties of the product in human volunteers ~~and for certain products, such as gene therapies,~~or in patients with the target disease.


Phase II			Clinical trials are conducted with groups of patients afflicted with a specific disease in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety.


Phase III			Larger, multi-center, comparative clinical trials are conducted with patients afflicted with a specific disease in order to determine safety and efficacy as primary support for regulatory approval by the FDA to market a product candidate for a specific disease.

The FDA closely monitors the progress of each of the three phases of clinical trials that are conducted in the ~~U.S.~~United States and may, at its discretion, re-evaluate, alter, suspend or terminate the testing based upon the data accumulated to that point and the FDA’s assessment of the risk/benefit ratio to the patient. Institutional Review Boards, Institutional Ethics Committees and Data Safety Monitoring Boards also closely monitor the conduct of our trials and may also place holds on our clinical trials or recommend that we voluntarily do so. Clinical trials conducted in foreign countries are also subject to oversight by regulatory authorities in those countries.

Once Phase III trials are completed, drug developers submit the results of preclinical studies and clinical trials to the FDA in the form of an NDA ~~or a biologics license application, or BLA,~~ for approval to commence commercial sales. In most cases, the submission of an NDA ~~or BLA~~ is subject to a substantial application user fee. Under the Prescription Drug User Fee Act, or PDUFA, ~~guidelines that are currently in effect,~~ the FDA has a goal of ten months from the date of filing of a standard NDA for a new molecular entity to review and act on the submission.

The FDA generally has a six-month review goal of priority NDAs.

In addition, under the Pediatric Research Equity Act of 2003 as amended and reauthorized, certain applications or supplements to an application must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults or full or partial waivers from the pediatric data requirements.

The FDA also may require submission of a risk evaluation and mitigation strategy ~~plan~~ to ensure that the benefits of the drug outweigh its risks. The risk evaluation and mitigation strategy ~~plan~~ could include medication guides, physician communication plans, assessment plans and/or additional elements to assure safe use, such as restricted distribution methods, patient registries, or other risk minimization tools.

The FDA conducts a preliminary review of all NDAs ~~and BLAs~~ within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an application for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA ~~or BLA~~ to determine, among other things, whether the drug is safe and effective for its intended use and whether the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity.

The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving an NDA, ~~or BLA,~~ the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with current Good Manufacturing Practice requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, ~~or BLA,~~ the FDA may inspect one or more clinical trial sites to assure compliance with Good Clinical Practice requirements.

After evaluating the NDA ~~or BLA~~ and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a complete response letter. A complete response letter generally contains a statement of specific conditions that must be met in order to secure final approval of the application and may require additional clinical or preclinical testing in order for FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase IV clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a risk evaluation and mitigation strategy, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After

approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.

We will also have to complete an approval process similar to that in the ~~U.S.~~United States in order to commercialize our product candidates in each foreign country. The approval procedure and the time required for approval vary from country to country and may involve additional testing. Foreign approvals may not be granted on a timely basis, or at all. In addition, regulatory approval of prices is required in most countries other than the ~~U.S.~~United States The resulting prices may not be sufficient to generate an acceptable return to us or our corporate collaborators.

In the European Union, there are currently two potential tracks for seeking marketing approval for a product not authorized in any European Union member state: a decentralized procedure and a centralized procedure. In the decentralized procedure, identical applications for marketing authorization are submitted simultaneously to the national regulatory agencies. Regulatory review is led by one member state (the reference-member state), and its assessment—based on safety, quality and efficacy—is reviewed and approved (assuming there are no concerns that the product poses a serious risk to public health) by the other member states from which the applicant is seeking approval (the concerned-member states). The decentralized procedure leads to a series of single national approvals in all relevant countries. In the centralized procedure, which is required of all products derived from biotechnology, a company submits a single marketing authorization application to the European Medicines Agency, or EMA, which conducts an evaluation of the dossier, drawing upon its scientific resources across Europe. If the drug product is proven to fulfill the requirements for quality, safety and efficacy, the EMA’s Committee for Medicinal Products of Human Use, or CHMP, adopts a positive opinion, which is transmitted to the European Commission for final decision on grant of the marketing authorization. While the EC generally follows the CHMP’s opinion, it is not bound to do so. Subsequent commercialization is enabled by country-by-country reimbursement approval.

Orphan Drug ~~Designation~~

Designation. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the ~~U.S.,~~United States, or if it affects more than 200,000, there is no reasonable expectation that sales of the drug in the ~~U.S.~~United States will be sufficient to offset the costs of developing and making the drug available in the ~~U.S.~~United States Orphan drug designation must be requested before submitting an ~~NDA or BLA.~~NDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If the FDA approves a sponsor’s marketing application for a designated orphan drug for use in the rare disease or condition for which it was designated, the sponsor is eligible for a seven-year period of marketing exclusivity, during which the FDA may not approve another sponsor’s marketing application for a drug with the same active moiety and intended for the same use or indication as the approved orphan drug, except in limited circumstances, such as if a subsequent sponsor demonstrates its product is clinically superior. During a sponsor’s orphan drug exclusivity period, competitors, however, may receive approval for drugs with different active moieties for the same indication as the approved orphan drug, or for drugs with the same active moiety as the approved orphan drug, but for different indications. Orphan drug exclusivity could block the approval of one of our products for ~~seven~~7 years if a competitor obtains approval for a drug with the same active moiety intended for the same indication before we do, unless we are able to demonstrate that grounds for withdrawal of the orphan drug exclusivity exist, or that our product is clinically superior. Further, if a designated orphan drug receives marketing approval for an indication broader than the rare disease or condition for which it received orphan drug designation, it may not be entitled to exclusivity.

Legislation similar to the Orphan Drug Act has been enacted in other countries outside of the United States, including the ~~EU.~~European Union. The orphan legislation in the EUEuropean Union is available for therapies addressing conditions that affect five or fewer out of 10,000 persons, are life‑threatening or chronically debilitating conditions and for which no satisfactory treatment is authorized. The market exclusivity period is for ~~ten~~10 years, although that period can be reduced to ~~six~~6 years if, at the end of the fifth year, available evidence establishes that the product does not justify maintenance of market exclusivity.

Post-Approval ~~Requirements~~

Requirements. Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing, annual program user fee requirements for any marketed products, as well as new application fees for supplemental applications with clinical data.

The FDA may impose a number of post-approval requirements as a condition of approval of an ~~NDA or BLA.~~NDA. For example, the FDA may require post-marketing testing, including Phase IV clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with current Good Manufacturing Practices, or cGMP, requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP requirements and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a risk evaluation and mitigation ~~strategies~~strategy program. Other potential consequences include, among other things:

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~~restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;~~

•restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

~~fines, warning letters or holds on post-approval clinical trials;~~

•fines, warning letters or holds on post-approval clinical trials;

~~refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals;~~

•refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals;

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

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

•injunctions or the imposition of civil or criminal penalties.

•

~~injunctions or the imposition of civil or criminal penalties.~~

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. The FDA does not regulate behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.

~~Additional Regulation for Gene Therapy Products~~

In addition to the regulations discussed above, there are a number of standards that apply to gene therapy. FDA has issued various guidance documents regarding gene therapies, which outline factors that FDA will consider at each of the stages of development and relate to, among other things: the proper preclinical assessment of gene therapies; the chemistry, manufacturing and controls information that should be included in an IND application; the proper design of tests to measure product potency in support of an IND or BLA; and measures to observe delayed adverse effects in subjects who have been exposed to investigational gene therapies when the risk of such effects is high. For instance, FDA usually recommends that sponsors observe all surviving subjects who receive treatment using gene therapies that are based on adeno-associated virus vectors in clinical trials for potential gene therapy-related delayed adverse events for a minimum five-year period, followed by 10 years of annual queries, either in person or by questionnaire. FDA does not require the long-term tracking to be complete prior to its review of the BLA.

In addition to FDA oversight and oversight by institutional review boards, gene therapy clinical trials are also subject to review and oversight by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment.

Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In the ~~U.S.~~United States and markets in other countries, sales of any products for which we receive regulatory approval will depend, in part, on the extent to which third-party payors provide coverage and establish adequate reimbursement levels for such drug products.

In the ~~U.S.,~~United States, third-party payors include federal and state healthcare programs, government authorities, private managed care providers, private health insurers and other organizations. No uniform policy for coverage and reimbursement exists in the United States, and coverage and reimbursement can differ significantly from payor to payor. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates, but also have their own methods and approval process apart from Medicare determinations. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our drug products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical drug products and medical services, in addition to questioning their safety and efficacy. Such payors may limit coverage to specific drug products on an approved list, also known as a formulary, which might not include all of the FDA-approved drugs for a particular indication. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Nonetheless, our products or product candidates, including INGREZZA, may not be considered medically necessary or cost-effective.

Moreover, the process for determining whether a third-party payor will provide coverage for a drug product may be separate from the process for setting the price of a drug product or for establishing the reimbursement rate that such a payor will pay for the drug product. A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product does not assure that other payors will also provide coverage for the drug product. Adequate third-party payor reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

The marketability of any product or product candidates for which we or our collaborators receive regulatory approval for commercial sale may suffer if third-party payors fail to provide coverage and adequate reimbursement. In addition, emphasis on managed care in the ~~U.S.~~United States has increased and we expect will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party payor reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Healthcare Reform

The ~~U.S.~~United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the ~~U.S.~~United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality or expanding access. In the ~~U.S.,~~United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

By way of example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively the ACA, was signed into law, which intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees on the health industry and impose additional health policy reforms.

~~Some of the provisions of the ACA have yet to be fully implemented, and there~~

There have been legal and political challenges to certain aspects of the ACA. Since January 2017, the ~~current presidential~~Trump administration ~~has~~ signed ~~two~~several executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the ACA. Concurrently, Congress ~~has~~ considered legislation that would repeal or repeal and replace all or part of the ACA. ~~Legislation~~For example, legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, includes a provision ~~repealing,~~that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. ~~In addition,~~On June 17, 2021, the ~~2020 federal spending package permanently eliminates, effective January 1, 2020, the ACA-mandated “Cadillac” tax~~U.S. Supreme Court dismissed a challenge on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. On December 14, 2018, a Texas U.S. District Court Judge ruledprocedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by ~~Congress as part of~~Congress. Thus, the ~~Tax Cuts and Jobs Act. Additionally, on December 18, 2019,~~ACA will remain in effect in its current form. Prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of ~~Appeals for~~obtaining health insurance coverage through the 5^th ~~Circuit ruled~~ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ~~individual mandate was unconstitutional and remanded~~ACA will be subject to judicial or Congressional challenges in the ~~case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well.~~future. It is unclear how ~~this decision, future decisions, subsequent appeals,~~such challenges and ~~other efforts to repeal and replace~~ the ~~ACA~~healthcare reform measures of the Biden administration will impact the ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include, among others, aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013 and, due to subsequent legislative amendments, including the Investment and Jobs Act, will remain in effect through ~~2029~~2031, except for a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic, unless additional Congressional action is taken.

Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequestration.

For example, on July 24, 2020 and September 13, 2020, the ~~federal level,~~Trump administration announced several executive orders related to drug pricing that sought to implement several of the ~~current presidential~~ administration’s ~~budget proposal for fiscal year 2020 contains further drug price control measures that could be enacted during~~proposals. As a result, the ~~2020 budget process or in other future legislation. Additionally, the current presidential administration~~FDA concurrently released a ~~“Blueprint”~~final rule and guidance in September 2020, providing pathways for states to ~~lower drug prices~~build and ~~reduce out-of-pocket costs of drugs. The~~submit importation plans for drugs from Canada. This rule is undergoing legal challenge.

Further, on November 20, 2020, the U.S. Department of Health and Human Services, ~~has solicited feedback on some of these measures and,~~or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the ~~same,~~point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. This rule has ~~implemented others under its existing authority. Although~~been stayed by the Biden Administration until 2023 while pending litigation is heard in the courts.

On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. As a ~~number~~result of litigation challenging the Most Favored Nation model, on December 27, 2021, CMS published a final rule that rescinds the Most Favored Nation model interim final rule.

Additionally, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these ~~and other measures may require additional authorization to become effective, Congress and the current presidential administration have each indicated that it will continue to seek new legislative and/~~principles. No legislation or administrative ~~measures~~actions have been finalized to ~~control drug costs.~~ implement these principles. It is unclear whether these or similar policy initiatives will be implemented in the future.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.

Competition

The biotechnology and pharmaceutical industries are subject to rapid and intense technological change. We face, and will continue to face, competition in the development and marketing of our products and product candidates from academic institutions, government agencies, research institutions and biotechnology and pharmaceutical companies. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approval and marketing than we do.

Competition may also arise from, among other things, new drug development technologies, new or improved treatment options for preventing or reducing the incidence of disease in diseases our products treat and new small molecule or other classes of therapeutic agents. Such developments by competitors could reduce or eliminate the use of our products or may limit the utility and application of ongoing clinical trials for our product candidates.

~~Additional information about the competition that our marketed products face is set forth below.~~

Tardive ~~Dyskinesia~~

Dyskinesia.INGREZZA competes with AUSTEDO (deutetrabenazine), which was approved by the FDA for the treatment of TDtardive dyskinesia in adults in August 2017 and is marketed by Teva Pharmaceutical Industries, and several clinical development-stage programs targeting tardive dyskinesia and related movement disorders. Additionally, there are a number of commercially available medicines used to treat TDtardive dyskinesia off-label, such as ~~tetrabenazine (Xenazine~~^Xenazine® (tetrabenazine) and generic ~~equivalents), botulinum toxin,~~equivalents, and various antipsychotic medications (e.g., clozapine), anticholinergics, benzodiazepines (off-label), and ~~anticholinergics. We~~botulinum toxin.

Parkinson’s Disease. ONGENTYS competes with two other FDA-approved COMT inhibitors and their generic equivalents. Additionally, there are ~~also aware~~a number of ~~several~~alternative adjunctive treatment options (FDA-approved and in clinical ~~development-stage programs that, if successfully developed and approved, may~~development) for Parkinson’s patients which compete with ~~INGREZZA~~ONGENTYS, including various L-dopa preparations, dopamine agonists, MAO-B inhibitors and others. In terms of potential future competition, there are several programs in ~~the TD market.~~

late-stage clinical development.

Endometriosis

and Uterine Fibroids. ORILISSA ~~competes~~and ORIAHNN each compete with several FDA-approved products for the treatment of endometriosis, uterine fibroids, infertility and central precocious puberty. Additionally, there is also competition from surgical ~~interventions. Over 100,000~~intervention, including hysterectomies ~~are performed in~~

~~the U.S. annually as a direct result of endometriosis, as well as a significant number of laparoscopic procedures to ablate endometrial explants.~~and ablations. Separate from these options, there are many programs in clinical development which serve as potential future competition. Lastly, there are numerous medicines used to treat the symptoms of disease ~~(vs~~(vs. endometriosis or uterine fibroids directly) which may also serve as competition: oral contraceptives, ~~nonsteroidal anti-inflammatory drugs, or~~ NSAIDs and other pain medications, including opioids.

~~Parkinson’s Disease~~

Opicapone would currently compete directly with two FDA-approved COMT inhibitors and their generic equivalents. In addition, there are a number of alternative adjunctive treatment options (FDA-approved and in clinical development) for Parkinson’s disease patients which would compete with opicapone, including but not limited to various L-dopa preparations, dopamine agonists, MAO-B inhibitors. We are also aware of several programs in late-stage clinical development that may compete with opicapone.

Congenital Adrenal ~~Hyperplasia~~

Hyperplasia.For CAH, high doses of corticosteroids are the current standard of care to both correct the endogenous cortisol deficiency as well as reduce the excessive ACTH levels. In the ~~U.S.~~United States alone, there are more than two dozen companies manufacturing steroid-based products. In addition, there are several programs in clinical development targeting CAH and several companies developing medicinal treatments for CAH.

~~Epilepsy~~

Epilepsy.Our investigational ~~therapies~~treatments for potential use in epilepsy may in the future compete with numerous approved anti-seizure medications and development-stage programs being pursued by several other companies. Commonly used anti-seizure medications include phenytoin, levetiracetam, brivaracetam, cenobamate, carbamazepine, clobazam, lamotrigine, valproate, oxcarbazepine, topiramate, lacosamide, perampanel and cannabidiol, among others. There are currently no FDA-approved treatments specifically indicated for the early infantile epileptic encephalopathies SCN8A-DEE and EE-CSWS; however, a number of different anti-seizure medications are currently used in these patient populations.

Neuropsychiatry. Our investigational treatments for potential use in schizophrenia and depression may in the future compete with several development-stage programs being pursued by other companies. Currently, there are no FDA-approved treatments specifically indicated for CIAS; however, there are a number of different anti-psychotic medications currently used in these patient populations.

Other. Our investigational treatments for potential use in neurology, neuroendocrinology and neuropsychiatry may in the future compete with numerous approved products and development-stage programs being pursued by several other companies.

~~Gene Therapy~~

Human Capital

Our ~~investigational gene therapies may in the future compete with numerous approved products and development-stage programs being pursued by several companies.~~

~~Employees~~

AsEmployees.We have grown to a team of more than 900 employees as of December 31, ~~2019,~~2021, all of whom were employed in the United States. Our highly qualified and experienced team, which includes scientists, physicians and professionals across sales, marketing, manufacturing, regulatory, finance and other essential functions are critical to our success. We also leverage temporary workers to provide flexibility for our business needs. During 2021, we ~~had approximately 700 full-time employees. None~~added over 200 new employees to our team.

We expect to continue to add additional employees in 2022 with a focus on expanding our commercial salesforce, research, and development organizations. We continually evaluate our business needs and opportunities and balance in house expertise and capacity with external expertise and capacity. Currently, we rely on third-party contract manufacturers.

Our Culture.The success of our human capital management investments is evidenced by our low employee turnover, a number which is regularly reviewed by our Board of Directors as part of their oversight of our human capital strategy. In recognition of our efforts, in 2021, we received the following rewards:

•#4 in Fortune Best Workplaces in Health Care & BiopharmaTM

•#7 in Fortune Best Small & Medium WorkplacesTM

•#13 in Fortune Best Workplaces for WomenTM

•#25 in Fortune Best Workplaces for MillennialsTM

Employee Engagement, Talent Development & Benefits.We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees. We provide our employees ~~are represented by~~with competitive salaries and bonuses, opportunities for equity ownership, development programs that enable continued learning and growth and a ~~collective bargaining arrangement,~~robust employment package that promotes well-being across all aspects of their lives, including health care, retirement planning and paid time off. As part of our promotion and retention efforts, we also invest in ongoing leadership development programs as well as offer tuition reimbursement. In addition, we regularly conduct an employee survey to gauge employee engagement and identify areas of focus.

Diversity & Inclusion.Much of our success is rooted in the diversity of our teams and our commitment to inclusion. We value diversity at all levels and continue to focus on extending our diversity and inclusion initiatives across our entire workforce. We believe that our business benefits from the different perspectives a diverse workforce brings, and we ~~believe~~pride ourselves on having a strong, inclusive and positive culture based on our ~~relationship with our employees is good.~~

~~Insurance~~

~~We maintain product liability insurance coverage for INGREZZA~~shared mission and our clinical trials in amounts consistent with industry standards. However, insurance coverage is becoming increasingly expensive, and we may not be able to obtain or maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability.

values.

Corporate Information

We were originally incorporated in California in January 1992 and reincorporated in Delaware in May 1996. Our principal executive offices are located at 12780 El Camino Real, San Diego, California 92130. Our telephone number is (858) 617-7600.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our website at www.neurocrine.com, as soon as reasonably practicable after such reports are available on the Securities and Exchange Commission, or SEC, website at www.sec.gov. Additionally, copies of our Annual Report will be made available, free of charge, upon written request. Information found on, or accessible through, our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K.

Item 1A. Risk Factors

The following information sets forth risk factors that could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Annual Report on Form 10-K and those we may make from time to time. If any of the following risks actually occur, our business, operating results, prospects or financial condition could be harmed. Additional risks not presently known to us, or that we currently deem immaterial, may also affect our business operations.

~~Risks Related~~

Summary Risk Factors

We face risks and uncertainties related to ~~Our Company~~

our business, many of which are beyond our control.In particular, risks associated with our business include:

•We may not be able to continue to successfully commercialize INGREZZA, ONGENTYS, or any of our product candidates if they are approved in the future.

•If physicians and patients do not continue to accept INGREZZA or do not accept ONGENTYS, or our sales and marketing efforts are not effective, we may not generate sufficient revenue.

•Governmental and third-party payors may impose sales and pharmaceutical pricing controls on our products or limit coverage and/or reimbursement for our products that could limit our product revenues and delay sustained profitability.

•Our business could be adversely affected by the effects of health pandemics or epidemics, including the COVID-19 pandemic, which could also cause significant disruption in the operations of third-party manufacturers, contract research organizations, or CROs, or other third parties upon whom we rely.

•We face intense competition, and if we are unable to compete effectively, the demand for our products may be reduced.

•Because the development of our product candidates is subject to a substantial degree of technological uncertainty, we may not succeed in developing any of our product candidates.

•Our clinical studies may be delayed for safety or other reasons, or fail to demonstrate the safety and efficacy of our product candidates, which could prevent or significantly delay their regulatory approval.

•We depend on our current collaborators for the development and commercialization of several of our products and product candidates and may need to enter into future collaborations to develop and commercialize certain of our product candidates.

•Use of our approved products or those of our collaborators could be associated with side effects or adverse events.

•We have recently increased the size of our organization and will need to continue to increase the size of our organization. We may encounter difficulties with managing our growth, which could adversely affect our results of operations.

•If we are unable to retain and recruit qualified scientists and other employees or if any of our key senior executives discontinues his or her employment with us, it may delay our development efforts or impact our commercialization of INGREZZA, ONGENTYS or any product candidate approved by the FDA.

•We currently have no manufacturing capabilities. If third-party manufacturers of INGREZZA, ONGENTYS or any of our product candidates fail to devote sufficient time and resources to our concerns, or if their performance is substandard, our clinical trials and product introductions may be delayed, and our costs may rise.

•We currently depend on a limited number of third-party suppliers. The loss of these suppliers, or delays or problems in the supply of INGREZZA or ONGENTYS, could materially and adversely affect our ability to successfully commercialize INGREZZA or ONGENTYS.

•We license some of our core technologies and drug candidates from third parties. If we default on any of our obligations under those licenses, or violate the terms of these licenses, we could lose our rights to those technologies and drug candidates or be forced to pay damages.

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

•Health care reform measures and other recent legislative initiatives could adversely affect our business.

•Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations.

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

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

•If we cannot raise additional funding, we may be unable to complete development of our product candidates or establish commercial and manufacturing capabilities in the future.

Risks Related to Our Company

We may not be able to continue to successfully commercialize INGREZZA, ONGENTYS, or any of our product candidates if they are approved in the future.

Our ability to produce INGREZZA revenues consistent with expectations ultimately depends on our ability to ~~sell our products~~continue to successfully commercialize INGREZZA and secure adequate third-party ~~reimbursement if and when they are approved by the FDA.~~reimbursement. Our experience in marketing and selling pharmaceutical products began with INGREZZA’s approval in 2017, when we hired our ~~sales force~~salesforce and established our distribution and reimbursement capabilities, all of which are necessary to successfully commercialize ~~INGREZZA.~~our current and future products. We have continued to invest in our commercial infrastructure and distribution capabilities in the past ~~three~~4 years, including the expansion of our ~~sales force expansion~~specialty salesforce, which we announced in ~~late 2018.~~the third quarter of 2021 and anticipate completing in the second quarter of 2022. While our team members and consultants have experience marketing and selling pharmaceutical products, we may face difficulties related to managing the rapid growth of our personnel and infrastructure, and there can be no guarantee that we will be able to maintain the personnel, systems, arrangements and capabilities necessary to continue to successfully commercialize INGREZZA, or to successfully commercialize ONGENTYS or any product

candidate approved by the FDA in the future.

In addition, our business has been and may continue to be adversely affected by the effects of health pandemics or epidemics, including the ongoing COVID-19 pandemic. In parts of the country where the pandemic is having a greater impact, some hospitals, community mental health facilities and other healthcare facilities continue to have policies that limit access of our sales representatives, medical affairs personnel and patients to such facilities. These policies are likely to change from time to time as communities or regions grapple with outbreaks. In addition, many health care practitioners have adopted telehealth for patient interactions, which may impact the ability of the health care practitioner to screen for and diagnose tardive dyskinesia. Further, during the COVID-19 pandemic, the use of physician telehealth services increased significantly, fueled by an expansion of coverage and reimbursement from government and other payors. The limitations that telehealth places on the ability to conduct a thorough visual and physical examination may impact the ability of providers to screen for movement disorders, leading to potentially fewer patients to be diagnosed and referred for treatment. The ultimate impact of the COVID-19 pandemic, including any lasting effects on the way we conduct our business, is highly uncertain and subject to continued change. If we fail to maintain successful marketing, sales and reimbursement capabilities, ~~or fail to enter into successful marketing arrangements with third parties,~~ our product revenues may suffer.

If physicians and patients do not continue to accept INGREZZA or do not accept ~~any of our other products,~~ONGENTYS or our sales and marketing efforts are not effective, we may not generate sufficient revenue.

The commercial success of INGREZZA or ~~any of our other products, if approved for marketing,~~ONGENTYS will depend upon the acceptance of those products as safe and effective by the medical community and patients.

The market acceptance of INGREZZA or ~~any of our other products~~ONGENTYS could be affected by a number of factors, including:

•

~~the timing of receipt of marketing approvals for indications;~~

•the timing of receipt of marketing approvals for additional indications;

~~the safety and efficacy of the products;~~

•

•the safety and efficacy of the ~~pricing of our~~ products;

••

~~the availability of healthcare payor coverage and adequate reimbursement for~~ the pricing of our products;

•the availability of healthcare payor coverage and adequate reimbursement for the products;

~~public perception regarding any gene therapy products we may develop;~~

•public perception regarding any products we may develop;

~~the success of existing competitor products addressing our target markets or the emergence of equivalent or superior products; and~~

•the success of existing competitor products addressing our target markets or the emergence of equivalent or superior products; and

~~the cost-effectiveness of the products.~~

•the cost-effectiveness of the products.

If the medical community, patients and ~~patients~~payors do not ~~ultimately~~continue to accept our products as being safe, effective, superior and/or cost-effective, we may not generate sufficient revenue.

Governmental and third-party payors may impose sales and pharmaceutical pricing controls on our products or limit coverage and/or reimbursement for our products or impose policies that could limit our product revenues and delay sustained profitability.

Our ability to continue to commercialize ~~any products~~INGREZZA successfully ~~including INGREZZA,~~or to successfully commercialize ONGENTYS, will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available. The continuing efforts of government and third-party payors to contain or reduce the costs of health care and the price of prescription drugs through various means may ~~reduce~~impact our ~~potential~~ revenues. These payors’ efforts could decrease the price that we receive for any products we may develop and sell in the future.

Assuming we obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover all or a significant portion of the out-of-pocket cost of our products. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available regardless of whether they are approved by the FDA for that particular use.

Coverage decisions by payors for our competitors' products may also impact coverage for our products.

Government authorities and other third-party payors are developing increasingly sophisticated methods of controlling healthcare costs, such as by limiting coverage and the amount of reimbursement for particular medications. Further, no uniform policy requirement for coverage and reimbursement for drug products exists among third-party payors in the ~~U.S.~~United States. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. In addition, communications from government officials regarding health care costs and pharmaceutical pricing could have a negative impact on our stock price, even if such communications do not ultimately impact coverage or reimbursement decisions for our products.

There may also be significant delays in obtaining coverage and reimbursement for newly approved drugs or indications, and coverage may be more limited than the purposes for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize INGREZZA, ONGENTYS or any other product candidate for which we obtain marketing approval. Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

Further, a majority of our current revenue is derived from federal healthcare program payors, including Medicare and Medicaid. Thus, changes in government reimbursement policies, reductions in payments and/or our suspension or exclusion from participation in federal healthcare programs could have a material adverse effect on our business.

Further, during the COVID-19 pandemic, the use of physician telehealth services has rapidly increased, fueled by an unprecedented expansion of coverage and reimbursement across insurers. The limitations that telehealth places on the ability to conduct a thorough physical examination may impact the ability of providers to screen for movement disorders, leading potentially fewer patients to be diagnosed and/or treated.

Our business could be adversely affected by the effects of health pandemics or epidemics, including the COVID-19 pandemic, which could also cause significant disruption in the operations of third-party manufacturers CROs, or other third parties upon whom we rely.

Our business could be adversely affected by the effects of health pandemics or epidemics, which could also cause significant disruption in the operations of third-party manufacturers, CROs and other third parties upon whom we rely. As a result of the ongoing COVID-19 pandemic, we may experience disruptions that could severely impact our supply chain, ongoing and future clinical trials and commercialization of INGREZZA and ONGENTYS. For example, the COVID-19 pandemic has resulted in travel restrictions and the shutdown or delay of business activities in various regions. In response to the COVID-19 pandemic, we implemented a remote work model for all employees except certain key essential members involved in business-critical activities. Most of our field-based employees have resumed in-person interactions in accordance with location-specific guidance. Our office-based employees have returned to the office under flexible work guidelines to help balance business needs, employee health, well-being and safety and the evolving work environment. However, as the effects of the pandemic continue to rapidly evolve with the emergence of new COVID-19 variants, a remote work model may nevertheless need to be reinstated at some point in the future. We continue to evaluate the impact of global spikes or surges in COVID-19 infection and hospitalization rates, as well as the impact of emerging COVID-19 variants on the efficacy of vaccines. The effects of a remote and flexible work model may negatively impact productivity, disrupt our business and delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. In addition, we may face several challenges or disruptions upon a return back to the workplace, including re-integration challenges by our employees and distractions to management related to such transition. These and similar, and perhaps more severe, disruptions in our operations due to the COVID-19 pandemic could negatively impact our business, operating results and financial condition.

Quarantines, stay at home orders, travel restrictions and other state and local restrictions, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases, could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain.

In addition, clinical site initiation and patient enrollment may be delayed due to concerns for patient safety and prioritization of healthcare resources toward the COVID-19 pandemic. Some patients may not be able to comply with clinical trial protocols if quarantines impede patient travel or interrupt healthcare services. Similarly, our ability to recruit and retain patients, principal investigators and site staff may be hindered, which would adversely impact our clinical trial operations. Increases in COVID-19 cases or hospitalizations in the future could cause us or any of our clinical sites to again limit or suspend our patient enrollment and screening activities.

The COVID-19 pandemic, which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or predict, the pandemic has caused disruption in the global financial markets. This disruption, if sustained or recurrent, could make it more difficult for us to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the COVID-19 pandemic could materially affect our business and the value of our common stock.

The effects of the COVID-19 pandemic continue to rapidly evolve. The ultimate impact of the COVID-19 pandemic or a similar health pandemic or epidemic is highly uncertain and subject to continued change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare systems or the global economy as a whole. These effects could have a material impact on our operations, or the operations of third parties on whom we rely.

We face intense competition, and if we are unable to compete effectively, the demand for our products may be reduced.

Competition may also arise from, among other things:

•other drug development technologies;

•methods of preventing or reducing the incidence of disease, including vaccines; and

•new small molecule or other classes of therapeutic agents.

Developments by others (including the development of generic equivalents) may render our product candidates or technologies obsolete or noncompetitive.

We are commercializing and performing research on or developing products for the treatment of several disorders including endometriosis, tardive dyskinesia, uterine fibroids, essential tremor, classic congenital adrenal hyperplasia, pain, Parkinson’s disease and other neurology, neuroendocrinology and neuropsychiatry-related diseases and disorders, and there are a number of competitors to our products and product candidates. If one or more of our competitors’ products or programs are successful (including the development of generic equivalents), the market for our products may be reduced or eliminated.

•INGREZZA competes with AUSTEDO (deutetrabenazine), which was approved by the FDA for the treatment of tardive dyskinesia in adults in August 2017 and is marketed by Teva Pharmaceutical Industries, and several clinical development-stage programs targeting tardive dyskinesia and related movement disorders. Additionally, there are a number of commercially available medicines used to treat tardive dyskinesia off-label, such as Xenazine® (tetrabenazine) and generic equivalents, and various antipsychotic medications (e.g., clozapine), anticholinergics, benzodiazepines (off-label), and botulinum toxin.

•ONGENTYS competes with two other FDA-approved COMT inhibitors and their generic equivalents. Additionally, there are a number of alternative adjunctive treatment options (FDA-approved and in clinical development) for Parkinson’s patients which compete with ONGENTYS, including various L-dopa preparations, dopamine agonists, MAO-B inhibitors and others. In terms of potential future competition, there are several programs in late-stage clinical development.

•ORILISSA and ORIAHNN each compete with several FDA-approved products for the treatment of endometriosis, uterine fibroids, infertility and central precocious puberty. Additionally, there is also competition from surgical intervention, including hysterectomies and ablations. Separate from these options, there are many programs in clinical development which serve as potential future competition. Lastly, there are numerous medicines used to treat the symptoms of disease (vs. endometriosis or uterine fibroids directly) which may also serve as competition: oral contraceptives, NSAIDs and other pain medications, including opioids.

•For CAH, high doses of corticosteroids are the current standard of care to both correct the endogenous cortisol deficiency as well as reduce the excessive ACTH levels. In the United States alone, there are more than two dozen companies manufacturing steroid-based products. In addition, there are several programs in clinical development targeting CAH and several companies developing medicinal treatments for CAH.

•Our investigational treatments for potential use in epilepsy may in the future compete with numerous approved anti-seizure medications and development-stage programs being pursued by several other companies. Commonly used anti-seizure medications include phenytoin, levetiracetam, brivaracetam, cenobamate, carbamazepine, clobazam, lamotrigine, valproate, oxcarbazepine, topiramate, lacosamide, perampanel and cannabidiol, among others. There are currently no FDA-approved treatments specifically indicated for the early infantile epileptic encephalopathies SCN8A-DEE and EE-CSWS; however, a number of different anti-seizure medications are currently used in these patient populations.

•Our investigational treatments for potential use in schizophrenia and depression may in the future compete with several development-stage programs being pursued by other companies. Currently, there are no FDA-approved treatments specifically indicated for CIAS; however, there are a number of different anti-psychotic medications currently used in these patient populations.

•Our investigational treatments for potential use in neurology, neuroendocrinology and neuropsychiatry may in the future compete with numerous approved products and development-stage programs being pursued by several other companies.

Compared to us, many of our competitors and potential competitors have substantially greater:

•capital resources;

•sales and marketing experience;

•research and development resources, including personnel and technology;

•regulatory experience;

•preclinical study and clinical testing experience;

•manufacturing, marketing and distribution experience; and

•production facilities.

Moreover, increased competition in certain disorders or therapies may make it more difficult for us to recruit or enroll patients in our clinical trials for similar disorders or therapies.

Because the development of our product candidates is subject to a substantial degree of technological uncertainty, we may not succeed in developing any of our product candidates.

All of our product candidates are currently in research or clinical development with the exceptions of INGREZZA, which has been approved by the FDA for TD, and ORILISSA (partnered with AbbVie), which has been approved by the FDA for the management of moderate to severe endometriosis pain in women.

Only a small number of research and development programs ultimately result in commercially successful drugs. ~~In addition, to date the FDA has granted regulatory approval for only a very limited number of gene therapy products.~~

Potential products that appear to be promising at early stages of development may not reach the market for a number of reasons. These reasons include the possibilities that the potential products may:

•

~~be found ineffective or cause harmful side effects during preclinical studies or clinical trials;~~

•be found ineffective or cause harmful side effects during preclinical studies or clinical trials;

~~fail to receive necessary regulatory approvals on a timely basis or at all;~~

•

~~be precluded from commercialization by proprietary rights of third parties;~~

•fail to receive necessary regulatory approvals on a timely basis or at all;

~~be difficult to manufacture on a large scale; or~~

•be precluded from commercialization by proprietary rights of third parties;

~~be uneconomical to commercialize or fail to achieve market acceptance.~~

•be difficult to manufacture on a large scale; or

•be uneconomical to commercialize or fail to achieve market acceptance.

If any of our product candidates encounters any of these potential problems, we may never successfully market that product candidate.

Our clinical trials may be delayed for safety or other reasons or fail to demonstrate the safety and efficacy of our product candidates, which could prevent or significantly delay their regulatory approval.

Before obtaining regulatory approval for the sale of any of our potential products, we must subject these product candidates to extensive preclinical and clinical testing to demonstrate their safety and efficacy for humans. Clinical trials are expensive, time-consuming and may take years to ~~complete.~~

complete and the outcomes are uncertain.

In connection with the clinical trials of our product candidates, we face the risks that:

•

the FDA or similar foreign regulatory authority may not allow an IND application or foreign equivalent filings required to initiate human clinical studies for our drug candidates or the FDA may require additional preclinical studies as a condition of the initiation of Phase I clinical studies, or additional clinical studies for progression from Phase I to Phase II, or Phase II to Phase III, or for NDA approval;

•the FDA or similar foreign regulatory authority may not allow an IND or foreign equivalent filings required to initiate human clinical studies for our drug candidates or the FDA may require additional preclinical studies as a condition of the initiation of Phase I clinical studies, or additional clinical studies for progression from Phase I to Phase II, or Phase II to Phase III, or for NDA approval;

~~the product candidate may not prove to be effective or as effective as other competing product candidates;~~

•

~~we may discover that a product candidate may cause harmful side effects or results of required toxicology studies may not be acceptable to the FDA;~~

•the product candidate may not prove to be effective or as effective as other competing product candidates;

~~the results may not replicate the results of earlier, smaller trials;~~

•we may discover that a product candidate may cause harmful side effects or results of required toxicology or other studies may not be acceptable to the FDA;

~~the FDA or similar foreign regulatory authorities may require use of new or experimental endpoints that may prove insensitive to treatment effects;~~

•

~~we or the FDA or similar foreign regulatory authorities may suspend~~•clinical trial results may not replicate the results of previous trials;

•the FDA or similar foreign regulatory authorities may require use of new or experimental endpoints that may prove insensitive to treatment effects;

~~the results may not be statistically significant;~~

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

~~patient recruitment may be slower than expected;~~

•the results may not be statistically significant;

~~the FDA may not accept the data from any trial or trial site outside of the U.S.;~~

•clinical site initiation or patient recruitment and enrollment may be slower or more difficult than expected;

~~patients may drop out of the trials; and~~

•the FDA may not accept the data from any trial or trial site outside of the United States;

~~regulatory requirements may change.~~

•patients may drop out of the trials;

•unforeseen disruptions or delays may occur, caused by man-made or natural disasters or public health pandemics or epidemics or other business interruptions, including, for example, the COVID-19 pandemic; and

•regulatory requirements may change.

These risks and uncertainties impact all of our clinical ~~programs. For example,~~programs and any of the clinical, regulatory or operational events described above could change our planned clinical and regulatory ~~activities for~~activities. In addition, due to the ~~opicapone program in Parkinson’s disease and/or our crinecerfont (NBI-74788) program for~~impact of the ~~treatment of congenital adrenal hyperplasia, or CAH.~~COVID-19 pandemic, clinical site initiation and new patient enrollment has been negatively impacted. Additionally, any of these events described above could result in suspension of a program and/or obviate any filings for necessary regulatory approvals.

In addition, late-stage clinical trials are often conducted with patients having the most advanced stages of disease. During the course of treatment, these patients can die or suffer other adverse medical effects for reasons that may not be related to the pharmaceutical agent being tested but which can nevertheless adversely affect clinical trial conduct, completion and results. Any failure or substantial delay in completing clinical trials for our product candidates may severely harm our business.

Even if the clinical trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more trials could be required before we submit our product candidates for approval. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, approval of our product candidates may be significantly delayed, or we may be required to expend significant additional resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates.

We depend on our current collaborators for the development and commercialization of several of our products and product candidates and may need to enter into future collaborations to develop and commercialize certain of our product candidates.

~~Our strategy for fully developing and commercializing ORILISSA is dependent upon maintaining~~

We depend on our current ~~collaboration agreement with AbbVie. This collaboration agreement provides~~collaborators for ~~significant future payments should certain~~the development regulatory and commercial milestones be achieved, and royalties on future sales of elagolix. Under this agreement, AbbVie is responsible for, among other things, conducting clinical trials and obtaining required regulatory approvals for elagolix; as well as manufacturing and commercialization of ~~ORILISSA.~~

~~Because~~several of our ~~reliance on AbbVie, the commercialization~~products and ~~continued development of ORILISSA could be substantially delayed,~~product candidates and ~~our ability~~may need to ~~receive~~enter into future ~~funding could be substantially impaired, if AbbVie:~~

•

~~does not successfully commercialize ORILISSA for endometriosis;~~

•

~~fails to gain regulatory approval of elagolix for uterine fibroids, and if applicable, successfully launch and commercialize elagolix for that indication;~~

•

~~does not conduct its collaborative activities in a timely manner;~~

•

~~does not devote sufficient time and resources to our partnered program;~~

•

~~terminates its agreement with us;~~

•

~~develops, either alone or with others, products that may compete with elagolix;~~

•

~~disputes our respective allocations of rights to any products or technology developed during our collaboration; or~~

•

~~merges with a third party that wants to terminate our agreement.~~

~~In March 2015, we entered into a collaboration and license agreement with MTPC~~collaborations to develop and commercialize ~~INGREZZA~~certain of our product candidates. For example, we depend on AbbVie for the manufacture and commercialization of ORILISSA and ORIAHNN and for the continued development of elagolix. We collaborate with MTPC for the development and commercialization of valbenazine for movement disorders in Japan and other select Asian markets. We ~~will~~also rely on ~~MTPC to achieve certain development, regulatory and~~BIAL for the commercial ~~milestones which, if achieved, could generate significant future revenue for us. Our collaboration with MTPC is subject to risks and uncertainties similar to those described above.~~supply of ONGENTYS. In addition, we collaborate with Xenon Pharmaceuticals, Inc. for the development of NBI-921352, Idorsia Pharmaceuticals Ltd for the development of NBI-827104, Takeda Pharmaceutical Company Limited for the development of luvadaxistat, NBI-1065845 and NBI-1065846 and Heptares Therapeutics Limited for the development of NBI-1117568.

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

•strategic collaborators may ~~need~~sell, transfer or divest assets or programs related to ~~enter into other out-licensing collaborations~~our partnered product or product candidates;

•we may be required to ~~assist in~~undertake the expenditure of substantial operational, financial and management resources;

•we may be required to assume substantial actual or contingent liabilities;

•we may not be able to control the amount and timing of resources that our strategic collaborators devote to the development or commercialization of our products or product candidates;

•we may not be able to influence our strategic collaborator’s decisions regarding the development and collaboration of our partnered product and product candidates, and as a result, our collaboration partners may not pursue or prioritize the development and commercialization of ~~other~~those partnered products and product candidates in a manner that is in our best interest;

•strategic collaborators may select indications or design clinical trials in a way that may be less successful than if we ~~are developing now~~were doing so;

•strategic collaborators may not conduct collaborative activities in a timely manner, provide insufficient funding, terminate a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new version of a product candidate for clinical testing;

•strategic collaborators may ~~develop in the future, and any such future collaborations would be subject to similar risks and uncertainties.~~

~~Effective in March 2019, we entered into a collaboration and license agreement with Voyager for the research,~~not pursue further development and commercialization of ~~four programs, including NBIb-1817 (VY-AADC) for Parkinson’s disease,~~products resulting from the ~~Friedreich’s ataxia program~~strategic collaboration arrangement or may elect to discontinue research and ~~two undisclosed programs. In December 2019, we entered into~~development programs;

•disagreements or disputes may arise between us and our strategic collaborators that result in delays or in costly litigation or arbitration that diverts management’s attention and consumes resources;

•strategic collaborators may experience financial difficulties;

•strategic collaborators may not properly maintain, enforce or defend our intellectual property rights or may use our proprietary information in a ~~license and collaboration agreement with Xenon, pursuant~~manner that could jeopardize or invalidate our proprietary information or expose us to potential litigation;

•strategic collaborators could terminate the arrangement or allow it to expire, which we acquired an exclusive license to NBI-921352 (XEN901), a clinical-stage selective Nav1.6 sodium channel inhibitor with potential in SCN8A development and epileptic encephalopathy, or SCN8A-DEE, and other forms of epilepsy. We also acquired an exclusive license to pre-clinical compounds for development, including selective Nav1.6 and Nav1.2/1.6 inhibitors. Voyager and Xenon could take actions that may be adverse to us, or they could halt, slow, or deprioritize theirwould delay the development and commercialization ~~efforts under~~and may increase the ~~collaborations. We could also experience disagreements~~cost of developing and commercializing our products or ~~delays involving the determination of additional programs. In any such instances, our ability to commercialize any~~ product ~~candidate related to the Voyager~~candidates; and ~~Xenon collaborations could be delayed or prohibited.~~

In 2019, we acquired an option from Idorsia to license ACT-709478, a potent, selective, orally-active, and brain penetrating T-type calcium channel blocker. The option is exercisable by us following the acceptance by the FDA of the IND for ACT-709478 for the treatment of a rare pediatric epilepsy. Idorsia is solely responsible for the development and filing of the IND for ACT-709478, and we cannot predict if the FDA will accept the NDA, or if the FDA does accept the NDA, if we will exercise our option to license ACT-709478.

~~These issues and possible disagreements with our current or any future corporate~~

•strategic collaborators could ~~lead to delays in the collaborative research, development~~develop, either alone or ~~commercialization of our~~with others, products or product ~~candidates. Furthermore, disagreements~~candidates that may compete with ~~these parties could require or result in litigation or arbitration, which would be time-consuming and expensive.~~ ours.

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

We ~~are substantially dependent on BIAL for the development and commercialization of opicapone, including the receipt of regulatory~~may not be able to successfully commercialize ONGENTYS.

In April 2020, we received FDA approval for ~~opicapone~~ONGENTYS as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult ~~Parkinson's~~Parkinson’s disease patients,.

~~In February 2017,~~ and in September 2020, we ~~entered into a license agreement~~launched the commercial sale of ONGENTYS with ~~BIAL for the development and~~our existing commercial infrastructure. The successful commercialization of ~~opicapone for the treatment~~ONGENTYS is subject to many risks, and there are numerous examples of ~~human diseases~~unsuccessful product launches and ~~conditions,~~failures, including ~~Parkinson’s disease, in the U.S.~~by pharmaceutical companies with more experience and Canada. In June 2019, we submitted an NDA with the FDA for opicapone as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients. The FDA has indicated that the Prescription Drug User Fee Act target action date, on which the FDA is expected to complete its review of the opicapone NDA for Parkinson's disease, is April 26, 2020. Our strategy for developing and commercializing opicapone, including the receipt of regulatory approval for opicapone, is dependent upon maintaining our current collaboration with BIAL. Under the terms of our agreement with BIAL, althoughresources than us. If we are ~~responsible for~~unable to effectively train our employees and equip them with effective materials, including medical and sales literature to help them inform and educate health care practitioners about the ~~management~~benefits of ~~all opicapone development and commercialization activities, we depend on BIAL~~ONGENTYS and its ~~suppliers to supply all drug product and investigation medicinal product for the development and~~proper administration, our commercialization of opicapone. BIAL relies on third-party contract manufacturers to produce opicapone. These contract manufacturers may encounter difficulties in achieving volume production, quality control, or quality assurance. As a result, these contract manufacturersONGENTYS may not be ~~able~~successful. Even if we are successful in effectively training and equipping our salesforce, there are many factors that could cause the commercialization of ONGENTYS to ~~adequately produce opicapone in commercial quantities when required, which~~be unsuccessful, including a number of factors that are outside our control. Health care practitioners may ~~impact~~not prescribe ONGENTYS and patients may be unwilling to use ONGENTYS if insurance coverage is not provided or reimbursement is inadequate. In addition, our ability to ~~deliver opicapone on a timely basis. In addition, we~~train our employees and ~~BIAL have established a joint steering committee~~effectively communicate with ~~overall coordination and strategic oversight over activities under~~potential prescribers could be adversely affected by the ~~agreement and to provide a forum for regular exchange~~effects of ~~information, and BIAL has~~health pandemics or epidemics, including the right to co-promote licensed products during certain periods of time and to engage in certain marketing-related activities in cooperation with us. Because of our substantial reliance on BIAL, any failure by BIAL to timely or fully comply with its obligations under our agreement, any disagreement with BIAL, or any decision by BIAL to not devote sufficient time and resources to our collaboration, could substantially delay and/or prohibit our ability to develop and commercialize opicapone.

ongoing COVID-19 pandemic.

Use of our approved products or those of our collaborators ~~including INGREZZA and ORILISSA,~~ could be associated with side effects or adverse events.

As with most pharmaceutical products, use of our approved products or those of our collaborators ~~including INGREZZA and ORILISSA,~~ could be associated with side effects or adverse events which can vary in severity (from minor adverse reactions to death) and frequency (infrequent or prevalent). Side effects or adverse events associated with the use of our products or those of our collaborators may be observed at any time, including after a product is commercialized, and reports of any such side effects or adverse events may negatively impact demand for our or our collaborators’ products or affect our or our collaborators’ ability to maintain regulatory approval for such products. Side effects or other safety issues associated with the use of our approved products or those of our collaborators could require us or our collaborators to modify or halt commercialization of these products or expose us to product liability lawsuits which will harm our business. We or our collaborators may be required by regulatory agencies to conduct additional studies regarding the safety and efficacy of our products which we have not planned or anticipated. Furthermore, there can be no assurance that we or our collaborators will resolve any issues related to any product related adverse events to the satisfaction of the FDA or any regulatory agency in a timely manner or ever, which could harm our business, prospects and financial condition.

~~Gene therapy treatments,~~

We have recently increased the size of our organization and will need to continue to increase the size of our organization. We may encounter difficulties with managing our growth, which we are developing pursuant to our collaboration and license agreement with Voyager, may be perceived as unsafe or may result in unforeseen adverse events. Negative public opinion and increased regulatory scrutiny of gene therapy maycould adversely affect our ~~ability~~results of operations.

As of December 31, 2021, we had more than 900 full-time employees. Although we have substantially increased the size of our organization, we may need to ~~initiate or continue clinical development or obtain regulatory approvals for gene therapy product candidates or~~add additional qualified personnel and resources, especially with the ~~commercialization of gene therapy products.~~

~~Gene therapy remains a novel technology, with few gene therapy products approved to date~~planned increase in the ~~U.S. Public perception~~size of our salesforce. Our current infrastructure may be ~~influenced by claims that gene therapy is unsafe,~~inadequate to support our development and ~~gene therapy~~commercialization efforts and expected growth. Future growth will impose significant added responsibilities on our organization, including the need to identify, recruit, maintain and integrate additional employees, and may ~~not gain the acceptance of the public or the medical community. As part~~take time away from running other aspects of our collaboration and license agreement with Voyager, a Phase II clinical trial of NBIb-1817 is being conducted. There is no guarantee that this program or other collaboration gene therapy product candidates will not be placed on clinical hold by the FDA, as has been the case for many gene therapy clinical programs. Even if we are able to successfully complete clinical development of a gene therapy product and obtain commercial approval, the success of our collaboration with Voyager will depend upon physicians who specialize in the treatment of genetic diseases targeted by gene therapy product candidates, prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they are familiar and for which greater clinical data may be available. More restrictive government regulations or negative public opinion related to gene therapy products may delay or impair thebusiness, including development and commercialization of our ~~gene therapy~~ product ~~candidates or demand for any gene therapy products we develop.~~

The limited precedent for gene therapy approvals makes it difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for the product candidates we are developing through our collaboration with Voyager.

~~The FDA has limited experience in the review~~candidates.

Our future financial performance and approval of gene therapy products. The limited precedent for gene therapy approvals makes it difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for the product candidates we are developing through our collaboration with Voyager.

Regulatory requirements governing gene therapy products have changed frequently and may continue to change in the future. As a result, the regulatory review process may take longer or cost more than we anticipate, including requirements for additional preclinical studies or clinical trials, and delay or prevent approval and commercialization of our gene therapy product candidates we are developing through our collaboration with Voyager. While the FDA has issued draft guidance for the development of gene therapies and proposed rules that would streamline certain requirements to which gene therapies are currently subject, it remains to be seen as to whether such initiatives will ultimately increase the speed of drug development in gene therapies such as the product candidates we are developing through our collaboration with Voyager.

~~Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease~~ our ability to ~~generate~~commercialize INGREZZA, ONGENTYS and any other product candidates that receive regulatory approval will depend, in part, on our ability to manage any future growth effectively. In particular, as we commercialize INGREZZA and ONGENTYS, we will need to support the training and ongoing activities of our salesforce and will likely need to continue to expand the size of our employee base for managerial, operational, financial and other resources. To that end, we must be able to successfully:

•manage our development efforts effectively;

•integrate additional management, administrative and manufacturing personnel;

•further develop our marketing and sales organization;

•compensate our employees on adequate terms in an increasingly competitive, inflationary market;

•attract and retain personnel; and

•maintain sufficient ~~product revenue,~~administrative, accounting and management information systems and controls.

We may not be able to accomplish these tasks or successfully manage our ~~business, financial condition, results of~~ operations and, ~~prospects would be harmed~~.

~~We face intense competition,~~accordingly, may not achieve our research, development and ifcommercialization goals. Our failure to accomplish any of these goals could harm our financial results and prospects.

If we are unable to ~~compete effectively,~~retain and recruit qualified scientists and other employees or if any of our key senior executives discontinues his or her employment with us, it may delay our development efforts or impact our commercialization of INGREZZA, ONGENTYS or any product candidate approved by the ~~demand for~~FDA.

We are highly dependent on the principal members of our management, commercial and scientific staff. The loss of any of these people could impede the achievement of our objectives, including the successful commercialization of INGREZZA, ONGENTYS or any product candidate approved by the FDA. Furthermore, recruiting and retaining qualified scientific personnel to perform research and development work in the future, along with personnel with experience marketing and selling pharmaceutical products, is critical to our success. We may be ~~reduced.~~

~~The~~unable to attract and retain personnel on acceptable terms given effects of the COVID-19 pandemic, as well as the competition among biotechnology, pharmaceutical and ~~pharmaceutical industries are subject to rapid~~health care companies, universities and ~~intense technological change. We face, and will continue to face, competition in the development and marketing of our products and product candidates from academic institutions, government agencies,~~non-profit research institutions for experienced scientists and ~~biotechnology~~individuals with experience marketing and selling pharmaceutical ~~companies.~~

~~Competition~~products. We may ~~also arise from, among other things:~~

•

~~other drug development technologies;~~

face

•

~~methods of preventing or reducing the incidence of disease, including vaccines; and~~

•

~~new small molecule or other classes of therapeutic agents.~~

~~Developments by others may render~~particular retention challenges in light of the recent rapid growth in our ~~product candidates or technologies obsolete or noncompetitive.~~

~~We are commercializing~~personnel and ~~performing research~~infrastructure and the perceived impact of those changes upon our corporate culture. In addition, we rely on or developing products for the treatment of several disorders including endometriosis, TD, uterine fibroids, essential tremor, classic congenital adrenal hyperplasia, pain, Parkinson’s disease, Friedreich’s ataxia, and other neurological and endocrine-related diseases and disorders, and there are a significant number of ~~competitors~~consultants to assist us in formulating our ~~products~~research and ~~product candidates. If one~~development strategy and our commercialization strategy. Our consultants may have commitments to, or ~~more of our competitors’ products~~advisory or ~~programs are successful, the market for our products~~consulting agreements with, other entities that may ~~be reduced or eliminated.~~

•

With respect to INGREZZA for TD, we compete with Teva Pharmaceutical Industries, which received FDA approval for AUSTEDO to treat TD in August 2017, and several clinical development-stage programs targeting TD and related movement disorders. Additionally, there are a number of commercially available medicines used to treat TD off-label, such as Xenazine (tetrabenazine) and generic equivalents, and various antipsychotic medications (e.g., clozapine), anticholinergics, benzodiazepines (off-label), and botulinum toxin.

limit their availability to us.

•

In endometriosis, ORILISSA competes with several FDA-approved products for the treatment of endometriosis, uterine fibroids, infertility, and central precocious puberty. Additionally, there is also competition from surgical interventions. Approximately 130,000 hysterectomies are performed in the U.S. annually as a direct result of endometriosis, as well as a significant number of laparoscopic procedures to ablate endometrial explants. Separate from these options, there are many programs in clinical development which serve as potential future competition. Lastly, there are numerous medicines used to treat the symptoms of disease (vs. endometriosis directly) which may also serve as competition: oral contraceptives, NSAIDs and other pain medications including opioids.

•

With respect to opicapone for Parkinson’s disease, there are currently two FDA-approved COMT inhibitors. Opicapone would compete directly with these two drugs and their generic equivalents. Additionally, there are a number of alternative adjunctive treatment options (FDA-approved and in clinical development) for Parkinson’s patients which would compete with opicapone, including various L-dopa preparations, dopamine agonists, MAO-B inhibitors and others. In terms of potential future competition, there are several programs in late-stage clinical development.

•

As for congenital adrenal hyperplasia, or CAH, high doses of corticosteroids are the current standard of care to both correct the endogenous cortisol deficiency as well as reduce the excessive ACTH levels. In the U.S. alone, there are more than two dozen companies manufacturing steroid-based products. Additionally, there are several companies developing medicinal treatments for CAH.

•

~~Our investigational therapies for potential use in epilepsy may in the future compete with numerous approved products and development-stage programs being pursued by several companies.~~

•

Our development programs using Voyager’s proprietary gene therapy platform (NBIb-1817 for Parkinson’s disease and the Friedreich’s ataxia program) may in the future compete with development-stage programs being pursued by numerous companies.

~~Compared to us, many of our competitors and potential competitors have substantially greater:~~

•

~~capital resources;~~

•

~~research and development resources, including personnel and technology;~~

•

~~regulatory experience;~~

•

~~preclinical study and clinical testing experience;~~

•

~~manufacturing, marketing and distribution experience; and~~

•

~~production facilities.~~

We currently have no manufacturing capabilities. If third-party manufacturers of INGREZZA, ONGENTYS or any of our product candidates fail to devote sufficient time and resources to our concerns, or if their performance is substandard, our clinical trials and product introductions may be delayed, and our costs may rise.

We have in the past utilized, and intend to continue to utilize, third-party manufacturers to produce the drug compounds we use in our clinical trials and for the commercialization of our products. We have limited experience in manufacturing products for commercial purposes and do not currently have any manufacturing facilities. Establishing internal commercial manufacturing capabilities would require significant time and resources, and we may not be able to timely or successfully establish such capabilities. Consequently, we depend on, and will continue to depend on, several contract manufacturers for all production of products for development and commercial purposes, including INGREZZA and ~~opicapone.~~ONGENTYS. If we are unable to obtain or retain third-party manufacturers, we will not be able to develop or commercialize our products, including INGREZZA and ~~opicapone.~~ONGENTYS. The manufacture of our products for clinical trials and commercial purposes is subject to specific FDA regulations, including current Good Manufacturing Practice regulations. Our third-party manufacturers, including BIAL and its suppliers, might not comply with FDA regulations relating to manufacturing our products for clinical trials and commercial purposes or other regulatory requirements now or in the future. In addition, the manufacture of gene therapy products, which will be necessary under our collaboration and license agreement with Voyager, is technically complex and necessitates substantial expertise and capital investment. Our reliance on contract manufacturers also exposes us to the following risks:

•

contract manufacturers may encounter difficulties in achieving volume production, quality control or quality assurance, and also may experience shortages in qualified personnel. As a result, our contract manufacturers might not be able to meet our clinical schedules or adequately manufacture our products in commercial quantities when required;

•contract manufacturers may encounter difficulties in achieving volume production, quality control or quality assurance, and also may experience shortages in qualified personnel. As a result, our contract manufacturers might not be able to meet our clinical schedules or adequately manufacture our products in commercial quantities when required;

switching manufacturers may be difficult because the number of potential manufacturers is limited. It may be difficult or impossible for us to find a replacement manufacturer quickly on acceptable terms, or at all;

•switching manufacturers may be difficult because the number of potential manufacturers is limited. It may be difficult or impossible for us to find a replacement manufacturer quickly on acceptable terms, or at all;

~~our contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to successfully produce, store or distribute our products; and~~

•our contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to successfully produce, store or distribute our products; and

drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the U.S. Drug Enforcement Administration, and other agencies to ensure strict compliance with cGMP and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’ compliance with these regulations and standards.

•drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the United States Drug Enforcement Administration, and other agencies to ensure strict compliance with cGMP and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’ compliance with these regulations and standards.

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

We currently depend on a limited number of third-party suppliers. The loss of these suppliers, or delays or problems in the supply of INGREZZA or ONGENTYS, could materially and adversely affect our ability to successfully commercialize ~~INGREZZA.~~

INGREZZA or ONGENTYS.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of process controls required to consistently produce the active pharmaceutical ingredients, or API, ~~and~~ the finished drug product and packaging in sufficient quantities while meeting detailed product specifications on a repeated basis. Manufacturers of pharmaceutical products may encounter difficulties in production, such as difficulties with production costs and yields, process controls, quality control and quality assurance, including testing of stability, impurities and impurity levels and other product specifications by validated test methods, ~~and~~ compliance with strictly enforced ~~U.S.,~~United States, state and ~~non-U.S. regulations.~~non-United States regulations, and disruptions or delays caused by man-made or natural disasters, pandemics or epidemics, or other business interruptions, including, for example, the COVID-19 pandemic. We depend on a limited number of suppliers for the production and packaging of INGREZZA and its API. If our third-party suppliers for INGREZZA encounter these or any other manufacturing, quality or compliance difficulties, we may be unable to meet commercial demand for INGREZZA, which could

materially and

adversely affect our ability to successfully commercialize INGREZZA. ~~We also depend~~In addition, under the terms of our agreement with BIAL, although we are responsible for the management of all ONGENTYS commercialization activities, we rely on BIAL and its suppliers to supply all drug product for the commercialization of ONGENTYS. BIAL relies on third-party contract manufacturers to produce ONGENTYS. These contract manufacturers may encounter difficulties in achieving volume production, ~~of opicapone drug substance and drug product.~~

quality control, or quality assurance. As a result, these contract manufacturers may not be able to adequately produce ONGENTYS in commercial quantities when required, which may impact our ability to deliver ONGENTYS on a timely basis.

In addition, if our suppliers fail or refuse to supply us with INGREZZA or its API for any reason, it would take a significant amount of time and expense to qualify a new supplier. The FDA and similar international regulatory bodies must approve manufacturers of the active and inactive pharmaceutical ingredients and certain packaging materials used in pharmaceutical products. The loss of a supplier could require us to obtain regulatory clearance and to incur validation and other costs associated with the transfer of the API or product manufacturing processes. If there are delays in qualifying new suppliers or facilities or if a new supplier is unable to meet FDA or a similar international regulatory body’s requirements for approval, there could be a shortage of INGREZZA, which could materially and adversely affect our ability to successfully commercialize INGREZZA. If BIAL is unable or refuses to supply us with ~~opicapone~~ONGENTYS drug product for any reason, or does not meet FDA or international regulators’ requirements for approval, we have limited opportunity to qualify a new supplier. This could materially and adversely affect our ability to ~~obtain regulatory approval for opicapone or~~ successfully commercialize ~~opicapone.~~

ONGENTYS.

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

We depend on independent clinical investigators and ~~contract research organizations, or~~ CROs to conduct our clinical trials under their agreements with us. The investigators are not our employees, and we cannot control the amount or timing of resources that they devote to our programs. If our independent investigators fail to devote sufficient time and resources to our drug development programs, or if their performance is substandard, or not in compliance with Good Clinical Practices, it may delay or prevent the approval of our ~~FDA~~regulatory applications and our introduction of new ~~drugs.~~treatments. The CROs we contract with for execution of our clinical trials play a significant role in the conduct of the trials and the subsequent collection and analysis of data. Failure of the CROs to meet their obligations could adversely affect clinical development of our products. Moreover, these independent investigators and CROs may also have relationships with other commercial entities, some of which may compete with us. If independent investigators and CROs assist our competitors at our expense, it could harm our competitive position.

We do not and will not have access to all information regarding the products and product candidates we licensed to AbbVie.

We do not and will not have access to all information regarding elagolix, including potentially material information about commercialization plans, medical information strategies, clinical trial design and execution, safety reports from clinical trials, safety reports, regulatory affairs, process development, manufacturing and other areas known by AbbVie. In addition, we have confidentiality obligations under our agreement with AbbVie. Thus, our ability to keep our shareholders informed about the status of elagolix will be limited by the degree to which AbbVie keeps us informed and allows us to disclose such information to the public. If AbbVie fails to keep us informed about commercialization efforts related to elagolix, or the status of the clinical development or regulatory approval pathway of other product candidates licensed to it, we may make operational and/or investment decisions that we would not have made had we been fully informed, which may materially and adversely affect our business and operations.

We are subject to ongoing obligations and continued regulatory review for ~~INGREZZA, which may result in significant additional expense and market withdrawal.~~INGREZZA. Additionally, our other product candidates, if approved, could be subject to labeling and other ~~restrictions~~post-marketing requirements and ~~market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.~~

~~We received FDA regulatory approval for INGREZZA in April 2017. This approval and other regulatory~~restrictions.

Regulatory approvals for any of our product candidates may ~~also~~ be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase IV clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. ~~With~~For example, with respect to the FDA’s approval of INGREZZA for ~~TD,~~tardive dyskinesia in April 2017, we are subject to certain post-marketing requirements and commitments. ~~Failure to comply with these post-marketing requirements and commitments could result in withdrawal of our marketing approval for INGREZZA.~~ In addition, with respect to INGREZZA, and any product candidate that the FDA or a comparable foreign regulatory authority approves, the

manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with current Good ~~Manufacturing~~Clinical Practices for any clinical trials that we conduct post-approval. ~~Later~~Failure to comply with these ongoing regulatory requirements, or later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, ~~or failure to comply with regulatory requirements,~~ may result in, among other things:

•

~~restrictions on the marketing or manufacturing of the product, changes in the product’s label, withdrawal of the product from the market, or voluntary or mandatory product recalls;~~

•restrictions on the marketing or manufacturing of the product, changes in the product’s label, withdrawal of the product from the market, or voluntary or mandatory product recalls;

~~fines, warning letters or holds on clinical trials;~~

•fines, warning or untitled letters or holds on clinical trials;

~~refusal by the FDA to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals;~~

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

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

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

~~product injunctions or the imposition of civil or criminal penalties.~~

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

•product injunctions or the imposition of civil or criminal penalties.

The ~~FDA’s policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval~~occurrence of any of our product candidates or future indications for currently approved products. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory

~~compliance, we~~these events may ~~lose any marketing approval that we may have obtained, which would~~ adversely affect our business, prospects and ability to achieve or sustain profitability on a sustained basis.

If we are unable to retain and recruit qualified scientists or if any of our key senior executives discontinues his or her employment with us, it may delay our development efforts or impact our commercialization of INGREZZA or any product candidate approved by the FDA.

We are highly dependent on the principal members of our management and scientific staff. The loss of any of these people could impede the achievement of our objectives, including the successful commercialization of INGREZZA or any product candidate approved by the FDA. Furthermore, recruiting and retaining qualified scientific personnel to perform research and development work in the future, along with personnel with experience marketing and selling pharmaceutical products, is critical to our success. We may be unable to attract and retain personnel on acceptable terms given the competition among biotechnology, pharmaceutical and health care companies, universities and non-profit research institutions for experienced scientists and individuals with experience marketing and selling pharmaceutical products. We may face particular retention challenges in light of the recent rapid growth in our personnel and infrastructure and the perceived impact of those changes upon our corporate culture. In addition, we rely on a significant number of consultants to assist us in formulating our research and development strategy and our commercialization strategy. Our consultants may have commitments to, or advisory or consulting agreements with, other entities that may limit their availability to us.

If the market opportunities for our products and product candidates are smaller than we believe they are, our expected revenues may be adversely affected, and our business may suffer.

Certain of the diseases that INGREZZA, ONGENTYS and our other product candidates are being developed to address are in underserved and underdiagnosed populations. Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who will seek treatment utilizing our products or product candidates, may not be accurate. If our estimates of the prevalence or number of patients potentially on therapy prove to be inaccurate, the market opportunities for INGREZZA, ONGENTYS and our other product candidates may be smaller than we believe they are, our prospects for generating expected revenue may be adversely affected and our business may suffer.

We license some of our core technologies and drug candidates from third parties. If we default on any of our obligations under those licenses, or violate the terms of these licenses, we could lose our rights to those technologies and drug candidates or be forced to pay damages.

We are dependent on licenses from third parties for some of our key technologies. These licenses typically subject us to various commercialization, reporting and other obligations. If we fail to comply with these obligations, we could lose important rights. If we were to default on our obligations under any of our licenses, we could lose some or all of our rights to develop, market and sell products covered by these licenses. For example, BIAL may terminate our license agreement, pursuant to which we have rights to ~~develop and~~ commercialize ~~opicapone,~~ONGENTYS, if we fail to use commercially reasonable efforts ~~fail~~ to ~~submit an NDA for a licensed product by a~~comply with specified ~~date,~~obligations under the license agreement, or if we otherwise breach the license agreement. ~~Pursuant to~~In addition, several of our collaboration and license ~~agreement with Voyager, Voyager can~~agreements allow our licensors to terminate ~~the agreement~~such agreements if we challenge the validity or enforceability of certain ~~Voyager~~ intellectual property rights or if we commit a material breach in whole or in part of the agreement and do not cure such breach within the agreed upon cure period. Pursuant to our collaboration and license agreement with Xenon, Xenon can terminate the agreement if we commit a material breach in whole or in part or the agreement and do not cure such breach within the agreed upon cure period. In addition, if we were to violate any of the terms of our licenses, we could become subject to damages. Likewise, if we were to lose our rights under a license to use proprietary research tools, it could adversely affect our existing collaborations or adversely affect our ability to form new collaborations. We also face the risk that our licensors could, for a number of reasons, lose patent protection or lose their rights to the technologies we have licensed, thereby impairing or extinguishing our rights under our licenses with them.

The conditional conversion feature of the 2024 Notes, if triggered, may adversely affect our financial condition, operating results, or liquidity.

In the event the conditional conversion feature of the 2.25% convertible senior notes due May 15, 2024, or the 2024 Notes, is triggered, holders of 2024 Notes will be entitled to convert their 2024 Notes at any time during specified periods at their option. If one or more of the holders of the 2024 Notes elects to convert their notes, unless we satisfy

our conversion obligation by delivering only shares of our common stock with respect to any conversion premium, we would be required to settle all or a portion of our conversion obligation through the payment of cash, which could adversely affect our liquidity. The conditional convertibility of the 2024 Notes will be monitored at each quarterly reporting date and analyzed dependent upon market prices of our common stock during the prescribed measurement periods. In the event that we have the election to redeem the 2024 Notes or the holders of the 2024 Notes have the election to convert the 2024 Notes at any time during the prescribed measurement period, the 2024 Notes would then be considered a current obligation and classified as such. We are not aware of any events or market conditions that would allow us to redeem the 2024 Notes or the holders of the 2024 Notes to convert the 2024 Notes for the quarterly period ended December 31, 2021, or as of the date of this report.

Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations.

~~To date,~~

In May 2017, we ~~have~~ sold $517.5 million aggregate principal amount of ~~2.25% convertible senior notes due May 15, 2024, or~~ the 2024 Notes. In November 2020, we entered into separate, privately negotiated transactions with certain holders of the 2024 Notes to repurchase $136.2 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $186.9 million in cash. As of December 31, 2021, $381.2 million aggregate principal amount of the 2024 Notes remained outstanding. We may also incur additional indebtedness to meet future financing needs. Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:

•

~~increasing our vulnerability to adverse economic and industry conditions;~~

•increasing our vulnerability to adverse economic and industry conditions;

~~limiting our ability to obtain additional financing;~~

•limiting our ability to obtain additional financing;

~~requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes;~~

•requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes;

~~limiting our flexibility to plan for, or react to, changes in our business;~~

•limiting our flexibility to plan for, or react to, changes in our business;

~~diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the 2024 Notes; and~~

•diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the 2024 Notes; and

~~placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.~~

•placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.

Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under the 2024 Notes and any additional indebtedness that we may incur. In addition, our cash needs may increase in the future. In addition, any future indebtedness that we may incur may contain financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness. If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full.

~~The conditional conversion feature of the 2024 Notes, if triggered, may adversely affect our financial condition and liquidity.~~

As of December 31, 2019, the conditional conversion feature of the 2024 Notes had been triggered, allowing holders of 2024 Notes to convert their 2024 Notes at any time during the period beginning on January 2, 2020 and ending at the close of business on March 31, 2020. The future conditional convertibility of the 2024 Notes will be monitored at each quarterly reporting date and analyzed dependent upon market prices of our common stock during the prescribed measurement periods, and as a result, it is possible that holders of 2024 Notes will continue to be entitled to convert their 2024 Notes at any time during specified periods at their option. If one or more of the holders of the 2024 Notes elects to convert their 2024 Notes, unless we satisfy our conversion obligation by delivering only shares of our common stock, we would be required to settle all or a portion of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

We have a history of losses and expect to increase our expenses for the foreseeable future, and we may ~~never achieve sustained~~not be able to sustain profitability.

Since our inception, we have incurred significant net losses and negative cash flow from operations. AtAs of December 31, ~~2019,~~2021, we had an accumulated deficit of ~~$1.1~~$0.6 billion as a result of historical operating losses.

~~In April 2017, we~~

We received FDA approval offor INGREZZA for ~~TD,~~tardive dyskinesia in April 2017 and for ONGENTYS for Parkinson’s disease in ~~July 2018, our~~April 2020. Our partner AbbVie received FDA approval for ORILISSA for ~~management of moderate to severe~~ endometriosis ~~pain~~ in ~~women.~~July 2018 and for ORIAHNN for uterine fibroids in May 2020. However, we have not yet obtained regulatory approvals for any other product candidates. Even if we continue to succeed in commercializing INGREZZA, or if we successfully commercialize ONGENTYS or are successful in developing and commercializing any of our other product candidates, we may not be ~~profitable.~~able to sustain profitability. We also expect to continue to incur significant operating and capital expenditures as we:

•

~~commercialize INGREZZA for TD;~~

•commercialize INGREZZA for tardive dyskinesia;

~~seek regulatory approvals for our product candidates;~~

•commercialize ONGENTYS for Parkinson’s disease;

~~develop, formulate, manufacture and commercialize our product candidates;~~

•seek regulatory approvals for our product candidates or for additional indications for our current products;

~~in-license or acquire new product development opportunities;~~

•

~~implement additional internal systems and infrastructure; and~~

•develop, formulate, manufacture and commercialize our product candidates;

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

•in-license or acquire new product development opportunities;

•implement additional internal systems and infrastructure; and

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

We expect to increase our expenses and other investments in the coming years as we fund our operations, in-licensing or acquisition opportunities, and capital expenditures. While we were profitable for the year ended December 31, ~~2019,~~2021, our future operating results and profitability may fluctuate from period to period due to the factors described above, and we will need to generate significant revenues to achieve and maintain profitability and positive cash flow on a sustained basis. We may not be able to generate these revenues, and we may never achieve profitability on a sustained basis in the future. Our failure to maintain or increase profitability on a sustained basis could negatively impact the market price of our common stock.

At December 31, 2019, we had approximately 700 full-time employees. Although we have substantially increased the size of our organization, we may need to add additional qualified personnel and resources, especially now that we have a commercial sales force. Our current infrastructure may be inadequate to support our development and commercialization efforts and expected growth. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees, and may take time away from running other aspects of our business, including development and commercialization of our product candidates.

Our future financial performance and our ability to commercialize INGREZZA and any other product candidates that receive regulatory approval will depend, in part, on our ability to manage any future growth effectively. In particular, as we commercialize INGREZZA, we will need to support the training and ongoing activities of our sales force and will likely need to continue to expand the size of our employee base for managerial, operational, financial and other resources. To that end, we must be able to successfully:

•

~~manage our development efforts effectively;~~

•

~~integrate additional management, administrative and manufacturing personnel;~~

•

~~further develop our marketing and sales organization; and~~

•

~~maintain sufficient administrative, accounting and management information systems and controls.~~

We may not be able to accomplish these tasks or successfully manage our operations and, accordingly, may not achieve our research, development, and commercialization goals. Our failure to accomplish any of these goals could harm our financial results and prospects.

We may be subject to claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

As is commonplace in the biotechnology industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

Because our operating results may vary significantly in future periods, our stock price may decline.

Our quarterly revenues, expenses and operating results have fluctuated in the past and are likely to fluctuate significantly in the future. Our financial results are unpredictable and may fluctuate, for among other reasons, due to seasonality and timing of customer purchases and commercial sales of INGREZZA, impact of the commercial launch of ONGENTYS and ORIAHNN, royalties from out-licensed products, the impact of Medicare Part D coverage, our achievement of product development objectives and milestones, clinical trial enrollment and expenses, research and development expenses and the timing and nature of contract manufacturing, ~~and~~ contract research ~~payments.~~payments, fluctuations in our effective tax rate, and disruptions caused by man-made or natural disasters or public health pandemics or epidemics or other business interruptions, including, for example, the COVID-19 pandemic. A high portion of our costs are predetermined on an annual basis, due in part to our significant research and development costs. Thus, small declines in revenue could disproportionately affect financial results in a quarter. While we were profitable for the year ended December 31, ~~2019,~~2021, our future operating results and profitability may fluctuate from period to period, and even if we become profitable on a quarterly or annual basis, we may not be able to sustain or increase our profitability. Moreover, as our company and our market capitalization have grown, our financial performance has become increasingly subject to quarterly and annual comparisons with the expectations of securities analysts or investors. The failure of our financial results to meet these expectations, either in a single quarterly or annual period over a sustained period time, could cause our stock price to decline.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flows, financial condition or results of operations.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business and financial condition. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, ~~legislation~~the Biden administration and Congress have proposed various United States federal tax law changes which, if enacted, ~~in 2017, informally titled the Tax Cuts and Jobs Act,~~could have a material impact on our business, cash flows, financial condition, or the Tax Act, enacted many significant changes to the U.S. tax laws. Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us, and certain aspectsresults of ~~the Tax Act repealed or modified in future legislation.~~operations. In addition, it is uncertain if and to what extent various states will conform to ~~the Tax Act or any newly enacted~~ federal tax ~~legislation. Changes in corporate~~laws. Future tax ~~rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Act or future~~ reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future ~~U.S.~~United States tax expense.

Our ability to use net operating loss carryforwards and certain other tax attributes may be limited.

Our net operating loss, or NOL, carryforwards generated in tax years ~~ending~~beginning on or prior to December 31, 2017, are only permitted to be carried forward for 20 years under applicable ~~U.S.~~US tax law. Under ~~the Tax Act,~~current law, our federal NOLs generated in tax years ~~ending~~beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOLs ~~generated~~ in tax years beginning after December 31, ~~2017,~~2020, is ~~limited.~~limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to ~~the Tax Act.~~federal tax laws. In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. We do not believe we have experienced any previous ownership changes, but the determination is complex and there can be no assurance we are correct. Furthermore, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.

As a result, our pre-2018 NOL carryforwards may expire prior to being used and our NOL carryforwards generated ~~thereafter~~in tax years beginning after December 31, 2017, will be subject to a percentage limitation and, if we undergo an ownership change (or if we previously underwent such an ownership change), our ability to use all of our pre-change NOLs and other pre-change tax attributes (such as research tax credits) to offset our post-change income or taxes may be limited. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a result, we may be unable to use all or a material portion of our NOLs and other tax attributes, which could adversely affect our future cash flows.

Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.

Our effective tax rate is derived from a combination of applicable tax rates in the various places that we operate. In preparing our financial statements, we estimate the amount of tax that will become payable in each of such places. Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including changes in the mix of our profitability from state to state, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income taxes and changes in tax laws. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial statements.

In addition, on December 31, 2020, we determined, based on our facts and circumstances, that it was more likely than not that a substantial portion of our deferred tax assets would be realized and, as a result, substantially all of our valuation allowance against our deferred tax assets was released. Therefore, beginning in 2021, we commenced recording income tax expense at an estimated tax rate that will likely approximate statutory tax rates, which could result in a significant reduction in our net income and net income per share.

The price of our common stock is volatile.

The market prices for securities of biotechnology and pharmaceutical companies historically have been highly volatile, and the market for these securities has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. The COVID-19 pandemic, for example, has negatively affected the stock market and investor sentiment and has resulted in significant volatility. Furthermore, especially as we and our market capitalization have grown, the price of our common stock has been increasingly affected by quarterly and annual comparisons with the valuations and recommendations of the analysts who cover our business. If our results do not meet these analysts’ forecasts, the expectations of our investors or the financial guidance we provide to investors in any period, which is based on assumptions that may be incorrect or that may change from quarter to quarter, the market price of our common stock could decline. Over the course of the last twelve months, the price of our common stock has ranged from approximately ~~$120~~$72 per share to approximately ~~$72~~$120 per share. The market price of our common stock may fluctuate in response to many factors, including:

•

~~sales of INGREZZA and ORILISSA;~~

•

~~the status and cost of our post-marketing commitments for INGREZZA;~~

•sales of INGREZZA and our other products;

~~the results of our clinical trials;~~

•the status and cost of our post-marketing commitments for INGREZZA;

~~reports of safety issues related to INGREZZA or ORILISSA;~~

•the results of our clinical trials;

whether the FDA approves opicapone for the treatment of Parkinson’s disease and elagolix for the treatment of uterine fibroids, both of which have a PDUFA target action date in the second quarter of 2020, or if the FDA fails to meet such targeted action dates;

•reports of safety issues related to INGREZZA, ONGENTYS, ORILISSA, or ORIAHNN;

~~developments concerning new and existing collaboration agreements;~~

•developments concerning new and existing collaboration agreements;

~~announcements of technological innovations or new therapeutic products by us or others;~~

•announcements of technological innovations or new therapeutic products by us or others;

~~general economic and market conditions, including economic and market conditions affecting the biotechnology industry;~~

•general economic and market conditions, including economic and market conditions affecting the biotechnology industry;

~~developments in patent or other proprietary rights;~~

•developments in patent or other proprietary rights;

~~developments related to the FDA;~~

•developments related to the FDA and foreign regulatory agencies;

~~future sales of our common stock by us or our stockholders;~~

•future sales of our common stock by us or our stockholders;

~~comments by securities analysts;~~

•comments by securities analysts;

~~additions or departures of key personnel;~~

•additions or departures of key personnel;

~~fluctuations in our operating results;~~

•fluctuations in our operating results;

~~potential litigation matters;~~

•potential litigation matters and developments in existing litigation matters, such as the ANDA litigation matters;

~~government regulation;~~

•government regulation;

~~government and third-party payor coverage and reimbursement;~~

•government and third-party payor coverage and reimbursement;

~~failure of any of our product candidates, if approved, to achieve commercial success; and~~

•failure of any of our product candidates, if approved, to achieve commercial success;

~~public concern as to the safety of our drugs.~~

•disruptions caused by man-made or natural disasters, pandemics or epidemics or other business interruptions, including, for example, the COVID-19 pandemic; and

•public concern as to the safety of our drugs.

In addition, we are a member of the S&P MidCap 400 index. If we cease to be represented in the S&P MidCap 400 index, or other indexes or indexed products, as a result of our market capitalization falling below the threshold for inclusion in the index, certain institutional shareholders may, due to their internal policies and investment guidelines, be required to sell their shareholdings. Such sales may result in further negative pressure on our stock price and, when combined with reduced trading volume and liquidity, could adversely affect the value of your investment and your ability to sell your shares.

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

We have entered into agreements for the distribution ~~agreements~~of INGREZZA with a limited number of specialty pharmacy providers and ~~a specialty distributor,~~distributors, and all of our product sales of INGREZZA are to these customers. Two of these customers represented approximately ~~86%~~82% of our total product revenue for ~~the year ended December 31, 2019~~2021 and a significant majority of our accounts receivable balance atas of December 31, ~~2019.~~2021. If any of these significant customers becomes subject to bankruptcy, is unable to pay us for our products or is acquired by a company that wants to terminate the relationship with us, or if we otherwise lose any of these significant customers, our revenue, results of operations and cash flows would be adversely affected. Even if we replace the loss of a significant customer, we cannot predict with certainty that such transition would not result in a decline in our revenue, results of operations and cash flows.

If we cannot raise additional funding, we may be unable to complete development of our product candidates or establish commercial and manufacturing capabilities in the future.

We may require additional funding to ~~effectively commercialize INGREZZA, to~~ continue our research and ~~product~~ development programs, to conduct preclinical studies and clinical trials, for operating expenses, to pursue regulatory approvals for our product candidates, for the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims, if any, and the cost of product in-licensing and any possible acquisitions. In addition, we may require additional funding to establish manufacturing and marketing capabilities in the future. We believe that our existing capital resources, together with investment income and future payments due under our strategic alliances, will be sufficient to satisfy our current and projected funding requirements for at least the next twelve months. However, these resources might be insufficient to conduct research and development programs, the cost of product in-taking and possible

acquisitions, fully commercialize products and operate the company to the full extent currently planned. If we cannot obtain adequate funds, we may be required to curtail significantly our commercial plans or one or more of our research and development programs or obtain funds through additional arrangements with corporate collaborators or others that may require us to relinquish rights to some of our technologies or product candidates.

Our future capital requirements will depend on many factors, including:

•

~~the commercial success of INGREZZA and/or ORILISSA;~~

•the commercial success of INGREZZA, ONGENTYS, ORILISSA and/or ORIAHNN;

~~debt service obligations on the 2024 Notes;~~

•

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

•debt services obligations on the 2024 Notes;

~~the magnitude and complexity of our research and development programs;~~

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

~~progress with preclinical testing and clinical trials;~~

•the magnitude and complexity of our research and development programs;

~~the time and costs involved in obtaining regulatory approvals;~~

•progress with preclinical testing and clinical trials;

•the time and costs involved in obtaining regulatory approvals;

~~the costs involved in filing and pursuing patent applications, enforcing patent claims, or engaging in interference proceedings or other patent litigation;~~

•the cost involved in filing and pursuing patent applications, enforcing patent claims, or engaging in interference proceedings or other patent litigation;

~~competing technological and market developments;~~

•competing technological and market developments;

~~the establishment of additional strategic alliances;~~

•

developments related to any future litigation;

•the cost of commercialization activities and arrangements, including advertising campaigns;

~~the cost of commercialization activities and arrangements, including manufacturing of our product candidates; and~~

•the cost of manufacturing our product candidates;

~~the cost of product in-licensing and any possible acquisitions.~~

•the impact of the COVID-19 pandemic on our business; and

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

We intend to seek additional funding through strategic alliances and may seek additional funding through public or private sales of our securities, including equity securities. For example, for so long as we continue to satisfy the requirements to be deemed a well-known seasoned issuer, we can utilize a shelf registration statement, to allow us to issue an unlimited number of securities from time to time. In addition, during the second quarter of 2017, we issued the 2024 Notes and we have previously financed capital purchases and may continue to pursue opportunities to obtain additional debt financing in the future. In November 2020, we entered into separate, privately negotiated transactions with certain holders of the 2024 Notes to repurchase $136.2 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $186.9 million in cash. As of December 31, 2021, $381.2 million aggregate principal amount of the 2024 Notes remained outstanding. Additional equity or debt financing might not be available on reasonable terms, if at all. In addition, disruptions due to the COVID-19 pandemic could make it more difficult for us to access capital. Any additional equity financings will be dilutive to our stockholders and any additional debt financings may involve operating covenants that restrict our business.

Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, new SEC regulations and Nasdaq rules, are creating uncertainty for companies such as ours. These laws, regulations and standards are subject to varying interpretations in some cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased ~~sales,~~selling, general and administrative expenses and management time related to compliance activities. If we fail to comply with these laws, regulations and standards, our reputation may be harmed and we might be subject to sanctions or investigation by regulatory authorities, such as the SEC. Any such action could adversely affect our financial results and the market price of our common stock.

Increasing use of social media could give rise to liability and result in harm to our business.

Our employees are increasingly utilizing social media tools and our website as a means of communication. Despite our efforts to monitor social media communications, there is risk that the unauthorized use of social media by our employees to communicate about our products or business, or any inadvertent disclosure of material, nonpublic information through these means, may result in violations of applicable laws and regulations, which may give rise to

liability and result in harm to our business. In addition, there is also risk of inappropriate disclosure of sensitive information, which could result in significant legal and financial exposure and reputational damages that could potentially have a material adverse impact on our business, financial condition and results of operations. Furthermore, negative posts or comments about us or our products on social media could seriously damage our reputation, brand image and goodwill.

Risks Related to Our Industry

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

Our success will depend on our ability to, among other things:

•obtain patent protection for our products;

•preserve our trade secrets;

•prevent third parties from infringing upon our proprietary rights; and

•operate without infringing upon the proprietary rights of others, both in the United States and internationally.

Because of the substantial length of time and expense associated with bringing new products through the development and regulatory approval processes in order to reach the marketplace, the pharmaceutical industry places considerable importance on obtaining patent and trade secret protection for new technologies, products and processes. Accordingly, we intend to seek patent protection for our proprietary technology and compounds. However, we face the risk that we may not obtain any of these patents and that the breadth of claims we obtain, if any, may not provide adequate protection of our proprietary technology or compounds.

We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, through confidentiality agreements with our commercial collaborators, employees and consultants. We also have invention or patent assignment agreements with our employees and some, but not all, of our commercial collaborators and consultants. However, if our employees, commercial collaborators or consultants breach these agreements, we may not have adequate remedies for any such breach, and our trade secrets may otherwise become known or independently discovered by our competitors.

In addition, although we own a number of patents, the issuance of a patent is not conclusive as to its validity or enforceability, and third parties may challenge the validity or enforceability of our patents. We cannot assure you how much protection, if any, will be given to our patents if we attempt to enforce them and they are challenged in court or in other proceedings. It is possible that a competitor may successfully challenge our patents or that challenges will result in limitations of their coverage. Moreover, competitors may infringe our patents or successfully avoid them through design innovation. In addition, potential competitors have in the past and may in the future file an ANDA with the FDA seeking approval to market a generic version of our products, or our competitors’ products, before the expiration of the patents covering our products or our competitors’ products, as applicable. To prevent infringement or unauthorized use, we have in the past and may in the future need to file infringement claims, which are expensive and time-consuming. For example, we are currently engaged in various intellectual property litigation matters against potential competitors related to INGREZZA. Refer to Item 3. Legal Proceedings for a more detailed description of these matters. In addition, in an infringement proceeding a court may decide that a patent of ours or a patent of a competitor is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover its technology. Interference proceedings declared by the United States Patent and Trademark Office may be necessary to determine the priority of inventions with respect to our patent applications (or those of our licensors) or a patent of a competitor. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and be a distraction to management. Litigation or interference proceedings, including proceedings of a competitor, may also result in a competitor entering the marketplace faster than expected. We cannot assure you that we will be able to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.

Health care reform measures and other recent legislative initiatives could adversely affect our business.

The business and financial condition of pharmaceutical and biotechnology companies are affected by the efforts of governmental and third-party payors to contain or reduce the costs of health ~~care.~~care and to lower drug prices. In the ~~U.S.,~~United States, comprehensive health care reform legislation ~~was~~has been enacted by the Federal government and we expect that there will continue to be a number of federal and state proposals to implement government control over the pricing of prescription pharmaceuticals. In addition, increasing emphasis on reducing the cost of health care in the ~~U.S.~~United States will continue to put pressure on the ~~rate of adoption~~pricing and ~~pricing~~reimbursement of prescription pharmaceuticals. Moreover, in some foreign jurisdictions, pricing of prescription pharmaceuticals is already subject to government control. Additionally, other federal and state legislation ~~imposes new~~impose obligations on manufacturers of pharmaceutical products, among others, related to product tracking and tracing. Among the requirements of this ~~new~~ legislation, manufacturers are required to provide certain information regarding the drug product provided to individuals and entities to which product ownership is transferred, label drug product with a product identifier, and keep certain records regarding distribution of the drug product. Further, under this ~~new~~ legislation, manufacturers will have drug product investigation, quarantine, disposition, notification and purchaser license verification responsibilities related to counterfeit, diverted, stolen and intentionally adulterated products, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.

Additionally, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, was signed into law, which was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees on the health industry and impose additional health policy reforms. Among the provisions of the ACA of importance to our drug products and potential drug candidates are:

•an annual, nondeductible fee on any entity that manufactures, or imports, specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;

•

an annual, nondeductible fee on any entity that manufactures, or imports, specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;

•

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% ~~of the average manufacturer price for branded and generic drugs, respectively;~~

•

~~a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;~~

•

~~extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;~~

•

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

•

a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be covered under Medicare Part D;

•

~~expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and~~

•

~~a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.~~

~~Some~~ of the ~~provisions~~average manufacturer price for branded and generic drugs, respectively;

•a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

•extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

•expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the ~~ACA have yet~~federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

•a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be ~~fully implemented,~~covered under Medicare Part D;

•expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and ~~there~~

•a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

There have been executive legal and political challenges to certain aspects of the ACA. ~~Since January 2017, two executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by~~For example, on June 17, 2021 the ~~ACA have been put into place. Concurrently, Congress has considered legislation~~United States Supreme Court dismissed a challenge on procedural grounds that would repeal or repeal and replace all or part of the ACA. Legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act includes a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. In December 2018, the Centers for Medicare and Medicaid Services, or CMS, published a new final rule permitting further collections and payments to and from certain ACA-qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. In addition, the 2020 federal spending package permanently eliminates, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. On December 14, 2018, a U.S. District Court Judge in Texas ruled thatargued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by ~~Congress as part~~Congress. Thus, the ACA will remain in effect in its current form.

Further, prior to the United States Supreme Court ruling, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ~~Tax Cuts~~ACA marketplace, which began February 15, 2021 and ~~Jobs Act. Additionally, on December 18, 2019,~~remained open through August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ~~U.S. Court of Appeals for the 5~~^th ~~Circuit ruled~~ACA. It is possible that the ~~individual mandate was unconstitutional and remanded~~ACA will be subject to judicial or Congressional challenges in the ~~case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well.~~future. It is unclear how ~~this decision, future decisions, subsequent appeals,~~any such challenges and ~~other efforts to repeal and replace~~ the ~~ACA~~healthcare reform measures of the Biden administration will impact the ~~ACA and our business.~~

ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013 and, due to subsequent legislative amendments to the statute, including the ~~BBA,~~Infrastructure Investment and Jobs Act, will remain in effect through ~~2027~~2031, except for a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic, unless additional Congressional action is taken. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequestration. The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, increased the statute of limitations period for the government to recover overpayments to providers from ~~three~~3 to ~~five~~5 years.

Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015, which ended the use of the statutory formula, also referred to as the Sustainable Growth Rate, for clinician payment and established a quality payment incentive program, also referred to as the Quality Payment Program. This program provides clinicians with two ways to participate, including through the Advanced Alternative Payment Models, or APMs, and the Merit-based Incentive Payment System, or MIPS. In November 2019, the Centers for Medicare & Medicaid Services, or CMS, issued a final rule finalizing the changes to the Quality Payment Program. At this time, it isremains unclear how the introduction of the Quality Payment Program will impact overall physician reimbursement.

Also, there has been heightened governmental scrutiny recently over pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the ~~current presidential~~Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that attempted to implement several of the administration’s ~~budget proposal~~proposals. As a result, the FDA concurrently released a final rule and guidance in September 2020 providing pathways for the 2020 fiscal year contains further drug price control measures that could be enacted during the budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to ~~negotiate drug prices under Medicaid,~~build and ~~to eliminate cost sharing~~submit importation plans for ~~generic~~ drugs ~~for low-income patients.~~from Canada. Further, on November 20, 2020, the current presidential administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. The U.S.United States Department of Health and Human Services, or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has ~~solicited feedback~~been delayed by the Biden administration from January 1, 2022 to January 1, 2023. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed by the Biden administration until January 1, 2023. On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries. As a result of litigation challenging the Most Favored Nation model, on ~~certain~~December 27, 2021, CMS published a final rule that rescinds the Most Favored Nation interim final rule. In July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue to advance these ~~measures and, additionally, has~~principles. No legislation or administrative actions have been finalized to implement these principles. In addition, Congress is considering drug pricing as part of other

reform measures. It is unclear whether these or similar policy initiatives will be implemented ~~others under its existing authority.~~in the future. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product. In particular, it is possible that additional governmental action is taken in response to the COVID-19 pandemic. Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain sustained profitability or commercialize our ~~drugs.~~

~~Additionally, on May 30, 2018,~~drugs, particularly since the ~~Trickett Wendler, Frank Mongiello, Jordan McLinn,~~majority of our current revenue is derived from federal healthcare programs, including Medicare and Matthew Bellina Right to Try Act of 2017 was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.

Medicaid.

We are currently unable to predict what additional legislation or regulation, if any, relating to the health care industry may be enacted in the future or what effect recently enacted federal legislation or any such additional legislation or regulation would have on our business. The pendency or approval of such proposals or reforms could result in a decrease in our stock price or limit our ability to raise capital or to enter into collaboration agreements for the further development and commercialization of our programs and products.

Any relationships with healthcare professionals, principal investigators, consultants, customers (actual and potential) and third-party payors in connection with our current and future business activities are and will continue to be subject, directly or indirectly, to federal and state healthcare laws. If we are unable to comply, or have not fully complied, with such laws, we could face penalties, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations.

Our business operations and activities may be directly, or indirectly, subject to various federal and state healthcare laws, including without limitation, fraud and abuse laws, false claims laws, data privacy and security laws, as well as transparency laws regarding payments or other items of value provided to healthcare providers. These laws may restrict or prohibit a wide range of business activities, including, but not limited to, research, manufacturing, distribution, pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. These laws may impact, among other things, our current activities with principal investigators and research subjects, as well as current and future sales, marketing, patient co-payment assistance and education programs.

Such laws include:

•

the federal Anti-Kickback Statute which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;

•the federal Anti-Kickback Statute which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;

the federal civil and criminal false claims laws, including the federal civil False Claims Act, and civil monetary penalties laws, which impose criminal and civil penalties against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

•the federal civil and criminal false claims laws, including the federal civil False Claims Act, and Civil Monetary Penalties Laws, which impose criminal and civil penalties against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

~~HIPAA, which imposes criminal and civil liability for, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;~~

•the Health Insurance Portability and Accountability Act, or HIPAA, which imposes criminal and civil liability for, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and its implementing regulations, which also imposes obligations, including mandatory contractual terms, on certain types of individuals and entities, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and its implementing regulations, which also imposes obligations, including mandatory contractual terms, on covered entities, including certain healthcare providers, health plans and healthcare clearinghouses, as well as their business associates and their covered subcontractors, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to CMS information related to payments or other transfers of value made to physicians and teaching hospitals, and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members; and

•

analogous state, local, and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures or drug pricing; state and local laws that require the registration of pharmaceutical sales representatives; state and local “drug takeback” laws and regulations; and state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

•the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to CMS information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners) and teaching hospitals, and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members; and

•analogous state, local and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures or drug pricing; state laws that require disclosure of price increases above certain identified thresholds as well as of new commercial launches in the state; state and local laws that require the registration of pharmaceutical sales representatives; state and local “drug take back” laws and regulations; and state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. While our interactions with healthcare professionals, including our speaker programs and other arrangements, such as our contributions to patient assistance programs, have been structured to comply with these laws and related guidance, it is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws. If our operations or activities are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to, without limitation, significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages,

reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate.

In addition, any sales of our product once commercialized outside the ~~U.S.~~United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

We could face liability if a regulatory authority determines that we are promoting INGREZZA, ONGENTYS or any of our product candidates that receives regulatory approval, for “off-label” uses.

A company may not promote “off-label” uses for its drug products. An off-label use is the use of a product for an indication that is not described in the product’s FDA-approved label in the ~~U.S.~~United States or for uses in other jurisdictions that differ from those approved by the applicable regulatory agencies. Physicians, on the other hand, may prescribe products for off-label uses. Although the FDA and other regulatory agencies do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications from companies or their ~~sales force~~salesforce with respect to off-label uses of products for which marketing clearance has not been issued. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling. A company that is found to have promoted off-label use of its product may be subject to significant liability, including civil and criminal sanctions. We intend to comply with the requirements and restrictions of the FDA and other regulatory agencies with respect to our promotion of our products, including INGREZZA and ONGENTYS, but we cannot be sure that the FDA or other regulatory agencies will agree that we have not violated their restrictions. As a result, we may be subject to criminal and civil liability. In addition, our management’s attention could be diverted to handle any such alleged violations. If the FDA or any other governmental agency initiates an enforcement action against us, or if we are the subject of a qui tam suit brought by a private plaintiff on behalf of the government, and it is determined that we violated prohibitions relating to the promotion of products for unapproved uses, we could be subject to substantial civil or

criminal fines or damage awards and other sanctions such as consent decrees and corporate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations. Any such fines, awards or other sanctions would have an adverse effect on our revenue, business, financial prospects and reputation.

If our information technology systems or data is or were compromised, we ~~are unable~~could experience adverse impacts resulting from such compromise, including, but not limited to, ~~protect~~interruptions to our ~~intellectual property,~~operations such as our ~~competitors could develop and market products based on our discoveries, which may reduce demand for our products.~~

~~Our success will depend on our ability to, among other things:~~

•

~~obtain patent protection for our products;~~

•

~~preserve our trade secrets;~~

•

~~prevent third parties from infringing upon our proprietary rights; and~~

•

~~operate without infringing upon the proprietary rights of others, both in the U.S. and internationally.~~

Because of the substantial length of time and expense associated with bringing new products through the development and regulatory approval processes in order to reach the marketplace, the pharmaceutical industry places considerable importance on obtaining patent and trade secret protection for new technologies, products and processes. Accordingly, we intend to seek patent protection for our proprietary technology and compounds. However, we face the riskclinical trials, claims that we ~~may not obtain any of these patents and that the breadth of claims we obtain, if any, may not provide adequate~~breached our data protection ~~of our proprietary technology or compounds.~~

~~If we fail to obtain or maintain orphan drug designation or other regulatory exclusivity for some of our product candidates, our competitive position would be harmed.~~

A product candidate that receives orphan drug designation can benefit from a streamlined regulatory process as well as potential commercial benefits following approval. Currently, this designation provides market exclusivity in the U.S. and the EU for seven years and ten years, respectively, if a product is the first such product approved for such orphan indication. This market exclusivity

does not, however, pertain to indications other than those for which the drug was specifically designated in the approval, nor does it prevent other types of drugs from receiving orphan designations or approvals in these same indications. Further, even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the new drug is clinically superior to the orphan product or a market shortage occurs.

In the EU, orphan exclusivity may be reduced to six years if the drug no longer satisfies the original designation criteria or can be lost altogether if the marketing authorization holder consents to a second orphan drug application or cannot supply enough drug, or when a second applicant demonstrates its drug is “clinically superior” to the original orphan drug. We may not be successful obtaining orphan drug designations for any indications and, even if we succeed, such orphan drug designations may fail to result in or maintain orphan drug exclusivity upon approval, which would harm our competitive position.

~~The technologies we use in our research as well as the drug targets we select may infringe the patents or violate the proprietary rights of third parties.~~

We cannot assure you that third parties will not assert patent or other intellectual property infringement claims against us or our collaborators with respect to technologies used in potential products. If a patent infringement suit were brought against us or our collaborators, we or our collaborators could be forced to stop or delay developing, manufacturing or selling potential products that are claimed to infringe a third party’s intellectual property unless that party grants us or our collaborators rights to use its intellectual property. In such cases, we could be required to obtain licenses to patents or proprietary rights of others in order to continue to commercialize our products. However, we may not be able to obtain any licenses required under any patents or proprietary rights of third parties on acceptable terms, or at all. Even if our collaborators or we were able to obtain rights to the third party’s intellectual property, these rights may be non-exclusive, thereby giving our competitors access to the same intellectual property. Ultimately, we may be unable to commercialize some of our potential products or may have to cease some of our business operations as a result of patent infringement claims, which could severely harm our business.

Our employees, independent contractors, principal investigators, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees and independent contractors, such as principal investigators, consultants, commercial partners and vendors, or by employees of our commercial partners could include failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and abuse laws, to report financial information or data accurately, to maintain the confidentiality of our trade secrets or the trade secrets of our commercial partners, or to disclose unauthorized activities to us. In particular, sales, marketing and other business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, kickbacks, self-dealing and other abusive practices. Employee and independent contractor misconduct could also involve the improper use of individually identifiable information, including, without limitation, information obtained in the course of clinical trials, which could result in regulatory sanctions and seriousobligations, harm to our ~~reputation. Any action against our employees, independent contractors, principal investigators, consultants, commercial partners~~reputation, and a loss of customers or ~~vendors for violations of these laws could result in significant civil, criminal, and administrative penalties, fines, and imprisonment.~~

~~We face potential product liability exposure far in excess of our insurance coverage.~~

The use of any of our potential products in clinical trials, and the sale of any approved products, including INGREZZA, may expose us to liability claims. These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling our products. We have product liability insurance coverage for our clinical trials in the amount of $35.0 million per occurrence and $35.0 million in the aggregate. In addition, we have product liability insurance related to the sale of INGREZZA in the amount of $35.0 million per occurrence and $35.0 million in the aggregate. However, our insurance may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability from any current or future clinical trials or approved products. A successful product liability claim, or series of claims, brought against us would decrease our cash reserves and could cause our stock price to fall.sales.

Furthermore, regardless of the eventual outcome of a product liability claim, any product liability claim against us may decrease demand for our approved products, including INGREZZA, damage our reputation, result in regulatory investigations that could require costly recalls or product modifications, cause clinical trial participants to withdrawal, result in costs to defend the related litigation, decrease our revenue, and divert management’s attention from managing our business.

~~Our activities involve hazardous materials, and we may be liable for any resulting contamination or injuries.~~

Our research activities involve the controlled use of hazardous materials. We cannot eliminate the risk of accidental contamination or injury from these materials. If an accident occurs, a court may hold us liable for any resulting damages, which may harm our results of operations and cause us to use a substantial portion of our cash reserves, which would force us to seek additional financing.

Cyber security breaches and other disruptions could compromise our information, including the theft of our intellectual property, and could expose us to liability, which would cause our business and reputation to suffer.

We are increasingly dependent on information technology systems and infrastructure, including mobile technologies, to operate our business. In the ordinary course of our business, we collect, use, safeguard, share, transfer and ~~store~~otherwise process confidential and sensitive electronic information on our networks and in our data centers. This information includes, among other things, our intellectual property and proprietary information, the confidential information of our collaborators and licensees, and the personally identifiable information of our employees. It is

important to our operations and business strategy that this electronic information remains secure and is perceived to be secure. The size and complexity of our information technology systems, and those of third-party vendors with whom we contract, and the volume of data we retain, make such systems potentially vulnerable to breakdown, malicious intrusion, security breaches, ransomware attacks, social engineering attacks, supply-chain attacks, and other cyber-attacks. Ransomware attacks are becoming increasingly prevalent and severe. To alleviate the financial, operational and reputational impact of a ransomware attack, it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including, for example, if applicable laws or regulations prohibit such payments). Similarly, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties in our supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems and infrastructure or the information technology systems and infrastructure of third parties that support our operations.Furthermore, if the COVID-19 pandemic requires us to reinstate a remote workforce model, our information technology systems and data will be at increased risk as more of our employees work from home, utilizing network connections outside our premises.

Additionally, natural disasters, public health pandemics or epidemics (including, for example, the COVID-19 pandemic), terrorism, war and telecommunication and electrical failures may result in damage to or the interruption or impairment of key business processes, or the loss or corruption of confidential information, including intellectual property, proprietary business information and personal information. Information security risks have significantly increased in recent years in part due to the proliferation of new technologies and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign private parties and state actors. A security breach or privacy violation that leads to disclosure or modification of or prevents access to personally identifiable information or other protected information could harm our reputation, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, require us to verify the correctness of database contents and otherwise subject us to liability under laws and regulations that protect personal data, resulting in increased costs or loss of revenue. Similarly, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Additionally, theft of our intellectual property or proprietary business information could require substantial expenditures to remedy. If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, and we may suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information. In addition, these breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above. Moreover, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information, trade secrets or other intellectual property. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. Although to our knowledge we have not experienced any material incident or disruption to date, we and our vendors have been the target of cybersecurity incidents of this nature and expect them to continue. While we have implemented security measures to protect our data security and information technology systems, such measures may not prevent such

events. Significant disruptions of our information technology systems or breaches of data security could have a material adverse effect on our business, financial condition and results of operations.

~~Compliance~~

If we fail to obtain or maintain orphan drug designation or other regulatory exclusivity for some of our product candidates, our competitive position would be harmed.

In addition to any patent protection, we rely on forms of regulatory exclusivity to protect our products such as orphan drug designation. A product candidate that receives orphan drug designation can benefit from a streamlined regulatory process as well as potential commercial benefits following approval. Currently, this designation provides market exclusivity in the United States for 7 years and the European Union for 10 years if a product is the first such product approved for such orphan indication. This market exclusivity does not, however, pertain to indications other than those for which the drug was specifically designated in the approval, nor does it prevent other types of drugs from receiving orphan designations or approvals in these same indications. Further, even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the new drug is clinically superior to the orphan product or a market shortage occurs.

In the European Union, orphan exclusivity may be reduced to 6 years if the drug no longer satisfies the original designation criteria or can be lost altogether if the marketing authorization holder consents to a second orphan drug application or cannot supply enough drug, or when a second applicant demonstrates its drug is “clinically superior” to the original orphan drug.

If we do not have adequate patent protection for our products, then the relative importance of obtaining regulatory exclusivity is even greater. We may not be successful obtaining orphan drug designations for any indications and, even if we succeed, such product candidates with ~~global privacy~~such orphan drug designations may fail to achieve FDA approval. Even if a product candidate with orphan drug designation may receive marketing approval from the FDA, it may fail to result in or maintain orphan drug exclusivity upon approval, which would harm our competitive position.

The technologies we use in our research as well as the drug targets we select may infringe the patents or violate the proprietary rights of third parties.

Our business operations may subject us to disputes, claims and lawsuits, which may be costly and time-consuming and could materially and adversely impact our financial position and results of operations.

From time to time, we may become involved in disputes, claims and lawsuits relating to our business operations. In particular, we may face claims related to the safety of our products, intellectual property matters, employment matters, tax matters, commercial disputes, competition, sales and marketing practices, environmental matters, personal injury, insurance coverage and acquisition or divestiture-related matters. Any dispute, claim or lawsuit may divert management’s attention away from our business, we may incur significant expenses in addressing or defending any dispute, claim or lawsuit, and we may be required to pay damage awards or settlements or become subject to equitable remedies that could adversely affect our operations and financial results. For example, we are currently engaged in various intellectual property litigation matters against potential competitors related to INGREZZA. Refer to Item 3. Legal Proceedings for a more detailed description of these matters.

Litigation related to these disputes may be costly and time-consuming and could materially and adversely impact our financial position and results of operations if resolved against us. In addition, the uncertainty associated with litigation could lead to increased volatility in our stock price.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees and independent contractors, such as principal investigators, consultants, commercial partners and vendors, or by employees of our commercial partners could include failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and abuse laws, to report financial information or data ~~security requirements~~accurately, to maintain the confidentiality of our trade secrets or the trade secrets of our commercial partners, or to disclose unauthorized activities to us. In particular, sales, marketing and other business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, kickbacks, self-dealing and other abusive practices. Employee and independent contractor misconduct could also involve the improper use of individually identifiable information, including, without limitation, information obtained in the course of clinical trials, which could result in ~~additional costs~~regulatory sanctions and ~~liabilities~~serious harm to our reputation. Any action against our employees, independent contractors, principal investigators, consultants, commercial partners or vendors for violations of these laws could result in significant civil, criminal and administrative penalties, fines and imprisonment.

We face potential product liability exposure far in excess of our insurance coverage.

The use of any of our potential products in clinical trials, and the sale of any approved products, including INGREZZA and ONGENTYS, may expose us to liability claims. These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling our products. We have product liability insurance coverage for our clinical trials in the amount of $45.0 million per occurrence and $45.0 million in the aggregate. In addition, we have product liability insurance related to the sale of INGREZZA and ONGENTYS in the amount of $45.0 million per occurrence and $45.0 million in the aggregate. However, our insurance may not reimburse us or ~~inhibit~~may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability from any current or future clinical trials or approved products. A successful product liability claim, or series of claims, brought against us would decrease our ~~ability~~cash reserves and could cause our stock price to ~~collect~~fall. Furthermore, regardless of the eventual outcome of a product liability claim, any product liability claim against us may decrease demand for our approved products, including INGREZZA and ~~process~~ONGENTYS, damage our reputation, result in regulatory investigations that could require costly recalls or product modifications, cause clinical trial participants to withdrawal, result in costs to defend the related litigation, decrease our revenue, and divert management’s attention from managing our business.

Our activities involve hazardous materials, and we may be liable for any resulting contamination or injuries.

We are subject to stringent and changing obligations related to data ~~globally,~~privacy and ~~the~~information security. Our actual or perceived failure to comply with such ~~requirements~~obligations could have a material adverse effect on our reputation, business, financial condition or results of operations.

~~The~~

In the ordinary course of our business, we process confidential and sensitive electronic information, including personal information, on our networks and in our data centers. We are subject to numerous federal, state, local and foreign laws, orders, codes, regulations and regulatory ~~framework for~~guidance regarding privacy, data protection, information security and the ~~collection, use, safeguarding, sharing, transfer~~processing of personal information, the number and scope of which are expanding, changing, subject to differing applications and interpretations, and may be inconsistent among countries. Our data processing activities may also subject us to other data privacy and security obligations, such as industry standards, external and internal privacy and security policies, contracts and other obligations that govern the processing of data by us and by third parties on our behalf.

Laws in Europe regarding privacy, data protection, information ~~worldwide is rapidly evolving~~security and ~~is likely~~the processing of personal data have been significantly reformed and continue to ~~remain uncertain for the foreseeable future.~~undergo reform. For example, the ~~EU’s~~European Union’s General Data Protection Regulation, or the EU GDPR, ~~imposes~~and the United Kingdom’s GDPR, or the UK GDPR, impose strict ~~obligations on~~requirements for processing the ~~processing of~~ personal data ~~including personal health data,~~of individuals located, respectively, within the European Economic Area, or EEA, and the free movement of such data. The GDPR applies to any company established in the EU as well as any company outside the EU that processes personal data in connection with the offering of goods or services to individuals in the EUUnited Kingdom, or the ~~monitoring of their behavior.~~UK. The EU GDPR ~~enhances~~and the UK GDPR enhance data protection obligations for processors and controllers of personal data, including, for example, obligations relating to: processing health and other sensitive data; obtaining consent of individuals; providing notice to individuals regarding data processing activities; responding to data subject requests; taking certain measures when engaging third-party processors; notifying data subjects and regulators of data breaches; and implementing safeguards to protect the security and confidentiality of personal ~~data;~~data. The EU GDPR and ~~transferring personal data to countries outside~~ the ~~EU, including the U.S. The~~UK GDPR ~~imposes~~impose substantial fines for breaches of data protection requirements, which can be up to four percent of global revenue or 20 million euros, whichever is greater, and it also ~~confers~~confer a private right of action on data subjects for breaches of data protection requirements. The EU GDPR, the UK GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as EU regulations governing clinical trial data and other healthcare data, ~~or other personal information from our clinical trials,~~ could require us to change our business practices or lead to government enforcement actions, private litigation or significant penalties against us and could have a material adverse effect on our business, financial condition or results of operations.

~~Additionally, California recently~~

Certain jurisdictions have enacted ~~legislation that has been dubbed~~data localization laws and cross-border personal data transfers laws. For example, absent appropriate safeguards or other circumstances, the ~~first “GDPR-like” law~~EU GDPR generally restricts the transfer of personal data to countries outside of the EEA, such as the United States, which the European Commission does not consider to provide an adequate level of personal data protection. If we cannot implement a valid compliance mechanism for cross-border personal data transfers, we may face increased exposure to regulatory actions, substantial fines and injunctions against processing or transferring personal data from Europe or elsewhere. The inability to import personal data to the United States may significantly and negatively impact our business operations, including by limiting our ability to conduct clinical trial activities in Europe and elsewhere; limiting our ability to collaborate with parties subject to European and other data protection laws or requiring us to increase our personal data processing capabilities in Europe and/or elsewhere at significant expense.

Laws regarding privacy, data protection, information security and the processing of personal information are also becoming increasingly common in the ~~U.S. Known as~~United States at both the federal and state level. For example, the California Consumer Privacy Act, or CCPA, which went into effect in 2020, imposes obligations on businesses to which it ~~creates~~applies. These obligations include, without limitation, providing specific disclosures in privacy notices, affording California residents certain rights related to their personal data, and requiring businesses subject to the CCPA to implement certain measures to effectuate California residents’ personal data rights. The CCPA allows for statutory fines for noncompliance (up to $7,500 per violation). In addition, it is anticipated that the California Privacy Rights Act of 2020, or the CPRA, effective January 1, 2023, will expand the CCPA. For example, the CPRA establishes a new ~~individual~~California Privacy Protection Agency to implement and enforce the CCPA (as amended), which could increase the risk of an enforcement action. Other states have also enacted data privacy ~~rights~~laws.

Our obligations related to data privacy and security are quickly changing in an increasingly stringent fashion. These obligations may be subject to differing applications and interpretations, which may be inconsistent among jurisdictions or in conflict. Preparing for ~~consumers (as~~and complying with these obligations requires us to devote significant resources (including, without limitation, financial and time-related resources). These obligations may necessitate changes to our information technologies, systems and practices and those of any third parties that ~~word is broadly defined in the law) and places increased~~process personal data on our behalf. In addition, these obligations may even require us to change to our business model.

Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so. Moreover, despite our efforts, our personnel or third-parties upon whom we rely may fail to comply such obligations that impacts our compliance posture. If we fail, or are perceived to have failed, to address or comply with data privacy and security obligations, we could face significant consequences. These consequences may include, but are not limited to, government enforcement actions, litigation, additional reporting requirements and/or oversight, bans on ~~entities handling~~processing personal data and orders to destroy or not use personal data. Any of ~~consumers or households. The CCPA, which went into~~these events could have a material adverse effect on ~~January 1, 2020, requires covered companies to provide new disclosures to California consumers, and provides such consumers new ways to opt-out~~our reputation, business, financial condition or results of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

operations.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

~~We lease our~~

Our corporate headquarters ~~which~~ are located in San Diego, California, and consist of 141,000 square feet of laboratory and office space located at 12780 El Camino Real, 45,000 square feet of office space located at 12777 High Bluff Drive and 37,000 square feet of office space located at 12790 El Camino Real.

California. We believe that our property and equipment are generally well maintained, ~~and~~ in good operating condition and ~~are~~ suitable for the conduct of our business.

Details of our leased facilities, which include our corporate headquarters and consist of office space and research and development laboratories, follow.

Address

Type

Square Feet

12780 El Camino Real, San Diego, California

Office Space, Research and Development Laboratories

141,000

12790 El Camino Real, San Diego, California

Office Space

88,000

10420 Wateridge Circle, San Diego, California

Research and Development Laboratories

46,000

12777 High Bluff Drive, San Diego, California

Office Space

45,000

12770 El Camino Real, San Diego, California

Office Space

26,000

On February 8, 2022, we entered into a lease agreement for a four-building campus facility consisting of up to approximately 535,000 gross square feet, to be constructed in San Diego, California, pursuant to which we also secured a 6-year option for the construction of a fifth building consisting of up to approximately 121,000 gross square feet and an option to purchase the entire campus facility, which will consist of office space and research and development laboratories, in the future. Upon completion of construction, we expect to utilize the campus facility as our new corporate headquarters and expect to begin subleasing our existing leased facilities.

Item 3.Legal ~~Legal~~ Proceedings

In the second quarter of 2021, we received notices from (i) Teva Pharmaceuticals Development, Inc., (ii) Lupin Limited, (iii) Crystal Pharmaceutical (Suzhou) Co. Ltd., and (iv) Zydus Pharmaceuticals (USA) Inc. (each an “ANDA Filer”) that each company had filed an abbreviated new drug application, or ANDA, with the FDA seeking approval of a generic version of INGREZZA. The ANDAs each contained a Paragraph IV Patent Certification alleging that certain of our patents covering INGREZZA are invalid and/or will not be infringed by each ANDA Filer’s manufacture, use or sale of the medicine for which the ANDA was submitted. We filed suit in the United States District Court for the District of Delaware in July 2021 against (i) Teva Pharmaceuticals, Inc. and its affiliates Teva Pharmaceuticals Development, Inc., Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries Ltd., (ii) Lupin Limited and its affiliates Lupin Pharmaceuticals, Inc., and Lupin Atlantis Holdings S.A., (iii) Crystal Pharmaceutical (Suzhou) Co., Ltd., and its affiliate Crystal Pharmatech Co., Ltd., and (iv) Zydus Pharmaceuticals (USA) Inc. and its affiliates Zydus Worldwide DMCC, Cadila Healthcare Limited d/b/a Zydus Cadila and Zydus Healthcare (USA) LLC. We also filed suit in the United States District Court for the District of New Jersey in July 2021 against Zydus Pharmaceuticals (USA) Inc. and its affiliates Zydus Worldwide DMCC, Cadila Healthcare Limited d/b/a Zydus Cadila and Zydus Healthcare (USA) LLC seeking to prevent any ANDA Filer from selling a generic version of INGREZZA.

From time to time, ~~in the normal course of business,~~ we may bealso become subject to ~~various legal matters such as threatened or pending claims or proceedings. We are not currently a party to any material~~other legal proceedings or claims ~~nor are we aware~~arising in the ordinary course of ~~any~~our business. We currently believe that none of the claims or actions pending against us is likely to have, individually or ~~threatened litigation or claims that could have~~in the aggregate, a material adverse effect on our business, ~~operating results, cash flows or~~ financial condition ~~should such~~or results of operations. Given the unpredictability inherent in litigation, ~~or claim be resolved unfavorably.~~

however, we cannot predict the outcome of these matters.

Item 4. Mine Safety Disclosures

None.

~~None.~~

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the Nasdaq Global Select Market under the symbol “NBIX”.

~~At January 31, 2020,~~

As of February 7, 2022, there were approximately 4947 stockholders of record of our common stock. We have not paid any cash dividends on our common stock since inception and do not anticipate paying cash dividends in the foreseeable future.

Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K.

Recent Sales of Unregistered Securities and Issuer Purchases of Equity Securities

There were no unregistered sales of our equity securities ~~during 2019. In addition,~~and we did not repurchase any of our equity securities during ~~2019.~~

2021.

Stock Performance Graph and Cumulative Total Return*

The graph below shows the cumulative total stockholder return assuming the investment of $100 on December 31, ~~2014~~2016 (and the reinvestment of dividends thereafter) in each of (i) Neurocrine Biosciences, Inc.’s common stock, (ii) the Nasdaq Composite Index and (iii) the Nasdaq Biotechnology Index. The comparisons in the graph below are based upon historical data and are not indicative of, or intended to forecast, future performance of our common stock or Indexes.

* The material in this section is not “soliciting material”, is not deemed “filed” with the Securities and Exchange Commission, ~~(SEC)~~or SEC, and is not to be incorporated by reference into any of our SEC filings whether made before or after the date hereof and irrespective of any general incorporation language in any such SEC filing except to the extent we specifically incorporate this section by reference.

~~Item 6.~~

~~Selected Financial Data~~

The following selected financial data have been derived from our audited financial statements. The information set forth below is not necessarily indicative of our results of future operations and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K.

(in thousands, except per share data)
2019

2018

2017

2016

2015

Consolidated Statements of Operations Data

Revenues:

Product sales, net
$
752,900

$
409,608

$
116,626

$
—

$
—

Collaboration revenue

35,187

41,632

45,000

15,000

19,769

Total revenues

788,087

451,240

161,626

15,000

19,769

Operating expenses:

Cost of sales

7,428

4,889

1,254

—

—

Research and development

200,042

155,774

91,827

94,291

81,491

Acquired in-process research and development

154,272

4,750

30,000

—

—

Sales, general and administrative

354,062

248,932

169,906

68,081

32,480

Total operating expenses

715,804

414,345

292,987

162,372

113,971

Operating income (loss)

72,283

36,895

(131,361
)

(147,372
)

(94,202
)
Other (expense) income:

Interest expense

(31,963
)

(30,530
)

(19,523
)

—

—

Unrealized loss on restricted equity securities

(12,987
)

—

—

—

—

Investment income and other, net

19,209

15,476

8,342

6,282

5,273

Total other (expense) income

(25,741
)

(15,054
)

(11,181
)

6,282

5,273

Income (loss) before provision for income taxes

46,542

21,841

(142,542
)

(141,090
)

(88,929
)
Provision for income taxes

9,530

730

—

—

—

Net income (loss)
$
37,012

$
21,111

$
(142,542
)

$
(141,090
)

$
(88,929
)
Net income (loss) per share, basic
$
0.40

$
0.23

$
(1.62
)

$
(1.63
)

$
(1.05
)
Net income (loss) per share, diluted
$
0.39

$
0.22

$
(1.62
)

$
(1.63
)

$
(1.05
)
Weighted average common shares outstanding, basic

91,627

90,235

88,089

86,713

84,496

Weighted average common shares outstanding, diluted

95,732

95,386

88,089

86,713

84,496

blank

Consolidated Balance Sheets Data

Cash and cash equivalents and marketable securities
$
970,178

$
866,941

$
763,290

$
350,840

$
461,679

Working capital ⁽¹⁾
$
265,747

$
649,544

$
500,493

$
280,028

$
358,359

Total assets
$
1,306,040

$
993,151

$
817,591

$
365,086

$
474,785

Convertible senior notes
$
408,807

$
388,496

$
369,618

$
—

$
—

Accumulated deficit
$
(1,132,700
)

$
(1,177,755
)

$
(1,198,866
)

$
(1,056,324
)

$
(915,234
)
Total stockholders’ equity
$
636,923

$
480,765

$
372,138

$
314,877

$
424,454

(1) At December 31, 2019, the conditional conversion feature of the 2024 Notes had been triggered, allowing holders of 2024 Notes to convert their 2024 Notes at any time during the period beginning on January 2, 2020 and ending at the close of business on March 31, 2020. Accordingly, the 2024 Notes have been classified as a current liability at December 31, 2019.

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations section contains forward-looking statements pertaining to, among other things, the commercialization of our product and product candidates, the expected continuation of our collaborative agreements, the receipt of research and development payments thereunder, the future achievement of various milestones in product development and the receipt of payments related thereto, the potential receipt of royalty payments, preclinical testing and clinical trials of potential products, the period of time that our existing capital resources will meet our funding requirements, and our financial results of operations. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various risks and uncertainties, including those set forth in this Annual Report on Form 10-K under the heading “Item 1A. Risk Factors.” See “Forward-Looking Statements” in Part I of this Annual Report on Form 10-K.

Overview

~~We are a commercial-stage biopharmaceutical company focused on discovering and developing innovative and life-changing treatments~~

At Neurocrine Biosciences, our purpose is simple: to relieve suffering for ~~patients~~people with ~~serious, challenging and under-addressed~~great needs, but few options. For three decades, we have applied our unique insight into neuroscience to advance medicines for neurological, endocrine and psychiatric disorders. ~~We specialize~~Our efforts have resulted in targeting and interrupting disease-causing mechanisms involving the interconnected pathways of the nervous and endocrine systems. Currently, we are primarily focused on the commercialization of INGREZZA^® ~~(valbenazine) in the~~ United States ~~or U.S., our first U.S.~~ Food and Drug Administration, or FDA, approved ~~product.~~

~~In April~~treatments for tardive dyskinesia, Parkinson’s disease, endometriosis* and uterine fibroids* and a diversified portfolio of investigational therapies with the potential to address unmet clinical needs of patients worldwide living with neurological, endocrine and psychiatric disorders. (*in collaboration with AbbVie Inc., or AbbVie)

We launched INGREZZA® (valbenazine) in the United States in May 2017 ~~we received FDA approval of our~~as the first ~~product, INGREZZA,~~FDA-approved drug for the treatment of ~~adults with~~ tardive dyskinesia ~~or TD. Shortly after receiving FDA approval, we began commercializing INGREZZA~~and launched ONGENTYS® (opicapone) in the ~~U.S. using a specialty sales force primarily focused on educating physicians who treat~~United States in September 2020 as an FDA-approved add-on treatment to levodopa/carbidopa in patients with ~~TD, including psychiatrists and neurologists.~~

~~In addition to~~Parkinson's disease experiencing motor fluctuations. INGREZZA net product sales represent the significant majority of our ~~first marketed~~total net product ~~our collaboration~~sales.

Our partner AbbVie ~~Inc., or AbbVie, received approval of~~launched ORILISSA® ~~(elagolix) for~~(elagolix tablets) in the ~~management of moderate to severe endometriosis pain~~United States in ~~women from the FDA in July~~August 2018 and ~~Health Canada~~launched ORIAHNN® (elagolix, estradiol and norethindrone acetate capsules and elagolix capsules) in ~~October 2018.~~the United States in June 2020. We receive royalties at tiered percentage rates on ~~any~~AbbVie net sales of ~~ORILISSA.~~

~~Our late-stage pipeline includes opicapone as an adjunctive therapy~~elagolix.

Business Highlights

•INGREZZA net product sales for 2021 increased $88.8 million, or 8.9%, to ~~levodopa/DOPA decarboxylase inhibitors~~$1.1 billion, primarily driven by increased total prescriptions reflecting higher customer demand and increased commercial activities.

•On February 8, 2022, we entered into a lease agreement for a four-building campus facility to be constructed in ~~adult Parkinson's disease patients, elagolix~~San Diego, California, pursuant to which we also secured a 6-year option for the ~~treatment~~construction of ~~heavy menstrual bleeding, or HMB, associated~~a fifth building and an option to purchase the entire campus facility, which will consist of office space and research and development laboratories, in the future. Upon completion of construction, we expect to utilize the campus facility as our new corporate headquarters and expect to begin subleasing our existing leased facilities.

Pipeline Highlights

•In the fourth quarter of 2021, we announced positive top-line data from the Phase III KINECT-HD study evaluating the efficacy, safety and tolerability of valbenazine in 120 adult patients with ~~uterine fibroids~~chorea in ~~women,~~Huntington disease, also known as Huntington chorea. The study met the primary endpoint of reduction in severity of chorea. We plan to submit a supplemental new drug application for valbenazine for the treatment of Huntington chorea ~~in adult patients~~ with Huntington’s disease, or HD, and NBIb-1817 (VY-AADC) for the treatment of advanced Parkinson’s disease patients with motor fluctuations that are refractory to medical management. Our product candidates for uterine fibroids and advanced Parkinson’s disease are partnered with AbbVie and Voyager Therapeutics, Inc., or Voyager, respectively.

~~In the third quarter of 2019,~~ the FDA ~~accepted our new drug application,~~in second half of 2022.

•Completed strategic partnership with Heptares Therapeutics Limited, or NDA, for opicapone for the treatment of Parkinson’s disease with a Prescription Drug User Fee Act, or PDUFA, target action date of April 26, 2020. Also, in the third quarter of 2019, the FDA accepted AbbVie’s NDA for elagolix for the treatment of uterine fibroids with a PDUFA target action date in the second quarter of 2020.

~~Our early-stage~~Heptares, to expand clinical pipeline ~~includes crinecerfont (NBI-74788)~~ for ~~the treatment of congenital adrenal hyperplasia, or CAH, elagolix for the treatment of polycystic ovary syndrome, or PCOS, in women and a vesicular monoamine transporter 2, or VMAT2, inhibitor~~psychiatry disorders. Upfront fee associated with ~~potential use in the treatment of neurologic and psychiatric disorders. Our product candidate for PCOS is partnered with AbbVie.~~

~~In December 2019, we entered into a license and collaboration agreement with Xenon Pharmaceuticals Inc, or Xenon, a clinical-stage biopharmaceutical company. Pursuant to the terms of~~ the agreement ~~we acquired an exclusive license to NBI-921352 (XEN901), a clinical-stage candidate with potential in epilepsy.~~

In January 2020, we announced a collaboration and optional licensing agreement with Idorsia Pharmaceuticals Ltd, granting us an option to license ACT-709478, a potent, selective, orally active and brain penetrating T-type calcium channel blocker, in clinical development for the treatment of a rare pediatric epilepsy. The option also includes a research collaboration to discover, identify and develop additional novel T-type calcium channel blockers.

~~Going forward, we expect to augment our product pipeline by acquiring, through license or otherwise, additional drug candidates for~~totaled $100.0 million, which, including certain transaction-related costs, was expensed as in-process research and development ~~or R&D, and potential commercialization.~~

~~Results of Operations~~

~~Revenues~~

~~The following table presents our revenues by category.~~

in 2021.

Year Ended December 31,

(in thousands)
2019

2018

2017

INGREZZA product sales, net
$
752,900

$
409,608

$
116,626

Collaboration revenue

35,187

41,632

45,000

Total revenues
$
788,087

$
451,240

$
161,626

~~Product Sales, net~~•

In April 2017, the FDA approved INGREZZA for the treatment of TD. INGREZZA became available for prescription in late April 2017. Net product sales were $752.9 million for 2019, $409.6 million for 2018 and $116.6 million for 2017.

~~Collaboration Revenue~~

~~Collaboration revenue reflects event-based milestones, royalties and license fees earned under our collaboration agreements with AbbVie and~~2021, Mitsubishi Tanabe Pharma Corporation, or ~~MTPC.~~

~~In the third quarter of 2019, we recognized a $20.0 million event-based milestone as revenue upon the FDA’s acceptance of AbbVie’s NDA submission of elagolix~~MTPC, received approvals for marketing authorization for valbenazine for the treatment of ~~uterine fibroids.~~tardive dyskinesia in Indonesia, Singapore, South Korea and Thailand. In addition, MTPC has submitted filings for marketing authorization, which are currently under review, in Japan and Malaysia.

Impact of COVID-19

The COVID-19 pandemic has dramatically changed the ~~third quarter~~ways in which we live and interact with one another. While we adapt to this new shared reality, our purpose remains unchanged: to relieve suffering for people with great needs, but few options.

Although the initial impact of ~~2018,~~the pandemic has subsided, we ~~recognized~~are uncertain as to how more transmissible variants may impact our business. We remain committed to (1) prioritizing the safety, health and well-being of patients and their caregivers, healthcare providers and our employees; (2) ensuring patients with tardive dyskinesia are well supported and have continued uninterrupted access to INGREZZA, for which we have not experienced and currently do not expect any supply disruption; and (3) advancing clinical studies.

Most of our field-based employees have resumed in-person interactions in accordance with location-specific guidance. Our office-based employees have returned to the office under flexible work arrangement guidelines to help balance business needs, employee health, well-being and safety and the evolving work environment. However, as the effects of the pandemic continue to rapidly evolve with the emergence of new COVID-19 variants, a ~~$40.0~~remote work model may nevertheless need to be reinstated at some point in the future. We continue to evaluate the impact of global spikes or surges in COVID-19 infection and hospitalization rates, as well as the impact of emerging COVID-19 variants on the efficacy of vaccines.

Most hospitals, community mental health facilities, physicians’ offices, pharmacies and other healthcare facilities have relaxed their policies that limited access of patients and our employees to such facilities and limited the ability of patients, pharmacies and prescribers to interact with each other. However, we anticipate these policies may change from time to time as communities or regions grapple with outbreaks. The ultimate impact of the COVID-19 pandemic, including any lasting effects on our revenue and the way we conduct our business, is highly uncertain and subject to continued change. We recognize that this pandemic will continue to present unique challenges for us throughout 2022.

Results of Operations

Revenues

Net Product Sales by Sales Product.


	Year Ended December 31,
(in millions)	2021		2020		2019
INGREZZA net product sales	$	1,081.9	$	993.1	$	752.9
ONGENTYS net product sales	8.2		1.0		—
Total net product sales	$	1,090.1	$	994.1	$	752.9

For 2021 compared to 2020, the increase in total net product sales primarily reflected increased INGREZZA net product sales mainly driven by increased total prescriptions reflecting higher customer demand and increased commercial activities.

For 2020 compared to 2019, the increase in total net product sales primarily reflected increased INGREZZA net product sales driven by increased total prescriptions.

Collaboration Revenues by Category.


	Year Ended December 31,
(in millions)	2021		2020		2019
Elagolix royalties	$	22.3	$	19.2	$	14.3
Milestone	15.0		30.0		20.0
Non-cash collaboration revenue and other	6.1		2.6		0.9
Total collaboration revenue	$	43.4	$	51.8	$	35.2

For 2021, total collaboration revenue primarily reflected the achievement of a $15.0 million ~~event-based~~ milestone ~~as revenue upon the FDA-approval of AbbVie’s ORILISSA~~associated with MTPC's marketing authorization application submission for valbenazine for the ~~management~~treatment of ~~moderate to severe endometriosis pain~~tardive dyskinesia in ~~women. In the third quarter~~Japan and royalties earned on AbbVie net sales of ~~2017, AbbVie’s NDA submission for elagolix in endometriosis was accepted as filed by the FDA, resulting in~~elagolix.

For 2020, total collaboration revenue primarily reflected the achievement of a $30.0 million ~~event-based~~ milestone ~~which we recognized as revenue~~associated with the FDA’s approval of AbbVie’s ORIAHNN for uterine fibroids in the fourth quarter of 2017. We also recognized $15.0 million in development event-based payments as revenue in 2017, resulting from Mitsubishi Tanabe Pharma Corporation’s, or MTPC’s, initiation of Phase II/III development of INGREZZA in TD in Asia.

~~We are eligible to receive~~2020 and royalties ~~at tiered percentage rates~~earned on ~~any~~AbbVie net sales of ~~ORILISSA. We recognized royalty revenues~~elagolix.

For 2019, total collaboration revenue primarily reflected the achievement of a $20.0 million milestone associated with the FDA’s acceptance of AbbVie’s new drug application submission for elagolix for uterine fibroids and royalties earned on AbbVie net sales of ~~ORILISSA of $14.3 million for 2019 and $1.6 million for 2018. We recognized no royalty revenues in 2017.~~

elagolix.

Operating Expenses

Cost of ~~Sales~~

~~Cost~~Sales.


	Year Ended December 31,
(in millions)	2021		2020		2019
Cost of sales	$	14.3	$	10.1	$	7.4

The increase in cost of sales ~~was $7.4 million for~~from 2020 to 2021 and 2019 ~~$4.9 million for 2018 and $1.3 million for 2017.~~

to 2020 reflected increased INGREZZA net product sales driven by increased total prescriptions.

Research and Development,

or R&D, Expenses by Category.

We support our drug discovery and development efforts through the commitment of significant resources to discovery, R&D programs, and business development opportunities.

Costs are reflected in the applicable development stage based upon the program status when incurred. Therefore, the same program could be reflected in different development stages in the same reporting period. For several of our programs, the R&D activities are part of our collaborative ~~and other relationships.~~

arrangements.


	Year Ended December 31,
(in millions)	2021		2020		2019
Late stage	$	55.7	$	55.1	$	43.7
Early stage	43.9		30.2		25.3
Research and discovery	50.5		43.3		24.6
Milestone	5.4		20.0		10.0
Payroll and benefits	129.1		95.4		71.3
Facilities and other	43.5		31.0		25.1
Total R&D expense	$	328.1	$	275.0	$	200.0

Late ~~stage consists~~Stage.Consists of costs incurred ~~related to~~for product candidates in Phase II registrational studies and ~~onwards.~~ all subsequent activities.

For 2021 compared to 2020, the increase in late stage R&D expense primarily reflected continued investment in Phase III programs for crinecerfont in congenital adrenal hyperplasia and valbenazine in Huntington disease and initiation of a Phase III program for valbenazine as adjunctive treatment of schizophrenia, offset by decreased investment associated with the termination of the NBIb-1817 program for Parkinson’s disease, which became effective in August 2021.

For 2020 compared to 2019, the increase in late stage R&D expense primarily reflected increased investment in Phase III programs for crinecerfont in congenital adrenal hyperplasia and continued enrollment in the Phase III program for valbenazine Huntington disease.

Early ~~stage consists~~Stage.Consists of costs incurred ~~related to~~for product candidates ~~in post-investigational~~after the approval of an investigational new drug application ~~or IND,~~by the applicable regulatory agency through Phase II non-registrational studies.

For 2021 compared to 2020, the increase in early stage R&D expense primarily reflected continued enrollment in Phase II programs for NBI-827104 in epileptic encephalopathy with continuous spike and wave during sleep and essential tremor and initiation of Phase II programs for NBI-921352 in focal onset seizure and SCN8A developmental epileptic encephalopathy.

For 2020 compared to 2019, the increase in early stage R&D expense primarily reflected increased investment in three in-licensed psychiatry clinical development programs beginning in mid-2020 and two in-licensed epilepsy clinical development programs beginning at the end of 2019.

Research and Discovery.Consists of costs incurred prior to the approval of an investigational new drug application by the applicable regulatory agency.

For 2021 compared to 2020, the increase in research and discovery ~~consists~~R&D expense primarily reflected a full year of ~~pre-IND costs. Milestone expenses reflect payments made~~investment in psychiatry and epilepsy preclinical development programs in-licensed in 2020, offset by decreased investment in preclinical gene therapy programs.

For 2020 compared to 2019, the increase in research and discovery R&D expense primarily reflected increased investment in preclinical gene therapy programs and an epilepsy preclinical development program in-licensed in 2020.

Milestone. Consists of costs incurred for development and/or regulatory milestones in connection with our collaborative ~~and other relationships.~~ arrangements.

In 2021, we expensed a milestone of $5.4 million associated with the European Union’s approval for the NBI-921352 clinical trial application in September 2021.

In 2020, we expensed a milestone of $20.0 million associated the FDA’s approval for ONGENTYS for Parkinson’s disease.

In 2019, we expensed a milestone of $10.0 million associated with the FDA’s acceptance of the new drug application for opicapone as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients.

Payroll and ~~benefits consists~~Benefits. Consists of costs incurred for salaries and wages, payroll taxes, benefits and share-based compensation associated with employees involved in ~~ongoing~~ R&D activities. Share-based compensation may fluctuate from period to period based on factors that are not within our control, such as our stock price on the dates share-based grants are issued.

For 2021 compared to 2020, the increase in payroll and benefits R&D expense primarily reflected increased personnel expenses on higher headcount and a $14.7 million increase in non-cash share-based compensation expense, including a $6.4 million charge related to the modification of certain share-based awards.

For 2020 compared to 2019, the increase in payroll and benefits R&D expense primarily reflected increased personnel expenses on higher headcount.

Facilities and ~~other consists~~Other.Consists of indirect costs incurred ~~in support~~for the benefit of ~~overall R&D activities and non-specific programs, including activities that benefit~~ multiple programs, ~~such as management costs, as well as~~including depreciation, information technology and facility-based ~~expenses. These costs are not allocated to a specific program or stage.~~

~~The following table presents R&D expense by category:~~

Year Ended December 31,

(in thousands)
2019

2018

2017

Late stage
$
43,673

$
14,237

$
6,423

Early stage

25,260

41,659

18,917

Research and discovery

24,642

17,047

11,173

Milestone payments

10,000

10,000

—

Payroll and benefits

71,347

61,950

42,180

Facilities and other

25,120

10,881

13,134

Total R&D expense
$
200,042

$
155,774

$
91,827

R&D expense was $200.0 million in 2019, $155.8 million in 2018 and $91.8 million in 2017. The increase in R&D expense from 2018 to 2019 was primarily due to funding of development activities in connection with our collaboration with Voyager, ongoing progression of our product candidate pipeline and increased personnel expenses, ~~on higher headcount. The increase in R&D expense from 2017 to 2018 was primarily due to the ongoing progression of our product candidate pipeline and increased personnel expenses on higher headcount.~~

such as rent expense.

Acquired In-Process Research and Development,

~~In-process research and development,~~ or IPR~~&D, was $154.3 million for 2019, $4.8 million for 2018 and $30.0 million for 2017.~~ &D.


	Year Ended December 31,
(in millions)	2021		2020		2019
IPR&D expense	$	105.3	$	164.5	$	154.3

In ~~connection with the payment of the upfront fee pursuant to our collaboration and license agreement with Voyager,~~2021, we ~~recorded a~~

~~charge of $113.1 million, accounted for~~expensed as IPR&D ~~in the first quarter of 2019. In the second quarter of 2019, we entered into an amendment to the collaboration and license agreement with Voyager, pursuant to which we paid Voyager $5.0~~$100.3 million ~~upfront, accounted for as IPR&D, to obtain outside the U.S. rights to the Friedreich’s ataxia program. In~~in connection with the payment of the upfront fee pursuant to our collaboration with ~~Xenon,~~Heptares.

In 2020, we ~~recorded a charge~~expensed as IPR&D $46.0 million and $118.5 million, respectively, in connection with the payments of the upfront fees pursuant to our collaborations with Idorsia Pharmaceuticals Ltd, or Idorsia, and Takeda Pharmaceutical Company Limited, or Takeda.

In 2019, we expensed as IPR&D $118.1 million and $36.2 million, ~~accounted for as IPR&D,~~respectively, in connection with the ~~fourth quarter~~payments of ~~2019. In~~ the ~~third quarter of 2018, we entered into a research collaboration~~upfront fees pursuant to our collaborations with ~~Jnana~~Voyager Therapeutics, Inc., or Jnana, pursuant to which we paid Jnana $4.8 million upfront, accounted for as IPR&D, to obtain access to their proprietary drug discovery platform. In connection with the payment of the upfront fee pursuant to our exclusive license agreement with BIAL – Portela & Ca, S.A.Voyager, and Xenon Pharmaceuticals, Inc., ~~we recorded a charge of $30.0 million, accounted for as IPR&D, in the first quarter of 2017.~~or Xenon.

~~Sales,~~

Selling, General and Administrative,

~~Sales, general and administrative,~~ or SG~~&A, expense was $354.1 million in 2019, $248.9 million in 2018 and $169.9 million in 2017. The~~&A.


	Year Ended December 31,
(in millions)	2021		2020		2019
SG&A expense	$	583.3	$	433.3	$	354.1

For 2021 compared to 2020, the increase in SG&A expense ~~from 2018~~primarily reflected increased investment to support our commercial initiatives, including the May 2021 launch of our INGREZZA direct-to-consumer advertising campaign, "TD Spotlight", increased personnel expenses on higher headcount and a $19.5 million increase in non-cash share-based compensation expense.

For 2020 compared to 2019, ~~was primarily due to~~ the sales force expansion completed in the third quarter of 2018, the national launch of a patient-focused disease state awareness campaign, Talk About TD, and an increase in the Branded Pharmaceutical Drug fee expense. The increase in SG&A expense ~~from 2017~~primarily reflected increased personnel expenses on higher headcount and continued investment in INGREZZA marketing.

Other Expense, Net.


	Year Ended December 31,
(in millions)	2021		2020		2019
Interest expense	$	(25.8)	$	(32.8)	$	(32.0)
Unrealized gain (loss) on equity securities	20.9		(17.7)		(13.0)
Loss on extinguishment of convertible senior notes	—		(18.4)		—
Investment income and other, net	3.8		12.6		19.2
Total other expense, net	$	(1.1)	$	(56.3)	$	(25.8)

For 2021 compared to ~~2018 was primarily due to our commercial launch for INGREZZA in April 2017 and~~2020, the ~~subsequent sales force expansion in the third quarter of 2018.~~

~~Other Expense~~

~~Other expense, net, was $25.7 million in 2019, $15.1 million in 2018 and $11.2 million in 2017. The increase~~decrease in other expense, net, ~~from 2018 to 2019 was primarily due to an~~reflected a net unrealized ~~loss~~gain of ~~$13.0~~$20.9 million recognized to adjust our equity investments in Voyager and Xenon to fair value, asa non-recurring debt extinguishment charge of ~~December 31, 2019. The~~$18.4 million in November 2020 associated with the partial repurchase of our convertible senior notes and decreased interest expense resulting from a lower convertible debt balance throughout 2021, partially offset by decreased interest income stemming from lower yields on our debt security investments.

For 2020 compared to 2019, the increase in other expense, net, ~~from 2017 to 2018~~primarily reflected a debt extinguishment charge of $18.4 million in November 2020 associated with the partial repurchase of our convertible senior notes.

Provision for (Benefit from) Income Taxes.


	Year Ended December 31,
(in millions)	2021		2020		2019
Provision for (benefit from) income taxes	$	11.8	$	(300.6)	$	9.5

For 2021, the effective tax rate was lower than federal and state tax rates primarily due to ~~higher interest expense resulting from our issuance~~excess tax benefits associated with share-based compensation and research tax credits. Beginning in the first quarter of ~~$517.5 million of 2.25% convertible senior notes due May 15, 2024, or the 2024 Notes, in May 2017.~~

~~Provision for Income Taxes~~

~~Our provision for income taxes was $9.5 million for 2019 and $0.7 million for 2018, reflecting estimated current state income taxes for both periods. We did not have~~2021, we began recording a provision for income taxes ~~for 2017. At December 31, 2019~~using an effective tax rate approximating federal and ~~2018, we had full~~state statutory tax rates. Due to the ability to offset any pre-tax income against previously benefited federal net operating losses, no federal cash tax was incurred in 2021.

For 2020, the benefit from income taxes reflected a $296.3 million benefit associated with the release of substantially all of our valuation ~~allowances~~allowance against our ~~net~~ deferred tax assets ~~as realization was uncertain. As a result, our~~on December 31, 2020. The effective tax ~~expense~~rate for ~~both periods varies~~2020 varied from the statutory tax rate primarily due to changes in our valuation ~~allowances,~~allowance, net of other permanent book/tax differences, tax credits generated and impacts of changes in tax laws.

For 2019, the provision for income taxes reflected estimated and current state income taxes. The effective tax rate for 2019 varied from the statutory tax rate primarily due to changes in our valuation allowance, net of other permanent book/tax differences, tax credits generated and impacts of changes in tax laws. As of December 31, 2019, we had a full valuation allowance against our net deferred tax assets as realization was uncertain.

Net Income ~~(Loss)~~

~~Net~~and Diluted Earnings per Share.


	Year Ended December 31,
(in millions, except per share data)	2021		2020		2019
Net income	$	89.6	$	407.3	$	37.0
Diluted earnings per share	$	0.92	$	4.16	$	0.39

For 2021 compared to 2020, the decrease in net income ~~was $37.0 million, or $0.39~~and diluted earnings per share ~~for 2019~~primarily reflected a $296.3 million benefit associated with the release of substantially all of our valuation allowance against our deferred tax assets on December 31, 2020, increased investment to support our commercial initiatives, including the May 2021 launch of our INGREZZA direct-to-consumer advertising campaign, "TD Spotlight", and ~~$21.1 million, or $0.22 diluted earnings per share, for 2018. We incurred a net loss of $142.5 million, or $1.62 net loss per share, for 2017. The change from 2018 to 2019 was primarily the result of~~increased investment in our expanded clinical portfolio, partially offset by increased INGREZZA net product sales ~~offset by $154.3~~and decreased IPR&D expense reflecting lower upfront payments for asset acquisitions.

For 2020 compared to 2019, the increase in net income and diluted earnings per share primarily reflected a $296.3 million benefit associated with the release of ~~IPR&D in connection with our collaborations with Voyager and Xenon, ongoing support for the commercial launch of INGREZZA for TD and progression~~substantially all of our ~~clinical pipeline. The change from 2017 to 2018 was primarily the result of~~valuation allowance against our deferred tax assets on December 31, 2020 and increased INGREZZA net product sales, partially offset by ongoing support for the commercial launch of INGREZZA for TDtardive dyskinesia and progression of our clinical pipeline.

Liquidity and Capital Resources

~~At December 31, 2019,~~

Sources of Liquidity

We believe that our ~~cash, cash equivalents~~existing capital resources, funds generated by anticipated INGREZZA net product sales and ~~marketable securities totaled $970.2 million,~~investment income will be sufficient to satisfy our current and projected funding requirements for at least the next twelve months. However, we cannot guarantee that our existing capital resources and anticipated revenues will be sufficient to conduct and complete all of our research and development programs or commercialization activities as planned. We may seek to access the public or private equity markets whenever conditions are favorable or pursue opportunities to obtain additional debt financing in the future. We may also seek additional funding through strategic alliances or other financing mechanisms. However, we cannot provide assurance that adequate funding will be available on terms acceptable to us, if at all. In addition, the disruption of global financial markets caused by the COVID-19 pandemic, if sustained or recurrent, could make it more difficult for us to access capital, which could in the future negatively affect our liquidity.

Information Regarding Our Financial Condition.


	December 31,
(in millions)	2021		2020
Total cash, cash equivalents and marketable securities	$	1,272.0	$	1,028.1
Working Capital:
Total current assets	$	972.8	$	1,016.2
Less total current liabilities	245.8		186.5
Total working capital	$	727.0	$	829.7

Information Regarding Our Cash Flows.


	Year Ended December 31,
(in millions)	2021		2020		2019
Net cash provided by operating activities	$	256.5	$	228.5	$	147.0
Net cash (used in) provided by investing activities	(130.2)		4.1		(211.1)
Net cash provided by (used in) financing activities	27.4		(157.8)		32.4
Change in cash, cash equivalents and restricted cash	$	153.7	$	74.8	$	(31.7)

Net Cash Provided by Operating Activities.

For 2021 compared ~~with $866.9 million at December 31, 2018.~~

~~Net~~to 2020, the increase in net cash provided by operating activities ~~was $152.1 million~~primarily reflected increased INGREZZA net product sales and lower upfront payments for asset acquisitions, partially offset by increased investment to support our commercial initiatives and advancing our expanded clinical portfolio.

For 2020 compared to 2019, ~~and $101.4 million for 2018. Net~~the increase in net cash ~~used in~~provided by operating activities ~~was $94.3 million for 2017. The increase in positive cash flow from 2018 to 2019 was~~ primarily ~~driven by~~reflected increased INGREZZA net product sales, partially offset by incremental INGREZZA investment and ~~upfront payments~~progression of ~~$118.1 million and $36.2 million~~our clinical pipeline.

Net Cash (Used in) Provided by Investing Activities.

Periodic fluctuations in ~~connection with our collaborations with Voyager and Xenon, respectively. The significant change to positive~~net cash ~~flow generated from operations from 2017 to 2018 was primarily~~(used in) provided by investing activities are generally driven by ~~increased INGREZZA net product sales and the achievement of a $40.0 million event-based milestone~~timing differences related to the ~~FDA’s approval~~purchases, sales and maturities of ~~ORILISSA.~~

~~Net cash used~~debt security investments and changes in ~~investing activities was $211.1 million for 2019, $242.9 million for 2018 and $251.3 million for 2017. The change in~~our portfolio-mix.

For 2021, net cash used in investing activities reflected a $4.6 million equity investment in Xenon associated with the European Union’s approval of our clinical trial application in September 2021 for ~~all periods presented resulted primarily from timing differences~~NBI-921352 for the treatment of focal onset seizures in ~~purchases, sales and maturities of marketable securities and changes in our portfolio-mix between cash equivalents and short-term and long-term investment holdings. Net~~adults.

For 2019, net cash used in investing activities ~~for 2019 also reflects~~reflected equity investments of $54.7 million in Voyager ~~in the first quarter of 2019~~ and $14.2 million in Xenon ~~in the fourth quarter of 2019.~~

associated with newly entered into collaboration and license agreements.

Net Cash Provided by (Used in) Financing Activities.

For 2021 and 2019, net cash provided by ~~financing~~investing activities ~~was $27.3 million for 2019, $29.5 million for 2018 and $516.6 million in 2017. Net cash provided by financing activities for 2019 and 2018~~ reflected proceeds from issuances of our common stock ~~option issuances. Net~~under benefit plans.

For 2020, net cash ~~provided by~~used in financing activities ~~for 2017~~ primarily reflected ~~net~~the partial repurchase of $136.2 million aggregate principal amount of our convertible senior notes for an aggregate repurchase price of $186.9 million in cash, partially offset by proceeds from issuances of ~~$502.8 million associated~~our common stock under benefit plans.

Material Cash Requirements

In the pharmaceutical industry, it can take a significant amount of time and capital resources to successfully complete all stages of research and development and commercialize a product candidate, which ultimate length of time and spend required cannot be accurately estimated as it varies substantially according to the type, complexity, novelty and intended use of a product candidate.

The funding necessary to execute our business strategies is subject to numerous uncertainties and we may be required to make substantial expenditures if unforeseen difficulties arise in certain areas of our business. In particular, our future capital requirements will depend on many factors, including:

•the commercial success of INGREZZA, ONGENTYS, ORILISSA and/or ORIAHNN;

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

•the magnitude and complexity of our research and development programs;

•progress with preclinical testing and clinical trials;

•the time and costs involved in obtaining regulatory approvals;

•the cost of commercialization activities and arrangements, including our ~~issuance~~advertising campaigns;

•the cost of manufacturing of our product candidates;

•the costs involved in filing and pursuing patent applications, enforcing patent claims, or engaging in interference proceedings or other patent litigation;

•competing technological and market developments;

•developments related to any future litigation;

•the impact of the ~~2024 Notes in May 2017.~~

~~Shelf Registration Statement.~~COVID-19 pandemic on our business; and

In addition to the foregoing factors, we have significant future capital requirements, including:

External Business Developments. In ~~February 2017,~~addition to our independent efforts to develop and market products, we ~~filed an automatic shelf registration statement which immediately became effective by rule~~may enter into collaboration and license agreements or acquire businesses from time-to-time to enhance our drug development and commercial capabilities. With respect to our existing collaboration and license agreements, we may be required to make potential future payments of up to $10.9 billion upon the ~~Securities~~achievement of certain event-based milestones.

Refer to Note 2 to the consolidated financial statements for more information on our significant collaboration and ~~Exchange Commission, or SEC. We sold no securities under this shelf registration statement in 2019, 2018 or 2017~~license agreements.

Convertible Senior Notes.In May 2017, we ~~issued~~completed a private placement of $517.5 million in aggregate principal amount of 2.25% convertible senior notes due May 15, 2024, or the 2024 Notes. At ~~December 31, 2019, the conditional conversion feature~~our election, we may redeem all, or any portion, of the 2024 Notes ~~had been triggered, allowing~~under certain circumstances. The 2024 Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness or the issuance or repurchase of securities by us. There are customary events of default with respect to the 2024 Notes, including that upon certain events of default, 100% of the principal and accrued and unpaid interest on the notes would become due and payable. In November 2020, we entered into separate, privately negotiated transactions with certain holders of the 2024

Notes to ~~convert their~~repurchase $136.2 million aggregate principal amount of the 2024 Notes ~~at any time during the period beginning on January 2, 2020 and ending at the close~~for an aggregate repurchase price of ~~business on March 31, 2020.~~

~~Off-Balance Sheet Arrangements~~

$186.9 million in cash. As of December 31, ~~2019,~~2021, $381.2 million aggregate principal amount of the 2024 Notes remained outstanding. With respect to the 2024 Notes, unless earlier converted, redeemed or repurchased, we ~~did not~~would be required to pay interest of $8.6 million in 2022, $8.6 million in 2023 and $4.3 million in 2024 and pay the aggregate principal amount outstanding of $381.2 million upon maturity of the notes in 2024.

Refer to Note 5 to the consolidated financial statements for more information on the 2024 Notes.

Leases.Our operating leases, which have ~~any off-balance sheet arrangements.~~

terms that expire beginning 2024 through 2031, consist of office space and research and development laboratories, including our corporate headquarters.

On February 8, 2022, we entered into a lease agreement for a four-building campus facility to be constructed in San Diego, California, pursuant to which we also secured a 6-year option for the construction of a fifth building and an option to purchase the entire campus facility, which will consist of office space and research and development laboratories, in the future. Upon completion of construction, we expect to utilize the campus facility as our new corporate headquarters and expect to begin subleasing our existing leased facilities.

Refer to Note 10 to the consolidated financial statements for more information on our leases, including a presentation of our approximate future minimum lease payments under non-cancelable operating leases.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon financial statements that we have prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, and related disclosures. On an on-going basis, we evaluate these estimates, including those related to revenue recognition and share-based compensation. Estimates are based on historical experience, information received from third parties and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Historically, revisions to our estimates have not resulted in a material change to the financial statements. The items in our financial statements requiring significant estimates and judgments are as follows:

Net Product ~~Sales, Net~~

Our product sales, net consist of sales of INGREZZA in the U.S. to a limited network of specialty pharmacy providers, which delivers INGREZZA to patients by mail, and a specialty distributor, which distributes INGREZZA primarily to closed-door pharmacies and government facilities. Product sales, net are recognized at the time the customer takes possession of the product.

Sales.Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, payors and other third parties. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.

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

~~Product discounts~~

– product discounts are based on payment terms extended to our customers, which include incentives offered for prompt payment. We maintain a reserve for product discounts based on our historical experience, including the timing of customer payments. To date, actual product discounts have not differed materially from our estimates.

~~Product returns~~ – our contracts with customers provide for product returns only if the product is damaged or there has been an error in shipment. Returns based on product expiry are not permitted. To date, product returns have not been significant, and a reserve has not been established.

Government ~~rebates~~ Rebates. ~~– we~~We are obligated to pay rebates for mandated discounts under the Medicaid Drug Rebate Program. The liability for such rebates ~~consist~~consists of invoices received for claims from prior quarters that remain unpaid, or for which an invoice has not been received, and estimated rebates for the current applicable reporting ~~period. Such rebates~~period, which are primarily ~~estimated~~ based ~~upon~~on actual historical rebates, estimated payor mix, state and federal regulations and related contractual ~~terms and~~terms. Estimated rebates are recorded as a reduction of ~~product sales~~revenue in the ~~same~~ period the related ~~revenue~~sale is recognized. To date, actual government rebates have not differed materially from our estimates.

~~Chargebacks~~

– the difference between the list price, or the price at which we sell INGREZZA product to our customers, and the contracted price, or the price at which our customers sell INGREZZA product to qualified healthcare professionals, is charged back to us by our customers. In addition to actual chargebacks received, we maintain a reserve for chargebacks based on estimated contractual discounts on INGREZZA product inventory levels on hand in our distribution channel. To date, actual chargebacks have not differed materially from our estimates.

~~Payor and pharmacy rebates~~

– we are obligated to pay rebates as a percentage of sales under payor and pharmacy contracts. We estimate these rebates based on actual historical rebates, contractual rebate percentages, sales made through the payor channel and purchases made by pharmacies. To date, actual payor and pharmacy rebates have not differed materially from our estimates.

~~Copay assistance~~ – we offer qualified patients financial assistance with prescription drug co-payments required by insurance. We accrue for copay assistance based on estimated claims and the cost per claim we expect to receive associated with inventory that remains in the distribution channel at period end. To date, actual copay assistance has not differed materially from our estimates.

Share-Based ~~Compensation~~

Compensation. For purposes of calculating share-based compensation, we estimate the fair value of share-based compensation awards using a Black-Scholes option-pricing model. The determination of the fair value of share-based compensation awards utilizing the Black-Scholes model is affected by our stock price and a number of assumptions, including but not limited to expected stock price volatility over the term of the awards and the expected term of stock options. Our stock options have characteristics significantly different from those of traded options, and changes in the assumptions can materially affect the fair value estimates. For example, an increase in the underlying stock price results in a significant increase in the Black-Scholes option-pricing. The fair value of performance-based

restricted stock units, or PRSUs, is estimated based on the closing sale price of our common stock on the date of grant. Expense recognition for PRSUs commences when attainment of the associated performance-based criteria is determined to be probable.

If factors change and we employ different assumptions, share-based compensation expense may differ significantly from what we have recorded in the past. If there is a difference between the assumptions used in determining share-based compensation expense and the actual factors which become known over time, we may change the input factors used in determining share-based compensation expense for future grants. These changes, if any, may materially impact our results of operations in the period such changes are made. For actual forfeitures, we recognize the adjustment to compensation expense in the period the forfeitures occur.

Income Taxes. Our income tax benefit (provision) is computed under the asset and liability method. Significant estimates are required in determining our income tax benefit (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 re-assess 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. Prior to 2020, we recorded a valuation allowance that fully offset our deferred tax assets. On December 31, 2020, based on our evaluation of various factors, such as our achievement of a cumulative three-year income position as of December 31, 2020, as well as our consideration of forecasts of future operating results and utilization of net operating losses and tax credits prior to their expiration, we released substantially all of our valuation allowance against our deferred tax assets and recorded a corresponding income tax benefit. We continue to maintain a valuation allowance against our California state deferred tax assets.

Additional Information

Refer to Note 1 to the consolidated financial statements for information on accounting pronouncements that have impacted or are expected to materially impact our consolidated financial condition, results of operations, or cash flows.

~~Factors That May Affect Future Financial Condition and Liquidity~~

The funding necessary to execute our business strategies is subject to numerous uncertainties, which may adversely affect our liquidity and capital resources. Marketing of approved pharmaceuticals and completion of clinical trials may take several years or more, but the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product candidate. It is also important to note that if a clinical candidate is identified, the further development of that candidate can be halted or abandoned at any time due to a number of factors. These factors include, but are not limited to, funding constraints, safety or a change in market demand.

The nature and efforts required to develop our product candidates into commercially viable products include research to identify a clinical candidate, preclinical development, clinical testing, FDA approval and commercialization. In the pharmaceutical industry, total R&D spend for a drug candidate that successfully completes all stages of R&D and is commercialized may exceed $2 billion. Further, it can take in excess of ten years to complete all stages of R&D for a drug candidate.

We test our potential product candidates in numerous preclinical studies to identify disease indications for which our product candidates may show efficacy. We may conduct multiple clinical trials to cover a variety of indications for each product candidate. As we obtain results from trials, we may elect to discontinue clinical trials for certain product candidates or for certain indications in order to focus our resources on more promising product candidates or indications. The duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the clinical trial protocol, including, among others, the following:

•

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

•

~~we may discover that a product candidate may cause harmful side effects;~~

•

~~patient recruitment may be slower than expected; and~~

•

~~patients may drop out of the trials.~~

For each of our programs, we periodically assess the scientific progress and merits of the programs to determine if continued R&D is economically viable. Certain of our programs have been terminated due to the lack of scientific progress and lack of prospects for ultimate commercialization. Because of the uncertainties associated with R&D of these programs, we may not be successful in achieving commercialization. As such, the ultimate timeline and costs to commercialize a product cannot be accurately estimated.

Our in-license, research and clinical development agreements are generally cancelable with written notice within 180 days or less. We may be required to pay up to $4.9 billion in milestone payments, plus sales royalties, in the event that all scientific research, development and commercialization milestones under these agreements are achieved.

Other than INGREZZA, which has been approved by the FDA for the treatment of TD, and ORILISSA (partnered with AbbVie), which has been approved by the FDA for the management of moderate to severe endometriosis pain in women, our product candidates have not yet achieved FDA regulatory approval, which is required before we can market them as therapeutic products in the U.S. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval, the FDA must conclude that our clinical data establish safety and efficacy. We must satisfy the requirements of similar regulatory authorities in foreign countries in order to market products in those countries. The results from preclinical testing and early clinical trials may not be predictive of results in later clinical trials. It is possible for a candidate to show promising results in clinical trials, but subsequently fail to establish sufficient safety and efficacy data necessary to obtain regulatory approvals.

As a result of the uncertainties discussed above, among others, the duration and completion costs of our R&D projects, clinical trials, and post-marketing studies are difficult to estimate and are subject to considerablevariation. Our inability to complete our R&D projects in a timely manner or our failure to enter into collaborative agreements, when appropriate, could significantly increase our capital requirements and could adversely impact our liquidity. These uncertainties could force us to seek additional, external sources of financing from time to time in order to continue with our business strategy. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would jeopardize the future success of our business.

We currently have limited experience in marketing and selling pharmaceutical products. If we fail to maintain successful marketing, sales, and reimbursement capabilities, or fail to enter into successful arrangements with third parties, our product revenues may suffer. We also may be required to make further substantial expenditures if unforeseen difficulties arise in other areas of our business. In particular, our future capital requirements will depend on many factors, including:

•

~~the commercial success of INGREZZA and/or ORILISSA;~~

•

~~debt service obligations on the 2024 Notes;~~

•

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

•

~~the magnitude and complexity of our research and development programs;~~

•

~~progress with preclinical testing and clinical trials;~~

•

~~the time and costs involved in obtaining regulatory approvals;~~

•

~~the costs involved in filing and pursuing patent applications, enforcing patent claims, or engaging in interference proceedings or other patent litigation;~~

•

~~competing technological and market developments;~~

•

~~the establishment of additional strategic alliances;~~

•

~~developments related to any future litigation;~~

•

~~the cost of commercialization activities and arrangements, including manufacturing of our product candidates; and~~

•

~~the cost of product in-licensing and any possible acquisitions.~~

~~We believe that our existing capital resources,~~funds generated by anticipated INGREZZA net product sales and investment income will be sufficient to satisfy our current and projected funding requirements for at least the next twelve months. However, we cannot guarantee that our existing capital resources and anticipated revenues will be sufficient to conduct and complete all of our research and development programs or commercialization activities as planned.

We may require additional funding to effectively commercialize INGREZZA, to continue our research and product development programs, to conduct preclinical studies and clinical trials, for operating expenses, to pursue regulatory approvals for our product candidates, for the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims, if any, the cost of product in-licensing and any possible acquisitions, and we may require additional funding to establish manufacturing and marketing capabilities in the future. We may seek to access the public or private equity markets whenever conditions are favorable. For example, we have an effective shelf registration statement on file with the SEC which allows us to issue an unlimited number of shares of our securities from time to time. In addition, we issued $517.5 million of convertible debt in May 2017 and we have previously financed capital purchases and may continue to pursue opportunities to obtain additional debt financing in the future. We may also seek additional funding through strategic alliances or other financing mechanisms. We cannot assure you that adequate funding will be available on terms acceptable to us, if at all. Any additional equity financings will be dilutive to our stockholders and any additional debt may involve operating covenants that may restrict our business. If adequate funds are not available through these means, we may be required to curtail significantly one or more of our research or development programs or obtain funds through arrangements with collaborators or others. This may require us to relinquish rights to certain of our technologies, products or product candidates. To the extent that we are unable to obtain third-party funding for such expenses, we expect that increased expenses will result in increased cash flow losses from operations. We cannot assure you that we will successfully develop our products under development or that our approved products will generate revenues sufficient to enable us to earn a profit.

~~Contractual Obligations~~

~~Our contractual obligations as of December 31, 2019, are as follows:~~

(in millions)
Total

2020

2021

2022

2023

2024 and
Thereafter

2024 Notes and related interest ⁽¹⁾
$
569.7

$
11.6

$
11.6

$
11.6

$
11.6

$
523.3

Operating leases ⁽²⁾

160.9

8.6

10.8

13.1

13.9

114.5

Total contractual obligations
$
730.6

$
20.2

$
22.4

$
24.7

$
25.5

$
637.8

(1) In May 2017, we completed a private placement of $517.5 million in aggregate principal amount of 2.25% convertible senior notes scheduled to mature on May 15, 2024, unless earlier converted, redeemed, or repurchased. At December 31, 2019, the conditional conversion feature of the 2024 Notes had been triggered, allowing holders of 2024 Notes to convert their 2024 Notes at any time during the period beginning on January 2, 2020 and ending at the close of business on March 31, 2020. We may not redeem the 2024 Notes prior to May 15, 2021. On or after this date, at our election, we may redeem all, or any portion, of the 2024 Notes under certain circumstances. The 2024 Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness or the issuance or repurchase of securities by us. There are customary events of default with respect to the 2024 Notes, including that upon certain events of default, 100% of the principal and accrued and unpaid interest on the 2024 Notes will automatically become due and payable. Amounts for the 2024 Notes and related interest in the table above assume that the 2024 Notes will be held until maturity.

(2) We lease our corporate headquarters, which consist of laboratory and office space located San Diego, California, under various operating lease agreements. In addition to minimum rental commitments, these operating leases may require us to pay additional amounts for taxes, insurance, maintenance and other operating expenses. The non-cancelable lease terms for these operating leases expire at various dates between 2029 and 2031 and do not include renewal options. Amounts for operating leases presented in the

~~table above reflect future minimum rental commitments under non-cancelable operating leases as of December 31 for each of the periods presented.~~

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are exposed to interest rate risk on our short-term investments. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest in highly liquid and high-quality government and other debt securities. To minimize our exposure due to adverse shifts in interest rates, we invest in short-term securities and ensure that the maximum average maturity of our investments does not exceed twelve months. If a ~~10%~~1% change in interest rates were to have occurred on December 31, ~~2019,~~2021, this change would not have had a material effect on the fair value of our investment portfolio as of that date. Due to the short holding period of our investments, we have concluded that we do not have a material financial market risk exposure.

Item 8. Financial Statements and Supplementary Data

NEUROCRINE BIOSCIENCES, INC.

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS


	~~Page~~
		Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)			43 60
Consolidated Balance Sheets ~~as of December 31, 2019 and 2018~~			46 62
Consolidated Statements of ~~Operations~~Income and Comprehensive Income ~~(Loss) for the years ended December 31, 2019, 2018 and 2017~~			47 63
Consolidated Statements of Stockholders’ Equity ~~for the years ended December 31, 2019, 2018 and 2017~~			48 64
Consolidated Statements of Cash Flows ~~for the years ended December 31, 2019, 2018 and 2017~~			49 65
Notes to the Consolidated Financial Statements			50 66

Report of Independent Registered Public Accounting Firm

To the ~~Shareholders~~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, ~~2019~~2021 and ~~2018,~~2020, the related consolidated statements of ~~operations~~income and comprehensive income, ~~(loss),~~ stockholders’ equity and cash flows for each of the three years in the period ended December 31, ~~2019~~2021, 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, ~~2019~~2021 and ~~2018,~~2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2019,~~2021, 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, ~~2019,~~2021, 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 ~~6, 2020~~11, 2022 expressed an unqualified opinion thereon.

~~Adoption of ASU No. 2016-02~~

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments.

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 ~~Matters~~

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.

Reserves for government rebates related to product sales

Description of the Matter

The Company sells drugs to specialty pharmacies and specialty distributors in the USU.S. (collectively, “customers”). As described in Note 1 to the consolidated financial statements, the Company recognizes revenues for sales of INGREZZA to its customers after deducting management’s estimates of reserves, including drug coverage gap rebates it will provide under government ~~rebate~~ programs (“government rebates”). Estimated government rebates are presented within accounts payable and accrued liabilities on the consolidated balance sheet.


			Auditing the estimates of government rebates was complex and judgmental due to the level of uncertainty involved in management’s assumptions used in the measurement process. In particular, management was required to estimate, for product that remains in the distribution channel at December 31, ~~2019,~~2021, the portion of product that is expected to be subject to a government rebate and the applicable contractual government rebate percentage by forecasting the revenue, the payor type underlying the revenue and the applicable rebate amount ~~applicable~~ for the payor type.

How We Addressed the Matter in Our Audit

We tested the Company’s internal controls over management’s process for estimating the portion of product that is expected to be subject to a government rebate for product that remains in the distribution channel at December 31, ~~2019~~2021, including controls over management’s forecast of revenue and the accuracy of data used in the calculation.

To test management’s estimate of government rebate reserves our audit procedures included, among others, evaluating the methodologies used, testing the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by the Company in its analyses. Specifically, we compared the significant assumptions to third-party reports used by the Company to estimate product remaining in the distribution channel at December 31, ~~2019.~~2021. In addition, we compared the underlying government rebate percentages used in the Company’s analyses to those published by the applicable government entity. 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 impact of 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 ~~6, 2020~~

11, 2022

NEUROCRINE BIOSCIENCES, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
(in thousands, except per share data)	2019			2018
								December 31,
(in millions, except per share data)							(in millions, except per share data)	2021		2020
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	112,279		$	141,714		Cash and cash equivalents	$	340.8	$	187.1
Marketable securities		558,245			509,199
Debt securities available-for-sale (amortized cost was $370.6 and $612.4 as of December 31, 2021 and 2020, respectively)							Debt securities available-for-sale (amortized cost was $370.6 and $612.4 as of December 31, 2021 and 2020, respectively)	370.5		613.9
Accounts receivable		126,575			57,406		Accounts receivable	185.5		157.1
Inventory		17,288			10,864		Inventory	30.5		28.0
Other current assets		16,647			18,594		Other current assets	45.5		30.1
Total current assets		831,034			737,777		Total current assets	972.8		1,016.2
Marketable securities		299,654			216,028
Operating lease assets		74,364			—
Restricted equity securities		55,868			—
Deferred tax assets							Deferred tax assets	315.1		319.4
Debt securities available-for-sale (amortized cost was $563.2 and $226.7 as of December 31, 2021 and 2020, respectively)							Debt securities available-for-sale (amortized cost was $563.2 and $226.7 as of December 31, 2021 and 2020, respectively)	560.7		227.1
Right-of-use assets							Right-of-use assets	97.2		82.8
Equity securities							Equity securities	63.7		38.2
Property and equipment, net		41,914			33,869		Property and equipment, net	58.6		44.6
Restricted cash		3,206			5,477
Other long-term assets							Other long-term assets	4.4		6.4
Total assets	$	1,306,040		$	993,151		Total assets	$	2,072.5	$	1,734.7
blank
Liabilities and Stockholders' Equity

Liabilities and Stockholders’ Equity							Liabilities and Stockholders’ Equity
Current liabilities:							Current liabilities:
Accounts payable and accrued liabilities	$	141,285		$	86,377		Accounts payable and accrued liabilities	$	225.8	$	168.7
Convertible senior notes		408,807			—

Other current liabilities		15,195			1,856		Other current liabilities	20.0		17.8
Total current liabilities		565,287			88,233		Total current liabilities	245.8		186.5
Convertible senior notes		—			388,496		Convertible senior notes	335.1		317.9
Noncurrent operating lease liabilities		86,756			—		Noncurrent operating lease liabilities	105.3		94.4
Other long-term liabilities		17,074			35,657		Other long-term liabilities	12.3		9.7
Total liabilities		669,117			512,386		Total liabilities	698.5		608.5
blank

Stockholders’ equity:							Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000 shares authorized; 0 shares issued and outstanding		—			—
Common stock, $0.001 par value; 220,000 shares authorized; issued and outstanding shares were 92,272 and 90,797 at December 31, 2019 and 2018, respectively		92			91
Preferred stock, $0.001 par value; 5.0 shares authorized; no shares issued and outstanding as of December 31, 2021 and 2020							Preferred stock, $0.001 par value; 5.0 shares authorized; no shares issued and outstanding as of December 31, 2021 and 2020	—		—
Common stock, $0.001 par value; 220.0 shares authorized; 94.9 and 93.5 shares issued and outstanding as of December 31, 2021 and 2020, respectively							Common stock, $0.001 par value; 220.0 shares authorized; 94.9 and 93.5 shares issued and outstanding as of December 31, 2021 and 2020, respectively	0.1		0.1
Additional paid-in capital		1,768,118			1,660,361		Additional paid-in capital	2,011.4		1,849.7
Accumulated other comprehensive income (loss)		1,413			(1,932	)
Accumulated other comprehensive (loss) income							Accumulated other comprehensive (loss) income	(1.7)		1.8
Accumulated deficit		(1,132,700	)		(1,177,755	)	Accumulated deficit	(635.8)		(725.4)
Total stockholders’ equity		636,923			480,765		Total stockholders’ equity	1,374.0		1,126.2
Total liabilities and stockholders’ equity	$	1,306,040		$	993,151		Total liabilities and stockholders’ equity	$	2,072.5	$	1,734.7

See accompanying notes to consolidated financial statements.

NEUROCRINE BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS ~~OF OPERATIONS~~

INCOME

AND COMPREHENSIVE INCOME ~~(LOSS)~~

	Year Ended December 31,
(in thousands, except per share data)	2019			2018			2017
											Year Ended December 31,
(in millions, except per share data)										(in millions, except per share data)	2021		2020		2019
Revenues:										Revenues:
Product sales, net	$	752,900		$	409,608		$	116,626		Product sales, net	$	1,090.1	$	994.1	$	752.9
Collaboration revenue		35,187			41,632			45,000		Collaboration revenue	43.4		51.8		35.2
Total revenues		788,087			451,240			161,626		Total revenues	1,133.5		1,045.9		788.1
Operating expenses:										Operating expenses:
Cost of sales		7,428			4,889			1,254		Cost of sales	14.3		10.1		7.4
Research and development		200,042			155,774			91,827		Research and development	328.1		275.0		200.0
Acquired in-process research and development		154,272			4,750			30,000		Acquired in-process research and development	105.3		164.5		154.3
Sales, general and administrative		354,062			248,932			169,906
Selling, general and administrative										Selling, general and administrative	583.3		433.3		354.1
Total operating expenses		715,804			414,345			292,987		Total operating expenses	1,031.0		882.9		715.8
Operating income (loss)		72,283			36,895			(131,361	)
Operating income										Operating income	102.5		163.0		72.3
Other (expense) income:										Other (expense) income:
Interest expense		(31,963	)		(30,530	)		(19,523	)	Interest expense	(25.8)		(32.8)		(32.0)
Unrealized loss on restricted equity securities		(12,987	)		—			—
Unrealized gain (loss) on equity securities										Unrealized gain (loss) on equity securities	20.9		(17.7)		(13.0)
Loss on extinguishment of convertible senior notes										Loss on extinguishment of convertible senior notes	—		(18.4)		—
Investment income and other, net		19,209			15,476			8,342		Investment income and other, net	3.8		12.6		19.2
Total other expense, net		(25,741	)		(15,054	)		(11,181	)	Total other expense, net	(1.1)		(56.3)		(25.8)
Income (loss) before provision for income taxes		46,542			21,841			(142,542	)
Provision for income taxes		9,530			730			—
Net income (loss)		37,012			21,111			(142,542	)
Unrealized gain (loss) on marketable securities		3,345			(82	)		(1,532	)
Comprehensive income (loss)	$	40,357		$	21,029		$	(144,074	)
Net income (loss) per share, basic	$	0.40		$	0.23		$	(1.62	)
Net income (loss) per share, diluted	$	0.39		$	0.22		$	(1.62	)
Income before provision for (benefit from) income taxes										Income before provision for (benefit from) income taxes	101.4		106.7		46.5
Provision for (benefit from) income taxes										Provision for (benefit from) income taxes	11.8		(300.6)		9.5
Net income										Net income	89.6		407.3		37.0
Unrealized (loss) gain on debt securities available-for-sale										Unrealized (loss) gain on debt securities available-for-sale	(3.5)		0.4		3.4
Comprehensive income										Comprehensive income	$	86.1	$	407.7	$	40.4
Earnings per share, basic										Earnings per share, basic	$	0.95	$	4.38	$	0.40
Earnings per share, diluted										Earnings per share, diluted	$	0.92	$	4.16	$	0.39
Weighted average common shares outstanding, basic		91,627			90,235			88,089		Weighted average common shares outstanding, basic	94.6		93.1		91.6
Weighted average common shares outstanding, diluted		95,732			95,386			88,089		Weighted average common shares outstanding, diluted	97.9		97.8		95.7

See accompanying notes to consolidated financial statements.

NEUROCRINE BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock

Additional
Paid

Accumulated
Other
Comprehensive

Accumulated

Total
Stockholders’

(in thousands)
Shares

Amount

in Capital

Income (Loss)

Deficit

Equity

Balance at December 31, 2016

86,883

$
87

$
1,371,432

$
(318
)

$
(1,056,324
)

$
314,877

Net loss

—

—

—

—

(142,542
)

(142,542
)
Unrealized loss on marketable securities

—

—

—

(1,532
)

—

(1,532
)
Share-based compensation expense

—

—

42,522

—

—

42,522

Issuance of common stock for vested restricted stock units

562

1

—

—

—

1

Issuance of common stock for stock option exercises

1,349

1

13,863

—

—

13,864

Equity component of convertible debt, net

—

—

144,948

—

—

144,948

Balance at December 31, 2017

88,794

$
89

$
1,572,765

$
(1,850
)

$
(1,198,866
)

$
372,138

Net income

—

—

—

—

21,111

21,111

Unrealized loss on marketable securities

—

—

—

(82
)

—

(82
)
Share-based compensation expense

—

—

58,068

—

—

58,068

Issuance of common stock for vested restricted stock units

429

—

—

—

—

—

Issuance of common stock for stock option exercises

1,574

2

29,528

—

—

29,530

Balance at December 31, 2018

90,797

$
91

$
1,660,361

$
(1,932
)

$
(1,177,755
)

$
480,765

Net income

—

—

—

—

37,012

37,012

Unrealized gain on marketable securities

—

—

—

3,345

—

3,345

Share-based compensation expense

—

—

75,262

—

—

75,262

Cumulative-effect adjustment to equity due to adoption of ASU 2016-02

—

—

—

—

8,043

8,043

Issuance of common stock for vested restricted stock units

416

—

—

—

—

—

Issuance of common stock for stock option exercises

981

1

27,312

—

—

27,313

Issuance of common stock for employee stock purchase plan

78

—

5,183

—

—

5,183

Balance at December 31, 2019

92,272

$
92

$
1,768,118

$
1,413

$
(1,132,700
)

$
636,923


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
(in millions)	Shares	$
Balances at December 31, 2018	90.8	$	0.1	$	1,660.4	$	(2.0)	$	(1,177.7)	$	480.8
Net income	—	—		—		—		37.0		37.0
Unrealized gain on debt securities available-for-sale	—	—		—		3.4		—		3.4
Share-based compensation expense	—	—		75.3		—		—		75.3
Cumulative-effect adjustment to equity due to adoption of ASU 2016-02	—	—		—		—		8.0		8.0
Issuances of common stock under stock plans	1.5	—		32.4		—		—		32.4
Balances at December 31, 2019	92.3	$	0.1	$	1,768.1	$	1.4	$	(1,132.7)	$	636.9
Net income	—	—		—		—		407.3		407.3
Unrealized gain on debt securities available-for sale	—	—		—		0.4		—		0.4
Share-based compensation expense	—	—		100.0		—		—		100.0
Equity component of repurchased convertible senior notes, net	—	—		(47.5)		—		—		(47.5)
Issuances of common stock under stock plans	1.2	—		29.1		—		—		29.1
Balances at December 31, 2020	93.5	$	0.1	$	1,849.7	$	1.8	$	(725.4)	$	1,126.2
Net income	—	—		—		—		89.6		89.6
Unrealized loss on debt securities available-for-sale, net of tax	—	—		—		(3.5)		—		(3.5)
Share-based compensation expense	—	—		134.2		—		—		134.2
Issuances of common stock under stock plans	1.4	—		27.5		—		—		27.5
Balances at December 31, 2021	94.9	$	0.1	$	2,011.4	$	(1.7)	$	(635.8)	$	1,374.0

See accompanying notes to consolidated financial statements.

NEUROCRINE BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

(in thousands)
2019

2018

2017

Cash Flows from Operating Activities:

Net income (loss)
$
37,012

$
21,111

$
(142,542
)
Reconciliation of net income (loss) to net cash provided by (used in) operating activities:

Share-based compensation expense

75,262

58,068

42,522

Depreciation

7,452

4,024

2,400

Amortization of debt discount

18,922

17,552

10,937

Amortization of debt issuance costs

1,389

1,326

848

Net (accretion of discounts) amortization of premiums on investments

(1,965
)

1,449

1,756

Change in fair value of restricted equity securities

12,987

—

—

Other, net

754

(409
)

(1,445
)
Changes in operating assets and liabilities:

Accounts receivable

(69,169
)

(25,113
)

(31,127
)
Inventory

(6,424
)

(3,524
)

(1,024
)
Accounts payable and accrued liabilities

53,955

24,223

27,338

Other changes in operating assets and liabilities, net

21,879

2,657

(3,994
)
Net cash provided by (used in) operating activities

152,054

101,364

(94,331
)
blank

Cash Flows from Investing Activities:

Purchases of marketable securities

(797,169
)

(545,962
)

(583,408
)
Sales and maturities of marketable securities

669,691

327,825

339,088

Purchase of restricted equity securities

(68,855
)

—

—

Purchases of property and equipment

(14,748
)

(24,812
)

(6,940
)
Proceeds from sales of property and equipment

8

34

7

Net cash used in investing activities

(211,073
)

(242,915
)

(251,253
)
blank

Cash Flows from Financing Activities:

Issuance of common stock

27,313

29,530

13,865

Proceeds from issuance of convertible senior notes, net

—

—

502,781

Net cash provided by financing activities

27,313

29,530

516,646

Change in cash and cash equivalents and restricted cash

(31,706
)

(112,021
)

��
171,062

Cash and cash equivalents and restricted cash at beginning of period

147,191

259,212

88,150

Cash and cash equivalents and restricted cash at end of period
$
115,485

$
147,191

$
259,212

blank

Supplemental Disclosure:

Cash paid for interest
$
11,644

$
11,644

$
6,242

Cash paid for income taxes
$
507

$
—

$
—

Non-cash capital expenditures
$
953

$
2,318

$
—


	Year Ended December 31,
(in millions)	2021		2020		2019
Cash Flows from Operating Activities:
Net income	$	89.6	$	407.3	$	37.0
Reconciliation of net income to net cash provided by operating activities:
Share-based compensation expense	134.2		100.0		75.3
Depreciation	10.9		8.6		7.4
Amortization of debt discount	16.2		20.0		18.9
Amortization of debt issuance costs	1.1		1.4		1.4
Change in fair value of equity securities	(20.9)		17.7		13.0
Deferred income taxes	4.3		(310.7)		—
Loss on extinguishment of convertible senior notes	—		18.4		—
Other	4.4		3.7		(1.2)
Changes in operating assets and liabilities:
Accounts receivable	(28.4)		(30.5)		(69.2)
Inventories	(2.5)		(10.7)		(6.4)
Accounts payable and accrued liabilities	56.8		26.9		54.0
Other assets and liabilities, net	(9.2)		(23.6)		16.8
Net cash provided by operating activities	256.5		228.5		147.0

Cash Flows from Investing Activities:
Purchases of debt securities available-for-sale	(800.1)		(735.5)		(797.2)
Sales and maturities of debt securities available-for-sale	697.9		750.5		669.7
Purchases of equity securities	(4.6)		—		(68.9)
Purchases of property and equipment	(23.4)		(10.9)		(14.7)
Net cash (used in) provided by investing activities	(130.2)		4.1		(211.1)

Cash Flows from Financing Activities:
Issuances of common stock under benefit plans	27.5		29.1		32.4
Partial repurchase of convertible senior notes	(0.1)		(186.9)		—
Net cash provided by (used in) financing activities	27.4		(157.8)		32.4
Change in cash and cash equivalents and restricted cash	153.7		74.8		(31.7)
Cash and cash equivalents and restricted cash at beginning of period	190.3		115.5		147.2
Cash and cash equivalents and restricted cash at end of period	$	344.0	$	190.3	$	115.5

Supplemental Disclosure:
Non-cash capital expenditures	$	1.9	$	1.4	$	1.0
Right-of-use assets acquired through operating leases	$	23.4	$	12.8	$	77.1
Cash paid for interest	$	8.6	$	11.6	$	11.6
Cash paid for income taxes	$	5.1	$	15.3	$	0.5

See accompanying notes to consolidated financial statements.

NEUROCRINE BIOSCIENCES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Note~~

1. Organization and Summary of Significant Accounting Policies

Business Activities.Neurocrine Biosciences, Inc., or Neurocrine Biosciences, the Company, we, our or us, was incorporated in California in 1992 and reincorporated in Delaware in 1996. Neurocrine Continental, Inc., is a Delaware corporation and a wholly owned subsidiary of ~~Neurocrine.~~Neurocrine Biosciences. We also have ~~two~~2 wholly-owned Irish subsidiaries, Neurocrine Therapeutics, Ltd. and Neurocrine Europe, Ltd. both of which were formed in December 2014 and are inactive.

We are a commercial-stage biopharmaceutical company focused on discovering and developing innovative and life-changing treatments for patients with serious, challenging and under-addressed neurological, endocrine and psychiatric disorders. We specialize in targeting and interrupting disease-causing mechanisms involving the interconnected pathways of the nervous and endocrine systems. Currently, we are primarily focused on the commercialization of INGREZZA^® ~~(valbenazine) in the United States, our first U.S. Food and Drug Administration, or FDA, approved product.~~

In April 2017, we received FDA approval of our first product, INGREZZA, for the treatment of adults with tardive dyskinesia, or TD. Shortly after receiving FDA approval, we began commercializing INGREZZA in the U.S. using a specialty sales force primarily focused on educating physicians who treat patients with TD, including psychiatrists and neurologists.

~~In addition to our first marketed product, our collaboration partner, AbbVie Inc., or AbbVie, received approval of ORILISSA~~^® (elagolix) for the management of moderate to severe endometriosis pain in women from the FDA in July 2018 and Health Canada in October 2018. We are eligible to receive royalties at tiered percentage rates on any net sales of ORILISSA.

Our late-stage pipeline includes opicapone as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients, elagolix for the treatment of heavy menstrual bleeding, or HMB, associated with uterine fibroids in women, valbenazine for the treatment of chorea in adult patients with Huntington’s disease, or HD, and NBIB-1817 (VY-AADC) for the treatment of advanced Parkinson’s disease patients with motor fluctuations that are refractory to medical management. Our product candidates for uterine fibroids and advanced Parkinson’s disease are partnered with AbbVie and Voyager Therapeutics, Inc., or Voyager, respectively.

In December 2019, we entered into a license and collaboration agreement with Xenon Pharmaceuticals Inc, or Xenon, a clinical-stage biopharmaceutical company. Pursuant to the terms of the agreement, we acquired an exclusive license to NBI-921352 (XEN901), a clinical-stage candidate with potential in epilepsy.

Principles of Consolidation.The consolidated financial statements include the accounts of Neurocrine Biosciences as well as our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

~~Reclassifications.~~

Certain amounts in the consolidated financial statements for 2018 and 2017 have been reclassified to conform with the presentation adopted in the current year period, including an increase of $4.8 million and $30.0 million to acquired in-process research and development for 2018 and 2017, respectively, and a corresponding decrease to research and development in the same periods. These reclassifications had no impact on operating income (loss), net income (loss) or net income (loss) per share.

Use of Estimates.The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Industry Segment and Geographic Information.We operate in a single industry segment – the discovery, development and marketing of pharmaceuticals for the treatment of neurological, endocrine and ~~endocrine-based~~psychiatric-based diseases and disorders. We had no foreign-based operations during any of the years presented.

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 doubtful accounts. We estimate the allowance for doubtful accounts based on existing contractual payment terms, actual payment patterns of our customers and individual customer circumstances. To date, an allowance for doubtful accounts has not been material.

~~Marketable~~

Debt Securities. ~~Marketable~~Debt securities consist of investments in certificates of deposit, corporate debt securities and securities of government-sponsored entities. We classify ~~marketable~~debt securities as available-for-sale. ~~Marketable~~Debt securities available-for-sale are recorded at fair value, with unrealized gains and losses included in other comprehensive income ~~(loss), until realized. Realized gains~~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 of purchase premium or discount. Premiums and discounts on debt securities are amortized using the effective interest rate method. Gains and losses on sales of debt securities are ~~included~~recorded on the trade date in investment income and other, net, ~~on a specific-identification basis. Marketable~~and determined using the specific identification method.

Allowance for Credit Losses. For debt securities ~~classified as current have maturities of less than one year. Marketable securities classified as non-current have maturities of one to two years.~~

We review marketable securities for other-than-temporary impairment whenever the fair value of a marketable security is less than the amortized cost and evidence indicates that a marketable security’s carrying amount is not recoverable within a reasonable period of time. Factors consideredavailable-for-sale in ~~determining~~an unrealized loss position, we first assess whether an impairment is other-than-temporary include the length of time and extent to which the marketable security has been less than the cost basis, the financial condition of the issuer and our intent and ability to hold such marketable security until recovery of the associated amortized cost basis. Based on our evaluation, 0 such other-than-temporary impairments were identified at December 31, 2019 and 2018. Further, we ~~do not~~ intend to sell, ~~our marketable security investments and~~or it is ~~not~~ more likely than not that we will be required to sell, ~~these investments~~the security before recovery of ~~their~~its amortized cost ~~bases, which may be maturity.~~

~~Restricted Equity Securities.~~ ~~Investments in equity securities~~basis. If either of ~~certain companies that are subject~~the criteria regarding intent or requirement to ~~holding period restrictions longer than one year are carried at~~sell is met, the security’s amortized cost basis is written down to fair value ~~using an option pricing valuation model. The most significant assumptions within~~through earnings. For debt securities available-for-sale that do not meet the ~~option pricing valuation model are~~aforementioned criteria, we evaluate whether the ~~term~~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 ~~restrictions~~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 ~~stock price volatility, which~~amount that the fair value is ~~based upon~~less than the ~~historical volatility of similar companies. Unrealized gains and~~amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses ~~on investments in restricted equity securities are included~~is recognized in other ~~expense, net.~~comprehensive income or loss, as applicable.

Accrued interest receivables on debt securities available-for-sale totaled $2.2 million as of December 31, 2021 and $3.7 million as of December 31, 2020. 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 2021, 2020 or 2019.

Fair Value of Financial Instruments.We record cash equivalents, ~~marketable~~debt securities available-for-sale and ~~restricted~~ equity ~~securities~~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.

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.

~~The~~

Investments in debt securities available-for-sale are classified as Level 2 and carried at fair value. We estimate the fair value of ~~marketable~~debt securities ~~is determined using proprietary~~available-for-sale by utilizing third-party pricing services. These pricing services utilize industry standard valuation models, including both income and ~~analytical tools,~~market-based approaches, for which ~~utilize~~all significant inputs are observable, either directly or indirectly, to estimate fair value. Such inputs include market pricing ~~or prices~~based on real-time trade data for similar instruments, ~~that are both objective and publicly available, such as matrix pricing or reported trades,~~issuer credit spreads, benchmark yields, broker/dealer quotes ~~issuer spreads, two-sided markets, benchmark securities~~ and ~~bids~~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 ~~offers.~~

~~The fair value of restricted~~analyzing data in certain instances.

Investments in equity securities ~~is determined~~of certain companies that are subject to holding period restrictions longer than one year are classified as Level 3 and carried at fair value using an option pricing valuation model. The most significant assumptions within the option pricing valuation model are the ~~term of the restrictions and the~~ stock price volatility, which is based ~~upon~~on the historical volatility of similar ~~companies. Significant changes in any~~companies and the discount for lack of ~~those inputs in isolation would result in a significantly higher or lower fair value measurement.~~

~~The carrying amounts~~marketability related to the term of ~~accounts receivable and accounts payable and accrued liabilities approximate their fair values due to their short-term maturities.~~

~~There were 0~~the restrictions.

We deem transfers between levels inof the fair value hierarchy to have occurred at the end of the reporting period during ~~2019~~which the event or ~~2018.~~

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 assess the valuation of our inventory on a quarterly basis and adjust the value for excess and obsolete inventory to the extent management determines that the cost cannot be recovered based on estimates about future demand. Inventory costs resulting from these adjustments are recognized as cost of sales in the period in which they are incurred. 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.

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 ~~three~~3 to ~~seven~~7 years. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the remaining lease term. Depreciation expense was ~~$7.5~~$10.9 million for ~~2019, $4.0~~2021, $8.6 million for ~~2018~~2020 and ~~$2.4~~$7.4 million for ~~2017.~~2019.

Impairment of Long-Lived Assets.We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment exist, we assess the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through undiscounted future operating cash flows. If the carrying amount is not recoverable, we measure the amount of any impairment by comparing the carrying value of the asset to the present value of the expected future cash flows associated with the use of the asset.

Revenue Recognition. We recognize revenue when ~~our~~the customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. Revenue is recognized using a five-step model: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

Net Product ~~Sales, Net~~

~~Our product sales, net consist of sales of~~Sales. In the United States, we sell INGREZZA ~~in the U.S.~~® (valbenazine) primarily to ~~a limited network of~~ specialty pharmacy providers ~~which delivers INGREZZA to patients by mail,~~ and ~~a specialty distributor, which distributes INGREZZA~~distributors and ONGENTYS® (opicapone) primarily to ~~closed-door pharmacies and government facilities. Product~~wholesale distributors. We recognize net product sales ~~net are recognized at the time~~when the customer ~~takes possession~~obtains control of our product, which occurs at a point in time, typically upon delivery of our product to the ~~product.~~

customer.

Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, payors and other third parties. Such estimates are based on information received from external sources (such as written or oral information obtained from our customers with respect to their period-end inventory levels and sales to end-users during the reporting period), as supplemented by management’s judgement. Our process for estimating reserves established for these variable consideration components does not differ materially from historical practices. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.

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

Product ~~discounts~~Discounts. ~~– product~~Product discounts are based on payment terms extended to our customers at the time of sale, which include incentives offered for prompt payment. We maintain a reserve for product discounts based on our historical experience, including the timing of customer payments. To date, actual product discounts have not differed materially from our estimates.

~~Product returns~~

Government Rebates. – our contracts with customers provide for product returns only if the product is damaged or there has been an error in shipment. Returns based on product expiry are not permitted. To date, product returns have not been significant, and a reserve has not been established.

~~Government rebates~~ ~~– we~~We are obligated to pay rebates for mandated discounts under the Medicaid Drug Rebate Program. The liability for such rebates ~~consist~~consists of invoices received for claims from prior quarters that remain unpaid, or for which an invoice has not been received, and estimated rebates for the current applicable reporting period. Such ~~rebates~~estimates are ~~primarily estimated~~ based ~~upon,~~on actual historical rebates by state, estimated payor mix, state and federal regulations and ~~related~~relevant contractual terms, ~~and~~as supplemented by management’s judgement. Our rebate accrual calculations require us to project the magnitude of our sales that will be subject to these rebates. There is a significant time-lag in our receiving rebate notices from each state (generally, several months or longer after a sale is recognized). Estimated rebates are recorded as a reduction of ~~product sales~~revenue in the ~~same~~ period the related ~~revenue~~sale is recognized. To date, actual government rebates have not differed materially from our estimates.

~~Chargebacks~~

Chargebacks. ~~– the~~The difference between the list price, or the price at which we sell ~~INGREZZA product~~our products to our customers, and the contracted price, or the price at which our customers sell ~~INGREZZA product~~our products to qualified healthcare professionals, is charged back to us by our customers. In addition to actual chargebacks received, we maintain a reserve for chargebacks based on estimated contractual discounts on ~~INGREZZA~~ product inventory levels ~~on hand~~on-hand in our distribution channel. To date, actual chargebacks have not differed materially from our estimates.

Payor and ~~pharmacy rebates~~Pharmacy Rebates. ~~– we~~We are obligated to pay rebates as a percentage of sales under payor and pharmacy contracts. We estimate these rebates based on actual historical rebates, contractual rebate percentages, sales made through the payor channel and purchases made by pharmacies. To date, actual payor and pharmacy rebates have not differed materially from our estimates.

~~Copay assistance~~

Patient Financial Assistance. –To help patients afford our products, we offer financial assistance to qualified patients ~~financial assistance~~ with prescription drug co-payments required by ~~insurance.~~insurance as well as free trial vouchers to qualifying new patients. We accrue for ~~copay~~patient financial assistance based on estimated claims and the cost per claim we expect to receive associated with inventory that remains in the distribution channel at period end. To date, actual copay assistance ~~has~~and free trial vouchers have not differed materially from our estimates.

Distributor and Other Fees. In connection with the sales of our products, we pay distributor and other fees, which are generally recorded as a reduction of revenue, to certain customers that provide us with inventory management, data and distribution services. To the extent we can demonstrate a separable benefit and fair value for these services, we classify the associated costs in selling, general and administrative expenses. These costs are typically known at the time of sale, resulting in minimal adjustments subsequent to the period of sale.

Product Returns. We offer our customers product return rights primarily limited to errors in shipment, damaged product and expiring product, provided it is within a specified period of the product expiration date, as set forth in the associated distribution agreement. Where actual returns history is not available, we estimate a returns allowance based on benchmarking data for similar products and industry experience. We record this estimate as a reduction of revenue in the period the related sale is recognized. Once product is returned, it is destroyed. To date, actual product returns have not differed materially from our estimates.

Collaboration ~~Revenue~~

Revenues. We have entered into collaboration and licensing agreements under which we ~~license~~out-license certain rights to our product candidates to third parties. The terms of these arrangements typically include payment to us of one or more of the following: non-refundable, up-front license fees; development, regulatory and/or commercial milestone payments; and royalties on net sales of licensed products.

Licenses of ~~intellectual property –~~Intellectual Property. ifIf the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, we ~~use judgment to~~ assess the nature of the combined performance obligation to determine whether ~~the combined performance obligation~~it is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

~~Milestone payments –~~

Milestones. atAt the inception of each arrangement that includes developmental, regulatory or commercial ~~milestone payments,~~milestones, we evaluate whether achieving the milestones is considered probable and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone is included in the transaction price. ~~Milestone payments~~Amounts for milestones that are not within our control, such as ~~approvals from regulators or~~ where ~~attainment~~achievement of the specified event is dependent on the development activities of a third party or approvals from regulators, are not considered probable of being achieved until ~~those approvals are received or~~ the specified event occurs. Revenue is recognized from the satisfaction of performance obligations in the amount billable to the customer.

~~Royalty revenue~~

Royalties. ~~– for~~For arrangements that include sales-based royalties, ~~including milestone payments based on the level of sales,~~ 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 ~~ORILISSA.~~the associated collaboration products. Differences between actual results and estimated amounts are adjusted for in the period in which they become known, which typically follows the quarterly period in which the estimate was made. To date, actual royalties received have not differed materially from our estimates.

Concentration of Credit Risk. We do not currently have any of our own manufacturing facilities and therefore we depend on an outsourced manufacturing strategy for the production of INGREZZA for commercial use and for the production of our product candidates in clinical trials. We have contracts with one third-party manufacturer approved for the commercial production of

INGREZZA’s capsules at 2 separate sites and two third-party manufacturers approved for the production of INGREZZA’s API. Although there are potential sources of supply other than our existing suppliers, any new supplier would be required to qualify under applicable regulatory requirements.

We have entered into distribution agreements with a limited number of specialty pharmacy providers and a specialty distributor, and all of our product sales are to these customers. Our 2 largest customers represented approximately 86% of our product revenue for 2019 and a significant majority of our accounts receivable balance at December 31, 2019. For 2018 and 2017, our 3 largest customers represented approximately 93% of our product revenue and substantially all of our accounts receivable balance at December 31, 2018 and 2017.

Financial instruments that potentially subject us to ~~concentrations~~concentration of credit risk consist primarily of cash and cash equivalents ~~investments~~ and ~~accounts receivables.~~debt securities available-for-sale. We have established guidelines to limit our exposure to credit risk by diversifying our investment portfolio and by placing investments with high credit quality financial institutions ~~diversifying our investment portfolio~~ and ~~placing investments with~~ maturities that maintain safety and liquidity.

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

We are also subject to credit risk from our accounts receivable related to our product sales. Our two largest customers represented approximately 82% of our total product revenues for 2021 and approximately 86% for both 2020 and 2019, as well as the significant majority of our accounts receivable balances at December 31, 2021 and 2020. To date, we have not experienced any significant losses with respect to the collection of these accounts receivable.

Cost of Sales.Cost of sales includes third-party manufacturing, transportation, freight and indirect overhead costs associated with the manufacture and distribution of INGREZZA and ONGENTYS, royalty fees on net sales of ORILISSA and ORIAHNN, and adjustments for excess and obsolete inventory to the extent management determines that the cost cannot be recovered based on estimates about future demand.

Research and Development Expenses.Research and development, or R&D, expenses consist primarily of salaries, payroll taxes, employee benefits and share-based compensation charges for those individuals involved in ongoing R&D efforts; as well as scientific consulting fees, preclinical and clinical trial costs, R&D facilities costs, laboratory supply costs and depreciation of scientific equipment. All such costs are ~~charged to~~expensed as R&D ~~expense as~~when incurred. These expenses result from our independent R&D efforts, as well as efforts associated with collaborations, in-licenses and third-party funded research ~~arrangements.~~arrangements, including event-based milestones.

Asset Acquisitions.We account for acquisitions of an asset orthat does not (or a group of assets that do ~~not~~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~~asset (or assets) acquired on the basis of ~~their~~its (or their) relative fair ~~values.~~value(s) on the measurement date. No goodwill is recognized in an asset acquisition. Intangible assets ~~that are~~ acquired in an asset acquisition for use in R&D activities which have no alternative future use are expensed as in-process research and development, or IPR&D, on the acquisition date. Future costs to develop these assets are ~~recorded to~~expensed as R&D ~~expense as they are~~when incurred.

Advertising Expense. ~~In connection with the FDA approval and commercial launch of INGREZZA in April 2017, we began to incur advertising~~Advertising costs ~~which~~ are expensed when services are performed or goods are ~~delivered.~~delivered and are included in selling, general and administrative expense in our consolidated statements of income. We incurred advertising costs related to ~~our marketed product,~~ INGREZZA and ONGENTYS of $139.8 million for 2021, $64.8 million for 2020 and $40.6 million ~~in 2019, $20.5 million in 2018 and $10.1 million in 2017.~~for 2019.

Share-Based Compensation.We grant stock options to purchase our common stock to eligible employees and directors and also grant certain employees restricted stock units, or RSUs, and performance-based restricted stock units, or PRSUs. Additionally, we allow employees to participate in an employee stock purchase plan, or 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. ~~Restricted stock units~~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 ~~are~~is recognized and amortized on a straight-line basis over the requisite service period of the award, which is generally ~~three~~3 to ~~four~~4 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 ~~are~~is recognized and amortized on a straight-line basis over the purchase period, which is generally ~~six~~6 months. ~~Additionally, we granted certain~~ PRSUs ~~that~~ vest upon the achievement of certain ~~pre-defined~~predefined company-specific performance-based criteria. Expense related to ~~these~~ PRSUs is generally recognized ratably over the expected performance period once the ~~pre-defined~~predefined performance-based criteria for vesting becomes probable.

~~Net~~

Income ~~(Loss)~~Taxes. Our income tax provision (benefit) is computed under the asset and liability method. Significant estimates are required in determining our income tax provision (benefit). 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 re-assess 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. Prior to 2020, we recorded a valuation allowance that fully offset our deferred tax assets. On December 31, 2020, based on our evaluation of various factors, such as our achievement of a cumulative three-year income position as of December 31, 2020, as well as our consideration of forecasts of future operating results and utilization of net operating losses and tax credits prior to

their expiration, we released substantially all of our valuation allowance against our deferred tax assets and recorded a corresponding income tax benefit. Refer to Note 9 to the consolidated financial statements for more information.

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.

Earnings Per Share. Basic ~~net income (loss)~~earnings per share isare computed using the weighted average number of common shares outstanding during the period. Diluted ~~net income (loss)~~earnings per share isare computed using the treasury stock method and reflect the weighted average number of common and potentially dilutive shares outstanding during the period, ~~including the potentially dilutive shares resulting from the conversion of the 2024 Notes and~~ excluding ~~the~~those which effect ~~of stock options and restricted stock outstanding for periods when their effect is anti-dilutive, using the treasury stock method.~~would be anti-dilutive.

Convertible debt instruments that may be settled entirely or partly in cash ~~(such as the 2024 Notes)~~ may, in certain circumstances where the borrower has the ability and intent to settle in cash, be accounted for under the treasury stock method. ~~We issued~~In December 2021, we entered into the ~~2024 Notes with a combination settlement feature,~~First Supplemental Indenture, dated as of May 2, 2017, by and between the Company and U.S. Bank National Association, as Trustee, or the 2017 Indenture, pursuant to which we ~~have the ability and intent to use upon conversion of the 2024 Notes,~~irrevocably elected to settle the principal amount of ~~debt for~~the 2.25% convertible senior notes due May 15, 2024, or the 2024 Notes, in cash upon conversion and ~~the excess of the principal portion~~to settle any conversion premium in either cash or shares of our common stock. As a result, ~~of the approximately 6.8 million shares underlying the 2024 Notes,~~and consistent with historical practice, only the shares required to settle ~~the excess of the principal portion~~any conversion premium would be considered dilutive under the treasury stock method. Further, ~~approximately 0.3 million~~ PRSUs ~~were~~for which the performance condition has not been achieved are excluded from the calculation of diluted ~~net income~~earnings per share as the performance condition has not been achieved. In loss periods, basic net loss per share and diluted net loss per share are identical because the otherwise dilutive potential common shares become anti-dilutive and are therefore excluded.

share.

Recently Adopted Accounting Pronouncements.

ASU ~~2016-02.~~2019-12. ~~In February 2016, the Financial Accounting Standards Board, or FASB, issued~~On January 1, 2021, we adopted Accounting Standards Update, or ASU, ~~2016-02, “Leases~~2019-12, Income Taxes (Topic ~~842)”, which requires lessees to recognize leases on~~740): Simplifying the balance sheet and disclose key information about leasing arrangements. ASU 2016-02 establishes a right-of-use, or ROU, model that requires a lessee to recognize a ROU asset and lease liability on the balance sheetAccounting for ~~all leases with a term longer than twelve months. ASU 2016-02 also requires disclosures to~~Income Taxes

~~meet the objective of enabling users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. On January 1, 2019, we adopted ASU 2016-02~~, using the modified retrospective transition method. ~~Under this transition method, we recognized~~ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and ~~measured leases that existed at the~~amends existing guidance to improve consistent application ~~date in our consolidated balance sheet as~~ of ~~January 1, 2019.~~

Arrangements that are determined to be operating leases at inception are included in operating lease assets, noncurrent operating lease liabilities and other current liabilities in our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As none of our operating leases provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.Topic 740. The operating lease ROU asset is adjusted for any prepaid or accrued lease payments and any lease incentives received. Operating lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which we have elected to account for as a single lease component. Further, we have elected to recognize our short-term lease payments in profit or loss on a straight-line basis over the associated lease term and variable lease payments in the period in which the obligation for those payments is incurred. Short-term and variable lease payments were not material for 2019.

~~In connection with the~~ adoption of ASU 2016-02, we elected the package of practical expedients requiring no reassessment of whether any expired or existing contracts are or contain leases, the lease classification of any expired or existing leases, or initial direct costs for any existing leases. We also made accounting policy elections2019-12 did not to apply the recognition requirements under ASU 2016-02 to any of our short-term leases and to account for each separate lease and associated nonlease components as a single lease component for all of our leases.

In preparation for implementation of ASU 2016-02, we finalized key accounting assessments and updated processes to appropriately recognize and present the associated financial information. Based on these efforts, the adoption of ASU 2016-02 resultedresult in the recognition of (1) ROU assets of $50.0 million and operating lease liabilities of $70.9 million, resulting from leases of office and laboratory space; (2) the derecognition of deferred rent of $20.9 million for certain lease incentives received; and (3) a cumulative-effect adjustment ~~of $8.0 million~~ to ~~the opening balance of the accumulated deficit as of January 1, 2019, resulting from the recognition of an existing deferred gain on sale of real estate.~~retained earnings. The comparative prior period information continues to be reported under the accounting standards in effect during those periods. ~~Further, we expect~~The impact of the adoption ~~of ASU 2016-02 to be immaterial to our results of operations and cash flows on an ongoing basis.~~

~~ASU 2018-07.~~ In June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. On January 1, 2019, we adopted ASU 2018-07 using the modified retrospective transition method with no impact on our consolidated financial statements. Further, we expect the adoption of ASU 2018-07is expected to be immaterial to our financial position, results of operations and cash flows on an ongoing basis.

Recently Issued Accounting Pronouncements.

ASU ~~2016-13.~~2020-06. In ~~June 2016,~~August 2020, the FASB issued ASU ~~2016-13, "Measurement~~2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for certain financial instruments with characteristics of ~~Credit Losses on Financial Instruments".~~liabilities and equity, including convertible instruments and contracts in an entity's own equity. Among other changes, ASU 2020-06 removes the separation models for convertible instruments with cash or beneficial conversion features. Instead, entities will account for convertible debt instruments wholly as debt, unless certain other conditions are met. The ~~standard requires that credit losses be~~adoption of ASU 2020-06 is expected to prospectively reduce reported ~~using an expected losses model rather than the incurred losses model that is currently used,~~interest expense and ~~establishes additional disclosures related~~increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to credit risks. For available-for-sale debt securities with unrealized losses, the standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The standard limits the amount of credit losses to be recognized for available-for-sale debt securitiesliabilities as it relates to the ~~amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. The standard~~2024 Notes. ASU 2020-06 is effective for ~~interim and annual periods~~fiscal years beginning after December 15, ~~2019.~~2021, including interim periods within those fiscal years. We will adopt ASU 2020-06

~~Based~~ on January 1, 2022 using the ~~composition~~modified retrospective transition method, which allows for a cumulative-effect adjustment in the period of adoption and does not require restatement of prior period amounts. Under this transition method, the cumulative effect of the accounting change is expected to increase the carrying amount of the 2024 Notes by $42.2 million, reduce deferred tax liabilities by $10.0 million, reduce the accumulated deficit by $74.6 million, reduce additional paid-in capital by $106.8 million.

2. Collaboration and License Agreements

Under the terms of our ~~investment portfolio, current market conditions~~existing collaboration and ~~historical credit loss activity, the adoption of ASU 2016-13 is not expected to have a material impact on our consolidated financial position, results of operations or the related disclosures.~~

~~Note 2. License and Collaboration Agreements~~

~~AbbVie.~~ ~~In June 2010,~~license agreements, we announced an exclusive worldwide collaboration with AbbVie, to develop and commercialize elagolix and all next-generation gonadotropin-releasing factor, or GnRH, antagonists and collectively, GnRH Compounds, for women’s and men’s health. AbbVie made an upfront payment of $75.0 million and has agreedmay be required to make ~~additional development and regulatory event-based~~potential future payments of up to ~~$480.0 million, of which $135.0 million has been earned as of December 31, 2019, and up to an additional $50.0 million in commercial event-based payments.~~

Under the terms of the agreement, AbbVie is responsible for all third-party development, marketing and commercialization costs. We will be entitled to a percentage of worldwide sales of GnRH Compounds for the longer of ten years or the life of the related patent rights. AbbVie may terminate the collaboration at its discretion$10.9 billion upon ~~180 days’ written notice to us.~~

We evaluated the terms of this agreement under Topic 606 and determined that there is one performance obligation, the exclusive worldwide license with rights to develop, manufacture and commercialize elagolix. At execution, the transaction price included only

the $75.0 million up-front consideration received. None of the development or regulatory milestones were included in the transaction price, as all milestone amounts were fully constrained. As part of our evaluation of the constraint, we considered numerous factors, including that achievement of the milestones is outside of our control and contingent upon success in future clinical trials and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to AbbVie and therefore have also been excluded from the transaction price. We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

In the third quarter of 2019, AbbVie submitted a new drug application, or NDA, with the FDA for the approval of elagolix in the treatment of uterine fibroids. The NDA was accepted by the FDA with a Prescription Drug User Fee Act, or PDUFA, target action date in the second quarter of 2020. The FDA’s acceptance of the NDA triggered a milestone payment of $20.0 million, which we recognized as revenue in the third quarter of 2019 and received in the fourth quarter of 2019.~~On July 24, 2018, AbbVie received approval from the FDA for ORILISSA for the management of moderate to severe endometriosis pain in women, resulting in~~ the achievement of ~~a $40.0 million~~certain event-based milestone, which we recognized as revenue in 2018. We also recognized sales-based royalties on AbbVie net sales of ORILISSA of approximately $14.3 million for 2019 and $1.6 million for 2018. In 2017, event-based revenue of $30.0 million was recognized based on AbbVie’s new drug application,milestones. Such contingent payments are recorded when paid or ~~NDA, submission for elagolix in endometriosis being accepted by the FDA.~~

~~BIAL – Portela & Ca, S.A.~~payable.

~~In February 2017, we entered into an exclusive license agreement with BIAL – Portela & Ca, S.A.,~~

Heptares Therapeutics Limited, or BIAL, for the development and commercialization of opicapone for the treatment of human diseases and conditions, including Parkinson’s disease, in the U.S. and Canada. We paid BIAL an upfront license fee of $30.0 million, which was expensed in 2017 as acquired in-process R&D. During the first quarter of 2018, the FDA provided guidance on the regulatory path forward to support an NDA for opicapone for Parkinson’s disease, in which the FDA did not request that we conduct an additional Phase III study, resulting in a $10.0 million event-based milestone payment to BIAL, which was expensed as incurred.Heptares. In the second quarter of 2019, we submitted an NDA with the FDA for opicapone as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients. The NDA was accepted by the FDA with a PDUFA target action date of April 26, 2020. The FDA’s acceptance of the NDA triggered a milestone payment of $10.0 million, which we expensed as R&D in the second quarter of 2019. We may be required to pay up to an additional $95.0 million in milestone payments associated with the regulatory approval and net sales of opicapone. FDA approval of opicapone for Parkinson’s disease would trigger a milestone payment of $20.0 million, payable by us to BIAL. Upon commercialization of opicapone, we agreed to determine certain annual sales forecasts. In the event we fail to meet the minimum sales requirements for a particular year, we would be required to pay BIAL an amount equal to the difference between the actual net sales and minimum sales requirements for such year. In the event we fail to meet the minimum sales requirements for any two years, BIAL may terminate the agreement.

Under the terms of the agreement, we are responsible for the management and cost of all opicapone development and commercialization activities in the U.S. and Canada. Further, unless terminated earlier, the agreement will continue on a licensed product-by-product and country-by-country basis until a generic product in respect of such licensed product under the agreement is sold in a country and sales of such generic product are greater than a specified percentage of total sales of such licensed product in such country. Upon our written request prior to the estimated expiration of the term in respect of a licensed product, the parties shall negotiate a good faith continuation of BIAL’s supply of such licensed product after the term. After the term, and if BIAL is not supplying a certain licensed product, we shall pay BIAL a trademark royalty based on the net sales of such licensed product. Either party may terminate the agreement earlier if the other party materially breaches the agreement and does not cure the breach within a specified notice period, or upon the other party’s insolvency. BIAL may terminate the agreement if we fail to use commercially reasonable efforts or to submit an NDA for a licensed product by a specified date or under certain circumstances involving a change of control of Neurocrine. In certain circumstances where BIAL elects to terminate the agreement in connection with Neurocrine’s change of control, BIAL shall pay us a termination fee. We may terminate the agreement at any time for any reason upon six months written notice to BIAL if prior to the first NDA approval in the U.S., and upon nine months written notice to BIAL if such notice is given after the first NDA approval in the U.S. If our termination request occurs prior to the first NDA approval in the U.S., we shall pay BIAL a termination fee except under certain conditions specified in the agreement.

~~Voyager.~~We entered into a collaboration and license agreement with ~~Voyager, a clinical-stage gene therapy company,~~Heptares, which became effective in ~~March 2019. The agreement is focused on~~December 2021, to develop and commercialize certain compounds containing sub-type selective muscarinic M1, M4, or dual M1/M4 receptor agonists, which compounds we have the ~~development~~exclusive rights to develop, manufacture and commercialization of four programs using Voyager’s proprietary gene therapy platform. The four programs consist of the NBIb-1817 (VY-AADC) program for Parkinson’s disease, the Friedreich’s ataxia program andcommercialize worldwide, excluding in Japan, where Heptares retains the rights to ~~two undisclosed programs.~~develop, manufacture, and commercialize all compounds comprised of M1 receptor agonists, subject to certain exceptions. We are responsible for all development, manufacturing, and commercialization costs. With respect to such rights retained by Heptares, we retain the rights to opt in to profit sharing arrangements, pursuant to which we and Heptares will equally share in the operating profits and losses for such compounds in Japan. Subject to specified conditions, we may elect to exercise such opt-in rights with respect to each such compound either before initiation of the first proof of concept Phase II clinical trial for such compound or following our receipt from Heptares of the top-line data from such clinical trial for such compound. In addition, we have entered into a 2-year research collaboration with Heptares that, unless extended by the parties, is scheduled to expire in December 2023.

In connection with the agreement, we paid ~~Voyager $115.0~~Heptares $100.0 million upfront, and purchased $50.0 million of Voyager’s common stock at $11.9625 per share, representing approximately 4.2 million shares. Pursuant to the terms of the agreement, Voyager may also be entitled to an additional $1.7 billionwhich, including certain transaction-related costs, was expensed as IPR&D in ~~development, regulatory and commercial milestone payments, as well as royalties on net sales of any collaboration product.~~

Pursuant to development plans agreed to by us and Voyager, unless Voyager exercises its co-development and co-commercialization rights as provided for in the agreement, we will be responsible for all development costs. Further, upon the occurrence of a specified event for each program, we will assume responsibility for the development, manufacturing, and commercialization activities of such program.

2021. We accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business. Our equity investment in Voyager was recorded at a fair value of $54.7 million after considering Voyager’s stock price on the date of closing and certain lock-up and voting provisions applicable to the acquired shares. The remaining $113.1 million of the purchase price, which

~~includes the applicable transaction costs, was expensed as in-process research and development, or IPR&D, in the first quarter of 2019.~~

~~In June 2019, we entered into an amendment to the collaboration and license agreement with Voyager.~~ Under the terms of the ~~amendment, we paid Voyager $5.0 million upfront~~agreement, Heptares may be entitled to ~~obtain rights outside~~receive potential future payments of up to $2.6 billion upon the ~~United States, or U.S.,~~achievement of certain event-based milestones and would be entitled to receive royalties on the ~~Friedreich’s ataxia program~~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 ~~connection with~~such country. On a licensed product-by-licensed product and country-by-country basis, royalty payments would commence on the ~~early return~~first commercial sale of ~~those rights to Voyager pursuant to~~ a ~~restructuring~~licensed product and terminate on the later of ~~Voyager’s gene therapy relationship with Sanofi Genzyme. The upfront payment was expensed as IPR&D~~(i) the expiration of the last patent covering such licensed product in such country, (ii) a number of years from the ~~second quarter~~first commercial sale of ~~2019.~~

such licensed product in such country and (iii) the expiration of regulatory exclusivity for such licensed product in such country.

We may terminate the ~~collaboration and license~~ agreement in its entirety or with ~~Voyager~~respect to one or more targets upon 180 days’ written notice to ~~Voyager prior~~Heptares during the research collaboration term and upon 90 days’ written notice to the first commercial sale of any collaboration product or upon one year after the date of notice if such notice is provided after the first commercial sale of any collaboration product. Unless terminated earlier, the agreement will continue in effect untilHeptares following the expiration of the ~~last to expire royalty~~research collaboration term. Following the expiration of the research collaboration term, Heptares may terminate the agreement on a target-by-target basis in the event that we do not conduct any material development activities outside of Japan with respect to a certain compound or licensed product within the applicable target class for a continuous period of not less than 365 days and do not commence any ~~collaboration product or~~such activities within 120 days of receiving written notice. Either party may terminate the ~~last expiration or termination of any exercised co-development and co-commercialization rights by Voyager as provided for~~agreement, subject to specified conditions, (i) in the ~~agreement.~~

~~Xenon.~~event of material breach by the other party, subject to a cure period, (ii) if the other party challenges the validity or enforceability of certain intellectual property rights, subject to a cure period, or (iii) if the other party becomes insolvent or takes certain actions related to insolvency.

Takeda Pharmaceutical Company Limited, or Takeda. In ~~December 2019,~~2020, we entered into aan exclusive license ~~and collaboration~~ agreement with ~~Xenon~~Takeda, pursuant to ~~establish a collaboration under~~ which ~~the parties will identify, research and develop sodium channel inhibitors, including clinical candidate NBI-921352 (XEN901) and three preclinical candidates, which compounds~~ we ~~will have~~acquired the exclusive ~~right~~rights to ~~further~~ develop and commercialize ~~under~~certain early to mid-stage psychiatry compounds, including luvadaxistat, NBI-1065845, NBI-1065846 and four non-clinical stage compounds. Luvadaxistat and the ~~terms~~4 non-clinical stage compounds have each been designated as a royalty-bearing product. NBI-1065845 and ~~conditions set forth in the agreement.~~

NBI-1065846 are currently each designated as a profit-share product. We ~~will be solely~~are responsible ~~at our sole cost and expense,~~ for all manufacturing, development and ~~manufacturing~~commercialization costs of ~~the compounds and~~ any pharmaceutical product that contains a compound, subject to Xenon’s right to elect to co-fund the development of one product in a major indication and thus receive a mid-single digit percentage increase in royalties owed on the net sales of such product in the U.S. If Xenon exercises such option, the parties will share equally all reasonable and documented costs and expenses incurred in connection with the development of such product in the applicable indication, except costs and expenses that are solely related to the development of such product for regulatory approval outside the U.S.

royalty-bearing product.

In connection with the agreement, we paid ~~Xenon $30.0~~Takeda $120.0 million upfront, ~~and purchased $20.0 million of Xenon’s common stockat $14.196 per share, representing approximately 1.4 million shares. Pursuant to the terms of the agreement, Xenon may also be entitled to an additional $1.7 billion~~which, including certain transaction-related costs, was expensed as IPR&D in ~~development, regulatory and commercial milestone payments, as well as royalties on net sales of any collaboration product.~~

2020. We accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business. ~~Our equity investment~~Under the terms of the agreement, Takeda may be entitled to receive potential future payments of up to $1.9 billion upon the achievement of certain event-based milestones and would be entitled to receive royalties on the future net sales of any royalty-bearing product.

With respect to NBI-1065845 and NBI-1065846, we and Takeda will equally share in the operating profits and losses. Takeda retains the rights to opt-out of the profit-sharing arrangements, pursuant to which Takeda would be entitled to receive potential future payments upon the achievement of certain event-based milestones with respect to such compounds and receive royalties on the future net sales of such compounds (in lieu of equally sharing in the operating profits and losses). Takeda may elect to exercise such opt-out right for such compound immediately following the completion of a second Phase II clinical trial for such compound, or, under certain circumstances related to the development and commercialization activities to be performed by us, before the initiation of a Phase III clinical trial for such compound.

Unless earlier terminated, the agreement will continue on a licensed product-by-licensed product and country-by-country basis until the date on which, (i) for any royalty-bearing product, the royalty term has expired in such country; and (ii) for any profit-share product, for so long as we continue to develop, manufacture, or commercialize such licensed product.On a licensed product-by-licensed product and country-by-country basis, royalty payments would commence on the first commercial sale of a royalty-bearing product and terminate on the later of (i) the expiration of the last patent covering such royalty-bearing product in such country, (ii) a number of years from the first commercial sale of such royalty-bearing product in such country and (iii) the expiration of regulatory exclusivity for such royalty-bearing product in such country.

We may terminate the agreement in its entirety or in one or more (but not all) of the United States, Japan, the European Union and the United Kingdom, or, collectively, the major markets, upon 6 months’ written notice to Takeda (i) with respect to all licensed products prior to the first commercial sale of the first licensed product for which first commercial sale occurs, or (ii) with respect to all licensed products in one or more given target classes, as defined in the agreement, prior to the first commercial sale of the first licensed product in such target class for which first commercial sale occurs. We may terminate the agreement in its entirety or in one or more (but not all) of the major markets upon 12 months’ written notice to Takeda (i) with respect to all licensed products following the first commercial sale of the first licensed product for which first commercial sale occurs, or (ii) with respect to all licensed products in one or more given target classes following the first commercial sale of the first licensed product in such target class for which first commercial sale occurs. Takeda may terminate the agreement, subject to specified conditions, (i) if we challenge the validity or enforceability of certain Takeda intellectual property rights or (ii) on a target class-by-target class basis, in the event that we do not conduct any material development or commercialization activities with respect to any licensed product within such target class for a specified continuous period. Subject to a cure period, either party may terminate the agreement in the event of any material breach, solely with respect to the target class of a licensed product to which such material breach relates, or in its entirety in the event of any material breach that relates to all licensed products.

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

In connection with the agreement, we paid Idorsia $45.0 million upfront, which was expensed as IPR&D in 2020. We accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business. Under the terms of the agreement, Idorsia may be entitled to receive potential future payments of up to $1.7 billion upon the achievement of certain event-based milestones and would be entitled to receive royalties on the future net sales of any collaboration product.

We may terminate the agreement, in its entirety or with respect to a particular compound or development candidate, upon 90 days’ written notice to Idorsia. Further, in the event a party commits a material breach and fails to cure such material breach within 90 days after receiving written notice thereof, the non-breaching party may terminate the agreement in its entirety immediately upon written notice to the breaching party.

Xenon ~~was~~Pharmaceuticals Inc., or 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. We are responsible for all development and manufacturing costs of any collaboration product, subject to certain exceptions.

Under the terms of the agreement, Xenon may be entitled to receive potential future payments of up to $1.7 billion upon the achievement of certain event-based milestones and would be entitled to receive royalties on the future net sales of any collaboration product. Xenon retains the right to elect to co-develop one product in a major indication, pursuant to which Xenon would receive a mid-single digit percentage increase in royalties earned on the future net sales of such product in the United States and we and Xenon would equally share in the development costs of such product in the applicable indication, except where such development costs relate solely to the regulatory approval of such product outside the United States.

In connection with the agreement, we paid Xenon $30.0 million upfront and purchased approximately 1.4 million shares of Xenon common stock (at $14.196 per share) for $20.0 million. We accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business. The purchased shares were recorded at a fair value of $14.1 million after considering Xenon’s stock price on the measurement date ~~of closing~~ and certain ~~lock-up and voting provisions~~transfer restrictions applicable to the ~~acquired~~ shares. The remaining $36.2 million of the purchase price, which includes ~~the applicable transaction~~certain transaction-related costs, was expensed as IPR&D in 2019.

In connection with the ~~fourth quarter~~European Union’s approval for the clinical trial application for NBI-921352 for the treatment of ~~2019.~~

focal onset seizures in adults in September 2021, we paid Xenon a regulatory milestone of $10.0 million, including a purchase of approximately 0.3 million shares of Xenon common stock (at $19.9755 per share). The purchased shares were recorded at a fair value of $4.6 million after considering Xenon’s stock price on the measurement date and certain transfer restrictions applicable to the shares. The remaining $5.4 million of the milestone payment was expensed as R&D.

Unless earlier terminated, the ~~term of the license and collaboration~~ agreement will continue on a ~~product-by-product~~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 ~~exclusive~~ license ~~granted~~obtained by ~~Xenon to~~ us with respect to such product and country will become ~~fully-paid,~~fully paid, royalty free, perpetual and irrevocable. We may terminate the ~~license and collaboration~~ agreement ~~by providing at least~~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.

~~Mitsubishi Tanabe Pharma Corporation.~~

Voyager Therapeutics, Inc., or Voyager. ~~During 2015,~~In 2019, we entered into a collaboration and license agreement with ~~Mitsubishi Tanabe Pharma Corporation, or MTPC,~~Voyager, pursuant to which we acquired certain rights to develop and commercialize the NBIb-1817 for Parkinson’s disease program, Friedreich’s ataxia program and two undisclosed programs. We are responsible for all development costs of any collaboration product, subject to certain co-development and co-commercialization rights retained by Voyager. In February 2021, we notified Voyager of our termination of the ~~development and commercialization of INGREZZA~~NBIb-1817 for ~~movement disorders in Japan and~~Parkinson’s disease program, which became effective August 2, 2021. The termination did not apply to any program other ~~select Asian markets. MTPC made an up-front license fee of $30.0 million and has agreed to make payments up to $85.0 million in development and commercialization event-based payments, payments~~than the NBIb-1817 for ~~the manufacture of pharmaceutical products and royalties on product sales in select territories in Asia.~~Parkinson’s disease program.

Under the terms of the agreement, ~~MTPC~~Voyager may be entitled to receive potential future payments of up to $1.3 billion upon the achievement of certain event-based milestones and would be entitled to receive royalties on the future net sales of any collaboration product.

In connection with the agreement, we paid Voyager $115.0 million upfront and purchased approximately 4.2 million shares of Voyager common stock (at $11.9625 per share) for $50.0 million. We accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business. The purchased shares were recorded at a fair value of $54.7 million after considering Voyager’s stock price on the measurement date and certain transfer restrictions applicable to the shares. The remaining $113.1 million of the purchase price, which includes certain transaction-related costs, was expensed as IPR&D in 2019. In addition, we paid Voyager $5.0 million upfront, which was expensed as IPR&D in 2019, to acquire the rights outside the United States to the Friedreich’s ataxia program.

Unless terminated earlier, the agreement will continue in effect until the expiration of the last to expire royalty term with respect to any collaboration product or the last expiration or termination of any exercised co-development and co-commercialization rights by Voyager as provided for in the agreement. We may terminate the agreement upon 180 days’ written notice to Voyager prior to the first commercial sale of any collaboration product or upon 1 year after the date of notice if such notice is provided after the first commercial sale of any collaboration product.

BIAL – Portela & Ca, S.A., or BIAL. We acquired the United States and Canada rights to ONGENTYS® (opicapone) from BIAL in 2017, and launched ONGENTYS in the United States in September 2020 as an FDA-approved add-on treatment to levodopa/carbidopa in patients with Parkinson's disease experiencing motor fluctuations. We are responsible for all ~~third-party development, marketing~~commercialization costs of ONGENTYS in the United States and ~~commercialization costs~~Canada and rely on BIAL for the commercial supply of ONGENTYS.

Under the terms of the license agreement, BIAL may be entitled to receive potential future payments of up to $75.0 million upon the achievement of certain event-based milestones. In addition, with respect to ONGENTYS, in the event we fail to meet certain minimum sales requirements for a particular year in comparison to our annual sales forecast for such year, we would be obligated to pay BIAL an amount equal to the difference between the actual net

sales and minimum sales requirements for such year. Further, upon our written request to BIAL 12 months prior to the estimated expiration of the term of a licensed product, we will negotiate the continuation of BIAL’s supply of such licensed product after the term. After the term, and if BIAL is no longer supplying such licensed product, BIAL would be entitled to receive a low double-digit royalty on our future quarterly net sales of such licensed product.

In connection with the FDA’s approval for ONGENTYS for Parkinson’s disease in April 2020, we paid BIAL a regulatory milestone of $20.0 million, which was expensed as R&D in 2020. In connection with the FDA’s acceptance of the NDA for opicapone for Parkinson’s disease in 2019, we paid BIAL a regulatory milestone of $10.0 million, which was expensed as R&D in 2019.

Unless earlier terminated, the agreement will continue on a licensed product-by-licensed product and country-by-country basis until a generic product with respect to such licensed product is sold in a country and sales of such generic product are greater than a specified percentage of total sales of such licensed product in such country.

We may terminate the agreement upon 9 months’ written notice to BIAL. BIAL may terminate the agreement in the event we fail to meet the minimum sales requirements for any 2 years, or under certain circumstances involving a change of control of Neurocrine Biosciences. Under certain circumstances where BIAL elects to terminate the agreement in connection with a change of control of Neurocrine Biosciences, BIAL would be obligated to pay us a termination fee. Either party may terminate the agreement if the other party materially breaches the agreement and does not cure the breach within a specified notice period, or upon the other party’s insolvency.

Mitsubishi Tanabe Pharma Corporation, or MTPC.We out-licensed the rights to valbenazine in Japan and other select Asian markets to MTPC in 2015. MTPC is responsible for all development, manufacturing and commercialization costs of valbenazine in such markets.

Under the terms of the license agreement, we may be entitled to receive potential future payments of up to $55.0 million upon the achievement of certain event-based milestones and would be entitled to areceive royalties at tiered percentage ofrates on MTPC’s future net sales of ~~INGREZZA in Japan and other select Asian markets~~valbenazine for the longer of ~~ten~~10 years or the life of the related patent rights. ~~Further,~~

In connection with MTPC’s submission of a filing for marketing authorization for valbenazine for the treatment of tardive dyskinesia in Japan in April 2021, we received a regulatory milestone of $15.0 million, which was recognized as collaboration revenue in 2021.

We are currently conducting the KINECT-HD study, a placebo-controlled Phase III study of valbenazine in adult Huntington disease patients with chorea. In connection with our performance of the study, we recognized non-cash collaboration revenue of $5.7 million for 2021, $2.6 million for 2020 and $0.9 million for 2019. As of December 31, 2021, $1.0 million of revenue is being deferred in connection with our continuing performance obligations under the collaboration ~~effort between the parties to advance INGREZZA towards commercialization in Japan~~ and other select Asian markets is governed by joint steering and development committees with representatives from both parties. There are no performance, cancellation, termination or refund provisions in the agreement that would have a material financial consequence to us. We do not directly control when event-based payments will be ~~achieved or when royalty payments will begin.~~ recognized as non-cash collaboration revenue over the remaining study period using an input method according to costs incurred to-date relative to estimated total costs associated with the study.

MTPC may terminate the agreement ~~at its discretion~~ upon 180 days’ written notice to us. In such event, all ~~INGREZZA~~out-licensed product rights ~~for Japan and other select Asian markets~~ would revert to us.

AbbVie Inc., or AbbVie. We ~~assessed this arrangement~~out-licensed the global rights to elagolix to AbbVie in ~~accordance with Topic 606~~2010. AbbVie is responsible for all development and ~~identified the following performance obligations: (i) INGREZZA technology license and existing know-how; and (ii) development activities to initiate a clinical study~~commercialization costs of INGREZZA for Huntington’s chorea. We have the option to participate on the joint steering committee, but since participation is at our option it was deemed to not be a performance obligation. The option for MTPC to engage us to manufacture and supply pharmaceutical products, not at a discount, was not considered a material right and therefore not a performance obligation. Based on these assessments, we identified the license and the development activities as the only performance obligations at the inception of the agreement, which were both deemed to be distinct.

To evaluate the appropriate transaction price, we determined that the up-front amount constituted the entirety of the consideration to be included in the transaction price and to be allocated to the performance obligations based on our best estimate of their relative stand-alone selling prices. For the license, the stand-alone selling price was calculated using an income approach model and included the following key assumptions: the development timeline, revenue forecast, discount rate and probabilities of technical and regulatory

success. The relative selling price of our development activities to initiate a clinical study of INGREZZA for Huntington’s chorea was based on an assessment of costs to perform the study, based upon a peer company analysis for similar studies. We believe a change in the assumptions used to determine our stand-alone selling price for the license most likely would not have a significant effect on the allocation of consideration received (or receivable) to the performance obligations.elagolix.

At execution, the transaction price included only the $30.0 million up-front consideration received. None of the development or regulatory milestones have been included in the transaction price, as all milestone amounts were fully constrained. As part of our evaluation of the constraint, we considered numerous factors, including that achievement of the milestones is outside of our control and contingent upon success in future clinical studies and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to MTPC and therefore have also been excluded from the transaction price. We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

Under the terms of the license agreement, ~~any payment~~ we may be entitled to receive ~~is generally non-refundable.~~

~~Since inception~~potential future payments of up to $366.0 million upon the achievement of certain event-based milestones and will continue to receive royalties at tiered percentage rates on AbbVie’s quarterly net sales of elagolix for the longer of 10 years or the life of the ~~agreement, we have~~related patent rights.

AbbVie launched ORILISSA® (elagolix tablets) in the United States in August 2018 as an FDA-approved oral medication for the management of moderate to severe endometriosis pain in women. In June 2020, AbbVie launched ORIAHNN® (elagolix, estradiol and norethindrone acetate capsules and elagolix capsules) in the United States as an FDA-approved oral medication for the management of heavy menstrual bleeding associated with uterine fibroids in pre-menopausal women. We recognized elagolix royalty revenue of ~~$20.6~~$22.3 million ~~associated~~for 2021, $19.2 million for 2020 and $14.3 million for 2019.

In connection with the ~~delivery~~FDA’s approval for AbbVie’s ORIAHNN for uterine fibroids in May 2020, we received a regulatory milestone of ~~a technology license and existing know-how, and $15.0~~$30.0 million, which was recognized as collaboration revenue in ~~development event-based payments resulting from MTPC’s initiation~~2020. In connection with the FDA’s acceptance of ~~Phase II/III development of INGREZZA~~AbbVie’s NDA for ORIAHNN for uterine fibroids in ~~tardive dyskinesia, or TD, in Asia. In~~ 2019, we ~~recognized revenue~~received a regulatory milestone of ~~$0.9~~$20.0 million, in connection with our initiation of the KINECT-HD study in November 2019, a placebo-controlled Phase III study of valbenazine in adult Huntington’s disease patients with chorea. In accordance with our continuing performance obligations, $9.4 million of the $30.0 million up-front payment is being deferred and will bewhich was recognized as collaboration revenue ~~over~~in 2019.

AbbVie may terminate the ~~KINECT-HD study period. NaN revenue was recognized under the MTPC~~ agreement ~~for 2018.~~upon 180 days’ written notice to us. In ~~2017, we recognized $15.0 million in development event-based payments resulting from MTPC’s initiation of Phase II/III development of INGREZZA in TD in Asia.~~

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

3. ~~Marketable~~Debt Securities

~~Available-for-sale debt securities consisted of the following:~~

December 31,

(in thousands)
2019

2018

Commercial paper
$
144,472

$
94,572

Corporate debt securities

521,946

544,978

Securities of government-sponsored entities

191,481

85,677

Total marketable securities
$
857,899

$
725,227

The following table ~~presents~~summarizes the amortized cost, ~~gross~~ unrealized gain and loss recognized in accumulated other comprehensive income (loss) ~~positions~~ and ~~estimated~~ fair value ~~for available-for-sale~~of debt securities available-for-sale at December 31, 2021, aggregated by ~~investment category.~~

major security type and contractual maturity:

(in thousands)
Contractual
Maturity
(in years)

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Aggregate
Estimated
Fair
Value

December 31, 2019:

Classified as current assets:

Commercial paper
Less than 1

$
144,460

$
27

$
(15
)

$
144,472

Corporate debt securities
Less than 1

270,485

557

(42
)

271,000

Securities of government-sponsored entities
Less than 1

142,351

422

—

142,773

blank

$
557,296

$
1,006

$
(57
)

$
558,245

Classified as non-current assets:

Corporate debt securities
1 to 2

$
250,499

$
515

$
(68
)

$
250,946

Securities of government-sponsored entities
1 to 2

48,691

19

(2
)

48,708

blank

$
299,190

$
534

$
(70
)

$
299,654

blank

December 31, 2018:

Classified as current assets:

Commercial paper
Less than 1

$
94,617

$
—

$
(45
)

$
94,572

Corporate debt securities
Less than 1

395,385

—

(1,598
)

393,787

Securities of government-sponsored entities
Less than 1

20,887

8

(55
)

20,840

blank

$
510,889

$
8

$
(1,698
)

$
509,199

Classified as non-current assets:

Corporate debt securities
1 to 2

$
151,594

$
66

$
(469
)

$
151,191

Securities of government-sponsored entities
1 to 2

64,676

162

(1
)

64,837

blank

$
216,270

$
228

$
(470
)

$
216,028


		December 31, 2021								December 31, 2020
(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	$	204.8	$	—	$	—	$	204.8	$	82.2	$	—	$	—	$	82.2
Corporate debt securities	0 to 1 years	128.2		—		(0.1)		128.1		299.3		1.4		—		300.7
Securities of government-sponsored entities	0 to 1 years	37.6		—		—		37.6		230.9		0.1		—		231.0
		$	370.6	$	—	$	(0.1)	$	370.5	$	612.4	$	1.5	$	—	$	613.9

Corporate debt securities	1 to 3 years	$	358.9	$	—	$	(1.5)	$	357.4	$	144.8	$	0.4	$	—	$	145.2
Securities of government-sponsored entities	1 to 3 years	204.3		—		(1.0)		203.3		81.9		0.1		(0.1)		81.9
		$	563.2	$	—	$	(2.5)	$	560.7	$	226.7	$	0.5	$	(0.1)	$	227.1

As of December 31, 2021, our security portfolio consisted of 164 debt securities available-for-sale, including 136 such securities that were in an unrealized loss position but of high credit quality. Unrealized losses on these investments were primarily due to changes in interest rates. We do not intend to sell these investments and it is not more likely than not that we will be required to sell these investments before recovery of their amortized cost basis. We did not recognize an allowance for credit losses as of December 31, 2021 or 2020.

The following table ~~presents the estimated fair value and gross~~summarizes debt securities available-for-sale in an unrealized loss position for ~~available-for-sale~~less than 12 months, aggregated by major security type. There were no debt securities ~~aggregated by investment category and length~~available-for-sale in an unrealized loss position for longer than 12 months as of ~~time that such securities have been in a continuous loss position.~~

December 31, 2021 or 2020.

Less Than 12 Months

12 Months or Greater

Total

(in thousands)
Estimated
Fair Value

Unrealized
Losses

Estimated
Fair Value

Unrealized
Losses

Estimated
Fair Value

Unrealized
Losses

December 31, 2019:

Commercial paper
$
33,070

$
(15
)

$
—

$
—

$
33,070

$
(15
)
Corporate debt securities

186,052

(110
)

—

—

186,052

(110
)
Securities of government-sponsored entities

15,002

(2
)

—

—

15,002

(2
)
blank
$
234,124

$
(127
)

$
—

$
—

$
234,124

$
(127
)
blank

December 31, 2018:

Commercial paper
$
51,927

$
(45
)

$
—

$
—

$
51,927

$
(45
)
Corporate debt securities

274,696

(746
)

234,798

(1,321
)

509,494

(2,067
)
Securities of government-sponsored entities

4,999

(1
)

10,947

(55
)

15,946

(56
)
blank
$
331,622

$
(792
)

$
245,745

$
(1,376
)

$
577,367

$
(2,168
)


	December 31, 2021				December 31, 2020
(in millions)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Corporate Debt Securities	$	428.6	$	(1.6)	$	—	$	—
Securities of government-sponsored entities	230.5		(1.0)		95.0		(0.1)
	$	659.1	$	(2.6)	$	95.0	$	(0.1)

~~Note~~

4. Fair Value Measurements

Investments, which were measured at fair value on a recurring basis, consisted of the following:

Fair Value Measurements Using

(in thousands)
Carrying
Value

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

December 31, 2019:

Classified as current assets:

Cash and money market funds
$
112,279

$
112,279

$
—

$
—

Commercial paper

144,472

—

144,472

—

Securities of government-sponsored entities

142,773

—

142,773

—

Corporate debt securities

271,000

—

271,000

—

blank

670,524

112,279

558,245

—

Classified as long-term assets:

Certificates of deposit

3,206

3,206

—

—

Securities of government-sponsored entities

48,708

—

48,708

—

Corporate debt securities

250,946

—

250,946

—

Restricted equity securities

55,868

—

—

55,868

blank

1,029,252

115,485

857,899

55,868

Less cash and cash equivalents and restricted cash

(115,485
)

(115,485
)

—

—

Total investments
$
913,767

$
—

$
857,899

$
55,868

blank

December 31, 2018:

Classified as current assets:

Cash and money market funds
$
141,714

$
141,714

$
—

$
—

Commercial paper

94,572

—

94,572

—

Securities of government-sponsored entities

20,840

—

20,840

—

Corporate debt securities

393,787

—

393,787

—

blank

650,913

141,714

509,199

—

Classified as long-term assets:

Cash and money market funds

1,500

1,500

—

—

Certificates of deposit

3,977

3,977

—

—

Securities of government-sponsored entities

64,837

—

64,837

—

Corporate debt securities

151,191

—

151,191

—

blank

872,418

147,191

725,227

—

Less cash and cash equivalents and restricted cash

(147,191
)

(147,191
)

—

—

Total investments
$
725,227

$
—

$
725,227

$
—


	December 31, 2021								December 31, 2020
	Fair Value		Fair Value Measurements Using						Fair Value		Fair Value Measurements Using
(in millions)			Level 1		Level 2		Level 3				Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash and money market funds	$	340.8	$	340.8	$	—	$	—	$	187.1	$	187.1	$	—	$	—

Restricted cash:
Certificates of deposit	3.2		3.2		—		—		3.2		3.2		—		—

Debt securities available-for-sale:
Commercial paper	204.8		—		204.8		—		82.2		—		82.2		—
Corporate debt securities	485.5		—		485.5		—		445.9		—		445.9		—
Securities of government-sponsored entities	240.9		—		240.9		—		312.9		—		312.9		—

Equity securities:
Equity securities–biotechnology industry	63.7		52.7		—		11.0		38.2		—		—		38.2

	$	1,338.9	$	396.7	$	931.2	$	11.0	$	1,069.5	$	190.3	$	841.0	$	38.2

The following table presents a reconciliation of ~~restricted~~ equity ~~securities~~security investments, which were measured at fair value on a recurring basis ~~follows.~~

using significant unobservable inputs (Level 3):

(in thousands)

Balance at December 31, 2018

$
—

Investments in restricted equity securities

68,855

Net unrealized loss recognized on restricted equity securities during the period

(12,987)

Balance at December 31, 2019

$
55,868


	Year Ended December 31,
(in millions)	2021		2020		2019
Balance at beginning of period	$	38.2	$	55.9	$	—
Purchases (1)	4.6		—		68.9
Unrealized gain (loss) included in earnings	20.9		(17.7)		(13.0)
Transfers out of Level 3 (2)	(52.7)		—		—
Balance at end of period	$	11.0	$	38.2	$	55.9

~~Note~~

_________________________

(1) In September 2021, we purchased 0.3 million shares of Xenon's common stock, valued at $4.6 million on the date of purchase, in connection with the European Union’s approval of the clinical trial application for NBI-921352.

(2) In the fourth quarter of 2021, our equity security investment in Xenon was transferred from Level 3 to Level 1 as the associated holding period restriction expired.

As of December 31, 2021, the discount for lack of marketability used in the valuation analysis of our Voyager equity security investment was 2.5%. Unrealized gains and losses on equity security investments are included in other income (expense), net.

5. Convertible Senior Notes

On May 2, 2017, we completed a private placement of $517.5 million in aggregate principal amount of ~~2.25% convertible senior notes due 2024, or~~ the 2024 Notes and entered into ~~an indenture agreement that sets forth~~ the ~~details of all~~2017 Indenture with respect to the ~~terms and conditions~~2024 Notes. The net proceeds from the issuance of the 2024 Notes orwere approximately $502.8 million, after deducting commissions and the ~~2024 Indenture.~~offering expenses payable by us. The 2024 Notes accrue interest at a fixed rate of 2.25% per year, payable semiannually in arrears on May 15 and November 15 of each year, ~~beginning on November 15, 2017. The 2024 Notes~~and mature on May 15, 2024. ~~The net proceeds from the issuance~~

In November 2020, we entered into separate, privately negotiated transactions with certain holders of the 2024 Notes ~~were approximately $502.8~~to repurchase $136.2 million ~~after deducting commissions~~aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $186.9 million in cash. We accounted for the partial repurchase of the 2024 Notes as a debt extinguishment. As a result, we attributed $130.7 million of the aggregate repurchase price to the liability component based on the fair value of the liability component immediately before extinguishment. The fair value of the liability component was calculated at settlement using a discounted cash flow analysis with a discount rate of 3.37%, which was the market rate for similar notes that have no conversion rights. The difference of $56.3 million between the fair value of the aggregate consideration remitted to certain holders of the 2024 Notes and the ~~offering expenses payable by us.~~

fair value of the liability component was attributed to the reacquisition of the equity component and recognized as a reduction to additional paid-in capital. The carrying amount of the liability of $112.4 million at settlement was recognized as a reduction to the 2024 Notes and resulted in an $18.4 million loss on extinguishment.

We may redeem for cash all or part of the 2024 Notes if the last reported sale price (as defined in the 2024 Indenture) of our common stock has been at least 130% of the conversion price then in effect (equal to $98.70 as of December 31, 2021) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending on, and including, the trading day immediately before the date which we provide notice of redemption.

Holders of the 2024 Notes may convert the 2024 Notes at any time prior to the close of business on the business day immediately preceding May 15, 2024, only under the following circumstances:

~~(i)~~

during any calendar quarter commencing after the calendar quarter ending on September 30, 2017 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on each applicable trading day;

~~(ii)~~(i)during any calendar quarter (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price (equal to $98.70 as of December 31, 2021) on each applicable trading day;

during the five business-day period immediately after any 5 consecutive trading-day period (the measurement period) in which the trading price (as defined in the 2024 Indenture) per $1,000 principal amount of the 2024 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day;

~~(iii)~~(ii)during the 5 business-day period immediately after any 5 consecutive trading-day period (the measurement period) in which the trading price (as defined in the 2024 Indenture) per $1,000 principal amount of the 2024 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day;

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

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

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

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

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

In December 2021, we entered into the ~~conditional conversion feature described under (i) above had been triggered as of December 31, 2019, holders~~First Supplemental Indenture to the 2017 Indenture, pursuant to which we irrevocably elected to settle the principal amount of the 2024 Notes ~~may convert the 2024 Notes at~~in cash upon conversion and to settle any time during the period beginning on January 2, 2020 and ending at the close of business on March 31, 2020. Accordingly, the 2024 Notes have been classified as a current liability as of December 31, 2019. The future conditional convertibility of the 2024 Notes will be monitored at each quarterly reporting date and analyzed dependent upon market prices of our common stock during the prescribed measurement periods.

~~Upon~~ conversion ~~holders will receive the principal amount of their 2024 Notes and any excess conversion value,~~premium, calculated based on the per share volume-weighted average price ~~or VWAP,~~ for each of the 30 consecutive trading days during the observation ~~period. For both~~period (as more fully described in the ~~principal and excess conversion value, holders may receive~~2024 Indenture), in either cash or shares of our common stock. In the event of conversion, holders would forgo all future interest payments, any unpaid accrued interest, and the possibility of further stock ~~or a combination~~price appreciation. Upon the receipt of ~~cash and shares~~conversion requests, the settlement of ~~its common stock, at our option.~~

~~It is our intent and policy to settle conversions through combination settlement, which essentially involves repayment of an amount of cash equal~~the 2024 Notes will be paid pursuant to the ~~“principal portion” and delivery~~terms of the “share amount” in excess of the principal portion in shares of common stock or cash. In general, for each $1,000 in principal, the “principal portion” of cash upon settlement is defined as the lesser of $1,000, and the conversion value during the 25-day observation period as described in the indenture for the notes. The conversion value is the sum of the daily conversion value which is the product of the effective conversion rate divided by 25 days and the daily VWAP of our common stock. The “share amount” is the cumulative “daily share amount” during the observation period, which is calculated by dividing the daily VWAP into the difference between the daily conversion value (i.e., conversion rate x daily VWAP) and $1,000.

2024 Indenture.

The initial conversion rate for the 2024 Notes is 13.1711 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $75.92 per share of our common stock. At the initial conversion rate, settlement of the 2024 Notes for shares of our common stock would approximate ~~6.8~~5.0 million shares. The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. The initial conversion price of the 2024 Notes represented a premium of approximately 42.5% to the closing sale price of $53.28 per share of our common stock on the Nasdaq Global Select Market on April 26, 2017, the date that we priced the private offering of the 2024 Notes.

In the event of conversion, holders would forgo all future interest payments, any unpaid accrued interest and the possibility of further stock price appreciation. Upon the receipt of conversion requests, the settlement of the 2024 Notes will be paid pursuant to the terms of the 2024 Indenture. In the event that all of the 2024 Notes are converted, we would be required to repay the $517.5 million in principal value and any conversion premium in any combination of cash and shares of its common stock (at the Company’s option).

On or after, but not prior to May 15, 2021, we may redeem for cash all or part of the 2024 Notes if the last reported sale price (as defined in the 2024 Indenture) of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending on, and including, the trading day immediately before the date which we provide notice of redemption. The redemption price will equal the sum of (i) 100% of the principal amount

~~of the 2024 Notes being redeemed, plus (ii) accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date. No sinking fund is provided for the 2024 Notes.~~

If we undergo a fundamental change, as defined in the 2024 Indenture, subject to certain conditions, holders of the 2024 Notes may require us to repurchase for cash all or part of their 2024 Notes at a repurchase price equal to 100% of the principal amount of the 2024 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, if a ‘‘make-whole fundamental change’’ (as defined in the 2024 Indenture) occurs prior to January 15, 2024, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert ~~the 2024 Notes~~their notes in connection with the make-whole fundamental change.

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

~~An entity must~~

While the 2024 Notes were classified as a long-term liability as of December 31, 2021, the future convertibility and associated balance sheet classification will be monitored at each quarterly reporting date and analyzed dependent upon market prices of our common stock during the prescribed measurement periods. In the event that we have the election to redeem the 2024 Notes or the holders of the 2024 Notes have the election to convert the 2024 Notes at any time during the prescribed measurement period, the 2024 Notes would then be considered a current obligation and classified as such.

We are required to separately account for the liability and equity components of ~~convertible debt instruments, such as~~ the 2024 ~~Notes, that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost.~~Notes. The liability component of the instrument was valued in a manner that reflects the market interest rate for a similar nonconvertible instrument at the date of issuance. The initial carrying value of the liability component of $368.3 million was calculated using a 7.5% assumed borrowing rate. The equity component of $149.2 million, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the 2024 Notes and is recorded in additional paid-in capital on the consolidated balance sheet aton the issuance date. ~~That~~The equity component is treated as a discount on the liability component of the 2024 Notes, which is currently being amortized over the ~~seven-year~~7-year term of the 2024 Notes using the effective interest rate method. The equity component is not re-measured as long as it continues to meet the conditions for equity classification. AtAs of December 31, ~~2019,~~2021, the remaining period over which the discount on the liability component will be amortized was approximately ~~4.4~~2.4 years.

We plan to adopt ASU 2020-06 on January 1, 2022 using the modified retrospective transition method. Among other changes, ASU 2020-06 removes the separation models for convertible instruments with cash or beneficial conversion features. Refer to Note 1 to the consolidated financial statements for more information.

We allocated the total transaction costs of approximately $14.7 million related to the issuance of the 2024 Notes to the liability and equity components of the 2024 Notes based on their relative values. Transaction costs attributable to the liability component are amortized to interest expense over the ~~seven-year~~7-year term of the 2024 Notes, and transaction costs attributable to the equity component are netted with the equity component in stockholders’ equity.

The 2024 Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness or the issuance or repurchase of securities by ~~the Company.~~us. The 2024 Indenture contains customary events of default with respect to the 2024 Notes, including that upon certain events of default, 100% of the principal and accrued and unpaid interest on the 2024 Notes will automatically become due and payable.

~~Convertible senior notes,~~

The 2024 Notes, net of discounts and deferred financing costs, consisted of the following:

	December 31,
(in thousands)	2019			2018
								December 31,
(in millions)							(in millions)	2021		2020
Principal	$	517,500		$	517,500		Principal	$	381.2	$	381.3
Deferred financing costs		(6,937	)		(8,326	)	Deferred financing costs	(2.9)		(4.0)
Debt discount, net		(101,756	)		(120,678	)	Debt discount, net	(43.2)		(59.4)
Net carrying amount	$	408,807		$	388,496		Net carrying amount	$	335.1	$	317.9

The 2024 Notes were recorded at the estimated value of a similar non-convertible instrument on the date of issuance and accretes to the face value of the 2024 Notes over their ~~seven-year~~7-year term. The fair value of the 2024 Notes, which was estimated utilizing market quotations from an over-the-counter trading market (Level 2), was ~~$596.8~~$464.7 million atas of December 31, ~~2019~~2021 and ~~$616.1~~$514.3 million atas of December 31, ~~2018.~~

~~Note~~ 2020.

6. Other Balance Sheet Details

Inventory consisted of the following:

	December 31,
(in thousands)	2019		2018
						December 31,
(in millions)					(in millions)	2021		2020
Raw materials	$	14,148	$	7,855	Raw materials	$	11.2	$	16.6
Work in process		1,470		2,208	Work in process	3.6		2.4
Finished goods		1,670		801	Finished goods	15.7		9.0
Total inventory	$	17,288	$	10,864	Total inventory	$	30.5	$	28.0

Property and equipment, net, consisted of the following:

	December 31,
(in thousands)	2019			2018
								December 31,
(in millions)							(in millions)	2021		2020
Tenant improvements	$	26,342		$	19,857		Tenant improvements	$	34.9	$	29.5
Scientific equipment		33,483			28,163		Scientific equipment	51.6		39.2
Computer equipment		12,460			11,152		Computer equipment	18.1		13.9
Furniture and fixtures		3,188			2,968		Furniture and fixtures	5.9		3.7
blank		75,473			62,140
								110.5		86.3
Less accumulated depreciation		(33,559	)		(28,271	)	Less accumulated depreciation	(51.9)		(41.7)
Total property and equipment, net	$	41,914		$	33,869		Total property and equipment, net	$	58.6	$	44.6

Accounts payable and accrued liabilities consisted of the following:

	December 31,
(in thousands)	2019		2018
						December 31,
(in millions)					(in millions)	2021		2020
Accrued employee related costs	$	38,941	$	27,341	Accrued employee related costs	$	50.6	$	38.2
Revenue-related reserves for discounts and allowances		30,634		13,586	Revenue-related reserves for discounts and allowances	62.7		34.6
Accrued development costs		25,496		7,069	Accrued development costs	32.4		32.9
Current branded prescription drug fee					Current branded prescription drug fee	28.6		23.6
Accounts payable and other accrued liabilities		46,214		38,381	Accounts payable and other accrued liabilities	51.5		39.4
Total accounts payable and accrued liabilities	$	141,285	$	86,377	Total accounts payable and accrued liabilities	$	225.8	$	168.7

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

(in thousands)	December 31, 2019		December 31, 2018

						December 31,
(in millions)					(in millions)	2021		2020
Cash and cash equivalents	$	112,279	$	141,714	Cash and cash equivalents	$	340.8	$	187.1
Restricted cash		3,206		5,477	Restricted cash	3.2		3.2
Total cash, cash equivalents and restricted cash	$	115,485	$	147,191	Total cash, cash equivalents and restricted cash	$	344.0	$	190.3

~~Note~~

7. ~~Net Income (Loss)~~Earnings Per Share

~~Net income (loss)~~

Earnings per share ~~was~~were calculated as follows:

Year Ended December 31,

(in thousands, except per share data)
2019

2018

2017

Net income (loss) - basic and diluted
$
37,012

$
21,111

$
(142,542
)
Weighted average common shares outstanding, basic

91,627

90,235

88,089

Effect of dilutive securities:

Employee stock purchase program

25

11

—

Stock options

2,559

3,228

—

Restricted stock units

449

564

—

2024 Notes

1,072

1,348

—

Weighted average common shares outstanding, diluted

95,732

95,386

88,089

Net income (loss) per share, basic
$
0.40

$
0.23

$
(1.62
)
Net income (loss) per share, diluted
$
0.39

$
0.22

$
(1.62
)


	Year Ended December 31,
(in millions, except per share data)	2021		2020		2019
Net income - basic and diluted	$	89.6	$	407.3	$	37.0
Weighted-average common shares outstanding:
Basic	94.6		93.1		91.6
Effect of dilutive securities:

Stock options	1.8		2.4		2.6
Restricted stock units	0.3		0.5		0.4
2024 Notes	1.1		1.8		1.1
Diluted	97.9		97.8		95.7
Earnings per share:
Basic	$	0.95	$	4.38	$	0.40
Diluted	$	0.92	$	4.16	$	0.39

Shares which have been excluded from diluted per share amounts because their effect would have been anti-dilutive ~~include the following:~~

were 4.1 million for 2021, 2.5 million for 2020 and 2.1 million for 2019.

Year Ended December 31,

(in thousands)
2019

2018

2017

Stock options and restricted stock units

2,144

887

7,436

~~Note~~

8. Share-Based Compensation

~~Share-Based Compensation Plans.~~

In May 2011, we adopted the ~~Neurocrine Biosciences, Inc.~~ 2011 Equity Incentive Plan, as amended, or the 2011 Plan. The 2011 Plan ~~pursuant to which~~authorized 21 million shares of ~~our~~ common stock ~~are authorized~~ for ~~issuance. The 2011 Plan provides~~issuance and allowed for the grant of stock options, ~~that qualify as incentive~~ stock ~~options under Section 422 of the Internal Revenue Code of 1986, as amended, non-statutory stock options,~~appreciation rights, restricted stock awards, restricted stock unit awards, or RSUs, ~~stock appreciation rights,~~ performance stock awards, performance-based restricted stock units, or PRSUs, and certain other ~~forms~~awards. During 2020, the 2011 Plan was merged into the 2020 Plan (defined below). As a result, there were no shares of ~~equity compensation.~~ common stock remaining available for future grant under the 2011 Plan.

In May 2018, we adopted the ~~Neurocrine Biosciences, Inc.~~2018 Employee Stock Purchase Plan, or ESPP, pursuant to which ~~300,000~~0.3 million shares of ~~our~~ common stock are authorized for issuance. ~~During 2019, we issued 78,000 shares~~As of ~~our common stock under the ESPP. NaN purchases occurred under the ESPP during 2018.~~

We previously issued stock options and RSUs under the Neurocrine Biosciences, Inc. Inducement Plan, or the Inducement Plan, to certain employees. Pursuant to the Inducement Plan, we granted 70,000 stock options and 20,000 RSUs in 2018 and 410,000 stock options and 12,500 RSUs in 2017. We did 0t grant any stock options or RSUs pursuant to the Inducement Plan during 2019. These stock option grants have a ~~four-year~~ ~~vesting period and the RSUs generally have vesting periods of three to four years. We currently have a total of 211,000 stock options and RSUs outstanding under this Inducement Plan.~~

At December 31, ~~2019, 6.8~~2021, 0.1 million shares of common stock remained available for the future grant of awards under the 2011 Plan. Only share awards made under the 2011 Plan that are subsequently cancelled due to forfeiture or expiration are returned to the share poolremain available for future ~~grants.~~

~~We issue new shares upon~~grant under the ~~exercise of stock options,~~2018 ESPP.

In May 2020, we adopted the ~~issuance of stock bonus awards, and~~2020 Equity Incentive Plan, or the ~~vesting of RSUs and PRSUs. At December 31, 2019, 7.8~~2020 Plan. The 2020 Plan authorized 3.3 million shares of common stock for issuance and allows for the grant of stock options, stock appreciation rights, restricted stock awards, RSUs, performance stock awards, PRSUs and certain other awards. The 2011 Plan was merged into the 2020 Plan and, as a result, all remaining shares in the 2011 Plan were ~~reserved~~transferred into the 2020 Plan. As of December 31, 2021, 5.4 million shares of common stock remain available for future grant under the 2020 Plan.

Share-Based Compensation Expense. The effect of share-based compensation expense on our consolidated statements of income and comprehensive income by line-item follows:


	Year Ended December 31,
(in millions)	2021		2020		2019
Selling, general and administrative expense	$	85.8	$	66.3	$	49.5
Research and development expense	48.4		33.7		25.8
Total share-based compensation expense	$	134.2	$	100.0	$	75.3

Share-based compensation expense by award-type follows:


	Year Ended December 31,
(in millions)	2021		2020		2019
Stock options	$	60.5	$	47.5	$	36.5
RSUs	62.5		44.2		30.5
PRSUs	7.6		5.3		5.6
ESPP	3.6		3.0		2.7
Total share-based compensation expense	$	134.2	$	100.0	$	75.3

As of December 31, 2021, unrecognized share-based compensation expense by award-type and the weighted-average period over which such ~~issuances.~~

~~Vesting Provisions of Share-Based Compensation.~~expense is expected to be recognized, as applicable, were as follows:


(dollars in millions)	Unrecognized Expense		Weighted-Average Recognition Period
Stock options	$	101.7	2.5 years
RSUs	$	150.5	2.2 years

Stock Options. Typically, stock options ~~generally~~ have ~~terms of ten years from the date of grant,~~a 10-year term and ~~generally~~ vest over a ~~three~~ 3 to ~~four-year~~4-year period. The maximum contractual term for all options granted from the 2011 Plan is ten years. RSUs granted under the 2011 Plan generally have vesting periods of four years. PRSUs granted under the 2011 Plan vest based on the achievement of certain pre-defined Company-specific performance criteria and expire four to five years from the grant date.

~~Share-Based Compensation.~~ ~~The compensation cost that has been included in the statements of operations and comprehensive income (loss) for all share-based compensation arrangements is as follows:~~

Year Ended December 31,

(in thousands)
2019

2018

2017

Sales, general and administrative expense
$
49,489

$
31,847

$
27,951

Research and development expense

25,773

26,221

14,571

Share-based compensation expense
$
75,262

$
58,068

$
42,522

~~Stock Options.~~ The exercise price of ~~our~~ stock options granted is equal to the closing price of our common stock on the date of grant. The estimated fair value of each stock option award granted was determined on the date of grant using the Black-Scholes option-pricing valuation model with the following weighted-average assumptions for option grants:

Year Ended December 31,
(in thousands)
2019

2018

2017
Risk-free interest rate
2.4%

2.5%

2.0%
Expected volatility of common stock
54.8%

59.5%

58.0%
Dividend yield
0.0%

0.0%

0.0%
Expected option term
5.4 years

4.7 years

5.7 years

We estimate the fair value of stock options using athe Black-Scholes option-pricing model on the date of grant. ~~The fair values of equity instruments are recognized and amortized on a straight-line basis over the requisite service period.~~ 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 $45.02 for 2021, $45.67 for 2020 and $41.74 for 2019.

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,
	2021		2020		2019
Risk-free interest rate	0.6	%	1.4	%	2.4	%
Expected volatility of common stock	45.9	%	48.5	%	54.8	%
Dividend yield	0.0	%	0.0	%	0.0	%
Expected option term	5.2 years		5.3 years		5.4 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 ~~the~~a stock option is based upon observed interest rates appropriate for the expected term of our employee stock options.

•We have ~~never~~not historically declared or paid dividends and ~~has no plans~~do not intend to do so in the foreseeable future.

Our determination of fair value is affected by our stock price as well as a number of assumptions that require judgment. The weighted-average fair values of stock options granted during 2019, 2018 and 2017 estimated as of the grant date using the Black-Scholes option-pricing model, were $41.74, $43.42 and $25.11, respectively.

A summary of activity related to stock options follows:

	Year Ended December 31,
	2019					2018					2017
(in thousands, except weighted average data)	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at January 1		5,746		$	41.38		6,356		$	28.83		6,112		$	20.01
(in millions, except weighted average data)																(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, 2020																Outstanding at December 31, 2020	6.8	$	62.98
Granted		1,416			82.27		1,040			84.97		1,807			46.55	Granted	1.8	$	110.74
Exercised		(983	)		27.95		(1,592	)		18.95		(1,353	)		10.41	Exercised	(0.7)	$	28.02
Canceled		(72	)		75.09		(58	)		64.67		(210	)		43.05	Canceled	(0.2)	$	103.30
Outstanding at December 31		6,107		$	52.62		5,746		$	41.38		6,356		$	28.83
Outstanding at December 31, 2021																Outstanding at December 31, 2021	7.7	$	76.38	6.5 years	$	136.4
Exercisable at December 31, 2021																Exercisable at December 31, 2021	5.2	$	63.53	5.5 years	$	134.7

~~Stock options outstanding at December 31, 2019 had a weighted average remaining contractual term of 6.7 years.~~

~~For 2019, 2018 and 2017 share-based compensation expense related to stock options was $36.5 million, $35.4 million and $28.2 million, respectively. At December 31, 2019, there wasapproximately $75.0 million of unamortized compensation cost related to stock options, which we expect to recognize over a weighted average remaining vesting period of approximately 2.4 years. At~~

~~December 31, 2019, there were approximately 4.0 million stock options exercisable with a weighted average exercise price of $41.01 and a weighted-average remaining contractual term of~~ ~~5.8 years~~.

The total intrinsic value, which is the amount by which the exercise price was exceeded by the sale price of our common stock on the date of sale, of stock option exercises during 2019, 2018, and 2017 was $64.3 million, $117.0 million and $61.4 million, respectively. At December 31, 2019, the total intrinsic value of stock options ~~outstanding~~exercised was $58.0 million for 2021, $40.2 million for 2020 and ~~exercisable was $335.7~~$64.3 million ~~and $268.2~~ ~~million, respectively.~~for 2019. Cash received from stock option exercises was $20.7 million for ~~2019, 2018~~2021, $23.5 million for 2020 and ~~2017 was~~ $27.3 million ~~$29.5 million, and $13.9 million, respectively.~~

for 2019.

Restricted Stock Units.RSUs typically vest over a 4-year period. The fair value of RSUs is based on the closing sale price of our common stock on the date of issuance. ~~For 2019, 2018, and 2017 share-based compensation expense related~~RSUs may be subject to RSUs was $30.4 million, $21.9 million, and $13.9 million, respectively. As of December 31, 2019, there was approximately $75.5 million of unamortized compensation cost related to RSUs, which is expected to be recognized over a ~~weighted average remaining vesting period of approximately 2.4 years.~~

~~The total intrinsic value of RSUs converted into common shares for 2019, 2018 and 2017 was $36.1 million, $35.5 million, and $14.9 million, respectively. The RSUs,~~deferred delivery arrangement at the election of eligible ~~employees, may be subject to deferred delivery arrangement. The total intrinsic value of RSUs outstanding at December 31, 2019 was $147.2 million based on our closing stock price on that date.~~

employees.

A summary of activity related to RSUs follows:

Year Ended December 31,

2019

2018

2017

(in thousands, except weighted average data)
Number of
Units

Weighted Average
Grant Date Fair
Value per Unit

Number of
Units

Weighted Average
Grant Date Fair
Value per Unit

Number of
Units

Weighted Average
Grant Date Fair
Value per Unit

Outstanding at January 1

1,133

$
62.31

1,080

$
40.30

883

$
29.33

Granted

707

82.66

540

85.29

588

47.21

Cancelled

(56
)

74.49

(58
)

36.21

(41
)

40.62

Converted into common shares

(416
)

54.30

(429
)

59.23

(350
)

24.19

Outstanding at December 31

1,368

$
74.77

1,133

$
62.31

1,080

$
40.30


(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, 2020	1.5	$	89.60
Granted (1)	1.2	$	104.95
Released	(0.6)	$	82.22
Canceled	(0.1)	$	101.71
Unvested at December 31, 2021	2.0	$	99.96	1.3 years	$	174.1

_________________________

(1) In August 2021, our board of directors approved an equity grant of approximately 0.5 million RSUs, which will vest over a 2-year period, to our full-time employees other than our executive officers.

The total fair value of RSUs that vested was $64.3 million for 2021, $49.7 million for 2020 and $36.1 million for 2019.

Performance-Based Restricted Stock Units. ~~We had 0.3 million~~ PRSUs ~~outstanding at both December 31, 2019 and 2018. During 2018, we granted approximately 0.2 million PRSUs that~~ vest based on the achievement of certain ~~pre-defined Neurocrine-specific~~predefined Company-specific performance criteria and expire ~~approximately four~~3 to ~~five~~4 years from the grant date. ~~NaN PRSUs were granted during 2019 or 2017.~~ The fair value of PRSUs is estimated based on the closing sale price of our common stock on the date of grant. Expense recognition for PRSUs commences when attainment of the performance-based criteria is determined to be probable. ~~We recognized expense~~

A summary of ~~$5.6 million for 2019 and $0.4 million for 2017 related to PRSUs. We recognized 0 expense~~activity related to PRSUs ~~for 2018. At~~follows:


(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, 2020	0.2	$	102.90
Granted	0.2	$	114.68


Unvested at December 31, 2021	0.4	$	109.31	1.2 years	$	30.9

As of December 31, ~~2019, total~~2021, unrecognized ~~estimated~~share-based compensation expense ~~related to~~for PRSUs was ~~$14.1 million and the~~$32.0 million. The total ~~intrinsic~~fair value of PRSUs ~~outstanding~~that vested was ~~$35.5 million based on our closing stock price on that date. The total intrinsic value of PRSUs converted into common shares was $8.8~~$13.5 million for ~~2017.~~

2020. No PRSUs vested during 2021 or 2019.

Employee Stock Purchase Plan.Under the 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. ~~Share-based compensation expense recognized under the ESPP was $2.7 million for 2019 and $0.8 million for 2018.~~

~~Note~~

9. Income Taxes

Components of income tax expense (benefit) for continuing operations were as follows:

	Year Ended December 31,
(in thousands)	2019		2018			2017
									Year Ended December 31,
(in millions)								(in millions)	2021		2020		2019
Current:								Current:
Federal	$	—	$	(100	)	$	—	Federal	$	—	$	—	$	—
State		9,530		830			—	State	6.3		10.1		9.5
Total income tax expense	$	9,530	$	730		$	—
Total current taxes								Total current taxes	6.3		10.1		9.5
Deferred:								Deferred:
Federal								Federal	5.9		(287.5)		—
State								State	(0.4)		(23.2)		—
Total deferred taxes								Total deferred taxes	5.5		(310.7)		—
Provision for (benefit from) income taxes								Provision for (benefit from) income taxes	$	11.8	$	(300.6)	$	9.5

The provision for (benefit from) income taxes on earnings subject to income taxes differs from the statutory federal rate due to the following:

	December 31,
(in thousands)	2019			2018			2017
Federal income taxes at 21% for 2019 and 2018 and 35% for 2017	$	9,775		$	4,587		$	(49,889	)
											Year Ended December 31,
(in millions)										(in millions)	2021		2020		2019
Federal income taxes at 21%										Federal income taxes at 21%	$	21.3	$	22.4	$	9.8
State income tax, net of federal benefit		4,044			361			(4,013	)	State income tax, net of federal benefit	6.2		5.5		4.0
Tax effect on non-deductible expenses		855			446			433
Non-deductible expenses										Non-deductible expenses	0.2		0.6		0.8
Branded prescription drug fee		3,707			—			—		Branded prescription drug fee	4.8		4.9		3.7
Share-based compensation expense		(12,785	)		(9,778	)		(19,589	)	Share-based compensation expense	(11.3)		(6.7)		(12.8)
Officer compensation		3,068			915			2,163		Officer compensation	7.0		3.7		3.1
Change in tax rate		(4,143	)		(198	)		154,415		Change in tax rate	0.2		3.3		(4.1)
Expired tax attributes		1,228			13,874			2,998		Expired tax attributes	0.6		1.1		1.2
Research credits		(10,359	)		(13,526	)		(5,596	)	Research credits	(22.0)		(39.0)		(10.4)
Change in valuation allowance		13,883			4,306			(79,966	)	Change in valuation allowance	5.0		(296.3)		13.9
Other		257			(257	)		(956	)	Other	(0.2)		(0.1)		0.3
	$	9,530		$	730		$	—
Provision for (benefit from) income taxes										Provision for (benefit from) income taxes	$	11.8	$	(300.6)	$	9.5

Significant components of our deferred tax assets as of December 31, ~~2019~~2021 and ~~2018~~2020 are listed below.

~~We assess all available positive and negative evidence to estimate whether sufﬁcient future taxable income will be generated to permit use~~


	December 31,
(in millions)	2021		2020
Deferred tax assets:
Net operating losses	$	90.3	$	111.4
Research and development credits	129.7		109.6
Capitalized research and development	17.9		24.7
Share-based compensation expense	38.9		29.8
Operating lease assets	29.3		25.2
Intangible assets	86.1		86.7
Other	21.6		23.9
Total deferred tax assets	413.8		411.3
Deferred tax liabilities:
Convertible senior notes	(9.9)		(13.8)
Operating lease liabilities	(23.3)		(19.9)
Other	(10.7)		(8.4)
Total deferred tax liabilities	(43.9)		(42.1)
Net of deferred tax assets and liabilities	369.9		369.2
Valuation allowance	(54.8)		(49.8)
Net deferred tax assets	$	315.1	$	319.4

As of ~~the existing~~December 31, 2021, our deferred tax ~~assets. A signiﬁcant piece~~assets were primarily the result of ~~objective negative evidence evaluated was the cumulative book~~federal net operating loss ~~incurred over the three-year period ended~~carry forwards, capitalized research costs, acquired intangible assets and tax credit carryforwards. As of December 31, ~~2019. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth.~~

~~On the basis of this analysis,~~2021 and 2020, we recorded a valuation allowance of ~~$346.0~~$54.8 million and ~~$335.2~~$49.8 million, ~~at December 31, 2019 and 2018,~~ respectively, ~~to offset the net~~against our gross deferred tax asset ~~below as realization~~balance.

As of ~~such asset is uncertain. The amount~~each reporting date, management considers new evidence, both positive and negative, that could affect its assessment of the future realizability of our deferred tax ~~asset considered realizable, however, could be adjusted if estimates~~assets. As of future taxable income during the carryforward period are increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for future growth.

December 31,

(in thousands)

2019

2018

Deferred tax assets:

Net operating losses

$
181,300

$
223,800

Research and development credits

71,900

62,200

Capitalized research and development

28,000

34,800

Share-based compensation expense

22,900

17,300

Operating lease assets

23,300

100

Intangible assets

49,300

9,400

Other

18,500

19,100

Total deferred tax assets

395,200

366,700

Deferred tax liabilities:

Convertible senior notes

(24,100
)

(26,400
)
Operating lease liabilities

(18,200
)

—

Other

(6,900
)

(5,100
)
Total deferred tax liabilities

(49,200
)

(31,500
)
Net of deferred tax assets and liabilities

346,000

335,200

Valuation allowance

(346,000
)

(335,200
)
Net deferred tax assets

$
—

$
—

At December 31, ~~2019,~~2021, management determined there was sufficient positive evidence to conclude that it is more likely than not deferred tax assets of $315.1 million are realizable. The recorded valuation allowance of $54.8 million consisted primarily of state net operating loss and credit carryforwards for which management could not conclude it is more likely than not to be realized.

As of December 31, 2021, we had federal and state income tax net operating loss ~~carry forwards~~carryforwards of ~~approximately $816.2~~$421.1 million and ~~$359.8~~$329.9 million, respectively. The federal net operating losses will begin to expire in ~~2024,~~2028, unless previously utilized.

~~A portion of the California net operating loss carry forwards expired in 2018. The remaining~~

California net operating losses will begin to expire in ~~2028~~2031 unless previously utilized and the net operating losses related to other states will begin to expire in 2026.

In addition, we ~~have~~had federal and ~~California~~state R&D tax credit ~~carry forwards~~carryforwards of ~~$73.2~~$107.3 million and ~~$47.5~~$66.3 million, respectively. A portion of the federal R&D tax credit ~~carry forwards~~carryforwards expired in ~~2019.~~2021. The remaining federal R&D tax credits will continue to expire beginning in ~~2020,~~2022, unless previously utilized. The California R&D tax credits carry forward ~~indefinitely.~~

indefinitely and the R&D tax credits related to other states will begin to expire in 2022, unless previously utilized.

Additionally, the future utilization of our net operating loss and R&D tax credit ~~carry forwards~~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 ~~result~~occur in the future. No ~~such~~ ownership changes have occurred through December 31, ~~2019.~~

2021.

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.

Our policy is to recognize interest or penalties related to income tax matters in income tax expense. Interest and penalties related to income tax matters were not material for ~~2019, 2018~~2021, 2020 or ~~2017.~~

2019.

We are subject to taxation in the ~~U.S.~~United States and various state jurisdictions. Our tax years for 2001 ~~(federal)~~for federal and ~~2008 (California)~~since inception for California and forward are subject to examination by federal and state tax authorities due to the ~~carry forward~~carryforward of unutilized net operating losses and R&D tax credits.

A summary of activity related to unrecognized tax benefits follows:

	Year Ended December 31,
(in thousands)	2019			2018			2017
										Year Ended December 31,
(in millions)									(in millions)	2021		2020		2019
Balance at January 1	$	54,775		$	37,403		$	34,112	Balance at January 1	$	60.8	$	63.9	$	54.8
Increases related to prior year tax positions		281			6,103			—
Increases related to current year tax positions		9,519			11,726			3,291
Increase (decrease) related to prior year tax positions									Increase (decrease) related to prior year tax positions	0.6		(5.7)		0.3
Increase related to current year tax positions									Increase related to current year tax positions	4.9		3.9		9.5
Settlements related to prior year tax positions									Settlements related to prior year tax positions	—		(0.2)		—
Expiration of the statute of limitations for the assessment of taxes		(657	)		(457	)		—	Expiration of the statute of limitations for the assessment of taxes	(1.7)		(1.1)		(0.7)
Balance at December 31	$	63,918		$	54,775		$	37,403	Balance at December 31	$	64.6	$	60.8	$	63.9

~~Note: Amounts presented~~ ~~in the table above exclude $28.3~~ ~~million of non-cancelable future minimum lease payments for operating leases that have not yet commenced.~~

~~Except as specifically noted above, the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K have a Commission File Number of 000-22705.~~


☑			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


		~~Page~~
			~~PART I~~Page
PART I
~~Item 1.~~			~~Business~~		3
Item ~~1A.~~ 1.	Business		~~Risk Factors~~3		15
Item 1A.	Risk Factors		15
Item 1B.			Unresolved Staff Comments		31
Item 2.	Properties		~~Properties~~31		31
Item 3.			Legal Proceedings		32
Item 4.			Mine Safety Disclosures		32

		PART II

Item 5.			Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		33
~~Item 6.~~		~~Selected Financial Data~~	34
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
Item 7A.			Quantitative and Qualitative Disclosures about Market Risk		41
Item 8.			Financial Statements and Supplementary Data		42
Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		67
Item 9A.			Controls and Procedures		67
Item 9B.			Other Information		70

		PART III

Item 10.			Directors, Executive Officers and Corporate Governance		71
Item 11.			Executive Compensation		71
Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		71
Item 13.			Certain Relationships and Related Transactions, and Director Independence		71
Item 14.			Principal Accounting Fees and Services		71

		PART IV

Item 15.			Exhibits, Financial Statement Schedules		72

(in millions)	Total		2020		2021		2022		2023		2024 and Thereafter
2024 Notes and related interest ⁽¹⁾	$	569.7	$	11.6	$	11.6	$	11.6	$	11.6	$	523.3
Operating leases ⁽²⁾		160.9		8.6		10.8		13.1		13.9		114.5
Total contractual obligations	$	730.6	$	20.2	$	22.4	$	24.7	$	25.5	$	637.8

	Common Stock				Additional Paid		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
(in thousands)	Shares		Amount		in Capital		Income (Loss)			Deficit			Equity
Balance at December 31, 2016		86,883	$	87	$	1,371,432	$	(318	)	$	(1,056,324	)	$	314,877
Net loss		—		—		—		—			(142,542	)		(142,542	)
Unrealized loss on marketable securities		—		—		—		(1,532	)		—			(1,532	)
Share-based compensation expense		—		—		42,522		—			—			42,522
Issuance of common stock for vested restricted stock units		562		1		—		—			—			1
Issuance of common stock for stock option exercises		1,349		1		13,863		—			—			13,864
Equity component of convertible debt, net		—		—		144,948		—			—			144,948
Balance at December 31, 2017		88,794	$	89	$	1,572,765	$	(1,850	)	$	(1,198,866	)	$	372,138
Net income		—		—		—		—			21,111			21,111
Unrealized loss on marketable securities		—		—		—		(82	)		—			(82	)
Share-based compensation expense		—		—		58,068		—			—			58,068
Issuance of common stock for vested restricted stock units		429		—		—		—			—			—
Issuance of common stock for stock option exercises		1,574		2		29,528		—			—			29,530
Balance at December 31, 2018		90,797	$	91	$	1,660,361	$	(1,932	)	$	(1,177,755	)	$	480,765
Net income		—		—		—		—			37,012			37,012
Unrealized gain on marketable securities		—		—		—		3,345			—			3,345
Share-based compensation expense		—		—		75,262		—			—			75,262
Cumulative-effect adjustment to equity due to adoption of ASU 2016-02		—		—		—		—			8,043			8,043
Issuance of common stock for vested restricted stock units		416		—		—		—			—			—
Issuance of common stock for stock option exercises		981		1		27,312		—			—			27,313
Issuance of common stock for employee stock purchase plan		78		—		5,183		—			—			5,183
Balance at December 31, 2019		92,272	$	92	$	1,768,118	$	1,413		$	(1,132,700	)	$	636,923

(in thousands)	Contractual Maturity (in years)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Aggregate Estimated Fair Value
December 31, 2019:
Classified as current assets:
Commercial paper	Less than 1	$	144,460	$	27	$	(15	)	$	144,472
Corporate debt securities	Less than 1		270,485		557		(42	)		271,000
Securities of government-sponsored entities	Less than 1		142,351		422		—			142,773
blank		$	557,296	$	1,006	$	(57	)	$	558,245
Classified as non-current assets:
Corporate debt securities	1 to 2	$	250,499	$	515	$	(68	)	$	250,946
Securities of government-sponsored entities	1 to 2		48,691		19		(2	)		48,708
blank		$	299,190	$	534	$	(70	)	$	299,654
blank
December 31, 2018:
Classified as current assets:
Commercial paper	Less than 1	$	94,617	$	—	$	(45	)	$	94,572
Corporate debt securities	Less than 1		395,385		—		(1,598	)		393,787
Securities of government-sponsored entities	Less than 1		20,887		8		(55	)		20,840
blank		$	510,889	$	8	$	(1,698	)	$	509,199
Classified as non-current assets:
Corporate debt securities	1 to 2	$	151,594	$	66	$	(469	)	$	151,191
Securities of government-sponsored entities	1 to 2		64,676		162		(1	)		64,837
blank		$	216,270	$	228	$	(470	)	$	216,028

	Less Than 12 Months					12 Months or Greater					Total
(in thousands)	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
December 31, 2019:
Commercial paper	$	33,070	$	(15	)	$	—	$	—		$	33,070	$	(15	)
Corporate debt securities		186,052		(110	)		—		—			186,052		(110	)
Securities of government-sponsored entities		15,002		(2	)		—		—			15,002		(2	)
blank	$	234,124	$	(127	)	$	—	$	—		$	234,124	$	(127	)
blank
December 31, 2018:
Commercial paper	$	51,927	$	(45	)	$	—	$	—		$	51,927	$	(45	)
Corporate debt securities		274,696		(746	)		234,798		(1,321	)		509,494		(2,067	)
Securities of government-sponsored entities		4,999		(1	)		10,947		(55	)		15,946		(56	)
blank	$	331,622	$	(792	)	$	245,745	$	(1,376	)	$	577,367	$	(2,168	)

				Fair Value Measurements Using
(in thousands)	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2019:
Classified as current assets:
Cash and money market funds	$	112,279		$	112,279		$	—	$	—
Commercial paper		144,472			—			144,472		—
Securities of government-sponsored entities		142,773			—			142,773		—
Corporate debt securities		271,000			—			271,000		—
blank		670,524			112,279			558,245		—
Classified as long-term assets:
Certificates of deposit		3,206			3,206			—		—
Securities of government-sponsored entities		48,708			—			48,708		—
Corporate debt securities		250,946			—			250,946		—
Restricted equity securities		55,868			—			—		55,868
blank		1,029,252			115,485			857,899		55,868
Less cash and cash equivalents and restricted cash		(115,485	)		(115,485	)		—		—
Total investments	$	913,767		$	—		$	857,899	$	55,868
blank
December 31, 2018:
Classified as current assets:
Cash and money market funds	$	141,714		$	141,714		$	—	$	—
Commercial paper		94,572			—			94,572		—
Securities of government-sponsored entities		20,840			—			20,840		—
Corporate debt securities		393,787			—			393,787		—
blank		650,913			141,714			509,199		—
Classified as long-term assets:
Cash and money market funds		1,500			1,500			—		—
Certificates of deposit		3,977			3,977			—		—
Securities of government-sponsored entities		64,837			—			64,837		—
Corporate debt securities		151,191			—			151,191		—
blank		872,418			147,191			725,227		—
Less cash and cash equivalents and restricted cash		(147,191	)		(147,191	)		—		—
Total investments	$	725,227		$	—		$	725,227	$	—

(in thousands)
Balance at December 31, 2018	$	—
Investments in restricted equity securities		68,855
Net unrealized loss recognized on restricted equity securities during the period		(12,987)
Balance at December 31, 2019	$	55,868

(in thousands)	Operating Leases
Year Ending December 31,
2020	$	8,558
2021		10,578
2022		10,900
2023		11,232
2024		11,574
Thereafter		91,271
Total operating lease payments		134,681
Less accreted interest		(39,643	)
		95,038
Less current operating lease liabilities		(8,282	)
Noncurrent operating lease liabilities	$	86,756


(in millions)	December 31, 2021
Year ending December 31, 2022	$	17.0
Year ending December 31, 2023	17.9
Year ending December 31, 2024	17.4
Year ending December 31, 2025	15.9
Year ending December 31, 2026	15.7
Thereafter	70.4
Total operating lease payments	154.3
Less accreted interest	32.5
Total operating lease liabilities	121.8
Less current operating lease liabilities included in other current liabilities	16.5
Noncurrent operating lease liabilities	$	105.3

(in thousands, except per share data)	First Quarter			Second Quarter			Third Quarter		Fourth Quarter
Year Ended December 31, 2019:
Total revenues	$	138,403		$	183,580		$	222,094	$	244,010
Total operating expenses ⁽¹⁾	$	239,400		$	149,119		$	131,996	$	195,289
Net (loss) income ⁽¹⁾	$	(102,115	)	$	51,338		$	53,789	$	34,000
Net (loss) income per share, basic ⁽¹⁾	$	(1.12	)	$	0.56		$	0.59	$	0.37
Net (loss) income per share, diluted ⁽¹⁾	$	(1.12	)	$	0.54		$	0.56	$	0.35
Weighted average common shares outstanding, basic		91,056			91,389			91,859		92,182
Weighted average common shares outstanding, diluted		91,056			94,779			96,074		97,229
blank
Year Ended December 31, 2018:
Total revenues	$	71,086		$	96,905		$	151,757	$	131,492
Total operating expenses	$	108,533		$	98,757		$	97,434	$	109,621
Net (loss) income	$	(41,818	)	$	(5,913	)	$	50,764	$	18,078
Net (loss) income per share, basic	$	(0.47	)	$	(0.07	)	$	0.56	$	0.20
Net (loss) income per share, diluted	$	(0.47	)	$	(0.07	)	$	0.52	$	0.19
Weighted average common shares outstanding, basic		89,526			90,100			90,555		90,742
Weighted average common shares outstanding, diluted		89,526			90,100			96,798		95,724


+						Management contract or compensatory plan or arrangement.

*						Confidential treatment has been granted with respect to certain portions of the exhibit.


**			~~Management contract or compensatory plan or arrangement.~~			Certain information in this exhibit has been omitted pursuant to Item 601 of Regulation S-K.


***						These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. Section 1350 and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of Neurocrine Biosciences, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

						Except as specifically noted above, the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K have a Commission File Number of 000-22705.


NEUROCRINE BIOSCIENCES, INC.
(Registrant)

By:						/s/ Kevin C. Gorman
						Kevin C. Gorman
						Chief Executive Officer

Date:						February ~~6, 2020~~ 11, 2022

By:						/s/ Matthew C. Abernethy
						Matthew C. Abernethy
						Chief Financial Officer

Date:						February ~~6, 2020~~ 11, 2022

~~Signature~~	~~Title~~
Signature		Title

/s/ Kevin C. Gorman		Chief Executive Officer and Director
Kevin C. Gorman, Ph.D.		(Principal Executive Officer)

/s/ Matthew C. Abernethy		Chief Financial Officer
Matthew C. Abernethy		(Principal Financial and Accounting Officer)

/s/ William H. Rastetter		Chairman of the Board of Directors
William H. Rastetter, Ph.D.

/s/ Gary A. Lyons		Director
Gary A. Lyons

/s/ Johanna Mercier		Director
Johanna Mercier

/s/ George J. Morrow		Director
George J. Morrow

/s/ Leslie V. Norwalk		Director
Leslie V. Norwalk

/s/ Richard F. Pops		Director
Richard F. Pops

/s/ ~~Alfred W. Sandrock, Jr~~.Shalini Sharp		Director
~~Alfred W. Sandrock, Jr., M.D., Ph.D.~~ Shalini Sharp

/s/ Stephen A. Sherwin		Director
Stephen A. Sherwin, M.D.

	~~Director~~
~~Shalini Sharp~~