nbix-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-22705

NEUROCRINE BIOSCIENCES, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

12780 El Camino Real

San Diego, CA

(Address of principal executive office)

33-0525145

(IRS Employer

Identification No.)

92130

(Zip Code)

(858) 617-7600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

NBIX

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 94,545,991 as of April 29, 2021.

NEUROCRINE BIOSCIENCES, INC.

TABLE OF CONTENTS


			PAGE

Part I. Financial Information			3

Item 1. Financial Statements			3

Condensed Consolidated Balance Sheets			3

Condensed Consolidated Statements of Operations and Comprehensive Income			4

Condensed Consolidated Statements of Stockholders’ Equity			5

Condensed Consolidated Statements of Cash Flows			6

Notes to the Condensed Consolidated Financial Statements			7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16

Item 3. Quantitative and Qualitative Disclosures About Market Risk			20

Item 4. Controls and Procedures			20

Part II. Other Information			21

Item 1A. Risk Factors			21

Item 6. Exhibits			45

Signatures			46

Part I. Financial Information

Item 1. Financial Statements

NEUROCRINE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


(in millions, except per share data)	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	352.6	$	187.1
Debt securities available-for-sale, at fair value (amortized cost $520.2 million at March 31, 2021 and $612.4 million at December 31, 2020)	521.1		613.9
Accounts receivable	147.8		157.1
Inventories	30.1		28.0
Other current assets	33.8		30.1
Total current assets	1,085.4		1,016.2
Deferred tax assets	325.6		319.4
Debt securities available-for-sale, at fair value (amortized cost $249.6 million at March 31, 2021 and $226.7 million at December 31, 2020)	249.6		227.1
Right-of-use assets	97.0		82.8
Equity securities	38.9		38.2
Property and equipment, net	45.3		44.6
Restricted cash	3.2		3.2
Other long-term assets	1.4		3.2
Total assets	$	1,846.4	$	1,734.7

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities	$	171.9	$	168.7

Other current liabilities	18.1		17.8
Total current liabilities	190.0		186.5
Convertible senior notes	322.0		317.9
Operating lease liabilities	107.5		94.4
Other long-term liabilities	21.3		9.7
Total liabilities	640.8		608.5

Stockholders’ equity:
Preferred stock, $0.001 par value; 5.0 shares authorized; no shares issued and outstanding at March 31, 2021 and December 31, 2020	—		—
Common stock, $0.001 par value; 220.0 shares authorized; issued and outstanding shares were 94.5 at March 31, 2021 and 93.5 at December 31, 2020	0.1		0.1
Additional paid-in capital	1,897.8		1,849.7
Accumulated other comprehensive income	1.0		1.8
Accumulated deficit	(693.3)		(725.4)
Total stockholders’ equity	1,205.6		1,126.2
Total liabilities and stockholders’ equity	$	1,846.4	$	1,734.7

See accompanying notes to the condensed consolidated financial statements.

NEUROCRINE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(unaudited)


	Three Months Ended March 31,
(in millions, except per share data)	2021		2020
Revenues:
Product sales, net	$	231.0	$	231.1
Collaboration revenue	5.6		6.0
Total revenues	236.6		237.1
Operating expenses:
Cost of sales	2.9		2.1
Research and development	73.2		58.3

Selling, general and administrative	129.0		117.8
Total operating expenses	205.1		178.2
Operating income	31.5		58.9
Other (expense) income:
Interest expense	(6.4)		(8.2)
Unrealized gain (loss) on restricted equity securities	0.7		(16.5)
Investment income and other, net	1.4		4.7
Total other expense, net	(4.3)		(20.0)
Income before (benefit from) provision for income taxes	27.2		38.9
(Benefit from) provision for income taxes	(4.9)		1.5
Net income	32.1		37.4
Unrealized loss on debt securities available-for-sale, net of tax	(0.8)		(2.8)
Comprehensive income	$	31.3	$	34.6
Net income per share, basic	$	0.34	$	0.40
Net income per share, diluted	$	0.33	$	0.39
Weighted average common shares outstanding, basic	94.2		92.6
Weighted average common shares outstanding, diluted	98.2		97.0

See accompanying notes to the condensed consolidated financial statements.

NEUROCRINE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)


						Accumulated Other Comprehensive Income (Loss)
	Common Stock			Additional Paid-In Capital				Accumulated Deficit
(in millions)	Shares	$								Total
Balances at December 31, 2020	93.5	$	0.1	$	1,849.7	$	1.8	$	(725.4)	$	1,126.2
Net income	—	—		—		—		32.1		32.1
Unrealized loss on debt securities available-for-sale, net of tax	—	—		—		(0.8)		—		(0.8)
Share-based compensation expense	—	—		32.9		—		—		32.9
Issuances of common stock under stock plans	1.0	—		15.2		—		—		15.2
Balances at March 31, 2021	94.5	$	0.1	$	1,897.8	$	1.0	$	(693.3)	$	1,205.6

Balances at December 31, 2019	92.3	$	0.1	$	1,768.1	$	1.4	$	(1,132.7)	$	636.9
Net income	—	—		—		—		37.4		37.4
Unrealized loss on debt securities available-for-sale, net of tax	—	—		—		(2.8)		—		(2.8)
Share-based compensation expense	—	—		22.8		—		—		22.8
Issuances of common stock under stock plans	0.5	—		6.0		—		—		6.0
Balances at March 31, 2020	92.8	$	0.1	$	1,796.9	$	(1.4)	$	(1,095.3)	$	700.3

See accompanying notes to the condensed consolidated financial statements.

NEUROCRINE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Three Months Ended March 31,
(in millions)	2021		2020
Cash Flows from Operating Activities:
Net income	$	32.1	$	37.4
Reconciliation of net income to net cash provided by operating activities:
Share-based compensation expense	32.9		22.8
Depreciation	2.5		2.1
Amortization of debt discount	3.9		5.0
Amortization of debt issuance costs	0.3		0.3
Change in fair value of equity security investments	(0.7)		16.5
Deferred income taxes	(6.2)		—
Other	2.6		0.4
Change in operating assets and liabilities:
Accounts receivable	9.3		(22.1)
Inventories	(2.1)		(3.9)
Accounts payable and accrued liabilities	11.0		(16.2)
Other assets and liabilities, net	1.7		(6.8)
Net cash provided by operating activities	87.3		35.5

Cash Flows from Investing Activities:
Purchases of debt securities available-for-sale	(93.7)		(172.0)
Sales and maturities of debt securities available-for-sale	161.3		206.5

Purchases of property and equipment	(4.5)		(1.3)
Net cash provided by investing activities	63.1		33.2

Cash Flows from Financing Activities:
Issuances of common stock under benefit plans	15.2		6.0
Partial repurchase of convertible senior notes	(0.1)		—
Net cash provided by financing activities	15.1		6.0
Change in cash, cash equivalents and restricted cash	165.5		74.7
Cash, cash equivalents and restricted cash at beginning of period	190.3		115.5
Cash, cash equivalents and restricted cash at end of period	$	355.8	$	190.2

Supplemental Disclosure:
Non-cash capital expenditures	$	0.1	$	0.8
Right-of-use assets acquired through operating leases	$	16.0	$	—

See accompanying notes to the condensed consolidated financial statements.

NEUROCRINE BIOSCIENCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Significant Accounting Policies

Description of Business. 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 Biosciences. We also have two 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 neuroscience-focused, biopharmaceutical company dedicated to discovering, developing and delivering life-changing treatments for people with serious, challenging and under-addressed neurological, endocrine and psychiatric disorders. Our diverse portfolio includes United States Food and Drug Administration, or FDA, approved treatments for tardive dyskinesia, Parkinson’s disease, endometriosis*, uterine fibroids* and clinical programs in multiple therapeutic areas. For nearly three decades, we have specialized in targeting and interrupting disease-causing mechanisms involving the interconnected pathways of the nervous and endocrine systems. (*in collaboration with AbbVie Inc.)

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial information and with the instructions of the Securities and Exchange Commission, or SEC, on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, the condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of our financial position and of the results of operations and cash flows for the periods presented. The accompanying unaudited condensed consolidated financial statements include the accounts of Neurocrine Biosciences and our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020, included in our Annual Report on Form 10-K, or the 2020 Form 10-K, filed with the SEC. The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for any other interim period or the full year. The condensed consolidated balance sheet at December 31, 2020, has been derived from the audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

There were no significant changes to our significant accounting policies as disclosed in the 2020 Form 10-K.

Recently Adopted Accounting Pronouncements.

ASU 2019-12. On January 1, 2021, we adopted Accounting Standards Update, or ASU, 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, using the modified retrospective transition method. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application of Topic 740. The adoption of ASU 2019-12 did not result in a cumulative-effect adjustment to retained earnings. The comparative prior period information continues to be reported under the accounting standards in effect during those periods. The impact of the adoption is expected to be immaterial to our financial position, results of operations, and cash flows on an ongoing basis.

Recently Issued Accounting Pronouncements.

ASU 2020-06. In August 2020, the FASB issued ASU 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 liabilities and equity, including convertible instruments, and amends existing earnings-per-share, or EPS, guidance by requiring that an entity use the if-converted method when calculating diluted EPS for convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We plan to adopt ASU 2020-06 effective January 1, 2022 using the modified retrospective transition method. We are currently evaluating the effect ASU 2020-06 will have on our consolidated financial statements and related disclosures.

2. Significant Collaboration and Licensing Agreements

Takeda Pharmaceutical Company Limited. We entered into an exclusive license agreement with Takeda Pharmaceutical Company Limited, or Takeda, which became effective in July 2020, to develop and commercialize certain compounds in Takeda’s early to mid-stage psychiatry pipeline. Specifically, Takeda granted us an exclusive license to (i) luvadaxistat (NBI-1065844/TAK-831) for adults with negative symptoms of schizophrenia, (ii) NBI-1065845 (TAK-653) for treatment-resistant depression, (iii) NBI-1065846 (TAK-041) for anhedonia and (iv) four non-clinical stage assets.

With respect to luvadaxistat, Takeda will retain the right to opt-in to a profit-sharing arrangement pursuant to which we and Takeda will equally share in the operating profits and losses associated with luvadaxistat (in lieu of receiving payments for milestones and royalties), subject to certain exceptions. Subject to specified conditions, Takeda may elect to exercise such opt-in right for luvadaxistat before we initiate a Phase III clinical study.

With respect to NBI-1065845 and NBI-1065846, Takeda will retain the rights to opt-out of the profit-sharing arrangements pursuant to which Takeda would be entitled to receive royalties on the future net sales of such asset (in lieu of equally sharing in the operating profits and losses). Takeda may elect to exercise such opt-out rights immediately following the completion of the associated second Phase II clinical study or, under certain circumstances related to the development and commercialization activities to be performed by us, before the initiation of a Phase III clinical study for such asset.

Under the terms of the agreement, Takeda may be entitled to receive payments of up to $1.9 billion upon the achievement of certain milestones associated with luvadaxistat and the four non-clinical stage assets, as well as receive royalties on the future net sales of such assets. We and Takeda will equally share in the operating profits and losses associated with NBI-1065845 and NBI-1065846.

Idorsia Pharmaceuticals Ltd. In May 2020, we entered a collaboration and licensing agreement with Idorsia Pharmaceuticals Ltd, or Idorsia, to license the global rights to NBI-827104 (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.

Under the terms of the agreement, Idorsia may be entitled to receive payments of up to $1.7 billion upon the achievement of certain milestones as well as receive royalties on the future net sales of any collaboration product.

Xenon Pharmaceuticals, Inc. In December 2019, we entered into a license and collaboration agreement with Xenon Pharmaceuticals Inc., or Xenon, to identify, research, and develop sodium channel inhibitors, including clinical candidate NBI-921352 (XEN901) and three preclinical candidates.

Under the terms of the agreement, Xenon may be entitled to receive payments of up to $1.7 billion upon the achievement of certain milestones as well as receive royalties on the future net sales of any collaboration product.

Voyager Therapeutics, Inc. We entered into a collaboration and license agreement with Voyager Therapeutics, Inc., or Voyager, which became effective in March 2019, to develop and commercialize four programs using Voyager’s proprietary gene therapy platform. The four programs consist of the NBIb-1817 (VY-AADC) for Parkinson’s disease program, the Friedreich’s ataxia program and the rights to two undisclosed programs.

In February 2021, we notified Voyager of our termination of the NBIb-1817 for Parkinson’s disease program. The effective date of this termination will be August 2, 2021. The termination does not apply to any other development program other than NBIb-1817 for Parkinson’s disease, and our collaboration and license agreement with Voyager will otherwise continue in effect.

Under the terms of the agreement, Voyager may be entitled to receive payments of up to $1.3 billion upon the achievement of certain milestones, as well as receive royalties on the future net sales of any collaboration product.

BIAL – Portela & Ca, S.A. We acquired the United States, or US, and Canada rights to ONGENTYS® (opicapone) from BIAL in the first quarter of 2017. We launched ONGENTYS in the US in September 2020, after receiving FDA approval for ONGENTYS as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients in April 2020. Under the terms of the agreement, BIAL may be entitled to receive payments of up to $75.0 million upon the achievement of certain milestones.

Mitsubishi Tanabe Pharma Corporation. In March 2015, we entered into a collaboration and license agreement with Mitsubishi Tanabe Pharma Corporation, or MTPC, for the development and commercialization of INGREZZA® (valbenazine) for movement disorders in Japan and other select Asian markets.

In February 2021, MTPC reported positive top-line results from the J-KINECT Phase III study, designed to evaluate the efficacy and safety of valbenazine in tardive dyskinesia. In April 2021, MTPC submitted a Marketing Authorization Application, or MAA, with the Ministry of Health and Welfare in Japan for valbenazine for the treatment of tardive dyskinesia. MTPC submission of valbenazine triggered a milestone payment of $15.0 million, to be paid by MTPC to Neurocrine Biosciences and recognized as collaboration revenue in the second quarter of 2021.

In accordance with our continuing performance obligations, $5.7 million of the $30.0 million upfront payment received from MTPC is being deferred and will be recognized as collaboration revenue over the ongoing KINECT-HD study period using an input method according to costs incurred to-date relative to estimated total costs associated with the study. We recognized collaboration revenue of $1.1 million and $1.3 million for the three months ended March 31, 2021 and 2020, respectively, in connection with the ongoing KINECT-HD study, a placebo-controlled Phase III study of valbenazine in adult Huntington’s disease patients with chorea.

Under the terms of the agreement, we are entitled to receive royalties on the future worldwide net sales of any collaboration product in select territories in Asia and may also be entitled to receive payments of up to $70.0 million upon the achievement of certain milestones, including the $15.0 million milestone payment triggered upon MTPC submission of valbenazine in April 2021.

AbbVie Inc. In June 2010, we entered into an exclusive worldwide collaboration with AbbVie Inc., or AbbVie, to develop and commercialize elagolix and all next-generation gonadotropin-releasing factor antagonists for women’s and men’s health.

AbbVie received approval for ORILISSA® (elagolix tablets) in the US and Canada in August and November 2018, respectively, after receiving FDA and Health Canada approval for ORILISSA for endometriosis in July and October 2018, respectively. In June 2020, AbbVie launched ORIAHNN® (elagolix, estradiol and norethindrone acetate capsules and elagolix capsules) in the US after receiving FDA approval for ORIAHNN for uterine fibroids in May 2020. We recognized sales-based royalties on AbbVie net sales of ORILISSA and ORIAHNN of $4.5 million and $4.7 million for the three months ended March 31, 2021 and 2020, respectively.

Under the terms of the agreement, we are entitled to receive royalties on the future worldwide net sales of any collaboration product and may also be entitled to receive payments of up to $366.0 million upon the achievement of certain milestones.

3. Debt Securities

The following table summarizes the amortized cost, unrealized gain and loss recognized in accumulated other comprehensive income (loss), allowance for credit losses, and fair value of debt securities available-for-sale at March 31, 2021, aggregated by major security type and contractual maturity:


(in millions)	Contractual Maturity	Amortized Cost		Unrealized Gain		Unrealized Loss		Allowance for Credit Losses		Fair Value
Commercial paper	Within 1 year	$	93.2	$	—	$	—	$	—	$	93.2
Corporate debt securities	Within 1 year	239.6		0.9		—		—		240.5
Securities of government-sponsored entities	Within 1 year	187.4		—		—		—		187.4
		$	520.2	$	0.9	$	—	$	—	$

SEC Form 10-Q filed by Neurocrine Biosciences, Inc.