NEUROCRINE BIOSCIENCES INC

Previous wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations section contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A under the caption “Risk Factors.” The interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are contained in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations section contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A under the caption “Risk Factors.” The interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are contained in our Annual Report on Form 10-K for the year ended December 31, 2023 and our Quarterly Report on Form 10-Q for thethree months ended March 31, 2024.

Previous wording

Neurocrine Biosciences is a neuroscience-focused, biopharmaceutical company with a simple purpose: to relieve suffering for people with great needs, but few options. We are dedicated to discovering and developing life-changing treatments for patients with under-addressed neurological, neuroendocrine and neuropsychiatric disorders. The Company’s diverse portfolio includes U.S. Food and Drug Administration (FDA) approved treatments for tardive dyskinesia, chorea associated with Huntington's disease, adrenal insufficiency, and endometriosis and uterine fibroids in collaboration with AbbVie Inc. (AbbVie), a European Medicines Agency (EMA) approved treatment for classic congenital adrenal hyperplasia (CAH) and a diversified portfolio of advanced clinical-stage programs in multiple therapeutic areas.

Current wording

Neurocrine Biosciences is a neuroscience-focused, biopharmaceutical company with a simple purpose: to relieve suffering for people with great needs, but few options. We are dedicated to discovering and developing life-changing treatments for patients with under-addressed neurological, neuroendocrine and neuropsychiatric disorders. The company’s diverse portfolio includes U.S. Food and Drug Administration (FDA) approved treatments for tardive dyskinesia, chorea associated with Huntington's disease, endometriosis and uterine fibroids in collaboration with AbbVie Inc. (AbbVie), as well as a diversified portfolio of multiple compounds in mid- to late-phase clinical development across our core therapeutic areas.

Previous wording

We launched INGREZZA® (valbenazine) in the U.S. as the first FDA-approved drug for the treatment of tardive dyskinesia in May 2017 and for the treatment of adults with chorea associated with Huntington's disease in August 2023.

Current wording

We launched INGREZZA® (valbenazine) in the U.S. as the first FDA-approved drug for the treatment of tardive dyskinesia in May 2017 and for the treatment of chorea associated with Huntington's disease in August 2023.

Previous wording

Our partner AbbVie launched ORILISSA® (elagolix tablets) in the U.S. for the treatment of moderate to severe pain associated with endometriosis in August 2018 and ORIAHNN® (elagolix, estradiol and norethindrone acetate capsules and elagolix capsules) in the U.S. for the treatment of heavy menstrual bleeding due to uterine fibroids in June 2020. We receive royalties at tiered percentage rates on AbbVie net sales of elagolix.

Current wording

Our partner AbbVie launched ORILISSA® (elagolix tablets) in the U.S. for the treatment of endometriosis in August 2018 and ORIAHNN® (elagolix, estradiol and norethindrone acetate capsules and elagolix capsules) in the U.S. for the treatment of heavy menstrual bleeding due to uterine fibroids in June 2020. We receive royalties at tiered percentage rates on AbbVie net sales of elagolix.

Previous wording

Convertible Senior Notes. On May 2, 2017, we completed a private placement of $517.5 million in aggregate principal amount of 2.25% fixed-rated convertible senior notes due May 15, 2024 (the 2024 Notes). In 2020, we repurchased $136.2 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $186.9 million in cash. In 2022, we repurchased $210.8 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $279.0 million in cash. As of March 31, 2024, $170.4 million aggregate principal amount of the 2024 Notes remained outstanding.

Current wording

•Settled the convertible senior notes due May 15, 2024 (the 2024 Notes) in full in cash upon maturity.

Previous wording

•Received approval from the FDA for INGREZZA® SPRINKLE (valbenazine) capsules, a new oral granules formulation of INGREZZA capsules.

Current wording

•Received approval from the FDA for INGREZZA® SPRINKLE (valbenazine) capsules, a new oral granules formulation of INGREZZA capsules, and subsequently launched new sprinkle formulation of INGREZZA capsules for the treatment of adults with tardive dyskinesia and chorea associated with Huntington’s disease.

Previous wording

Results of Operations for the Three Months Ended March 31, 2024 and 2023

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Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

Compared with the comparable period last year, the increase in total net product sales primarily reflected increased INGREZZA net product sales driven by strong underlying patient demand and improved gross-to-net dynamics.

Current wording

Compared with the comparable period last year, the increase in total net product sales for the first six months of 2024 primarily reflected increased INGREZZA net product sales driven by strong underlying patient demand and improved gross-to-net dynamics.

Previous wording

Compared with the comparable period last year, the change in cost of revenues primarily reflected increased INGREZZA net product sales, offset by decreased costs due to the termination of our license agreement with BIAL, which became effective in December 2023, to commercialize and market ONGENTYS® (opicapone) in the U.S. and Canada.

Current wording

Compared with the comparable period last year, the decrease in cost of revenues for the first six months of 2024 primarily reflected the impact of decreased ONGENTYS® (opicapone) net product sales and lower ONGENTYS inventory reserves in connection with the termination of our license agreement with BIAL, which became effective in December 2023, partially offset by the impact of increased INGREZZA net product sales.

Previous wording

Compared with the comparable period last year, the decrease in late-stage expenses primarily reflected the successful completion of the Phase 3 programs for crinecerfont in CAH in the third quarter of 2023.

Current wording

Compared with the comparable period last year, the decrease in late-stage expenses for the first six months of 2024 primarily reflected the successful completion of the Phase 3 programs for crinecerfont in CAH in the third quarter of 2023 and lower spend on certain of our late-stage VMAT2 programs.

Previous wording

Compared with the comparable period last year, the change in early-stage expenses primarily reflected increased investment in advancing Phase 2 programs in psychiatry, offset by decreased spend on early stage programs in epilepsy.

Current wording

Compared with the comparable period last year, the increase in early-stage expenses for the first six months of 2024 primarily reflected increased investment in our muscarinic programs and advancing Phase 2 programs in psychiatry, offset by lower spend on early stage programs in epilepsy.

Previous wording

Compared with the comparable period last year, the increase in research and discovery expenses primarily reflected increased investment in preclinical development programs.

Current wording

Compared with the comparable period last year, the increase in research and discovery expenses for the first six months of 2024 primarily reflected increased investment in preclinical development programs, including our gene therapy programs.

Previous wording

Payroll and Benefits. Consists of costs incurred for salaries and wages, payroll taxes, benefits and stock-based compensation associated with employees involved in research and development activities. Stock-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 stock-based grants are issued.

Current wording

Payroll and Benefits. Consists of costs incurred for salaries and wages, payroll taxes, benefits and stock-based compensation associated with employees involved in research and development activities. Stock-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 stock-based grants are issued and timing of expense recognition related to performance-based restricted stock units, which is generally recognized ratably over the expected performance period once the predefined performance-based criteria for vesting becomes probable.

Previous wording

Compared with the comparable period last year, the increase in payroll and benefits expenses primarily reflected higher headcount, including an increase of $3.2 million in non-cash stock-based compensation expense.

Current wording

Compared with the comparable period last year, the increase in payroll and benefits expenses for the first six months of 2024 primarily reflected higher headcount, partially offset by decreased non-cash stock-based compensation expense primarily driven by a charge related to a change in equity grant agreement terms in the second quarter of 2023.

Previous wording

In the first quarter of 2024, we recognized $6.0 million of IPR&D expense in connection with the payment of the upfront fee pursuant to our collaboration with Biocytogen Pharmaceuticals (Beijing) Co., Ltd. In the first quarter of 2023, we recognized $143.9 million of IPR&D expense in connection with the payment of the upfront fee pursuant to the expansion of our collaboration with Voyager.

Current wording

Compared with the comparable period last year, the decrease in IPR&D expense for the first six months of 2024 reflected lower payments for upfront fees in connection with our collaborations. In the first six months of 2023, we recognized $143.9 million of IPR&D expense in connection with payment of the upfront fee pursuant to the expansion of our collaboration with Voyager.

Previous wording

Compared with the comparable period last year, the change in SG&A expenses primarily reflected continued investment in our commercial organization, including pre-launch crinecerfont activities, offset by decreases in other general and administrative costs.

Current wording

Compared with the comparable period last year, the increase in SG&A expenses for the first six months of 2024 primarily reflected continued investment in our commercial organization, including pre-launch crinecerfont activities, and impairment charges of $14.0 million associated with leased office space that has been vacated as we continue to occupy our new campus facility, partially offset by decreased non-cash stock-based compensation expense primarily driven by a charge related to a change in equity grant agreement terms in the second quarter of 2023.

Previous wording

Compared with the comparable period last year, the change in total other (expense) income, net, primarily reflected $88.7 million of expense recognized in connection with the bifurcation of the embedded conversion option of the convertible senior notes, partially offset by increased interest income on our debt security investments.

Current wording

Compared with the comparable period last year, the increase in total other expense, net, for the first six months of 2024 primarily reflected $138.4 million of expense recognized in connection with conversions of the 2024 Notes upon maturity in May 2024 and periodic fluctuations in the fair values of our equity security investments, partially offset by increased interest income on our debt security investments.

Previous wording

Benefit from Income Taxes.

Current wording

Provision for (Benefit from) Income Taxes.

Previous wording

The effective tax rate for the first quarter of 2024 varied from the federal and state statutory rates primarily due to credits generated for research activities, certain nondeductible expenses including debt extinguishment, excess tax benefits related to stock-based compensation, and losses incurred in foreign jurisdictions for which no tax benefit was recorded as management cannot conclude that it is more likely than not that the tax benefit of such losses will be realized in the future. For the comparable period last year, the effective tax rate varied from the federal and state statutory rates primarily due to excess tax benefits related to stock-based compensation.

Current wording

The effective tax rate for the second quarter and first six months of 2024 varied from the federal and state statutory rates primarily due to credits generated for research activities, certain nondeductible expenses including debt extinguishment, excess tax benefits related to stock-based compensation, and losses incurred in foreign jurisdictions for which no tax benefit was recorded as management cannot conclude that it is more likely than not that the tax benefit of such losses will be realized in the future. For the comparable periods last year, the effective tax rate varied from the federal and state statutory rates primarily due to credits generated for research activities, certain nondeductible expenses, the impact of changes in the state effective rate, and losses incurred in foreign jurisdictions for which no tax benefit was recorded as management cannot conclude that it is more likely than not that the tax benefit of such losses will be realized in the future.

Previous wording

Compared with the comparable period last year, the change in net income (loss) primarily reflected increased INGREZZA net product sales and decreased IPR&D expense in connection with our collaborations, partially offset by $88.7 million of expense recognized in connection with the bifurcation of the embedded conversion option of the convertible senior notes and increased investment in our expanded clinical portfolio.

Current wording

Compared with the comparable period last year, the increase in net income for the first six months of 2024 primarily reflected increased INGREZZA net product sales and lower total payments for upfront fees and development milestones achieved in connection with our collaborations, partially offset by $138.4 million of expense recognized in connection with conversions of the 2024 Notes upon maturity in May 2024, periodic fluctuations in the fair values of our equity security investments, and continued investment in our commercial organization, including pre-launch crinecerfont activities, and expanded clinical portfolio.

Previous wording

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 12 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.

Current wording

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 12 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 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.

Previous wording

Cash Flows from Operating Activities. Compared with the comparable period last year, the change in cash flows from operating activities primarily reflected increased INGREZZA net product sales and lower upfront payments in connection with our collaborations, partially offset by $88.7 million of expense recognized in connection with the bifurcation of the embedded conversion option of the convertible senior notes and increased investment in our expanded clinical portfolio.

Current wording

Cash Flows from Operating Activities. Compared with the comparable period last year, the change in cash flows from operating activities primarily reflected increased INGREZZA net product sales and lower total payments for upfront fees and development milestones achieved in connection with our collaborations, partially offset by increased cash paid for income taxes and increased investment in our expanded clinical portfolio.

Previous wording

Cash Flows from Financing Activities. Cash flows from financing activities reflected proceeds from issuances of our common stock for all periods presented.

Current wording

Cash Flows from Financing Activities. Compared with the comparable period last year, the change in cash flows from financing activities primarily reflected the settlement of the 2024 Notes in full for $308.8 million in cash, partially offset by increased proceeds from issuances of our common stock.

Previous wording

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

Current wording

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

Previous wording

•competing technological and market developments; and

Current wording

•competing technological and market developments;

Previous wording

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

Current wording

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

Previous wording

•the cost of manufacturing of our product candidates;

Current wording

•the cost of manufacturing our product candidates.

Previous wording

External Business Developments. In addition to our independent efforts to develop and market products, we 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 approximately $17.5 billion upon the achievement of certain milestones.

Current wording

External Business Developments. In addition to our independent efforts to develop and market products, we 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 approximately $17.7 billion upon the achievement of certain milestones.

Previous wording

The construction of the campus facility is phased. The first phase of construction, consisting of two buildings relating to office space, was completed in December 2023. As we begin to occupy our new campus facility, we will sublease certain of our existing leased premises when we determine there is excess leased capacity.

Current wording

The construction of the campus facility is phased. The first phase of construction, consisting of two buildings relating to office space, was completed in December 2023. As we continue to occupy our new campus facility, we will sublease certain of our existing leased premises when we determine there is excess leased capacity.