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 and our Quarterly Report on Form 10-Q for thethree months ended March 31, 2024.

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 thesix months ended June 30, 2024.

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 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. We estimate that tardive dyskinesia affects approximately 800,000 people in the U.S. and approximately 90% of the 40,0000 people in in the U.S. diagnosed with Huntington’s disease will develop chorea. Key elements of our commercial strategy include maximizing the opportunity in INGREZZA through consistent and effective commercial execution, continued development of valbenazine as the best-in-class treatment for new patient populations and to lead the evolving understanding of VMAT2 biology and its role in disease. INGREZZA net product sales accounted for approximately 99% of our total net product sales for the first nine months of 2024.

Previous wording

•Announced Kevin Gorman, Ph.D., will retire as Chief Executive Officer (CEO) on October 11, 2024. Kyle Gano, Ph.D., currently Neurocrine’s Chief Business Development and Strategy Officer, will succeed him in the CEO role. Dr. Gano will also join the Company’s Board of Directors at that time, and Dr. Gorman will continue to serve on the Company’s Board.

Current wording

•Kevin Gorman, Ph.D., retired as Chief Executive Officer (CEO) effective October 11, 2024. Kyle Gano, Ph.D., formerly Neurocrine’s Chief Business Development and Strategy Officer, succeeded Dr. Gorman in the CEO role and also joined the Company’s Board of Directors at that time. Dr. Gorman will continue to serve on the Company’s Board.

Previous wording

•Announced planned expansion of the INGREZZA psychiatry and long-term care sales teams to better serve patients by accelerating the number of people who are diagnosed and treated for tardive dyskinesia and chorea associated with Huntington's disease with INGREZZA.

Current wording

•Deployed expanded INGREZZA psychiatry and long-term care sales teams to better serve patients by accelerating the number of people who are diagnosed and treated for tardive dyskinesia and chorea associated with Huntington's disease with INGREZZA.

Previous wording

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

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Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

Previous 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.

Current wording

Compared with the comparable period last year, the increase in total net product sales for the first nine 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 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.

Current wording

Compared with the comparable period last year, the decrease in cost of revenues for the first nine 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 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.

Current wording

Compared with the comparable period last year, the decrease in late-stage expenses for the first nine 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 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.

Current wording

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

Previous 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.

Current wording

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

Previous wording

Compared with the comparable period last year, the increase in milestone expenses for the first six months of 2024 primarily reflected expense recognized in connection with development milestones achieved under our collaborations with Nxera, Takeda and Voyager.

Current wording

Compared with the comparable period last year, the increase in milestone expenses for the first nine months of 2024 primarily reflected expense recognized in connection with development milestones achieved under our collaborations with Nxera, Takeda, and Voyager Therapeutics, Inc. (Voyager).

Previous 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.

Current wording

Compared with the comparable period last year, the increase in payroll and benefits expenses for the first nine months of 2024 primarily reflected higher headcount, partially offset by decreased non-cash stock-based compensation expense 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 increase in facilities and other expenses for the first six months of 2024 primarily reflected increased rent expense related to our new campus facility.

Current wording

Compared with the comparable period last year, the increase in facilities and other expenses for the first nine months of 2024 primarily reflected increased rent expense related to our new campus facility.

Previous 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.

Current wording

Compared with the comparable period last year, the decrease in IPR&D expense for the first nine months of 2024 reflected lower payments for upfront fees in connection with our collaborations. In the first nine 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 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.

Current wording

Compared with the comparable period last year, the increase in SG&A expenses for the first nine months of 2024 primarily reflected continued investment in our commercial organization, including the recent expansion of our psychiatry and long-term care sales team in September 2024, pre-launch crinecerfont activities, increased facility expenses related to our new campus facility 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 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 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.

Current wording

Compared with the comparable period last year, the increase in total other expense, net, for the first nine 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 investments, partially offset by increased interest income on our debt security investments.

Previous 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.

Current wording

The effective tax rate for the third quarter and first nine 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 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.

Current wording

Compared with the comparable period last year, the increase in net income for the first nine months of 2024 primarily reflected increased INGREZZA net product sales, increased interest income on our debt security investments, 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 investments, and continued investment in our commercial organization, including pre-launch crinecerfont activities, and expanded pre-clinical and clinical portfolio.

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 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.

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 pre-clinical and clinical portfolio.

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 continue 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. The second phase of construction, consisting of two buildings relating to laboratory space, is scheduled for completion by the end of 2024. 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.