UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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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
NEUROCRINE BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
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33-0525145 |
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(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification No.) |
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(Address of principal executive office) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol |
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Name of each exchange on which registered |
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Common Stock, $0.001 par value |
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Nasdaq Global Select Market |
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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:
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:
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
NEUROCRINE BIOSCIENCES, INC.
TABLE OF CONTENTS
2
Part I. Financial Information
Item 1. Financial Statements
NEUROCRINE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
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(in thousands, except per share data) |
June 30, 2019 |
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December 31, 2018 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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Short-term investments in available-for-sale debt securities |
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Accounts receivable |
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Inventory |
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Other current assets |
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Total current assets |
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Restricted cash |
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Property and equipment, net |
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Long-term investments in available-for-sale debt securities |
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Investment in restricted equity securities |
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— |
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Operating lease assets |
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— |
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Total assets |
$ |
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$ |
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blank |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable and accrued liabilities |
$ |
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$ |
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Other current liabilities |
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Total current liabilities |
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Noncurrent operating lease liabilities |
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— |
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Convertible senior notes |
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Other long-term liabilities |
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Deferred rent |
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— |
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Deferred gain on sale of real estate |
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— |
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Total liabilities |
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blank |
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Stockholders’ equity: |
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Preferred stock, $ and outstanding |
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Common stock, $ outstanding shares were of December 31, 2018 |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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( |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ |
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$ |
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See accompanying notes to the condensed consolidated financial statements.
3
NEUROCRINE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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(in thousands, except per share data) |
2019 |
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2018 |
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2019 |
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2018 |
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Revenues: |
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Product sales, net |
$ |
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$ |
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$ |
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$ |
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Collaboration revenue |
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— |
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— |
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Total revenues |
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Operating expenses: |
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Cost of sales |
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Research and development |
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Acquired in-process research and development |
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— |
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— |
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Selling, general and administrative |
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Total operating expenses |
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Operating income (loss) |
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( |
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( |
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( |
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Other (expense) income: |
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Interest expense |
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( |
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( |
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( |
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( |
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Unrealized gain on restricted equity securities |
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— |
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— |
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Investment income and other, net |
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Total other income (expense), net |
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( |
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( |
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Income (loss) before provision for income taxes |
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( |
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( |
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( |
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Provision for income taxes |
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— |
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— |
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Net income (loss) |
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( |
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( |
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( |
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Unrealized gain (loss) on available-for-sale debt securities, net of tax |
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( |
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Comprehensive income (loss) |
$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Net income (loss) per share, basic |
$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Net income (loss) per share, diluted |
$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted average common shares outstanding, basic |
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Weighted average common shares outstanding, diluted |
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See accompanying notes to the condensed consolidated financial statements.
4
NEUROCRINE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Six Months Ended June 30, |
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(in thousands) |
2019 |
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2018 |
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Cash Flows from Operating Activities: |
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Net loss |
$ |
( |
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$ |
( |
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Reconciliation of net loss to net cash used in operating activities: |
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Share-based compensation expense |
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Depreciation and amortization |
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Amortization of debt discount |
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Amortization of debt issuance costs |
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(Accretion) amortization of discounts/premiums on investments, net |
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( |
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Change in fair value of restricted equity securities |
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( |
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— |
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Other |
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( |
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Change in operating assets and liabilities: |
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Accounts receivable |
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( |
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( |
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Inventory |
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( |
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( |
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Other current assets |
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( |
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Accounts payable and accrued liabilities |
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Other liabilities |
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( |
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Net cash used in operating activities |
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( |
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( |
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blank |
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Cash Flows from Investing Activities: |
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Purchases of available-for-sale debt securities |
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( |
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( |
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Sales and maturities of available-for-sale debt securities |
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Purchase of restricted equity securities |
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( |
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— |
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Purchases of property and equipment |
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( |
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( |
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Proceeds from sales of property and equipment |
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Net cash provided by (used in) investing activities |
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( |
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blank |
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Cash Flows from Financing Activities: |
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Issuance of common stock |
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Net cash provided by financing activities |
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Change in cash and cash equivalents and restricted cash |
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( |
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( |
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Cash and cash equivalents and restricted cash at beginning of period |
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Cash and cash equivalents and restricted cash at end of period |
$ |
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$ |
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blank |
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Supplemental Disclosure: |
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Cash paid for interest |
$ |
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$ |
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Cash paid for income taxes |
$ |
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$ |
— |
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Non-cash capital expenditures |
$ |
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$ |
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See accompanying notes to the condensed consolidated financial statements.
5
NEUROCRINE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
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Common Stock |
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Additional Paid |
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Accumulated Other Comprehensive |
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Accumulated |
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Total Stockholders’ |
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(in thousands) |
Shares |
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Amount |
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in Capital |
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Income (Loss) |
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Deficit |
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Equity |
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Balance at December 31, 2017 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Unrealized loss on investments in available-for-sale debt securities |
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— |
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— |
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— |
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( |
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— |
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( |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common stock for vested restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock for stock option exercises |
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— |
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— |
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Balance at March 31, 2018 |
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( |
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( |
) |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Unrealized gain on investments in available-for-sale debt securities |
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— |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common stock for vested restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock for stock option exercises |
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— |
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— |
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— |
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Balance at June 30, 2018 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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blank |
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Balance at December 31, 2018 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Unrealized gain on available-for-sale debt securities, net of tax |
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— |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Cumulative-effect adjustment to equity due to adoption of ASU 2016-02 |
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— |
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— |
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— |
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— |
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Issuance of common stock for vested restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock for stock option exercises |
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— |
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— |
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— |
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Issuance of common stock for employee stock purchase plan |
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— |
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— |
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— |
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Balance at March 31, 2019 |
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( |
) |
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( |
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Net income |
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— |
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— |
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— |
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— |
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Unrealized gain on available-for-sale debt securities, net of tax |
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— |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common stock for vested restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock for stock option exercises |
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— |
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— |
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Balance at June 30, 2019 |
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$ |
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$ |
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$ |
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$ |
( |
) |
|
$ |
|
|
See accompanying notes to the condensed consolidated financial statements.
6
NEUROCRINE BIOSCIENCES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Organization and Significant Accounting Policies
Description of Business. Neurocrine Biosciences, Inc. (Neurocrine, we, our or us) is a neuroscience-focused, biopharmaceutical company with more than 25 years of experience discovering and developing life-changing treatments for people 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.
Our portfolio includes United States Food and Drug Administration (FDA)-approved treatments for tardive dyskinesia (TD) and endometriosis and clinical development programs in multiple therapeutic areas including Parkinson’s disease, congenital adrenal hyperplasia, uterine fibroids, and polycystic ovary syndrome. Our treatment for endometriosis and our product candidates for uterine fibroids and polycystic ovary syndrome are partnered with AbbVie, Inc. (AbbVie). In addition, in January 2019, we entered into a collaboration and license agreement with Voyager Therapeutics, Inc. (Voyager), focused on the development and commercialization of four programs using Voyager’s proprietary gene therapy platform, including one clinical development program for advanced Parkinson’s disease patients, VY-AADC.
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions of the Securities and Exchange Commission (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 and our wholly owned subsidiaries.
These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018, included in our Annual Report on Form 10-K (2018 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 for the full year. The condensed consolidated balance sheet at December 31, 2018, 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 2018 Form 10-K.
Recently Adopted Accounting Pronouncements.
ASU 2016-02. In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)”, which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. ASU 2016-02 establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. ASU 2016-02 also requires disclosures to 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 and measured leases that existed at the application date in our condensed 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 condensed 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. 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 the six months ended June 30, 2019.
7
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 elections 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 resulted in the recognition of (1) ROU assets of $
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 condensed consolidated financial statements. Further, we expect the adoption of ASU 2018-07 to be immaterial to our condensed consolidated balance sheets, statements of operations and comprehensive income (loss), and statements of cash flows on an ongoing basis.
2. Significant Collaboration and Licensing Agreements
Voyager. We entered into a collaboration and license agreement with Voyager, a clinical-stage gene therapy company, which became effective in March 2019. The agreement is focused on the development and commercialization of four programs using Voyager’s proprietary gene therapy platform. The four programs consist of the VY-AADC program for Parkinson’s disease, the VY-FXN01 program for Friedreich’s ataxia, and the rights to two programs to be determined by the parties in the future.
In connection with the agreement, we paid Voyager $
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.
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 $
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 $
We may terminate the collaboration and license agreement with Voyager upon
BIAL – Portela & Ca, S.A. In February 2017, we entered into an exclusive license agreement with BIAL – Portela & Ca, S.A. (BIAL) for the development and commercialization of opicapone for the treatment of human diseases and conditions, including as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients, in the United States (U.S.) and Canada. We paid BIAL an upfront license fee of $
8
In the second quarter of 2019, we submitted a new drug application (NDA) with the FDA for opicapone as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients. The opicapone NDA was accepted by the FDA with a Prescription Drug User Fee Act target action date of April 26, 2020. The FDA’s acceptance of the opicapone NDA triggered a milestone payment of $
Mitsubishi Tanabe Pharma Corporation. In March 2015, we entered into a collaboration and license agreement with Mitsubishi Tanabe Pharma Corporation (MTPC) for the development and commercialization of INGREZZA® (valbenazine) for movement disorders in Japan and other select Asian markets. MTPC made an upfront payment of $
Since inception of the agreement, we have recognized revenue of $
AbbVie. In June 2010, we entered into an exclusive worldwide collaboration with AbbVie, to develop and commercialize elagolix and all next-generation gonadotropin-releasing factor antagonists for women’s and men’s health. AbbVie made an upfront payment of $
3. Investments
Available-for-sale (AFS) debt securities are carried at fair value, with any unrealized gains and losses reported in comprehensive income (loss). The cost basis of AFS debt securities is adjusted for the amortization of premiums and accretion of discounts to maturity, as applicable. Such amortization and accretion, as well as any interest and dividends, realized gains and losses, and declines in fair value judged to be other-than-temporary, if any, on AFS debt securities are included in investment income and other, net. The cost of AFS debt securities sold is based on the specific identification method. Additionally, investments in equity securities of certain companies that are subject to holding period restrictions longer than 1 year are carried at fair value. Net gains and losses on restricted equity securities are included in other income (expense), net.
Investments consisted of the following:
|
(in thousands) |
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||
|
Commercial paper |
|
$ |
|
|
|
$ |
|
|
|
Corporate debt securities |
|
|
|
|
|
|
|
|
|
Securities of government sponsored entities |
|
|
|
|
|
|
|
|
|
Restricted equity securities |
|
|
|
|
|
|
|
|
|
Total investments |
|
$ |
|
|
|
$ |
|
|
9
Investments classified as AFS debt securities consisted of the following:
|
(in thousands) |
|
Contractual Maturity (in years) |
|
Amortized Cost |
|
|
Gross Unrealized Gains(1) |
|
|
Gross Unrealized Losses(1) |
|
|
Aggregate Estimated Fair Value |
|
||||
|
June 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
Less than 1 |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Corporate debt securities |
|
Less than 1 |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Securities of government-sponsored entities |
|
Less than 1 |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total short-term available-for-sale debt securities |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Classified as non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
1 to 2 |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Securities of government-sponsored entities |
|
1 to 2 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total long-term available-for-sale debt securities |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
blank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
Less than 1 |
|
$ |
|
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
|
Corporate debt securities |
|
Less than 1 |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
Securities of government-sponsored entities |
|
Less than 1 |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total short-term available-for-sale debt securities |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Classified as non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
1 to 2 |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Securities of government-sponsored entities |
|
1 to 2 |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total long-term available-for-sale debt securities |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
(1) |
|
The following table presents the estimated fair value and gross unrealized loss position for AFS debt securities, as applicable, aggregated by investment category and length of time that such securities have been in a continuous loss position:
|
|
|
Less Than 12 Months |
|
|
12 Months or Greater |
|
|
Total |
|
|||||||||||||||
|
(in thousands) |
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
||||||
|
June 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
Corporate debt securities |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Securities of government-sponsored entities |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
blank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
Corporate debt securities |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Securities of government-sponsored entities |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
At each reporting date, we perform an evaluation of impairment to determine if any unrealized losses on investments in AFS debt securities are other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, and our intent and ability to hold the investment until recovery of the amortized cost basis. We intend and have the ability to hold such investments in unrealized loss positions until their amortized cost basis has been recovered. Further, based on our evaluation, we determined that any such unrealized losses were not other-than-temporary at June 30, 2019 and December 31, 2018.
10
4. Fair Value Measurements
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
|
|
Level 1: |
Observable inputs such as quoted prices in active markets; |
|
|
Level 2: |
Inputs include quoted prices for similar instruments in active markets and/or quoted prices for identical or similar instruments in markets that are not active near the measurement date; and |
|
|
Level 3: |
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
We classify our cash equivalents and available-for-sale investments within Level 1 or Level 2. The fair value of our investment grade corporate debt securities is determined using proprietary valuation models and analytical tools, which utilize market pricing or prices for similar instruments that are both objective and publicly available, such as matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, and offers.
The fair value of our investments in restricted equity securities is determined using an option pricing valuation model and classified as Level 3 within the fair value hierarchy. 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 the historical volatility of similar companies. Significant changes in any of those inputs in isolation would result in a significantly higher or lower fair value measurement.
The $
We did not reclassify any investments between levels in the fair value hierarchy during the six months ended June 30, 2019 and 2018.
11
Investments, which were measured at fair value on a recurring basis using the inputs described above, consisted of the following:
|
|
|
blank |
|
|
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) |
|
||||
|
June 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and money market funds |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
Commercial paper |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Securities of government-sponsored entities |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Corporate debt securities |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Subtotal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Classified as long-term assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and money market funds |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Securities of government-sponsored entities |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Corporate debt securities |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Restricted equity securities |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Total investments |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
blank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and money market funds |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
Commercial paper |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Securities of government-sponsored entities |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Corporate debt securities |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Subtotal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Classified as long-term assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and money market funds |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Securities of government-sponsored entities |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Corporate debt securities |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Less cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Total investments |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
The following table presents a reconciliation of our investment in restricted equity securities, which is measured at fair value on a recurring basis using the significant unobservable inputs (Level 3) described above.
|
(in thousands) |
|
|
|
|
|
Balance at December 31, 2018 |
|
$ |
— |
|
|
Investment in restricted equity securities |
|
|
|
|
|
Net unrealized gain recognized on restricted equity securities during the period |
|
|
|
|
|
Balance at March 31, 2019 |
|
|
|
|
|
Net unrealized gain recognized on restricted equity securities during the period |
|
|
|
|
|
Balance at June 30, 2019 |
|
$ |
|
|
12
5. Inventory
Inventory consisted of the following:
|
(in thousands) |
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||
|
Raw materials |
|
$ |
|
|
|
$ |
|
|
|
Work in process |
|
|
|
|
|
|
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
|
Total inventory |
|
$ |
|
|
|
$ |
|
|
6. Leases
In December 2007, we closed the sale of our facility and associated real property for a purchase price of $
Upon the closing of the sale of the facility and associated real property, we entered into an agreement (original lease) whereby we leased back our corporate headquarters, comprised of
In June 2017, we entered into an amendment to extend the current term of the original lease through
In May 2018, we entered into an agreement to lease
For the six months ended June 30, 2019, our operating lease cost was $
At June 30, 2019, the minimum lease payments for our operating lease liabilities were as follows:
|
(in thousands) |
|
Operating Leases |
|
|
|
Year Ending December 31, |
|
|
|
|
|
2019 (6 months remaining) |
|
$ |
|
|
|
2020 |
|
|
|
|
|
2021 |
|
|
|
|
|
2022 |
|
|
|
|
|
2023 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total operating lease payments |
|
|
|
|
|
Less accreted interest |
|
|
( |
) |
|
Total operating lease liabilities |
|
|
|
|
|
Less current operating lease liabilities |
|
|
( |
) |
|
Noncurrent operating lease liabilities |
|
$ |
|
|
13
7. Convertible Senior Notes
On May 2, 2017, we completed a private placement of $
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 (and only during such calendar quarter), if the last reported sale price of our common stock for at least |
|
|
(ii) |
during the five business-day period immediately after any five consecutive trading-day period (the measurement period) in which the trading price (as defined in the 2024 Indenture) per $ |
|
|
(iii) |
upon the occurrence of specified corporate events, including a merger or a sale of all or substantially all of our assets; or |
|
|
(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.
Upon conversion, holders will receive the principal amount of their 2024 Notes and any excess conversion value, calculated based on the per share volume-weighted average price for each of the 30 consecutive trading days during the observation period (as more fully described in the 2024 Indenture). For both the principal and excess conversion value, holders may receive cash, shares of our common stock or a combination of cash and shares of our 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 to the “principal portion” and delivery 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
The initial conversion rate for the 2024 Notes is 13.1711 shares of common stock per $
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 our common stock, at our option.
We may not redeem the 2024 Notes prior to May 15, 2021. On or after 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 our common stock has been at least
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 its 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.
14
While the 2024 Notes are currently classified as long-term on our condensed consolidated balance sheets, the future convertibility and resulting balance sheet classification of this liability will be monitored at each quarterly reporting date and will be analyzed dependent upon market prices of our common stock during the prescribed measurement periods. In the event that 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 the 2024 Notes as they may be settled entirely or partially in cash upon conversion in a manner that reflects our economic interest cost. 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 $
We allocated the total transaction costs of approximately $
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. The 2024 Indenture contains customary events of default with respect to the 2024 Notes, including that upon certain events of default,
The 2024 Notes, net of discounts and deferred financing costs, consisted of the following:
|
(in thousands) |
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||
|
Principal |
|
$ |
|
|
|
$ |
|
|
|
Deferred financing costs |
|
|
( |
) |
|
|
( |
) |
|
Debt discount, net |
|
|
( |
) |
|
|
( |
) |
|
Net carrying amount |
|
$ |
|
|
|
$ |
|
|
8. Net Loss Per Share
Net income (loss) per share was calculated as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(in thousands, except per share data) |
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Net income (loss) - basic and diluted |
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock purchase program |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock options |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
2024 Notes |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Diluted |
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
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.
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 the 2024 Notes with a combination settlement feature, which we have the ability and intent to use upon conversion of the 2024 Notes, to settle the principal amount of debt for cash and the excess of the principal portion in shares of our common stock. As a result, of the approximately
15
Shares which have been excluded from diluted per share amounts because their effect would have been anti-dilutive consisted of the following:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(in thousands) |
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Stock options, restricted stock and convertible senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
Item 2. 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, 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 below 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, 2018 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, 2018, and our Quarterly Report on Form 10-Q for the three months ended March 31, 2019.
Overview
We are a neuroscience-focused, biopharmaceutical company with more than 25 years of experience discovering and developing life-changing treatments for people 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.
Our portfolio includes United States Food and Drug Administration (FDA)-approved treatments for tardive dyskinesia (TD) and endometriosis and clinical development programs in multiple therapeutic areas including Parkinson’s disease, congenital adrenal hyperplasia, uterine fibroids, and polycystic ovary syndrome. Our treatment for endometriosis and our product candidates for uterine fibroids and polycystic ovary syndrome are partnered with AbbVie, Inc. (AbbVie). In addition, in January 2019, we entered into a collaboration and license agreement with Voyager Therapeutics, Inc. (Voyager), focused on the development and commercialization of four programs using Voyager’s proprietary gene therapy platform, including one clinical development program for advanced Parkinson’s disease patients, VY-AADC.
In December 2018, we announced topline data from the T-Force GOLD study, a Phase IIb study of valbenazine in pediatric patients with Tourette syndrome, failed to meet the primary endpoint. Based on these results, we terminated the T-Force PLATINUM study in the second quarter of 2019.
We currently have four major collaborations, two of which involve out-licensing of our proprietary technology to pharmaceutical partners.
Voyager. We entered into a collaboration and license agreement with Voyager, a clinical-stage gene therapy company, which became effective in March 2019. The agreement is focused on the development and commercialization of four programs using Voyager’s proprietary gene therapy platform. The four programs consist of the VY-AADC program for Parkinson’s disease, the VY-FXN01 program for Friedreich’s ataxia, and the rights to two programs to be determined by the parties in the future. 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 to obtain rights outside the United States to the Friedreich’s ataxia program, VY-FXN01, in connection with the early return of those rights to Voyager pursuant to a restructuring of Voyager’s gene therapy relationship with Sanofi Genzyme.
BIAL – Portela & Ca, S.A. In February 2017, we entered into an exclusive license agreement with BIAL – Portela & Ca, S.A. (BIAL) pursuant to which we in-licensed technology from BIAL for the development and commercialization of opicapone for the treatment of human diseases and conditions in the United States and Canada. In the second quarter of 2019, we submitted a new drug application (NDA) with the FDA for opicapone as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients. The opicapone NDA was accepted by the FDA with a Prescription Drug User Fee Act target action date of April 26, 2020. The FDA’s acceptance of the opicapone NDA triggered a milestone payment of $10.0 million, expensed as R&D in the second quarter of 2019, to be paid by us to BIAL in the third quarter of 2019.
Mitsubishi Tanabe Pharma Corporation. In March 2015, we entered into a collaboration and license agreement with Mitsubishi Tanabe Pharma Corporation for the development and commercialization of INGREZZA® (valbenazine) for movement disorders in Japan and other select Asian markets.
AbbVie. In June 2010, we entered into an exclusive worldwide collaboration with AbbVie to develop and commercialize elagolix and all next-generation gonadotropin-releasing hormone antagonists. AbbVie anticipates submitting an NDA to the FDA for the approval of elagolix in the treatment of uterine fibroids in 2019. The FDA’s acceptance of the NDA would trigger a milestone payment of $20.0 million, payable to us by AbbVie. Additionally, AbbVie intends to initiate a study of elagolix in women with polycystic ovary syndrome.
17
Results of Operations for the Three and Six Months Ended June 30, 2019 and 2018
Revenues
The following table presents revenues by category.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(in thousands) |
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
INGREZZA product sales, net |
$ |
180,544 |
|
|
$ |
96,905 |
|
|
$ |
316,975 |
|
|
$ |
167,991 |
|
|
Collaboration revenue |
|
3,036 |
|
|
|
— |
|
|
|
5,008 |
|
|
|
— |
|
|
Total revenues |
$ |
183,580 |
|
|
$ |
96,905 |
|
|
$ |
321,983 |
|
|
$ |
167,991 |
|
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 $180.5 million and $317.0 million for the three and six months ended June 30, 2019, respectively, compared with $96.9 million and $168.0 million in the comparable periods last year.
Collaboration Revenue
In July 2018, the FDA approved ORILISSA® (elagolix) for the management of moderate to severe endometriosis pain in women. We recognized sales-based royalties, payable to us by our collaboration partner AbbVie on quarterly net sales of ORILISSA, of $3.0 million and $5.0 million for the three and six months ended June 30, 2019, respectively.
Operating Expenses
Cost of Sales
Cost of sales was $1.6 million and $2.7 million for the three and six months ended June 30, 2019, respectively, compared with $0.9 million and $1.8 million in the comparable periods last year.
Research and Development
We support our drug discovery and development efforts through the commitment of significant resources to discovery, research and development (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.
Late stage consists of costs incurred related to product candidates in Phase II registrational studies and onwards. Early stage consists of costs incurred related to product candidates in post-investigational new drug application (IND) through Phase II non-registrational studies. Research and discovery consists of pre-IND costs. Milestone expenses reflect payments made in connection with our collaborative and other relationships. Payroll and 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.
Facilities and other consists of indirect costs incurred in support of overall R&D activities and non-specific programs, including activities that benefit multiple programs, such as management costs, as well as 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:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(in thousands) |
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Late stage |
$ |
13,890 |
|
|
$ |
4,632 |
|
|
$ |
19,478 |
|
|
$ |
7,992 |
|
|
Early stage |
|
5,588 |
|
|
|
10,551 |
|
|
|
11,792 |
|
|
|
18,906 |
|
|
Research and discovery |
|
5,033 |
|
|
|
1,561 |
|
|
|
8,658 |
|
|
|
2,873 |
|
|
Milestone expenses |
|
10,000 |
|
|
|
— |
|
|
|
10,000 |
|
|
|
10,000 |
|
|
Payroll and benefits |
|
16,914 |
|
|
|
13,447 |
|
|
|
32,799 |
|
|
|
35,116 |
|
|
Facilities and other |
|
10,262 |
|
|
|
6,797 |
|
|
|
16,612 |
|
|
|
11,048 |
|
|
Total R&D expense |
$ |
61,687 |
|
|
$ |
36,988 |
|
|
$ |
99,339 |
|
|
$ |
85,935 |
|
18
R&D expense was $61.7 million for the second quarter of 2019, compared with $37.0 million in the comparable period last year, primarily reflecting funding of development activities and milestone expenses of $10.0 million related to the FDA’s acceptance of the opicapone NDA for Parkinson’s disease in June 2019. For the first six months of 2019, R&D expense was $99.3 million compared with $85.9 million in the comparable period last year, primarily reflecting funding of development activities in connection with our collaboration with Voyager. The first six months of 2018 included milestone expenses of $10.0 million related to guidance received from the FDA in which it did not request an additional Phase III clinical trial to support an NDA submission for opicapone.
Acquired In-Process Research and Development
In-process research and development (IPR&D) was $5.0 million and $118.1 million for the three and six months ended June 30, 2019, respectively. In connection with the payment of the upfront fee pursuant to our collaboration and license agreement with Voyager, we recorded a charge of $113.1 million, accounted for as IPR&D, in the first quarter of 2019. In June 2019, we entered into an amendment to the collaboration and license agreement with Voyager, pursuant to which we paid Voyager $5.0 million upfront to obtain rights outside the United States to the Friedreich’s ataxia program, VY-FXN01. The upfront payment was expensed as IPR&D in the second quarter of 2019.
Sales, General and Administrative
Sales, general and administrative (SG&A) expense was $80.8 million and $168.4 million for the three and six months ended June 30, 2019, respectively, compared with $60.9 million and $119.6 million in the comparable periods last year, primarily reflecting the expansion of our sales force in the third quarter of 2018, the national launch of our patient-focused disease-state awareness campaign, Talk About TD, and an increase in the Branded Pharmaceutical Drug fee expense compared with the same periods last year.
Other Income (Expense)
Other income, net, was $17.6 million and $16.0 for the three and six months ended June 30, 2019, respectively, compared with other expense, net, of $4.1 million and $8.4 million in the comparable periods last year, primarily reflecting unrealized gains of $21.0 million and $22.6 million in the second quarter and first six months of 2019, respectively, to adjust our equity investment in Voyager to fair value as of June 30, 2019.
Provision for Income Taxes
Our provision for income taxes was $0.8 million for the second quarter of 2019, reflecting $1.1 million of state income tax expense, offset by $0.3 million of tax benefit recorded to income from continuing operations, with an equal and offsetting tax expense recorded to accumulated other income. For the first six months of 2019, our provision for income taxes was $0.3 million, reflecting $1.2 million of state income taxes, offset by $0.9 million of tax benefit recorded to income from continuing operations, with an equal and offsetting tax expense recorded to accumulated other income. We used the year-to-date effective tax rate method to determine our interim income tax expense for state jurisdictions where a reliable estimate of the annual effective tax rate could not be made. The tax provision recorded differs from the statutory rate of 21%, reflecting a full valuation allowance recorded against losses incurred.
Net Income (Loss)
Net income was $51.3 million, or $0.54 diluted earnings per share, for the second quarter of 2019, compared with a net loss of $5.9 million, or $0.07 net loss per share, in the comparable period last year, primarily reflecting increased INGREZZA net product sales compared with the same period last year and a $21.0 million unrealized gain to adjust our equity investment in Voyager to fair value as of June 30, 2019. For the first six months of 2019, we incurred a net loss of $50.8 million, or $0.56 net loss per share, compared with a net loss of $47.7 million, or $0.53 net loss per share, in the comparable period last year, primarily reflecting IPR&D charges of $118.1 million in the first six months of 2019 in connection with our collaboration with Voyager, partially offset by increased INGREZZA net product sales compared with the same period last year and a $22.6 million unrealized gain to adjust our equity investment in Voyager to fair value as of June 30, 2019.
Liquidity and Capital Resources
At June 30, 2019, our cash and cash equivalents and available-for-sale investments totaled $766.5 million compared with $866.9 million at December 31, 2018.
Net cash used in operating activities was $48.3 million for first the six months of 2019, compared with $18.0 million in the comparable period last year, primarily reflecting upfront payments of $118.1 million in the first six months of 2019 in connection with our collaboration with Voyager, partially offset by increased INGREZZA net product sales compared with the same period last year.
Net cash provided by investing activities was $40.7 million for the first six months of 2019, compared with $91.6 million net cash used in investing activities in the comparable period last year, reflecting timing differences associated with the purchases and sales and maturities of our available-for-sale investments, as well as changes in our portfolio-mix between cash equivalents and short-term and long-term investment holdings, offset by our $54.7 million equity investment in Voyager in the first quarter of 2019.
19
Net cash provided by financing activities was $6.9 million for the first six months of 2019, compared with $22.3 million in comparable period last year.
Shelf Registration Statement
In February 2017, we filed an automatic shelf registration statement which immediately became effective by rule of the Securities and Exchange Commission (SEC). For so long as we continue to satisfy the requirements to be deemed a well-known seasoned issuer, this shelf registration statement allows us to issue an unlimited number of securities from time to time. We sold no securities under this shelf registration statement in the first six months of 2019 or 2018.
Convertible Senior Notes
In May 2017, we issued $517.5 million of 2.25% convertible senior notes due May 15, 2024.
Off-Balance Sheet Arrangements
As of June 30, 2019, we did not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
There were no changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.
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 12 months. If a 10% change in interest rates were to have occurred on June 30, 2019, it 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.
Recently Issued Accounting Pronouncements
For a summary of new accounting pronouncements which may be applicable to us, see Note 1 to the condensed consolidated financial statements included in this report.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on facts and factors currently known by us. Consequently, these forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.
Forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “hopes,” “may,” “will,” “plan,” “intends,” “estimates,” “could,” “should,” “would,” “continue,” “seeks,” “proforma,” or “anticipates,” or other similar words (including their use in the negative), or by discussions of future matters such as the development of new products, technology enhancements, possible changes in legislation and other statements that are not historical. These statements include but are not limited to statements under the captions “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as other sections in this report. You should be aware that the occurrence of any of the events discussed under the heading in Part II titled “Item 1A. Risk Factors” and elsewhere in this report could substantially harm our business, results of operations and financial condition and that if any of these events occurs, the trading price of our common stock could decline and you could lose all or a part of the value of your shares of our common stock.
The cautionary statements made in this report are intended to be applicable to all related forward-looking statements wherever they may appear in this report. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we assume no obligation to update our forward-looking statements, even if new information becomes available in the future.
20
Item 3. Quantitative and Qualitative Disclosures About Market Risk
A discussion of our exposure to, and management of, market risk appears in Part I, Item 2 of this Quarterly Report on Form 10-Q under the heading “Interest Rate Risk.”
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports required by the Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the timelines specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
An evaluation was also performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of any changes to our internal control over financial reporting that occurred during our last fiscal quarter and that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our evaluation did not identify significant changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the quarter ended June 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II. Other Information
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 Quarterly Report on Form 10-Q 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. The risk factors set forth below with an asterisk (*) contain changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Risks Related to Our Company
*We may not be able to continue to successfully commercialize INGREZZA, 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 and secure adequate third-party reimbursement if and when they are approved by the FDA. Our experience in marketing and selling pharmaceutical products began with INGREZZA’s approval in 2017, when we hired our sales force and established our distribution and reimbursement capabilities, all of which are necessary to successfully commercialize INGREZZA. We have continued to invest in our commercial infrastructure and distribution capabilities in the past two years, including our sales force expansion in late 2018. 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 successfully commercialize INGREZZA or any product candidate approved by the FDA in the future. 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, 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, 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 could be affected by a number of factors, including:
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the timing of receipt of marketing approvals for indications; |
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the safety and efficacy of the products; |
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the pricing of our products; |
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the availability of healthcare payor coverage and adequate reimbursement for the products; |
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public perception regarding any gene therapy products we may develop; |
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the success of existing competitor products addressing our target markets or the emergence of equivalent or superior products; and |
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the cost-effectiveness of the products. |
If the medical community and patients do not ultimately accept our products as being safe, effective, superior and/or cost-effective, we may not generate sufficient revenue.
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.
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*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, could materially and adversely affect our ability to successfully commercialize INGREZZA.
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 and the finished product 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., state, and non-U.S. regulations. We depend on a limited number of suppliers for each of the production of INGREZZA and its active pharmaceutical ingredients. 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 on BIAL, and its suppliers, for the production of opicapone drug substance and drug product.
In addition, if our suppliers fail or refuse to supply us with INGREZZA or its active pharmaceutical ingredient 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 active pharmaceutical ingredients or product manufacturing processes. If there are delays in qualifying new suppliers or facilities or 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 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.
*We have no manufacturing capabilities. If third-party manufacturers of INGREZZA 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. 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. 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. 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:
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contract manufacturers may encounter difficulties in achieving volume production, quality control and 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; |
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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; |
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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 |
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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. |
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, or our future products and our ability to develop and deliver products on a timely and competitive basis.
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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 ability to commercialize any products successfully, including INGREZZA, 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 through various means may reduce 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 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.
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. 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, 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. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize INGREZZA 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.
*We are subject to ongoing obligations and continued regulatory review for INGREZZA, which may result in significant additional expense and market withdrawal. Additionally, our other product candidates, if approved, could be subject to labeling and other restrictions 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 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 respect to the FDA’s approval of INGREZZA for TD, 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 Practices for any clinical trials that we conduct post-approval. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency (especially for a product, such as INGREZZA, which has been administered in a relatively limited patient population to date), or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:
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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; |
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fines, warning letters or holds on clinical trials; |
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refusal by the FDA to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals; |
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product seizure or detention, or refusal to permit the import or export of products; and |
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product injunctions or the imposition of civil or criminal penalties. |
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The FDA’s policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval 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 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.
*We are substantially dependent on BIAL for the development and commercialization of opicapone, including the receipt of regulatory approval for opicapone as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients.
In February 2017, we entered into a license agreement with 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. 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 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, although we are responsible for the management of all opicapone development and commercialization activities, we depend on BIAL and its suppliers to supply all drug product and investigation medicinal product for the development and commercialization of opicapone. In addition, we and BIAL have established a joint steering committee with overall coordination and strategic oversight over activities under the agreement and to provide a forum for regular exchange of information, and BIAL has 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.
*Our clinical trials may 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.
In connection with the clinical trials of our product candidates, we face the risks that:
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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; |
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the product candidate may not prove to be effective or as effective as other competing product candidates; |
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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; |
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the results may not replicate the results of earlier, smaller trials; |
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the FDA or similar foreign regulatory authorities may require use of new or experimental endpoints that may prove insensitive to treatment effects; |
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we or the FDA or similar foreign regulatory authorities may suspend the trials; |
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the results may not be statistically significant; |
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patient recruitment may be slower than expected; |
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the FDA may not accept the data from any trial or trial site outside of the U.S.; |
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patients may drop out of the trials; and |
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regulatory requirements may change. |
These risks and uncertainties impact all of our clinical programs. For example, any of the clinical, regulatory or operational events described above could change our planned clinical and regulatory activities for the opicapone program in Parkinson’s disease and/or our NBI-74788 program for the treatment of CAH. Additionally, any of these events described above could result in suspension of a program and/or obviate any filings for necessary regulatory approvals.
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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 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.
*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 revenues may be adversely affected, and our business may suffer.
Certain of the diseases that INGREZZA and our 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 and our 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.
*Gene therapy treatments, 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 may adversely affect our ability to initiate or continue clinical development or obtain regulatory approvals for gene therapy product candidates or the commercialization of gene therapy products.
Gene therapy remains a novel technology, with few gene therapy products approved to date in the U.S. Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community. As part of our collaboration and license agreement with Voyager, a Phase II clinical trial of VY-AADC 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 the development and commercialization of our gene therapy product candidates or demand for any gene therapy products we develop.
*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:
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be found ineffective or cause harmful side effects during preclinical studies or clinical trials; |
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fail to receive necessary regulatory approvals on a timely basis or at all; |
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be precluded from commercialization by proprietary rights of third parties; |
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be difficult to manufacture on a large scale; or |
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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.
*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 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 sufficient product revenue, and our business, financial condition, results of operations and prospects would be harmed.
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 ORILISSA, 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 ORILISSA 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 ORILISSA, 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.
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 (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 applications and our introduction of new drugs. 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 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 our current collaboration agreement with AbbVie. This collaboration agreement provides for significant future payments should certain 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.
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Because of our reliance on AbbVie, the commercialization and continued development of ORILISSA could be substantially delayed, and our ability to receive future funding could be substantially impaired, if AbbVie:
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does not successfully commercialize ORILISSA for endometriosis; |
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fails to gain regulatory approval of elagolix for uterine fibroids, and if applicable, successfully launch and commercialize elagolix for that indication; |
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does not conduct its collaborative activities in a timely manner; |
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does not devote sufficient time and resources to our partnered program; |
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terminates its agreement with us; |
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develops, either alone or with others, products that may compete with elagolix; |
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disputes our respective allocations of rights to any products or technology developed during our collaboration; or |
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merges with a third party that wants to terminate our agreement. |
In March 2015, we entered into a collaboration and license agreement with Mitsubishi Tanabe to develop and commercialize INGREZZA in Japan and other select Asian markets. We will rely on Mitsubishi Tanabe to achieve certain development, regulatory and commercial milestones which, if achieved, could generate significant future revenue for us. Our collaboration with Mitsubishi Tanabe is subject to risks and uncertainties similar to those described above. In addition, we may need to enter into other out-licensing collaborations to assist in the development and commercialization of other product candidates we are developing now or 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, development and commercialization of four programs including Voyager’s Parkinson’s disease program, or AADC Program, Voyager’s Friedreich’s ataxia program, or FA Program, and two programs to be determined by us and Voyager at a later date, or the Discovery Programs. Pursuant to development plans to be agreed to by the parties, which will be overseen by a joint steering committee, Voyager has operational responsibility, subject to certain exceptions, for the conduct of the AADC Program, FA Program and Discovery Programs prior to specified transition events for each program. We have agreed to be responsible for all costs incurred by Voyager in conducting these activities for each program in accordance with an agreed budget. Upon the occurrence of specified events for each program, we have agreed to assume responsibility for development, manufacturing and commercialization activities for such program. Voyager might not be successful in achieving the goals set forth in the development plan prior to the occurrence of the specified events that give rise to us assuming responsibility for development, manufacturing and commercialization activities for such program. Further, Voyager’s objectives in connection with the collaboration may not be consistent with our best interests. Voyager could take actions that may be adverse to us, or it could halt, slow, or deprioritize its development and commercialization efforts under the collaboration. We could also experience disagreements or delays involving the determination of one or both of the Discovery Programs. In any such instances, our ability to commercialize any product candidate related to the AADC Program, FA Program or Discovery Programs could be delayed or prohibited.
These issues and possible disagreements with AbbVie, Mitsubishi Tanabe, Voyager, or any future corporate collaborators could lead to delays in the collaborative research, development or commercialization of our product candidates. Furthermore, disagreements with these parties could require or result in litigation or arbitration, which would be time-consuming and expensive. If any of these issues arise, it may delay the development and commercialization of drug candidates and, ultimately, our generation of product revenues.
*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, if we fail to use commercially reasonable efforts, fail to submit an NDA for a licensed product by a specified date, or otherwise breach the license agreement. Pursuant to our collaboration and license agreement with Voyager, Voyager can terminate the agreement 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. 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.
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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, we have sold $517.5 million aggregate principal amount of 2.25% convertible senior notes due May 15, 2024 (2024 Notes). 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:
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increasing our vulnerability to adverse economic and industry conditions; |
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limiting our ability to obtain additional financing; |
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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; |
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limiting our flexibility to plan for, or react to, changes in our business; |
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diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the 2024 Notes; and |
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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, operating results, or liquidity.
In the event the conditional conversion feature of 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, 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.
*We have a history of losses and expect to increase our expenses for the foreseeable future, and we may never achieve sustained profitability.
Since our inception, we have incurred significant net losses and negative cash flow from operations. As a result of historical operating losses, we had an accumulated deficit of approximately $1.2 billion as of December 31, 2018.
In April 2017, we received FDA approval of INGREZZA for TD, and in July 2018, our partner AbbVie received FDA approval for ORILISSA for management of moderate to severe endometriosis pain in women. However, we have not yet obtained regulatory approvals for any other product candidates. Even if we succeed in commercializing INGREZZA or developing and commercializing any of our other product candidates, we may not be profitable. We also expect to continue to incur significant operating and capital expenditures as we:
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commercialize INGREZZA for TD; |
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seek regulatory approvals for our product candidates; |
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develop, formulate, manufacture and commercialize our product candidates; |
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in-license or acquire new product development opportunities; |
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implement additional internal systems and infrastructure; and |
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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 three months ended June 30, 2019, 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.
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*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.
As of June 30, 2019, we had approximately 650 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:
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manage our development efforts effectively; |
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integrate additional management, administrative and manufacturing personnel; |
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further develop our marketing and sales organization; and |
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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 of commercial sales of INGREZZA, 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. In addition, in April 2017 we received regulatory approval from the FDA for INGREZZA in TD and our revenues will be dependent on our ability to sell INGREZZA and to secure adequate third-party reimbursement. 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 three months ended June 30, 2019, 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.
U.S. federal income tax reform could adversely affect our business and financial condition.
On December 22, 2017, U.S. federal income tax legislation was signed into law (H.R. 1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”, informally titled the Tax Cuts and Jobs Act, or the Tax Act). The Tax Act, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, repeal of the alternative minimum tax for corporations, limitation of the tax deduction for interest expense to 30% of adjusted taxable income (except for certain small businesses), limitation of the deduction for net operating losses generated in taxable years beginning after December 31, 2017, to 80% of current year taxable income, elimination of most carrybacks of net operating losses arising in taxable years ending after December 31, 2017, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the Tax Act is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the Tax Act. The impact of the Tax Act on holders of our common stock is also uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.
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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 on or prior to December 31, 2017, are only permitted to be carried forward for 20 years under applicable U.S. tax law. Under the Tax Act, our federal NOLs generated in tax years ending 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, is limited. It is uncertain if and to what extent various states will conform to the Tax Act. 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 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 passage of the newly enacted federal income tax law, 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.
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. 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 12 months, the price of our common stock has ranged from approximately $127.00 per share to approximately $65.00 per share. The market price of our common stock may fluctuate in response to many factors, including:
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sales of INGREZZA and ORILISSA; |
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the status and cost of our post-marketing commitments for INGREZZA; |
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the results of our clinical trials; |
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reports of safety issues related to INGREZZA or ORILISSA; |
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developments concerning new and existing collaboration agreements; |
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announcements of technological innovations or new therapeutic products by us or others; |
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general economic and market conditions, including economic and market conditions affecting the biotechnology industry; |
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developments in patent or other proprietary rights; |
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developments related to the FDA; |
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future sales of our common stock by us or our stockholders; |
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comments by securities analysts; |
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additions or departures of key personnel; |
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fluctuations in our operating results; |
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potential litigation matters; |
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government regulation; |
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government and third-party payor coverage and reimbursement; |
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failure of any of our product candidates, if approved, to achieve commercial success; and |
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public concern as to the safety of our drugs. |
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 12 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:
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the commercial success of INGREZZA and/or ORILISSA; |
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debt service obligations on the 2024 Notes; |
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continued scientific progress in our R&D and clinical development programs; |
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the magnitude and complexity of our research and development programs; |
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progress with preclinical testing and clinical trials; |
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the time and costs involved in obtaining regulatory approvals; |
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the costs involved in filing and pursuing patent applications, enforcing patent claims, or engaging in interference proceedings or other patent litigation; |
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competing technological and market developments; |
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the establishment of additional strategic alliances; |
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developments related to any future litigation; |
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the cost of commercialization activities and arrangements, including manufacturing of our product candidates; and |
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the cost of product in-licensing and any possible 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 currently on file with the SEC, 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. Additional equity or debt financing might not be available on reasonable terms, if at all. Any additional equity financings will be dilutive to our stockholders and any additional debt financings may involve operating covenants that restrict our business.
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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 Sarbanes-Oxley Act of 2002, 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, 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.
Risks Related to Our Industry
*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. In the U.S., comprehensive health care reform legislation was 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. will continue to put pressure on the rate of adoption and pricing of prescription pharmaceuticals. Moreover, in some foreign jurisdictions, pricing of prescription pharmaceuticals is already subject to government control. Additionally, other recent federal and state legislation imposes new 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, 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 potential drug candidates are:
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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; |
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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; |
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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; |
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extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; |
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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; |
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a new Medicare Part D coverage gap discount program, in which manufacturers must 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; |
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expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and |
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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. |
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Some of the provisions of the ACA have yet to be fully implemented, and there have been 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 the ACA have been put into place. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed repeal legislation, 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”. On January 22, 2018, a continuing resolution was enacted on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. 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. On December 14, 2018, a U.S. District Court Judge in Texas ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Cuts and Jobs Act. While such U.S. District Court Judge, as well as the current presidential administration and CMS, have stated that the ruling will have no immediate effect pending appeal of the decision, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA and our business.
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, will remain in effect through 2027 unless additional Congressional action is taken. 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 to five 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 will be fully implemented in 2019. At this time, it is unclear how the introduction of the Medicare 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 administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 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, and to eliminate cost sharing for generic drugs for low-income patients. Further, 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. Department of Health and Human Services, or HHS, has already started the process of soliciting feedback on certain of these measures and, additionally, is immediately implementing others under its existing authority. On January 31, 2019, the HHS Office of Inspector General proposed modifications to federal Anti-Kickback Statute safe harbors which, among other things, may affect rebates paid by manufacturers to Medicare Part D plans, the purpose of which is to further reduce the cost of drug products to consumers. Further, CMS issued a final rule, effective on July 9, 2019, that requires direct-to-consumer advertisements of prescription drugs and biological products, for which payment is available through Medicare or Medicaid, to include in the advertisement the Wholesale Acquisition Cost, or list price, of the drug or biological product if it is equal to or greater than $35 for a monthly supply or usual course of treatment. Prescription drugs and biological products that are in violation of these requirements will be included on a public list. In July 2019, the U.S. District Court for the District of Columbia vacated this rule, but it is expected that litigation regarding the rule will continue. 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. 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.
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Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, 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.
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:
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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; |
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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; |
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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; |
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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; |
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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 |
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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. |
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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. 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, 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. 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 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, 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.
*We face intense competition, and if we are unable to compete effectively, the demand for our products may be reduced.
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.
Competition may also arise from, among other things:
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other drug development technologies; |
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methods of preventing or reducing the incidence of disease, including vaccines; and |
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new small molecule or other classes of therapeutic agents. |
Developments by others 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, 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 number of competitors to our products and product candidates. If one or more of our competitors’ products or programs are successful, the market for our products may be reduced or eliminated. For example, in August 2017, Teva received approval for AUSTEDO to treat TD.
Compared to us, many of our competitors and potential competitors have substantially greater:
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capital resources; |
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research and development resources, including personnel and technology; |
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regulatory experience; |
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preclinical study and clinical testing experience; |
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manufacturing, marketing and distribution experience; and |
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production facilities. |
36
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:
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obtain patent protection for our products; |
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preserve our trade secrets; |
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prevent third parties from infringing upon our proprietary rights; and |
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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 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. To prevent infringement or unauthorized use, we may need to file infringement claims, which are expensive and time-consuming. In addition, in an infringement proceeding a court may decide that a patent of ours 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 U.S. Patent and Trademark Office may be necessary to determine the priority of inventions with respect to our patent applications or those of our licensors. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and be a distraction to management. 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 U.S.
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.
37
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 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, 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. 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 and 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 and store 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 and other cyber-attacks. 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 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. 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. 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.
38
Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could have a material adverse effect on our business, financial condition or results of operations.
The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. For example, the EU’s General Data Protection Regulation, or GDPR, imposes strict obligations on the processing of personal data, including personal health data, 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 EU or the monitoring of their behavior. The GDPR enhances 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; implementing safeguards to protect the security and confidentiality of personal data; and transferring personal data to countries outside the EU, including the U.S. The GDPR imposes 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 a private right of action on data subjects for breaches of data protection requirements. The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as 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.
39
Item 6. Exhibits
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Exhibit Number |
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Description |
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3.1 |
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3.2 |
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4.1 |
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4.2 |
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4.3 |
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Form of Note representing Neurocrine’s 2.25% Convertible Notes due 2024(5) |
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10.1 |
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10.2** |
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Employment Agreement dated January 8, 2018 between the Company and Eiry W. Roberts, M.D. |
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31.1 |
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31.2 |
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32* |
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101.INS |
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XBRL Instance Document. – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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XBRL Taxonomy Extension Schema Document. |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document. |
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(1) |
Incorporated by reference to Exhibit 3.1 of our Quarterly Report on Form 10-Q dated November 5, 2018 |
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(2) |
Incorporated by reference to Exhibit 3.2 of our Quarterly Report on Form 10-Q dated November 5, 2018 |
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(3) |
Incorporated by reference to our Registration Statement on Form S-1 (Registration No. 333-03172) |
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(4) |
Incorporated by reference to Exhibit 4.1 of our Current Report on Form 8-K dated May 2, 2017 |
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(5) |
Incorporated by reference to Exhibit 99.1 of our Current Report on Form 8-K dated May 2, 2017 |
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* |
These certifications are being furnished solely to accompany this quarterly 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. |
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Management contract or compensatory plan or arrangement |
Except as specifically noted above, our 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.
40
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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NEUROCRINE BIOSCIENCES, INC. |
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Dated: July 29, 2019 |
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/s/ Matthew C. Abernethy |
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Matthew C. Abernethy |
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Chief Financial Officer |
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(Duly authorized officer and Principal Financial Officer) |
41
Exhibit 10.1
AMENDMENT NO. 1 TO COLLABORATION AND LICENSE AGREEMENT
This Amendment No. 1 to Collaboration and License Agreement (the "Amendment") entered into and effective on June 14, 2019 (the "Amendment Execution Date"), is made by and between Voyager Therapeutics, Inc., a Delaware corporation, having its principal place of business at 75 Sidney Street, Cambridge, MA 02139 ("Voyager"), and Neurocrine Biosciences, Inc., a Delaware corporation, having its principal place of business at 12780 El Camino Real, San Diego, CA 92130 ("Neurocrine"). Voyager and Neurocrine each may be referred to individually as a "Party", or together as the "Parties" Capitalized terms that are not defined in this Amendment shall have the meaning set forth in the Agreement (as defined below).
WHEREAS, on January 28, 2019, Voyager and Neurocrine entered into a Collaboration and License Agreement (the "Agreement");
WHEREAS, Voyager intends to enter into a Termination Agreement with Genzyme (the "Genzyme Termination Agreement"), terminating Genzyme's rights under the Genzyme Agreement to the FA Program outside the United States;
WHEREAS, the Parties desire to amend the Agreement to modify the definition of "Territory" as set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the Parties hereby agree to modify the Agreement as follows:
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In consideration for agreements made in this Amendment, upon the effectiveness of the Genzyme Termination Agreement, Neurocrine shall pay Voyager a one time, non-refundable, non-creditable upfront payment of Five Million Dollars ($5,000,000) within five (5) Business Days (the "Amendment Effective Time"), provided that Voyager and Genzyme enter into the Genzyme Termination Agreement no later than July 31, 2019 (unless extended by written agreement between the Parties). Voyager shall provide Neurocrine written notice confirming that Voyager and Genzyme have entered into the Genzyme Termination Agreement and that the Genzyme Termination Agreement is effective. |
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As of the Amendment Effective Time, Genzyme's rights to the FA Program outside the United States shall be deemed to have expired, and the terms of Section 5.4 of the Agreement regarding the expanded definition of Territory with respect to Neurocrine's rights to the FA Program outside the United States shall automatically come into effect. |
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3. |
As of the Amendment Effective Time, the Territory will be expanded to include countries outside the United States with respect to the FA Program under the terms of the Agreement. |
As contemplated pursuant to Section 2.1.2 of the Agreement, as of the Amendment Execution Date, the Parties hereby mutually agree that the Potential Target List shall consist of the Targets set forth on EXHBIT A to this Amendment.
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4. |
All other terms and conditions in the Agreement that are not hereby amended are to remain in full force and effect. |
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5. |
This Amendment may be executed in two or more counterparts, including by facsimile or PDF signature pages, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. |
[Signature Page to Follow]
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their duly authorized representatives as of the Amendment Execution Date.
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VOYAGER THERAPEUTICS, INC. |
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NEUROCRINE BIOSCIENCES, INC. |
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By: |
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By: |
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Name: |
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Name: |
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Title: |
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Title: |
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2
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Target (gene) |
Potential Indication |
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ATXN2 |
SCA2 |
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ATXN3 |
SCA3 |
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DMPK |
Myotonic Dystrophy Type 1 |
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GALC |
Krabbe Disease |
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GRN |
Frontotemporal Dementia |
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NPCl |
Niemann-Pick Disease |
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PEXl |
Zellweger Syndrome |
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SARMl |
Charcot-Marie-Tooth Disease |
3
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter “Agreement”) is entered into effective January 8, 2018 by and between Neurocrine Biosciences, Inc., 12780 El Camino Real, San Diego, California 92130 (hereinafter the “Company”), and Eiry Roberts (hereinafter “Executive”).
R E C I T A L S
WHEREAS, the Company and Executive wish to set forth in this Agreement the terms and conditions under which Executive is to be employed by the Company;
NOW, THEREFORE, the Company and Executive, in consideration of the mutual promises set forth herein, agree as follows:
Article 1
NATURE OF EMPLOYMENT
1.1Commencement Date. Executive’s full-time employment with the Company will commence on January 8, 2018 (“Commencement Date”). This Agreement shall govern the terms of Executive’s employment on and after the Commencement Date until it is terminated by either the Company or Executive pursuant to the terms set forth in Article 6.
1.2At-Will Employment. Executive shall be employed at-will by the Company and therefore either Executive or the Company may terminate the employment relationship and this Agreement at any time, with or without Cause (as defined herein) and with or without advance notice, subject to the provisions of Article 6.
Article 2
EMPLOYMENT DUTIES
2.1Title/Responsibilities. Executive hereby accepts employment with the Company pursuant to the terms and conditions hereof. Executive agrees to serve the Company in the position of Chief Medical Officer. Executive shall have the powers and duties commensurate with such position, including but not limited to hiring personnel necessary to carry out the responsibilities for such position as set forth in the annual business plan approved by the Board of Directors.
2.2Full Time Attention. Executive shall devote her best efforts and her full business time and attention to the performance of the services customarily incident to such office and to such other services as the Chief Executive Officer (hereinafter “CEO”) or Board of Directors may reasonably request.
2.3Other Activities. Except upon the prior written consent of the CEO, Executive shall not during the period of employment engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that is or may be competitive with, or that might place her in a competing position to that of the Company or any other corporation or entity that directly or indirectly controls, is controlled by, or is under common control with the Company (an “Affiliated Company”), provided that Executive may own less than two percent (2%) of the outstanding securities of any such publicly traded competing corporation.
Article 3
COMPENSATION
3.1Base Salary. Executive shall receive a Base Salary at an annual rate of $520,000, payable semi-monthly in equal installments in accordance with the Company’s normal payroll practices. The CEO shall provide Executive with annual performance reviews, and, thereafter, Executive shall be entitled to such increase in Base Salary as the CEO and the Compensation Committee of the Board of Directors (hereinafter the “Compensation Committee”) may from time to time establish in their sole discretion.
3.2Incentive Bonus. In addition to any other bonus Executive shall be awarded by the Compensation Committee, Executive shall be eligible to receive an annual incentive bonus as determined by the Company’s Compensation Committee and CEO based upon the achievement by the Company of annual corporate goals established by the Board of Directors and the achievement of Executive in meeting annual personal goals established by the CEO and the Compensation Committee. Executive’s annual incentive bonus at target will be as set forth in the Company’s Executive Officer Bonus Plan (the “Target Annual Bonus”); for fiscal year 2018, this target is set at 50% of base pay earned. The Company’s annual corporate goals, and if applicable, the Executive’s annual personal goals, will be set forth in writing by the CEO and the Compensation Committee within ninety (90) days after the start of the Company’s fiscal year. The Compensation Committee in consultation with the independent members of the Board of Directors and the CEO shall, in their sole discretion, determine whether Executive’s annual personal goals have been attained. The Compensation Committee in consultation with the independent members of the Board of Directors shall, in its sole discretion, determine whether the annual corporate goals have been attained. Any annual incentive bonus shall be considered earned only if Executive is employed by the Company both on the date that the determination is made as to whether annual personal goals have been met, and on the date that the determination is made as to whether annual corporate goals have been met. These determinations generally will be made within the first quarter following the end of the Company’s fiscal year. Except as provided in Article 6 herein, no pro-rata bonus will be considered earned if Executive leaves the Company for any reason prior to the foregoing determination dates. Any annual incentive bonus that is earned shall be paid no later than the fifteenth day of the third month following the end of the Company’s fiscal year for which such bonus was earned.
Page 2 of 21
109912199 v2
(a)New Hire Option. Executive will receive (i) a new hire grant of nonstatutory stock options that would enable Executive to purchase up to [70,000 shares of common stock of the Company (the “New Hire Option”) and (ii) a new hire grant of 20,000 restricted stock units (the “New Hire RSU Grant” and, together with the New Hire Option, the “New Hire Equity Grants”). The grant of the New Hire Equity Grants is subject to Executive’s timely execution of this Agreement and Executive’s actual commencement of employment with the Company. The New Hire Equity Grants will (i) automatically be granted to Executive on the Commencement Date (the “Grant Date”), (ii) the New Hire Option will have an exercise price per share equal to the closing price per share of the Company’s common stock on the Grant Date, (iii) be subject to terms and conditions consistent with the Company’s 2Inducement Plan and applicable form of stock option agreement or restricted stock agreement, respectively, as approved by the Compensation Committee, (iv) the New Hire Option shall vest 25% on the first anniversary of the Grant Date, with the remaining 75% vesting in equal monthly installments over the following 36 months, subject in each case to Executive’s continued service with the Company, and (vi) the New Hire RSU Grant will vest 25% each year on the anniversary of the Grant Date, vesting in full on the fourth anniversary of the Grant Date, subject to Executive’s continued service with the Company. As soon as administratively practicable following the Grant Date, Executive will separately receive a stock option agreement and associated documentation related to the New Hire Equity Grants, including the applicable exercise price of the New Hire Option. The grant of the New Hire Equity Grants is intended to be a material inducement to the Executive’s employment by the Company.
(b)Additional Stock Awards. Subject to approval by the Company’s Compensation Committee, in consultation with the independent members of the Board of Directors, Executive will be eligible to receive additional Stock Awards on terms to be determined by the Compensation Committee at the time of any such grant. The determination whether to grant any additional Stock Award to Executive is in the sole discretion of the Compensation Committee, in consultation with the independent members of the Board of Directors. For all purposes of this Agreement, “Stock Awards” shall mean any rights granted by the Company to Executive with respect to the common stock of the Company, including, without limitation, stock options, stock appreciation rights, restricted stock, stock bonuses and restricted stock units.
3.4Inducement Advance. Executive shall receive a one-time cash inducement advance (the “Inducement Advance”) in the total amount of $225,000.00, subject to applicable withholding, which shall be deemed earned when Executive successfully completes two full years of employment from the Commencement Date. The Inducement Advance shall be paid on the next payroll date following the successful completion of 90 days of employment from the Commencement Date. Should Executive’s employment terminate within 24 months after the Commencement Date either pursuant to a Voluntary Resignation (as set forth in Section 6.7 herein) or pursuant to a Termination by the Company With Cause (as set forth in Section 6.4 herein), Executive shall be required to repay to the Company any amounts previously paid to her for the Inducement Advance, and hereby authorizes the Company to withhold any such amount from Executive’s final paycheck or other earned compensation. Should Executive’s employment terminate at any time pursuant to Sections 6.2, 6.3, 6.5, and 6.6 as set forth herein, Executive shall not be required to repay any portion of the Inducement Advance previously paid to him.
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109912199 v2
3.5Withholdings. All compensation and benefits payable to Executive under this Agreement shall be subject to all federal, state, local taxes and other withholdings and similar taxes and payments required by applicable law.
Article 4
EXPENSE ALLOWANCES AND FRINGE BENEFITS
4.1Vacation. Executive shall be entitled to participate in the Company’s vacation plan pursuant to the terms of that plan.
4.2Benefits. During Executive’s employment hereunder, the Company shall also provide Executive with the health insurance benefits it generally provides to its other senior management employees. As Executive becomes eligible in accordance with criteria to be adopted by the Company, the Company shall provide Executive with the right to participate in and to receive benefit from life, accident, disability, medical, and savings plans and similar benefits made available generally to employees of the Company as such plans and benefits may be adopted by the Company. With respect to long-term disability insurance coverage, the Executive will pay all premiums for such coverage with after-tax dollars, and the Company will reimburse the Executive for the premium costs so paid by the Executive, which reimbursement benefit shall be taxable income, subject to withholding. The amount and extent of benefits to which Executive is entitled shall be governed by the specific benefit plan as it may be amended from time to time. With respect to personal financial and tax planning expenses incurred by Executive (the “Financial Planning Expenses”), the Company will reimburse the Executive for Financial Planning Expenses incurred by the Executive during the 2018 calendar year and each calendar year thereafter, up to a maximum reimbursement benefit of $3,000 each calendar year, which reimbursement benefit shall be taxable income, subject to withholding. Such Financial Planning Expenses shall be reimbursed and accounted for under the expense reimbursement policies and procedures established by the Company (the “Expense Reimbursement Policy”), subject to Executive’s timely provision of adequate records and other documentary evidence of having incurred such Financial Planning Expenses in accordance with the terms of the Expense Reimbursement Policy; such reimbursement shall be made promptly, but in no event later than December 31 of the calendar year following the year in which such Financial Planning Expenses were incurred by Executive.
4.3Relocation Benefits. Executive shall be entitled to relocation benefits (the “Relocation Benefits”) as set forth below:
1)Airfare for Executive and family from Indiana to San Diego;
2)Temporary housing in San Diego for up to 90 days to be arranged by the Company through Relocation Coordinates, Inc., and not to exceed $8,000 per month;
3)A house hunting trip to San Diego;
4)Movement and storage (up to 90 days) of household goods to the San Diego area, all of which is to be coordinated by Relocation Coordinates, Inc;
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5)If needed, a full day tour with rental agent; and
6)A one-time cash relocation advance (“Relocation Advance”) in the amount of $220,000.00, less applicable tax withholdings including Federal and State taxes, payable on the next payroll following 30 days after the Commencement Date.
All Relocation Benefits must be taken or used within 15 months the Commencement Date. Should Executive’s employment terminate within 18 months after the Commencement Date either pursuant to a Voluntary Resignation (as set forth in Section 6.7 herein) or pursuant to a Termination by the Company With Cause (as set forth in Section 6.4 herein), Executive shall be required to repay to the Company any amounts previously paid to her for the Relocation Benefits (including the Relocation Advance), and hereby authorizes the Company to withhold any such amount from Executive’s final paycheck or other earned compensation. Should Executive’s employment terminate at any time pursuant to Sections 6.2, 6.3, 6.5, and 6.6 as set forth herein, Executive shall not be required to repay any portion of the Relocation Benefits previously paid to him.
4.4Business Expense Reimbursement. During the term of this Agreement, Executive shall be entitled to receive proper reimbursement for all reasonable out-of-pocket expenses incurred by her (in accordance with the Expense Reimbursement Policy) in performing services hereunder. Executive agrees to furnish to the Company adequate records and other documentary evidence of such expense for which Executive seeks reimbursement under the terms of the Expense Reimbursement Policy. Such expenses shall be reimbursed and accounted for under the Expense Reimbursement Policy, and such reimbursement shall be made promptly, but in no event later than December 31 of the calendar year following the year in which such expenses were incurred by Executive.
Article 5
CONFIDENTIALITY
5.1Proprietary Information. Executive represents and warrants that she has previously executed and delivered to the Company the Company’s standard Proprietary Information and Inventions Agreement.
5.2Return of Property. All documents, records, apparatus, equipment and other physical property which is furnished to or obtained by Executive in the course of her employment with the Company shall be and remain the sole property of the Company. Executive agrees that, upon the termination of her employment, she shall return all such property (whether or not it pertains to Proprietary Information as defined in the Proprietary Information and Inventions Agreement), and agrees not to make or retain copies, reproductions or summaries of any such property.
5.3No Use of Prior Confidential Information. Executive will not intentionally disclose to the Company or use on its behalf any confidential information belonging to any of her former employers or any other third party.
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6.1General. As set forth in Section 1.2 herein, Executive shall be employed on an at-will basis by the Company. Notwithstanding the foregoing, Executive’s employment and this Agreement may be terminated in one of six ways as set forth in this Article 6: (a) Executive’s Death (Section 6.2); (b) Executive’s Disability (Section 6.3); (c) Termination by the Company for Cause (Section 6.4); (d) Termination by the Company without Cause (Section 6.5); (e) Termination by Executive due to a Constructive Termination (Section 6.6); or (f) Voluntary Resignation (Section 6.7).
6.2By Death. Executive’s employment and this Agreement shall terminate automatically upon the death of Executive. In such event:
(a)Stock Awards. The vesting of all outstanding Stock Awards held by Executive shall be accelerated so that the amount of shares vested under such Stock Awards shall equal that number of shares that would have been vested if Executive had continued to render services to the Company for 12 continuous months after the date of Executive’s termination of employment. All Stock Awards held by Executive that are vested at the time of termination (including any accelerated Stock Awards) will be exercisable in accordance with their terms until the earlier of (x) one year after the termination date, or (y) the expiration of the maximum term of the option.
(b)Bonus. The Company shall pay to Executive’s beneficiaries or her estate, as the case may be, a lump sum amount equal to Executive’s Target Annual Bonus (as defined in Section 3.2) for the Company’s fiscal year in which Executive’s death occurs multiplied by a fraction, the numerator of which is the number of full months of employment by Executive in such fiscal year and the denominator of which is 12. Such amount shall be paid as soon as administratively practicable, but in no event later than March 15 following the year in which Executive’s death occurred.
(c)Accrued Compensation. The Company shall pay to Executive’s beneficiaries or her estate, as the case may be, any accrued Base Salary, any vested deferred compensation (other than pension plan or profit-sharing plan benefits that will be paid in accordance with the applicable plan), any benefits under any plans of the Company (other than pension and profit-sharing plans) in which Executive is a participant to the full extent of Executive’s rights under such plans, any accrued vacation pay and any appropriate business expenses incurred by Executive in connection with her duties hereunder, all to the date of termination (collectively “Accrued Compensation”).
(d)No Severance Compensation. The compensation and benefits set forth in Sections 6.2(a) through (c) herein shall be the only compensation and benefits provided by the Company in the event of Executive’s death and no other severance compensation or benefits shall be provided.
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6.3By Disability. If Executive is prevented from performing her duties hereunder by reason of any physical or mental incapacity that results in Executive’s satisfaction of all requirements necessary to receive benefits under the Company’s long-term disability plan due to a total disability, then, to the extent permitted by law, the Company may terminate the employment of Executive and this Agreement at or after such time. In such event, and if Executive signs the General Release set forth as Exhibit A or such other form of release as the Company may require (the “Release”) on or within the time period set forth therein, but in no event later than forty-five (45) days after the termination date and allows such Release to become effective (the “Release Effective Date”), then:
(a)Accrued Compensation. The Company shall pay to Executive all Accrued Compensation (as defined in Section 6.2(c) herein).
(b)Base Salary Continuation. The Company shall continue to pay Executive’s Base Salary, less required withholdings, for a period of 12 months (the “Disability Base Salary Payments”) following Executive’s separation from service; provided that the Disability Base Salary Payments shall be reduced by any insurance or other payments to Executive under policies and plans sponsored by the Company, even if premiums are paid by Executive. Subject to the provisions of Section 6.11, the Disability Base Salary Payments shall be paid in accordance with the Company’s standard payroll practices; provided, however, that any amounts that would otherwise be scheduled to be paid prior to the Release Effective Date shall instead accrue and be paid during the first payroll period following the Release Effective Date, and all other payments shall be made as originally scheduled.
(c)Bonus. The Company shall pay a lump sum amount equal to Executive’s Target Annual Bonus (as defined in Section 3.2) for the Company’s then-current fiscal year multiplied by a fraction, the numerator of which is the number of full months of employment by Executive in the current fiscal year and the denominator of which is 12. Such payment shall be made within ten (10) days following the Release Effective Date.
(d)Stock Awards. The vesting of all outstanding Stock Awards held by Executive shall be accelerated so that the amount of shares vested under such Stock Awards shall equal that number of shares which would have been vested if Executive had continued to render services to the Company for 12 continuous months after the date of Executive’s termination of employment.
(e)Health Insurance Benefits. To the extent provided by the federal COBRA law or, if applicable, state insurance laws, and by the Company’s current group health insurance policies, Executive will be eligible to continue Executive’s group health insurance benefits at Executive’s own expense. If Executive timely elects continued coverage under COBRA, the Company shall pay Executive’s COBRA premiums, and any applicable Company COBRA premiums, necessary to continue Executive’s then-current coverage for a period of 12 months after the date of Executive’s termination of employment; provided, however, that any such payments will cease if Executive voluntarily enrolls in a health insurance plan offered by another employer or entity during the period in which the Company is paying such premiums. Executive agrees to immediately notify the Company in writing of any such enrollment.
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Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot provide the foregoing benefit without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to Executive a taxable monthly amount to continue her group health insurance coverage in effect on the date of separation from service (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made regardless of whether Executive elects COBRA continuation coverage and shall commence in the month following the month in which Executive incurs a separation from service and shall end on the earlier of (x) the date on which Executive voluntarily enrolls in a health insurance plan offered by another employer or entity during the period in which the Company is paying such amounts and (y) 12 months after the date of Executive’s separation from service.
(f)Disability Plans. Nothing in this Section 6.3 shall affect Executive’s rights under any disability plan in which Executive is a participant.
6.4Termination by the Company for Cause.
(a)No Liability. The Company may terminate Executive’s employment and this Agreement for Cause (as defined below) without liability at any time. In such event, the Company shall pay Executive all Accrued Compensation (as defined in Section 6.2(c) herein), but no other compensation or reimbursement of any kind, including without limitation, any severance compensation or benefits shall be paid, and thereafter the Company’s obligations hereunder shall terminate.
(b)Definition of “Cause.” For purposes of this Agreement, “Cause” shall mean one or more of the following:
(i)Executive’s intentional commission of an act, or intentional failure to act, that materially injures the business of the Company; provided, however, that in no event shall any business judgment made in good faith by Executive and within Executive’s defined scope of authority constitute a basis for termination for Cause under this Agreement;
(ii)Executive’s intentional refusal or intentional failure to act in accordance with any lawful and proper direction or order of the Board of Directors, the Chief Executive Officer, or the individual to whom Executive reports.
(iii)Executive’s material breach of Executive’s fiduciary, statutory, contractual, or common law duties to the Company (including any material breach of this Agreement, the Proprietary Information and Inventions Agreement, or the Company’s written policies);
(iv)Executive’s indictment for or conviction of any felony or any crime involving dishonesty; or
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(v)Executive’s participation in any fraud or other act of willful misconduct against the Company; provided, however, that in the event that any of the foregoing events is reasonably capable of being cured, the Company shall provide written notice to Executive describing the nature of such event and Executive shall thereafter have ten (10) business days to cure such event.
6.5Termination by the Company without Cause.
(a)The Company’s Right. The Company may terminate Executive’s employment and this Agreement without Cause (as defined in Section 6.4(b) herein) at any time by giving thirty (30) days advance written notice to Executive.
(b)Severance Benefits. If the Company terminates Executive’s employment without Cause, and if Executive signs the Release on or within the time period set forth therein (but in no event later than forty-five (45) days after the termination date) and allows such Release to become effective (the “Release Effective Date”), then:
(i)Accrued Compensation. The Company shall pay to Executive all Accrued Compensation (as defined in Section 6.2(c) herein).
(ii)Cash Compensation Amount Payments. The Company shall pay Executive an amount calculated as follows: [Executive’s annualized Base Salary + Executive’s Target Annual Bonus (as defined in Section 3.2 herein)] multiplied by 1.0 (the “Cash Compensation Amount”). Subject to the provisions of Section 6.11, the Cash Compensation Amount will be paid in equal installments on the Company’s standard payroll dates over a period of 12 months following Executive’s separation from service; provided, however, that any amounts that would otherwise be scheduled to be paid prior to the Release Effective Date shall instead accrue and be paid during the first payroll period following the Release Effective Date, and all other payments shall be made as originally scheduled.
(iii)Stock Awards. The vesting of all outstanding Stock Awards held by Executive shall be accelerated so that the amount of shares vested under such Stock Awards shall equal that number of shares which would have been vested if Executive had continued to render services to the Company for 12 continuous months after the date of Executive’s termination of employment.
(iv)Health Insurance Benefits. To the extent provided by the federal COBRA law or, if applicable, state insurance laws, and by the Company’s current group health insurance policies, Executive will be eligible to continue Executive’s group health insurance benefits at Executive’s own expense. If Executive timely elects continued coverage under COBRA, the Company shall pay Executive’s COBRA premiums, and any applicable Company COBRA premiums, necessary to continue Executive’s then-current coverage for a period of 12 months after the date of Executive’s termination of employment; provided, however, that any such payments will cease if Executive voluntarily enrolls in a health insurance plan offered by another employer or entity during the period in which the Company is paying such premiums. Executive agrees to immediately notify the Company in writing of any such enrollment.
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Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot provide the foregoing benefit without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to Executive a taxable monthly amount to continue her group health insurance coverage in effect on the date of separation from service (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made regardless of whether Executive elects COBRA continuation coverage and shall commence in the month following the month in which Executive incurs a separation from service and shall end on the earlier of (x) the date on which Executive voluntarily enrolls in a health insurance plan offered by another employer or entity during the period in which the Company is paying such amounts and (y) 12 months after the date of Executive’s separation from service.
6.6Termination by Executive due to a Constructive Termination.
(a)Executive’s Right. Executive may resign her employment and terminate this Agreement at any time as a result of a Constructive Termination (as defined in Section 6.6(c) herein).
(b)Severance Benefits. If Executive resigns her employment and terminates this Agreement as a result of a Constructive Termination, and if Executive signs the Release on or within the time period set forth therein (but in no event later than forty-five (45) days after the termination date) and allows such Release to become effective, then Executive shall receive all of the severance benefits set forth in Section 6.5(b) herein.
(c)Definition of “Constructive Termination.” For purposes of this Agreement, “Constructive Termination” shall mean a resignation of employment and termination of this Agreement by Executive for one or more of the following reasons:
(i)Assignment to, or withdrawal from, Executive of any duties or responsibilities that results in a material diminution in such Executive’s authority, duties or responsibilities as in effect immediately prior to such change;
(ii)A material diminution in the position, authority, duties or responsibilities of the supervisor to whom Executive is required to report,
(iii)A material reduction by the Company of Executive’s annual Base Salary;
(iv)A relocation of Executive or the Company’s principal executive offices if Executive’s principal office is at such offices, to a location more than forty (40) miles from the location at which Executive is then performing her duties, except for an opportunity to relocate which is accepted by Executive in writing; or
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(v)A material breach by the Company of any provision of this Agreement or any other enforceable written agreement between Executive and the Company; provided however, that Executive must first provide the Company with written notice specifying the condition giving rise to a Constructive Termination within ninety (90) days following the initial existence of such condition; and Executive’s notice must specify that Executive intends to terminate her employment no earlier than thirty (30) days after providing such notice, and the Company must be given an opportunity to cure such condition within thirty (30) days following its receipt of such notice and avoid paying benefits.
6.7Voluntary Resignation. Executive may resign his or her employment and terminate this Agreement at any time for any reason other than due to a Constructive Termination (as defined in Section 6.6(c) herein). In such event, the Company shall pay Executive all Accrued Compensation (as defined in Section 6.2(c) herein), but no other compensation or reimbursement of any kind, including without limitation, any severance compensation or benefits shall be paid, and thereafter the Company’s obligations hereunder shall terminate.
6.8Change In Control.
(a)Severance Benefits. If (i) within six months after the consummation of a Change in Control (as defined in Section 6.8(b) herein), (1) the Company terminates Executive’s employment and this Agreement without Cause pursuant to Section 6.5 herein or (2) Executive resigns her employment and terminates this Agreement as a result of a Constructive Termination pursuant to Section 6.6 herein, and (ii) in either event (1) or (2), Executive signs the Release on or within the time period set forth therein, but in no event later than forty-five (45) days after the termination date and allows such Release to become effective (the “Release Effective Date”), then Executive shall receive the following severance benefits in lieu of any severance benefits set forth in Section 6.5(b) or Section 6.6(b) herein:
(i)Accrued Compensation. The Company shall pay to Executive all Accrued Compensation (as defined in Section 6.2(c) herein).
(ii)CIC Cash Compensation Amount Payment. The Company shall pay Executive an amount calculated as follows: [Executive’s annual Base Salary + Executive’s Target Annual Bonus (as defined in Section 3.2 herein)] multiplied by 1.5 (collectively, the “CIC Cash Compensation Amount”). The CIC Cash Compensation Amount will be paid in one lump sum within ten (10) days following the Release Effective Date.
(iii)Cash Payment for Stock Awards. Within ten (10) days following the Release Effective Date, the Company shall pay Executive a cash amount equal to the value, as of the date of the consummation of the Change in Control, of (1) all Stock Awards that are unvested at the time of termination of employment, and (2) all Stock Awards that are vested at the time of termination of employment and for which the shares subject to such Stock Awards have not yet been issued, including, without limitation, any unexercised stock options, unexercised stock appreciation rights, and unissued shares subject to a restricted stock unit award, provided, in either case, that such Stock Awards were held by Executive as of the date of consummation of the Change in Control, and all rights of Executive in such Stock Awards and
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any unvested shares of stock that previously may have been issued thereunder shall be extinguished as a result of such payment, with the result that such Stock Awards shall automatically terminate unexercised and unvested shares of stock previously issued shall automatically be reacquired by the Company or its successor. For purposes of the foregoing cash payment, (1) stock options and stock appreciation rights shall be valued on the basis of the difference between the value of the subject stock for purposes of the transaction constituting the Change of Control and the exercise or base price of the award, and (2) restricted stock, restricted stock units or other full value awards and shares of stock acquired under Stock Awards shall be valued on the basis of the value of the subject stock for purposes of the transaction constituting the Change in Control.
(iv)Health Insurance Benefits. To the extent provided by the federal COBRA law or, if applicable, state insurance laws, and by the Company’s current group health insurance policies, Executive will be eligible to continue Executive’s group health insurance benefits at Executive’s own expense. If Executive timely elects continued coverage under COBRA, the Company shall pay Executive’s COBRA premiums, and any applicable Company COBRA premiums, necessary to continue Executive’s then-current coverage for a period of 18 months after the date of Executive’s termination of employment; provided, however, that any such payments will cease if Executive voluntarily enrolls in a health insurance plan offered by another employer or entity during the period in which the Company is paying such premiums. Executive agrees to immediately notify the Company in writing of any such enrollment.
Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot provide the foregoing benefit without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to Executive a taxable monthly amount to continue her group health insurance coverage in effect on the date of separation from service (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made regardless of whether Executive elects COBRA continuation coverage and shall commence in the month following the month in which Executive incurs a separation from service and shall end on the earlier of (x) the date on which Executive voluntarily enrolls in a health insurance plan offered by another employer or entity during the period in which the Company is paying such amounts and (y) 18 months after the date of Executive’s separation from service.
(b)Definition of “Change in Control.” For purposes of this Agreement, a “Change in Control” shall have occurred if at any time during Executive’s employment hereunder, any of the following events shall occur:
(i)The Company is merged, or consolidated. or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than 50% of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the aggregate by the holders of voting securities of the Company immediately prior to such transaction;
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(ii)The Company sells all or substantially all of its assets or any other corporation or other legal person and thereafter, less than 50% of the combined voting power of the then-outstanding voting securities of the acquiring or consolidated entity are held in the aggregate by the holders of voting securities of the Company immediately prior to such sale;
(iii)There is a report filed after the date of this Agreement on Schedule 13 D or schedule 14 D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of l934 (the “Exchange Act”) disclosing that any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term beneficial owner is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) representing 50% or more of the combined voting power of the then-outstanding voting securities of the Company;
(iv)The Company shall file a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to item 1 of Form 8-X thereunder or Item 5(f) of Schedule 14 A thereunder (or any successor schedule, form or report or item therein) that the change in control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or
(v)During any period of two (2) consecutive years, individuals who at the beginning of any such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof unless the election to the nomination for election by the Company’s shareholders of each director of the Company first elected during such period was approved by a vote of at least two-thirds of the directors of the Company then still in office who were directors of the Company at the beginning of such period.
(c)Parachute Payments.
(i)If any payment or benefit (including payments or benefits pursuant to this Agreement) that Executive would receive in connection with a Change in Control or otherwise (“Payment”) would (1) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (2) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be equal to the Reduced Amount. The "Reduced Amount" shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive's receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting "parachute payments" is necessary so that the Payment equals the Reduced Amount, Executive shall have no rights to any additional payments and/or benefits, and reduction shall occur in the manner that results in the greatest economic benefit for Executive. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata.
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(ii)In the event it is subsequently determined by the Internal Revenue Service that some portion of the Reduced Amount as determined pursuant to clause (x) in the preceding paragraph is subject to the Excise Tax, Executive agrees to promptly return to the Company a sufficient amount of the Payment so that no portion of the Reduced Amount is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount is determined pursuant to clause (y) in the preceding paragraph, Executive will have no obligation to return any portion of the Payment pursuant to the preceding sentence.
(iii)The independent registered public accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the event described in Section 280G(b)(2)(A)(i) of the Code will perform the foregoing calculations. If the independent registered public accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting such Change in Control or similar transaction, the Company will appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder. The Company will bear all expenses with respect to the determinations by such independent registered public accounting firm required to be made hereunder. Any good faith determinations of the independent registered public accounting firm made hereunder will be final, binding and conclusive upon the Company and you.
6.9Mitigation. Except as otherwise specifically provided herein, Executive shall not be required to mitigate the amount of any payment provided under this Agreement by seeking other employment or self-employment, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or through self-employment or by retirement benefits after the date of Executive’s termination of employment from the Company, except as provided herein.
6.10Coordination. If upon termination of employment, Executive becomes entitled to rights under other plans, contracts or arrangements entered into by the Company, this Agreement shall be coordinated with such other arrangements so that Executive’s rights under this Agreement are not reduced, and that any payments under this Agreement offset the same types of payments otherwise provided under such other arrangements, but do not otherwise reduce any payments or benefits under such other arrangements to which Executive becomes entitled.
6.11Application of Section 409A. Notwithstanding anything to the contrary herein, the following provisions apply to the extent severance benefits provided herein are subject to Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”). Severance benefits shall not commence until Executive has a “separation from service” for purposes of Section 409A. If Executive is a “specified employee” within the meaning of 409A(a)(2)(B)(i) of the Code, any installment payments of Disability Base Salary Payments pursuant to Section 6.3(b) or Cash Compensation Amounts pursuant to Section 6.5(b) or 6.6(b) that are triggered by a separation from service shall be accelerated to the minimum extent necessary so that (a) the lesser of (y) the total cash severance payment amount, or (z) six (6) months of such installment payments are paid no later than March 15 of the calendar year following such termination, and (b) all amounts paid pursuant to the foregoing clause (a) will constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations and thus will be payable pursuant to the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations. It is intended that if
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Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code at the time of such separation from service the foregoing provision shall result in compliance with the requirements of Section 409A(a)(2)(B)(i) of the Code because payments to Executive will either be payable pursuant to the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations or will not be paid until at least 6 months after separation from service. The severance benefits are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly.
Article 7
GENERAL PROVISIONS
7.1Governing Law. The validity, interpretation, construction and performance of this Agreement and the rights of the parties thereunder shall be interpreted and enforced under California law without reference to principles of conflicts of laws. The parties expressly agree that inasmuch as the Company’s headquarters and principal place of business are located in California, it is appropriate that California law govern this Agreement.
7.2Assignment; Successors Binding Agreement.
(a)No Assignment. Executive may not assign, pledge or encumber her interest in this Agreement or any part thereof.
(b)Assumption by Successor. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by operation of law or by agreement in form and substance reasonably satisfactory to Executive, to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.
(c)This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributee, devisees and legatees. If Executive should die while any amount is at such time payable to Executive hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legates or other designee or, if there be no such designee, to her estate.
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7.3Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
To the Company:
Neurocrine Biosciences, Inc.
12780 El Camino Real
San Diego, CA 92130
Attn.: Chief Executive Officer
To Executive:
Matt Abernethy
Address on file with the Company
7.4Modification; Waiver; Entire Agreement. This Agreement constitutes the complete, final and exclusive embodiment of the entire agreement between Executive and the Company with regard to this subject matter. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations, including, without limitation, the Prior Employment Agreement which shall have no further force or effect. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Executive and such officer as may be specifically designated by the Board of Directors of the Company. No waiver by either party hereto at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or any prior or subsequent time.
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7.5Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
7.6Controlling Document. Except to the extent described in Section 6.10, in case of conflict between any of the terms and condition of this Agreement and any document herein referred to, the terms and conditions of this Agreement shall control.
7.7Executive Acknowledgment. Executive acknowledges (a) that she has consulted with or has had the opportunity to consult with independent counsel of her own choice concerning this Agreement, and has been advised to do so by the Company, and (b) that she has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on her own judgment.
7.8Dispute Resolution. To ensure the rapid and economical resolution of disputes that may arise in connection with Executive’s employment, Executive and the Company agree that any and all disputes, claims, or causes of action, in law or equity, arising from or relating to the enforcement, breach, performance, execution, or interpretation of this Agreement, Executive’s employment, or the termination of that employment, shall be resolved, to the fullest extent permitted by law pursuant to the Federal Arbitration Act, 9 U.S.C. §1-16, by final, binding and confidential arbitration in San Diego, California conducted before a single arbitrator by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) or its successor, under the then applicable JAMS rules; provided, however, that in no event shall the Arbitrator be empowered to hear or determine any class or collective claim of any type. The JAMS rules can be found online at www.jamsadr.com. By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or by administrative proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision including the arbitrator’s essential findings and conclusions and a statement of the award. The Company shall pay all of JAMS’ arbitration fees. Nothing in this letter agreement shall prevent either Executive or the Company from obtaining injunctive relief in court if necessary to prevent irreparable harm pending the conclusion of any arbitration. The parties agree that the arbitrator shall award reasonable attorneys’ fees, costs, and all other related expenses to the prevailing party in any action brought hereunder, and the arbitrator shall have discretion to determine the prevailing party in an arbitration where multiple claims may be at issue.
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109912199 v2
(a)Injunctive Relief. The parties agree that the services to be rendered by Executive hereunder are of a unique nature and that in the event of any breach or threatened breach of any of the covenants contained herein, the damage or imminent damage to the value and the goodwill of the Company’s business will be irreparable and extremely difficult to estimate, making any remedy at law or in damages inadequate. Accordingly, the parties agree that the Company shall be entitled to injunctive relief against Executive in the event of any breach or threatened breach of any such provisions by Executive, in addition to any other relief (including damage) available to the Company under this Agreement or under law.
(b)Exclusive. Both parties agree that the remedy specified in Section 7.9(a) above is not exclusive of any other remedy for the breach by Executive of the terms hereof.
7.10Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement.
Executed by the parties as follows:
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109912199 v2
GENERAL RELEASE
Pursuant to the terms of the Employment Agreement between Neurocrine Biosciences, Inc. (the “Company”) and --- (“Executive”) dated --- (the “Agreement”), the parties hereby enter into the following General Release (the “Release”):
1.Accrued Salary and Vacation. Executive understands that, on the last date of Executive’s employment with the Company, the Company will pay Executive any accrued salary and accrued and unused vacation to which Executive is entitled by law, regardless of whether Executive signs this Release.
2.General Release. Executive hereby generally and completely releases the Company and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns (collectively the “Released Parties”) of and from any and all claims, liabilities and obligations, both known and unknown, arising out of or in any way related to events, acts, conduct, or omissions occurring at any time prior to or at the time that Executive signs this Release.
3.Scope of Release. This general release includes, but is not limited to: (1) all claims arising out of or in any way related to Executive’s employment with the Company or the termination of that employment; (2) all claims related to Executive’s compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership or equity interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing (including claims based on or arising under the Agreement); (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act (as amended) (“ADEA”), the federal Family and Medical Leave Act, the California Labor Code (as amended), the California Family Rights Act, and the California Fair Employment and Housing Act (as amended).
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4.ADEA Waiver. Executive acknowledges that Executive is knowingly and voluntarily waiving and releasing any rights Executive may have under the ADEA, and that the consideration given for the waiver and release in the preceding paragraph is in addition to anything of value to which Executive is already entitled. Executive further acknowledges that Executive has been advised by this writing that: (1) Executive’s waiver and release do not apply to any rights or claims that may arise after the date Executive signs this Release; (2) Executive should consult with an attorney prior to signing this Release (although Executive may choose voluntarily not to do so); (3) Executive has twenty-one (21) days to consider this Release (although Executive may choose voluntarily to sign it earlier); (4) Executive has seven (7) days following the date Executive signs this Release to revoke it by providing written notice of revocation to the Company’s Chief Executive Officer; and (5) this Release will not be effective until the date upon which the revocation period has expired, which will be the eighth calendar day after the date Executive signs it provided that Executive does not revoke it (the “Effective Date”).
5.Section 1542 Waiver. EXECUTIVE UNDERSTANDS THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. Executive acknowledges that Executive has read and understands Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” Executive hereby expressly waives and relinquishes all rights and benefits under that section and any law or legal principle of similar effect in any jurisdiction with respect to Executive’s respective release of claims herein, including but not limited to Executive’s release of unknown and unsuspected claims.
6.Excluded Claims. Executive understands that notwithstanding the foregoing, the following are not included in the Released Claims (the “Excluded Claims”): (i) any rights or claims for indemnification Executive may have pursuant to any written indemnification agreement to which she is a party, the charter, bylaws, or operating agreements of any of the Released Parties, or under applicable law; or (ii) any rights which are not waivable as a matter of law. In addition, Executive understands that nothing in this release prevents Executive from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except that Executive acknowledges and agrees that Executive shall not recover any monetary benefits in connection with any such claim, charge or proceeding with regard to any claim released herein. Executive hereby represents and warrants that, other than the Excluded Claims, Executive is not aware of any claims she has or might have against any of the Released Parties that are not included in the Released Claims.
7.Executive Representations. Executive hereby represents that Executive has been paid all compensation owed and for all hours worked; Executive has received all the leave and leave benefits and protections for which Executive is eligible, pursuant to the Family and Medical Leave Act, the California Family Rights Act, or otherwise; and Executive has not suffered any on-the-job injury for which Executive has not already filed a workers’ compensation claim.
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8.Nondisparagement. Executive agrees not to disparage the Company, its parent, or its or their officers, directors, employees, shareholders, affiliates and agents, in any manner likely to be harmful to its or their business, business reputation, or personal reputation (although Executive may respond accurately and fully to any question, inquiry or request for information as required by legal process). The Company agrees that it shall instruct its directors and officers not to disparage Executive in any manner likely to be harmful to her business reputation or personal reputation (although such individuals may respond accurately and fully to any question, inquiry or request for information as required by legal process).
9.Cooperation. Executive agrees not to voluntarily (except in response to legal compulsion) assist any third party in bringing or pursuing any proposed or pending litigation, arbitration, administrative claim or other formal proceeding against the other party, or against the Company’s parent or subsidiary entities, affiliates, officers, directors, employees or agents. Executive further agrees to reasonably cooperate with the other party, by voluntarily (without legal compulsion) providing accurate and complete information, in connection with such other party’s actual or contemplated defense, prosecution, or investigation of any claims or demands by or against third parties, or other matters, arising from events, acts, or failures to act that occurred during the period of Executive’s employment by the Company.
10.No Admission of Liability. The parties agree that this Release, and performance of the acts required by it, does not constitute an admission of liability, culpability, negligence or wrongdoing on the part of anyone, and will not be construed for any purpose as an admission of liability, culpability, negligence or wrongdoing by any party and/or by any party’s current, former or future parents, subsidiaries, related entities, predecessors, successors, officers, directors, shareholders, agents, employees and assigns. The parties specifically acknowledge and agree that this Release is a compromise of disputed claims and that the Company denies any liability for any matter released herein.
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kevin C. Gorman, Chief Executive Officer of Neurocrine Biosciences, Inc., certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Neurocrine Biosciences, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have: |
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a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Dated: July 29, 2019 |
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/s/ Kevin C. Gorman |
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Kevin C. Gorman |
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Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew C. Abernethy, Chief Financial Officer of Neurocrine Biosciences, Inc., certify that:
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I have reviewed this quarterly report on Form 10-Q of Neurocrine Biosciences, Inc.; |
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have: |
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Dated: July 29, 2019 |
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/s/ Matthew C. Abernethy |
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Matthew C. Abernethy |
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Chief Financial Officer |
Exhibit 32
CERTIFICATIONS OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Neurocrine Biosciences, Inc. (Company) on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (Report), I, Kevin C. Gorman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
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(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934; and |
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(2) |
That information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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July 29, 2019 |
By: |
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/s/ Kevin C. Gorman |
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Name: |
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Kevin C. Gorman |
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Title: |
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Chief Executive Officer |
In connection with the Quarterly Report of Neurocrine Biosciences, Inc. (Company) on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (Report), I, Matthew C. Abernethy, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
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(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934; and |
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(2) |
That information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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July 29, 2019 |
By: |
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/s/ Matthew C. Abernethy |
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Name: |
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Matthew C. Abernethy |
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Title: |
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Chief Financial Officer |
Document and Entity Information - shares |
6 Months Ended | |
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Jun. 30, 2019 |
Jul. 24, 2019 |
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| Document And Entity Information [Abstract] | ||
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | Jun. 30, 2019 | |
| Document Fiscal Year Focus | 2019 | |
| Document Fiscal Period Focus | Q2 | |
| Trading Symbol | NBIX | |
| Entity Registrant Name | NEUROCRINE BIOSCIENCES INC | |
| Entity Central Index Key | 0000914475 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Entity Small Business | false | |
| Entity Emerging Growth Company | false | |
| Entity Common Stock, Shares Outstanding | 91,579,401 | |
| Entity Current Reporting Status | Yes | |
| Entity Shell Company | false | |
| Entity File Number | 0-22705 | |
| Entity Tax Identification Number | 330525145 | |
| Entity Address, Address Line One | 12780 El Camino Real | |
| Entity Address, City or Town | San Diego | |
| Entity Address, State or Province | California | |
| Entity Address, Postal Zip Code | 92130 | |
| City Area Code | 858 | |
| Local Phone Number | 617-7600 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Statement Of Financial Position [Abstract] | ||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 220,000,000 | 220,000,000 |
| Common stock, shares issued | 91,536,000 | 90,797,000 |
| Common stock, shares outstanding | 91,536,000 | 90,797,000 |
Condensed Consolidated Statements of Operations And Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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| Revenues: | ||||
| Revenues | $ 183,580 | $ 96,905 | $ 321,983 | $ 167,991 |
| Operating expenses: | ||||
| Cost of sales | 1,608 | 854 | 2,737 | 1,804 |
| Research and development | 61,687 | 36,988 | 99,339 | 85,935 |
| Acquired in-process research and development | 5,000 | 118,081 | ||
| Selling, general and administrative | 80,824 | 60,915 | 168,362 | 119,551 |
| Total operating expenses | 149,119 | 98,757 | 388,519 | 207,290 |
| Operating income (loss) | 34,461 | (1,852) | (66,536) | (39,299) |
| Other (expense) income: | ||||
| Interest expense | (7,942) | (7,591) | (15,795) | (15,095) |
| Unrealized gain on restricted equity securities | 20,965 | 22,645 | ||
| Investment income and other, net | 4,607 | 3,530 | 9,183 | 6,663 |
| Total other income (expense), net | 17,630 | (4,061) | 16,033 | (8,432) |
| Income (loss) before provision for income taxes | 52,091 | (5,913) | (50,503) | (47,731) |
| Provision for income taxes | 753 | 274 | ||
| Net income (loss) | 51,338 | (5,913) | (50,777) | (47,731) |
| Unrealized gain (loss) on available-for-sale debt securities, net of tax | 878 | 888 | 2,577 | (959) |
| Comprehensive income (loss) | $ 52,216 | $ (5,025) | $ (48,200) | $ (48,690) |
| Net income (loss) per share, basic | $ 0.56 | $ (0.07) | $ (0.56) | $ (0.53) |
| Net income (loss) per share, diluted | $ 0.54 | $ (0.07) | $ (0.56) | $ (0.53) |
| Weighted average common shares outstanding, basic | 91,389 | 90,100 | 91,226 | 89,814 |
| Weighted average common shares outstanding, diluted | 94,779 | 90,100 | 91,226 | 89,814 |
| Product sales, net | ||||
| Revenues: | ||||
| Revenues | $ 180,544 | $ 96,905 | $ 316,975 | $ 167,991 |
| Collaboration revenue | ||||
| Revenues: | ||||
| Revenues | $ 3,036 | $ 5,008 | ||
Organization and Significant Accounting Policies |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Accounting Policies [Abstract] | |
| Organization and Significant Accounting Policies |
1. Organization and Significant Accounting Policies
Description of Business. Neurocrine Biosciences, Inc. (Neurocrine, we, our or us) is a neuroscience-focused, biopharmaceutical company with more than 25 years of experience discovering and developing life-changing treatments for people 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. Our portfolio includes United States Food and Drug Administration (FDA)-approved treatments for tardive dyskinesia (TD) and endometriosis and clinical development programs in multiple therapeutic areas including Parkinson’s disease, congenital adrenal hyperplasia, uterine fibroids, and polycystic ovary syndrome. Our treatment for endometriosis and our product candidates for uterine fibroids and polycystic ovary syndrome are partnered with AbbVie, Inc. (AbbVie). In addition, in January 2019, we entered into a collaboration and license agreement with Voyager Therapeutics, Inc. (Voyager), focused on the development and commercialization of four programs using Voyager’s proprietary gene therapy platform, including one clinical development program for advanced Parkinson’s disease patients, VY-AADC. Basis of Presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions of the Securities and Exchange Commission (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 and our wholly owned subsidiaries. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018, included in our Annual Report on Form 10-K (2018 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 for the full year. The condensed consolidated balance sheet at December 31, 2018, 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 2018 Form 10-K. Recently Adopted Accounting Pronouncements. ASU 2016-02. In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)”, which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. ASU 2016-02 establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. ASU 2016-02 also requires disclosures to 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 and measured leases that existed at the application date in our condensed 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 condensed 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. 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 the six months ended June 30, 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 elections 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 resulted 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. The comparative prior period information continues to be reported under the accounting standards in effect during those periods. Further, we expect the adoption of ASU 2016-02 to be immaterial to our condensed consolidated statements of operations and comprehensive income (loss) and statements of 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 condensed consolidated financial statements. Further, we expect the adoption of ASU 2018-07 to be immaterial to our condensed consolidated balance sheets, statements of operations and comprehensive income (loss), and statements of cash flows on an ongoing basis. |
Significant Collaboration and Licensing Agreements |
6 Months Ended |
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Jun. 30, 2019 | |
| Text Block [Abstract] | |
| Significant Collaboration and Licensing Agreements |
2. Significant Collaboration and Licensing Agreements Voyager. We entered into a collaboration and license agreement with Voyager, a clinical-stage gene therapy company, which became effective in March 2019. The agreement is focused on the development and commercialization of four programs using Voyager’s proprietary gene therapy platform. The four programs consist of the VY-AADC program for Parkinson’s disease, the VY-FXN01 program for Friedreich’s ataxia, and the rights to two programs to be determined by the parties in the future. In connection with the agreement, we paid Voyager $115.0 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 billion in development, regulatory, and commercial milestones across the four programs, 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. 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 (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 to obtain rights outside the United States to the Friedreich’s ataxia program, VY-FXN01, in connection with the early return of those rights to Voyager pursuant to a restructuring of Voyager’s gene therapy relationship with Sanofi Genzyme. The upfront payment was expensed as IPR&D in the second quarter of 2019. We may terminate the collaboration and license agreement with Voyager 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. 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. BIAL – Portela & Ca, S.A. In February 2017, we entered into an exclusive license agreement with BIAL – Portela & Ca, S.A. (BIAL) for the development and commercialization of opicapone for the treatment of human diseases and conditions, including as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients, in the United States (U.S.) and Canada. We paid BIAL an upfront license fee of $30.0 million and have agreed to make additional regulatory event-based payments of up to $40.0 million, of which $10.0 million has been paid as of June 30, 2019, and up to an additional $75.0 million in commercial event-based payments. In the second quarter of 2019, we submitted a new drug application (NDA) with the FDA for opicapone as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients. The opicapone NDA was accepted by the FDA with a Prescription Drug User Fee Act target action date of April 26, 2020. The FDA’s acceptance of the opicapone NDA triggered a milestone payment of $10.0 million, expensed as R&D in the second quarter of 2019, to be paid by us to BIAL in the third quarter of 2019. Mitsubishi Tanabe Pharma Corporation. In March 2015, we entered into a collaboration and license agreement with Mitsubishi Tanabe Pharma Corporation (MTPC) for the development and commercialization of INGREZZA® (valbenazine) for movement disorders in Japan and other select Asian markets. MTPC made an upfront payment of $30.0 million and has agreed to make an additional $85.0 million in development and regulatory event-based payments, payments for the manufacture of pharmaceutical products, and royalties on product sales in select territories in Asia.
Since inception of the agreement, we have recognized revenue of $19.8 million associated with the delivery of a technology license and existing know-how, and $15.0 million in development event-based payments resulting from MTPC’s initiation of Phase II/III clinical trials of INGREZZA in TD in Asia. In accordance with our continuing performance obligations, $10.2 million of the $30.0 million upfront payment is being deferred to be recognized in future periods. Under the terms of the agreement, there is no general obligation to return the upfront payment for any non-contingent deliverable. AbbVie. In June 2010, we entered into an exclusive worldwide collaboration with AbbVie, to develop and commercialize elagolix and all next-generation gonadotropin-releasing factor antagonists for women’s and men’s health. AbbVie made an upfront payment of $75.0 million and has agreed to make additional development and regulatory event-based payments of up to $480.0 million, of which $115.0 million has been earned as of June 30, 2019, and up to an additional $50.0 million in commercial event-based payments. |
Investments |
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| Investments Schedule [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments |
3. Investments Available-for-sale (AFS) debt securities are carried at fair value, with any unrealized gains and losses reported in comprehensive income (loss). The cost basis of AFS debt securities is adjusted for the amortization of premiums and accretion of discounts to maturity, as applicable. Such amortization and accretion, as well as any interest and dividends, realized gains and losses, and declines in fair value judged to be other-than-temporary, if any, on AFS debt securities are included in investment income and other, net. The cost of AFS debt securities sold is based on the specific identification method. Additionally, investments in equity securities of certain companies that are subject to holding period restrictions longer than 1 year are carried at fair value. Net gains and losses on restricted equity securities are included in other income (expense), net. Investments consisted of the following:
Investments classified as AFS debt securities consisted of the following:
The following table presents the estimated fair value and gross unrealized loss position for AFS debt securities, as applicable, aggregated by investment category and length of time that such securities have been in a continuous loss position:
At each reporting date, we perform an evaluation of impairment to determine if any unrealized losses on investments in AFS debt securities are other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, and our intent and ability to hold the investment until recovery of the amortized cost basis. We intend and have the ability to hold such investments in unrealized loss positions until their amortized cost basis has been recovered. Further, based on our evaluation, we determined that any such unrealized losses were not other-than-temporary at June 30, 2019 and December 31, 2018. |
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Fair Value Measurements |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements |
4. Fair Value Measurements Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
We classify our cash equivalents and available-for-sale investments within Level 1 or Level 2. The fair value of our investment grade corporate debt securities is determined using proprietary valuation models and analytical tools, which utilize market pricing or prices for similar instruments that are both objective and publicly available, such as matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, and offers. The fair value of our investments in restricted equity securities is determined using an option pricing valuation model and classified as Level 3 within the fair value hierarchy. 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 the historical volatility of similar companies. Significant changes in any of those inputs in isolation would result in a significantly higher or lower fair value measurement. The $517.5 million of 2.25% convertible senior notes due May 15, 2024 (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 7-year term. The fair value of the 2024 Notes, estimated utilizing market quotations from an over-the-counter trading market (Level 2), was $683.1 million as of June 30, 2019 and $616.1 million as of December 31, 2018. We did not reclassify any investments between levels in the fair value hierarchy during the six months ended June 30, 2019 and 2018. Investments, which were measured at fair value on a recurring basis using the inputs described above, consisted of the following:
The following table presents a reconciliation of our investment in restricted equity securities, which is measured at fair value on a recurring basis using the significant unobservable inputs (Level 3) described above.
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Inventory |
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory |
5. Inventory Inventory consisted of the following:
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Leases |
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases |
6. Leases In December 2007, we closed the sale of our facility and associated real property for a purchase price of $109.0 million. Concurrent with the sale, we retired the entire $47.7 million in mortgage debt previously outstanding with respect to the facility and associated real property and received cash of $61.0 million, net of transaction costs and debt retirement. The ultimate result of this real estate sale was a net deferred gain of $39.1 million, of which the remaining balance was $8.0 million as of December 31, 2018, and which we recognized as a cumulative-effect adjustment to equity upon adoption of Topic 842 on January 1, 2019. Upon the closing of the sale of the facility and associated real property, we entered into an agreement (original lease) whereby we leased back our corporate headquarters, comprised of two buildings located in San Diego, California, for an initial term of 12 years. In 2008 through 2011, we entered into a series of subsequent amendments to the original lease, whereby we vacated a building and continued to occupy one building. In June 2017, we entered into an amendment to extend the current term of the original lease through December 31, 2029. Under the terms of the amendment, we will continue to pay base annual rent (subject to an annual fixed percentage increase), property taxes, and other normal and necessary expenses, such as utilities, repairs, and maintenance. Certain incentives were included in the lease, including $13.1 million in tenant improvement allowances and three months of rent abatement. In lieu of a cash security deposit, Wells Fargo Bank, N.A. (Wells Fargo) issued a $3.0 million letter of credit on our behalf, which is secured by a deposit of equal amount with the same bank. We have the right to extend the lease for 2 consecutive 10-year terms and a right of first offer for future rental of adjacent office space owned by the landlord. At commencement of the lease, we were not reasonably certain to exercise either of the two 10-year extension options contained within the lease. As such, these options were not recognized as part of the associated operating lease ROU asset or liability. In May 2018, we entered into an agreement to lease 44,718 square feet of office space in San Diego, California, which commenced on July 1, 2018, for a term of 10 years and 10 months. Under the terms of the lease, we will pay base annual rent (subject to an annual fixed percentage increase), plus property taxes, and other normal and necessary expenses, such as utilities, repairs, and maintenance. Certain incentives were included in the lease, including $4.2 million in tenant improvement allowances and twelve months of rent abatement. In lieu of a cash security deposit, Wells Fargo issued a $1.0 million letter of credit on our behalf, which is secured by a deposit of equal amount with the same bank. We do not have the right to extend the lease or right of first offer for future rental of adjacent office space owned by the landlord. For the six months ended June 30, 2019, our operating lease cost was $3.9 million and cash paid for amounts included in the measurement of lease liabilities for operating cash flows from operating leases was $3.3 million. As of June 30, 2019, we reported operating lease ROU assets and operating lease liabilities of $49.1 million and $69.9 million, respectively. Further, as of June 30, 2019, our operating leases had a weighted average remaining lease term of 10.3 years and a weighted average discount rate of 6.65%. At June 30, 2019, the minimum lease payments for our operating lease liabilities were as follows:
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Convertible Senior Notes |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Senior Notes |
7. 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 and entered into an indenture agreement (2024 Indenture) with respect to the 2024 Notes. 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 mature on May 15, 2024. The net proceeds from the issuance of the 2024 Notes were approximately $502.8 million, after deducting commissions and the offering expenses payable by us. 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:
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. Upon conversion, holders will receive the principal amount of their 2024 Notes and any excess conversion value, calculated based on the per share volume-weighted average price for each of the 30 consecutive trading days during the observation period (as more fully described in the 2024 Indenture). For both the principal and excess conversion value, holders may receive cash, shares of our common stock or a combination of cash and shares of our 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 to the “principal portion” and delivery 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 2024 Indenture. 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 volume weighted average price (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. 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 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 our common stock, at our option. We may not redeem the 2024 Notes prior to May 15, 2021. On or after 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 our 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 its 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. While the 2024 Notes are currently classified as long-term on our condensed consolidated balance sheets, the future convertibility and resulting balance sheet classification of this liability will be monitored at each quarterly reporting date and will be analyzed dependent upon market prices of our common stock during the prescribed measurement periods. In the event that 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 the 2024 Notes as they may be settled entirely or partially in cash upon conversion in a manner that reflects our economic interest cost. 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 was recorded in additional paid-in capital on the consolidated balance sheet at the issuance date. That equity component is treated as a discount on the liability component of the 2024 Notes, which is amortized over the seven-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. 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 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 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. The 2024 Notes, net of discounts and deferred financing costs, consisted of the following:
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Net Loss Per Share |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Loss Per Share |
8. Net Loss Per Share Net income (loss) per share was calculated as follows:
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. 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 the 2024 Notes with a combination settlement feature, which we have the ability and intent to use upon conversion of the 2024 Notes, to settle the principal amount of debt for cash and the excess of the principal portion in shares of our common stock. As a result, of the approximately 6.8 million shares underlying the 2024 Notes, only the shares required to settle the excess of the principal portion are considered under the treasury stock method. Shares which have been excluded from diluted per share amounts because their effect would have been anti-dilutive consisted of the following:
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Organization and Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2019 | |
| Accounting Policies [Abstract] | |
| Description of Business |
Description of Business. Neurocrine Biosciences, Inc. (Neurocrine, we, our or us) is a neuroscience-focused, biopharmaceutical company with more than 25 years of experience discovering and developing life-changing treatments for people 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. Our portfolio includes United States Food and Drug Administration (FDA)-approved treatments for tardive dyskinesia (TD) and endometriosis and clinical development programs in multiple therapeutic areas including Parkinson’s disease, congenital adrenal hyperplasia, uterine fibroids, and polycystic ovary syndrome. Our treatment for endometriosis and our product candidates for uterine fibroids and polycystic ovary syndrome are partnered with AbbVie, Inc. (AbbVie). In addition, in January 2019, we entered into a collaboration and license agreement with Voyager Therapeutics, Inc. (Voyager), focused on the development and commercialization of four programs using Voyager’s proprietary gene therapy platform, including one clinical development program for advanced Parkinson’s disease patients, VY-AADC. |
| Basis of Presentation |
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions of the Securities and Exchange Commission (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 and our wholly owned subsidiaries. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018, included in our Annual Report on Form 10-K (2018 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 for the full year. The condensed consolidated balance sheet at December 31, 2018, 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 2018 Form 10-K. |
| Recently Adopted Accounting Pronouncements |
Recently Adopted Accounting Pronouncements. ASU 2016-02. In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)”, which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. ASU 2016-02 establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. ASU 2016-02 also requires disclosures to 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 and measured leases that existed at the application date in our condensed 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 condensed 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. 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 the six months ended June 30, 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 elections 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 resulted 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. The comparative prior period information continues to be reported under the accounting standards in effect during those periods. Further, we expect the adoption of ASU 2016-02 to be immaterial to our condensed consolidated statements of operations and comprehensive income (loss) and statements of 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 condensed consolidated financial statements. Further, we expect the adoption of ASU 2018-07 to be immaterial to our condensed consolidated balance sheets, statements of operations and comprehensive income (loss), and statements of cash flows on an ongoing basis. |
Investments (Tables) |
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| Investments Schedule [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments |
Investments consisted of the following:
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| Summary of Investments Classified as AFS Debt Securities |
Investments classified as AFS debt securities consisted of the following:
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| Estimated Fair Value and Gross Unrealized Loss Position for AFS Debt Securities |
The following table presents the estimated fair value and gross unrealized loss position for AFS debt securities, as applicable, aggregated by investment category and length of time that such securities have been in a continuous loss position:
At each reporting date, we perform an evaluation of impairment to determine if any unrealized losses on investments in AFS debt securities are other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, and our intent and ability to hold the investment until recovery of the amortized cost basis. We intend and have the ability to hold such investments in unrealized loss positions until their amortized cost basis has been recovered. Further, based on our evaluation, we determined that any such unrealized losses were not other-than-temporary at June 30, 2019 and December 31, 2018. |
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Fair Value Measurements (Tables) |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments Measured at Fair Value on Recurring Basis |
Investments, which were measured at fair value on a recurring basis using the inputs described above, consisted of the following:
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| Reconciliation of Our Investment in Restricted Equity Securities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3) |
The following table presents a reconciliation of our investment in restricted equity securities, which is measured at fair value on a recurring basis using the significant unobservable inputs (Level 3) described above.
|
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Inventory (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Inventory |
Inventory consisted of the following:
|
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Leases (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Minimum Lease Payments for Operating Lease Liabilities |
At June 30, 2019, the minimum lease payments for our operating lease liabilities were as follows:
|
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Convertible Senior Notes (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Notes Net of Discount and Deferred Financing Costs |
The 2024 Notes, net of discounts and deferred financing costs, consisted of the following:
|
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Net Loss Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Net Income (Loss) Per Share |
Net income (loss) per share was calculated as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Anti-Dilutive Shares Excluded from Diluted Per Share Amounts |
Shares which have been excluded from diluted per share amounts because their effect would have been anti-dilutive consisted of the following:
|
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Organization and Significant Accounting Policies - Additional Information (Detail) - USD ($) $ in Thousands |
Jan. 01, 2019 |
Jun. 30, 2019 |
|---|---|---|
| Organization And Summary Of Significant Accounting Policies [Line Items] | ||
| Right-of-use (ROU) assets | $ 49,085 | |
| Operating lease liabilities | $ 69,934 | |
| ASU 2016-02 (Topic 842) | ||
| Organization And Summary Of Significant Accounting Policies [Line Items] | ||
| Right-of-use (ROU) assets | $ 50,000 | |
| Operating lease liabilities | 70,900 | |
| Derecognition of deferred rent for certain lease incentives received | 20,900 | |
| Recognition of Deferred Gain on Sale of Real Estate | ASU 2016-02 (Topic 842) | ||
| Organization And Summary Of Significant Accounting Policies [Line Items] | ||
| Deferred gain on sale of real estate as cumulative-effect adjustment to equity | $ 8,000 |
Investments (Detail) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Schedule Of Investments [Line Items] | ||
| Investments | $ 702,861 | $ 725,227 |
| Investments | 77,365 | |
| Commercial paper | ||
| Schedule Of Investments [Line Items] | ||
| Investments | 116,490 | 94,572 |
| Corporate debt securities | ||
| Schedule Of Investments [Line Items] | ||
| Investments | 419,293 | 544,978 |
| Securities of government-sponsored entities | ||
| Schedule Of Investments [Line Items] | ||
| Investments | 89,713 | 85,677 |
| Restricted equity securities | ||
| Schedule Of Investments [Line Items] | ||
| Investments | $ 77,365 | $ 0 |
Investments - Estimated Fair Value and Gross Unrealized Loss Position for AFS Debt Securities (Detail) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Schedule Of Available For Sale Securities [Line Items] | ||
| Less Than 12 Months, Fair Value | $ 53,569 | $ 331,622 |
| Less Than 12 Months, Unrealized Losses | (26) | (792) |
| 12 Months or Greater, Fair Value | 116,149 | 245,745 |
| 12 Months or Greater, Unrealized Losses | (93) | (1,376) |
| Total Fair Value | 169,718 | 577,367 |
| Total Unrealized Losses | (119) | (2,168) |
| Commercial paper | ||
| Schedule Of Available For Sale Securities [Line Items] | ||
| Less Than 12 Months, Fair Value | 9,984 | 51,927 |
| Less Than 12 Months, Unrealized Losses | (1) | (45) |
| Total Fair Value | 9,984 | 51,927 |
| Total Unrealized Losses | (1) | (45) |
| Corporate debt securities | ||
| Schedule Of Available For Sale Securities [Line Items] | ||
| Less Than 12 Months, Fair Value | 43,585 | 274,696 |
| Less Than 12 Months, Unrealized Losses | (25) | (746) |
| 12 Months or Greater, Fair Value | 111,155 | 234,798 |
| 12 Months or Greater, Unrealized Losses | (87) | (1,321) |
| Total Fair Value | 154,740 | 509,494 |
| Total Unrealized Losses | (112) | (2,067) |
| Securities of government-sponsored entities | ||
| Schedule Of Available For Sale Securities [Line Items] | ||
| Less Than 12 Months, Fair Value | 4,999 | |
| Less Than 12 Months, Unrealized Losses | (1) | |
| 12 Months or Greater, Fair Value | 4,994 | 10,947 |
| 12 Months or Greater, Unrealized Losses | (6) | (55) |
| Total Fair Value | 4,994 | 15,946 |
| Total Unrealized Losses | $ (6) | $ (56) |
Fair Value Measurements - Additional Information (Detail) - USD ($) $ in Thousands |
6 Months Ended | ||
|---|---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
May 02, 2017 |
|
| Debt Instrument [Line Items] | |||
| Convertible senior notes principal amount | $ 517,500 | $ 517,500 | |
| 2.25% Convertible Senior Notes due 2024 | |||
| Debt Instrument [Line Items] | |||
| Convertible senior notes principal amount | $ 517,500 | ||
| Convertible senior notes interest percentage | 2.25% | ||
| Convertible senior notes convertible latest date | May 15, 2024 | ||
| Convertible senior notes | 7 years | ||
| 2.25% Convertible Senior Notes due 2024 | Significant Other Observable Inputs (Level 2) | |||
| Debt Instrument [Line Items] | |||
| Debt instrument fair value | $ 683,100 | $ 616,100 |
Investments Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | $ 702,861 | $ 725,227 |
| Short-term investments | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | 619,978 | 650,913 |
| Short-term investments | Cash and money market fund | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | 140,985 | 141,714 |
| Short-term investments | Commercial paper | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | 116,490 | 94,572 |
| Short-term investments | Securities of government-sponsored entities | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | 59,424 | 20,840 |
| Short-term investments | Corporate debt securities | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | 303,079 | 393,787 |
| Long-term investments | Cash and money market fund | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | 1,500 | 1,500 |
| Long-term investments | Certificates of deposit | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | 3,977 | 3,977 |
| Long-term investments | Securities of government-sponsored entities | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | 30,289 | 64,837 |
| Long-term investments | Corporate debt securities | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | 116,214 | 151,191 |
| Long-term investments | Restricted equity securities | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | 77,365 | |
| Investments Including Cash Equivalents And Restricted Cash | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | 849,323 | 872,418 |
| Cash and Cash Equivalents | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Carrying Value | 146,462 | 147,191 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Short-term investments | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 140,985 | 141,714 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Short-term investments | Cash and money market fund | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 140,985 | 141,714 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Long-term investments | Cash and money market fund | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 1,500 | 1,500 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Long-term investments | Certificates of deposit | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 3,977 | 3,977 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Investments Including Cash Equivalents And Restricted Cash | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 146,462 | 147,191 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Cash and Cash Equivalents | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 146,462 | 147,191 |
| Significant Other Observable Inputs (Level 2) | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 625,496 | 725,227 |
| Significant Other Observable Inputs (Level 2) | Short-term investments | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 478,993 | 509,199 |
| Significant Other Observable Inputs (Level 2) | Short-term investments | Commercial paper | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 116,490 | 94,572 |
| Significant Other Observable Inputs (Level 2) | Short-term investments | Securities of government-sponsored entities | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 59,424 | 20,840 |
| Significant Other Observable Inputs (Level 2) | Short-term investments | Corporate debt securities | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 303,079 | 393,787 |
| Significant Other Observable Inputs (Level 2) | Long-term investments | Securities of government-sponsored entities | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 30,289 | 64,837 |
| Significant Other Observable Inputs (Level 2) | Long-term investments | Corporate debt securities | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 116,214 | 151,191 |
| Significant Other Observable Inputs (Level 2) | Investments Including Cash Equivalents And Restricted Cash | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 625,496 | $ 725,227 |
| Significant Unobservable Inputs (Level 3) | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 77,365 | |
| Significant Unobservable Inputs (Level 3) | Long-term investments | Restricted equity securities | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | 77,365 | |
| Significant Unobservable Inputs (Level 3) | Investments Including Cash Equivalents And Restricted Cash | Fair Value Measurements Recurring | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Fair value of assets on recurring basis | $ 77,365 |
Reconciliation of Our Investment in Restricted Equity Securities Measured at Fair Value on Quarterly Basis Using Significant Unobservable Inputs (Level 3) (Detail) - USD ($) $ in Thousands |
3 Months Ended | |||
|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Jan. 31, 2019 |
Dec. 31, 2018 |
|
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||||
| Investment in restricted equity securities | $ 77,365 | |||
| Balance at end of period | 77,365 | |||
| Restricted equity securities | ||||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||||
| Investment in restricted equity securities | 77,365 | $ 0 | ||
| Balance at end of period | 77,365 | $ 0 | ||
| Restricted equity securities | Fair Value Measurements Recurring | Significant Unobservable Inputs (Level 3) | Long-term investments | ||||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||||
| Investment in restricted equity securities | 77,365 | $ 56,400 | $ 54,720 | |
| Net unrealized gain recognized on restricted equity securities during the period | 20,965 | 1,680 | ||
| Balance at end of period | $ 77,365 | $ 56,400 | $ 54,720 | |
Inventory - Summary of Inventory (Detail) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Raw materials | $ 6,672 | $ 7,855 |
| Work in process | 3,451 | 2,208 |
| Finished goods | 1,895 | 801 |
| Total inventory | $ 12,018 | $ 10,864 |
Leases - Additional Information (Detail) $ in Thousands |
1 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
|
Dec. 31, 2007
USD ($)
Building
|
Jun. 30, 2019
USD ($)
Building
RenewalOption
|
Dec. 31, 2018
USD ($)
|
May 31, 2018
USD ($)
ft²
|
Jun. 30, 2017
USD ($)
|
Dec. 31, 2008
USD ($)
|
|
| Leases [Line Items] | ||||||
| Sale of facility and associated real property | $ 109,000 | |||||
| Mortgage debt retired | 47,700 | |||||
| Cash received net of transaction costs and debt retirement | $ 61,000 | |||||
| Net deferred gain on real estate sale | $ 8,000 | $ 39,100 | ||||
| Leaseback transaction lease period | 12 years | |||||
| Number of building leased | Building | 2 | 1 | ||||
| Number of vacated buildings | Building | 1 | |||||
| Letter of credit | $ 3,000 | |||||
| Number of times to renew the lease contract | RenewalOption | 2 | |||||
| Lease extension period | 10 years | |||||
| Lease description | At commencement of the lease, we were not reasonably certain to exercise either of the two 10-year extension options contained within the lease. | |||||
| Operating lease cost | $ 3,900 | |||||
| Cash paid for cashflows from operating lease | 3,300 | |||||
| Operating lease right of use asset | 49,085 | |||||
| Operating lease, liability | $ 69,934 | |||||
| Operating lease, weighted average remaining lease term | 10 years 3 months 18 days | |||||
| Operating lease, weighted average discount rate, percent | 6.65% | |||||
| Amended Lease Term | ||||||
| Leases [Line Items] | ||||||
| Lease expiration date | Dec. 31, 2029 | |||||
| Tenant improvement allowances | $ 13,100 | |||||
| Lease Agreement | ||||||
| Leases [Line Items] | ||||||
| Tenant improvement allowances | $ 4,200 | |||||
| Office space area leased | ft² | 44,718 | |||||
| Lease term | 10 years 10 months | |||||
| Lease Agreement | Letter of Credit | ||||||
| Leases [Line Items] | ||||||
| Lease security deposit | $ 1,000 |
Leases - Summary of Minimum Lease Payments for Operating Lease Liabilities (Detail) $ in Thousands |
Jun. 30, 2019
USD ($)
|
|---|---|
| Leases [Abstract] | |
| 2019 (6 months remaining) | $ 4,129 |
| 2020 | 8,399 |
| 2021 | 8,624 |
| 2022 | 8,888 |
| 2023 | 9,160 |
| Thereafter | 59,462 |
| Total operating lease payments | 98,662 |
| Less accreted interest | (28,728) |
| Total operating lease liabilities | 69,934 |
| Less current operating lease liabilities | (3,749) |
| Noncurrent operating lease liabilities | $ 66,185 |
Convertible Senior Notes - Additional Information (Detail) $ / shares in Units, shares in Millions |
6 Months Ended | ||
|---|---|---|---|
|
May 02, 2017
USD ($)
|
Jun. 30, 2019
USD ($)
d
$ / shares
shares
|
Dec. 31, 2018
USD ($)
|
|
| Debt Instrument [Line Items] | |||
| Convertible senior notes principal amount | $ 517,500,000 | $ 517,500,000 | |
| 2.25% Convertible Senior Notes due 2024 | |||
| Debt Instrument [Line Items] | |||
| Convertible senior notes principal amount | $ 517,500,000 | ||
| Convertible senior notes interest percentage | 2.25% | ||
| Convertible senior notes interest rate | 2.25% | ||
| Convertible senior notes convertible latest date | May 15, 2024 | ||
| Proceeds from Senior Convertible Notes | $ 502,800,000 | ||
| Threshold common stock trading days | d | 20 | ||
| Threshold consecutive common stock trading days | d | 30 | ||
| Threshold percentage of common stock price trigger | 130.00% | ||
| Debt instrument conversion obligation number of consecutive business days after consecutive trading day period | 5 days | ||
| Debt instrument conversion obligation period of consecutive trading days. | 5 days | ||
| Principal amount on conversion rate | $ 1,000 | ||
| Minimum percentage of common stock price trigger | 98.00% | ||
| Debt instrument convertible trading days during observation period | 30 days | ||
| Conversion Observation Period | 25 days | ||
| Debt instrument conversion value description | 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 volume weighted average price (VWAP) of our common stock. | ||
| Debt instrument conversion share amount description | 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. | ||
| Convertible senior notes convertible in to shares | 0.00131711 | ||
| Convertible senior notes conversion price | $ / shares | $ 75.92 | ||
| Market Price of Common stock | $ / shares | $ 53.28 | ||
| Convertible senior note premium | 42.50% | ||
| Shares issued to settle notes at initial conversion rate | shares | 6.8 | ||
| Threshold common stock trading days | d | 20 | ||
| Convertible senior notes redemption rate | 100.00% | ||
| Convertible senior note carrying value of the liability component | $ 368,300,000 | ||
| Convertible senior note assumed borrowing rate | 7.50% | ||
| Convertible senior note carrying value of the equity component | $ 149,200,000 | ||
| Convertible senior notes | 7 years | ||
| Transaction cost related to issuance of convertible senior note | $ 14,700,000 | ||
| Debt instrument events of default percentage of principal and accrued and unpaid interest due and payable upon default | 100.00% |
Convertible Senior Notes - Debt Net of Discounts and Deferred Financing Costs (Detail) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Debt Disclosure [Abstract] | ||
| Principal | $ 517,500 | $ 517,500 |
| Deferred financing costs | (7,639) | (8,326) |
| Debt discount, net | (111,395) | (120,678) |
| Net carrying amount | $ 398,466 | $ 388,496 |
Net Loss Per Share - Schedule of Net Income (Loss) Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Earnings Per Share [Abstract] | ||||||
| Net income (loss) - basic and diluted | $ 51,338 | $ (102,115) | $ (5,913) | $ (41,818) | $ (50,777) | $ (47,731) |
| Weighted-average common shares outstanding: | ||||||
| Weighted average common shares outstanding, basic | 91,389 | 90,100 | 91,226 | 89,814 | ||
| Effect of dilutive securities: | ||||||
| Employee stock purchase program | 41 | |||||
| Stock options | 2,551 | |||||
| Restricted stock | 285 | |||||
| 2024 Notes | 513 | |||||
| Diluted | 94,779 | 90,100 | 91,226 | 89,814 | ||
| Net income (loss) per share: | ||||||
| Basic | $ 0.56 | $ (0.07) | $ (0.56) | $ (0.53) | ||
| Diluted | $ 0.54 | $ (0.07) | $ (0.56) | $ (0.53) | ||
Net Loss Per Share - Additional Information (Details) shares in Millions |
6 Months Ended |
|---|---|
|
Jun. 30, 2019
shares
| |
| 2.25% Convertible Senior Notes due 2024 | |
| Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | |
| Share equivalents excluded from computation of earnings per share | 6.8 |
Net Loss Per Share - Schedule of Anti-Dilutive Shares Excluded from Diluted Per Share Amounts (Detail) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Stock Options Restricted Stock and Convertible Senior Notes | ||||
| Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||||
| Anti-dilutive shares excluded from diluted per share amounts | 2,349 | 8,422 | 8,533 | 8,289 |
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