ACADIA Pharmaceuticals Annual Report 2022

FY2022 Annual Report · ACADIA Pharmaceuticals
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2022 ANNUAL REPORT

Monumental new
medicines for patients.
Seminal achievements
for Acadia.

ACADIA IS ADVANCING BREAKTHROUGHS
IN NEUROSCIENCE TO ELEVATE LIFE.

For almost 30 years, we have been working at the forefront of healthcare to bring vital solutions to people who need them most.

With the approval of our second FDA-approved therapy, DAYBUE™, for treating Rett syndrome, we have broadened our treatment
areas to include rare central nervous system (CNS) disorders.

• NUPLAZID® (pimavanserin) is the ﬁrst and only FDA-approved treatment for hallucinations and delusions associated with

Parkinson's disease psychosis.

• DAYBUETM (troﬁnetide) is the ﬁrst and only FDA-approved treatment for Rett syndrome.

Acadia's clinical-stage development efforts focus on treating the negative symptoms of schizophrenia, Alzheimer's disease
psychosis, and neuropsychiatric symptoms in central nervous system disorders.

DEAR SHAREHOLDERS,

With the recent FDA approval of DAYBUE™ (troﬁnetide) for Rett
syndrome in March 2023, I am proud to share that Acadia has now
developed and commercialized two ﬁrst-and-only FDA approved
products for central nervous system (CNS) disorders with high
unmet need.

Acadia has proven its ability to bring meaningful new drugs to the
market through both internal and external discovery. Pimavanserin
was originally developed by Acadia and has been successfully
commercialized as NUPLAZID® for the treatment of Parkinson’s
disease psychosis (PDP) since April 2016. Troﬁnetide was identiﬁed
and licensed through our business development team. Our clinical
development team conducted a positive pivotal program, and our
commercial team has just launched DAYBUE as a treatment for
Rett syndrome.

As we build the foundation for sustained long term growth, we are
focused on:

•

•

•

The successful launch of DAYBUE for the treatment of
Rett syndrome.
Continuing to grow and maximize the proﬁtability of our
NUPLAZID franchise for PDP.
Developing the next wave of CNS breakthroughs by advancing
our pipeline programs which include potential treatments for
the negative symptoms of schizophrenia, Alzheimer's disease
psychosis, and rare genetic neurodevelopmental diseases.

Delivering DAYBUE to the Rett Syndrome Community
The successful FDA approval of DAYBUE was a seminal moment
for Acadia and represents newfound hope for the Rett
syndrome community.

Rett syndrome is a profoundly debilitating and complex, rare,
neurodevelopmental disorder, typically caused by a genetic
mutation on the MECP2 gene. It is characterized by a period of
normal development until six to 18 months of age, followed by
signiﬁcant developmental regression that can lead to an array of
unpredictable symptoms throughout the course of a patient’s life
requiring round-the-clock care. Rett syndrome is believed to affect
6,000 to 9,000 patients in the U.S., with 4,500 U.S. patients who
are currently diagnosed and cared for today.

The FDA approval of DAYBUE was supported by results from the
positive pivotal Phase 3 LAVENDER study. The study achieved
statistical signiﬁcance on both of its co-primary endpoints,
demonstrating meaningful improvement on the Rett Syndrome
Behaviour Questionnaire (RSBQ) total score (p=0.018), a
caregiver assessment of Rett syndrome, and the Clinical Global
Impression-Improvement (CGI-I) scale score (p=0.003) at week 12,
a caregiver assessment.

As the ﬁrst FDA-approved drug for the treatment of Rett syndrome,
DAYBUE now offers the potential to make meaningful differences
in the lives of patients and their families who have lacked options
to address the range of core behavioral, communication and
motor symptoms of Rett syndrome. Our commercial organization
is well-prepared to educate the Rett community on the potential
beneﬁts of DAYBUE.

ﬁeld base reps who will promote DAYBUE to healthcare providers
and institutions. Supporting our efforts will be our team of Medical
Science Liaisons who will help deliver important scientiﬁc information
and clinical education about DAYBUE. We have expanded our
Acadia Connect® support services hub to provide ongoing support
to patients and their families. Our commitment is to be there for our
patients, families and healthcare providers from the very beginning
and throughout their DAYBUE treatment journey.

Building on the Foundation of NUPLAZID (pimavanserin)
in PDP
Over the past few years, we've strategically grown and maximized
the proﬁtability of our NUPLAZID franchise despite operating in
a Parkinson’s market that was disproportionately affected by the
global pandemic. As a result, we have been able to deliver steady
prescription volumes in a smaller Parkinson’s population while
concurrently optimizing and reducing our NUPLAZID expense
base. As a result, we have signiﬁcantly grown cash ﬂow from this
franchise every year since it turned proﬁtable in 2019.

As we look ahead, there are two opportunities that support the
NUPLAZID business:

•

•

One is a change in the pandemic conditions related to the
PDP market, which we believe is a temporal situation and will
normalize at some point in the future.
Two, is the assimilation in the medical community of three
very important new publications that demonstrate the beneﬁts
of pimavanserin as a ﬁrst-line treatment option for PDP. Two
studies1,2 describe a lower mortality risk between treatment
with NUPLAZID as compared to off-label antipsychotics. A third
study3 highlights the differences in healthcare utilization when
treating with NUPLAZID as compared to off-label antipsychotics,
including lower all-cause hospitalizations and emergency
room visits.

We have invested in expanding our commercial organization to
successfully launch this ﬁrst-in-class, ﬁrst-to-market drug for a rare
disease with such a high unmet need. We have hired experienced

These data allow us to engage in a meaningful dialogue with
physicians and provide us with a patient-focused and critically
important message to further differentiate NUPLAZID.

Advancing Our Pipeline
Pimavanserin for Negative Symptoms of Schizophrenia
Pimavanserin is in Phase 3 development for treating the negative
symptoms of schizophrenia - patients whose hallucinations,
delusions, and paranoia are adequately controlled but still suffer
from persistent social withdrawal and lack of emotional response.
We have completed one positive pivotal study, ADVANCE-1, where
pimavanserin demonstrated statistically signiﬁcant improvement of
negative symptoms compared placebo. Today we are focused on
completing enrollment in our second pivotal study, ADVANCE-2,
with results expected in early 2024. If the ADVANCE-2 study
results are positive, we plan to submit a supplemental New Drug
Application for pimavanserin in this indication.

ACP-204 for Alzheimer's Disease Psychosis
ACP-204 is our leading second-generation 5-HT2A blocker designed
to leverage our learnings and experience with pimavanserin. Like
pimavanserin, ACP-204 is designed to provide anti-psychotic relief
with a favorable tolerability proﬁle. Additional design features
include a faster onset of action while reducing or eliminating QT
prolongation, a common trait of anti-psychotic therapies. We are
completing Phase 1 development and look forward to advancing
ACP-204 into Phase 2 studies later in 2023.

RNA-Based Treatments for Rare Genetic
Neurodevelopmental Diseases
Combining Acadia's neurology drug development and
commercialization expertise with our partner, Stoke Therapeutics’
research platform, we are advancing novel RNA-based medicines
for treating rare genetic neurodevelopmental diseases. Stoke
Therapeutics is a biotechnology company dedicated to addressing
the underlying cause of severe diseases by upregulating protein
expression with RNA-based medicines. This collaboration includes
SYNGAP1 syndrome, Rett syndrome (MECP2), and an undisclosed
neurodevelopmental target of mutual interest.

Our Mission…Elevate Life
Developing breakthroughs in neuroscience is challenging. We are
proud to have brought two ﬁrst-and-only FDA approved products
to market for difficult-to-treat central nervous system disorders and
are driven by the opportunity to improve lives in these vulnerable
populations. Our pipeline of new opportunities is exciting, and our
future is bright. I'm forever grateful for the employees, physicians,
patients, and families, together with our shareholders, who support
our mission to elevate life!

Stephen R. Davis
Chief Executive Officer
April 2023

References:
1 Mosholder AD, et al. Am J Psychiatry. 2022;179(8):553-561. Medicare beneﬁciaries (Parts A,B,D) – Apr.’16-Mar.’19
2 Layton JB, et al. Drug Safety. Published online 14 Dec 22. Medicare beneﬁciaries (Parts A,B,D) MDS 3.0 assessment – Apr. ‘16-Dec.’19
3 Kumar S. et al., Journal of Medical Economics 2023 Vol. 26 No.1,34-42. Retrospective cohort analysis of Parts A, B, and D claims from 100% Medicare sample from Jan.’13-Dec.’19

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K

(Mark One)
☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiff scal year ended December 31, 2022
Or

☐

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

For the transition period frff om

to

Commission File Number: 000-50768

ACADIA PHARMACEUTICALS INC.

(Exact Name of Registrant as Specififf ed in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

12830 El Camino Real, Suite 400
San Diego, Califorff nia
(Address of Principal Executive Offff iff ces)

06-1376651
(I.R.S. Employer
Identififf cation Number)

92130
(Zip Code)

Registrant’s telephone number, including area code:
(858) 558-2871
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, par value $0.0001 per share

Trading Symbol(s)
ACAD
Securities registered pursuant to Section 12(g) of the Act: None

Name of each exchange on which registered
The Nasdaq Stock Market LLC

Indicate by check mark if the registrant is a well-known seasoned issuer, as defiff ned in RulRR e 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to fiff le reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has fiff led all reports required to be fiff led by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past

such shorter period that the registrant was required to fiff le such reports), and (2) has been subject to such fiff ling requirements forff

the preceding 12 months (or forff
90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically everyrr

Regulation S-T (§ 232.405 of this chapta er) during the preceding 12 months (or forff
No ☐

Interactive Data File required to be submitted pursuant to RulRR e 405 of
such shorter period that the registrant was required to submit such fiff les). Yes ☒

Indicate by check mark whether the registrant is a large accelerated fiff ler, an accelerated fiff ler, a non-accelerated fiff ler, a smaller reporting company, or an
emerging growth company. See defiff nitions of “large accelerated fiff ler”, “accelerated fiff ler”, “smaller reporting company” and “emerging growth company” in RuRR le 12b-2
of the Securities Exchange Act of 1934:

Large accelerated fiff ler ☒
Non-accelerated fiff ler ☐ (Do not check if a smaller reporting company)

Accelerated fiff ler
☐
Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forff

complying with any new or

revised fiff nancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has fiff led a report on and attestation to its management’s assessment of the effff eff ctiveness of its internal control over
fiff nancial reporting under Section 404(b) of the Sarbar nes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting fiff rm that prepared or issued its audit report.
☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing

reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by

any of the registrant’s executive oﬃcers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defiff ned in RulRR e 12b-2 of the Securities Exchange Act of 1934). Yes ☐ No ☒
As of June 30, 2022, the last business day of the registrant’s most recently completed second fiff scal quarter, the aggregate market value of the registrant’s

common stock held by non-affff iff liates of the registrant was appr
Select Market on June 30, 2022 of $14.09 per share.

a

oximately $1.7 billion, based on the closing price of the registrant’s common stock on the Nasdaq Global

As of Februarr

ryrr 21, 2023, 162,230,184 shares of the registrant’s common stock, $0.0001 par value, were outstanding.

DOCUMENTS INCORPORARR TED BY REFERENCE

Portions of the registrant’s defiff nitive Proxy Statement to be fiff led with the Securities and Exchange Commission by May 1, 2023 are incorpor

rr

ated by refeff rence

into Part III of this report.

ACADIA PHARMACEUTICALS INC.

TABLE OF CONTENTS
FORM 10-K
For the Year Ended December 31, 2022

PART I
Item 1.
Business. ..........................................................................................................................................................
Item 1A. Risk Factors. ....................................................................................................................................................
Item 1B. Unresolved Staff Comments.
Properties. ........................................................................................................................................................
Item 2.
Item 3.
Legal Proceedings............................................................................................................................................
Item 4. Mine Safety Disclosures .................................................................................................................................

PART II

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

Securities..........................................................................................................................................................
Item 6.
[Reserved] ........................................................................................................................................................
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations..........................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Financial Statements and Supplementary Data................................................................................................
Item 8.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.........................
Item 9A. Controls and Procedures. .................................................................................................................................
Item 9B Other Information ............................................................................................................................................
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.............................................................

Item 10. Directors, Executive Officers and Corporate Governance. .............................................................................
Item 11. Executive Compensation. ................................................................................................................................
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. ......
Item 13. Certain Relationships and Related Transactions, and Director Independence. ...............................................
Principal Accountant Fees and Services. .........................................................................................................
Item 14.

PART III

Item 15. Exhibits and Financial Statement Schedules. ..................................................................................................
Form 10-K Summary .......................................................................................................................................
Item 16.

PART IV

Page

3
17
52
53
53
54

55
56
56
66
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69

69
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69

70
73

i

PART I

FORWARD-LOOKING STATEMENTS

This report and the inforff mation incorpor

r

ated herein by refeff rence contain forff ward-looking statements that involve a

number of risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our
results to diffff eff r materially frff om those expressed or implied by such forff ward-looking statements. Although our forff ward-
looking statements reflff ect the good faff ith judgment of our management, these statements can only be based on faff cts and
faff ctors currently known by us. Consequently, forff ward-looking statements are inherently subject to risks and uncertainties,
and actuat
l results and outcomes may diffff eff r materially frff om results and outcomes discussed in the forff ward-looking
statements. In addition, statements that “we believe” and similar statements reflff ect our beliefsff and opinions on the relevant
subject. These statements are based upon inforff mation availabla e to us as of the date of this report, and while we believe such
inforff mation forff ms a reasonabla e basis forff
should not be read to indicate that we have conducted an exhaustive inquiryrr
relevant inforff mation. These statements are inherently uncertain and you are cautioned not to unduly rely upon these
statements.

such statements, such inforff mation may be limited or incomplete, and our statements

into, or review of,ff all potentially availabla e

t

ties forff

candidates, the potential market opportuni

the commercialization of NUPLAZID, our plans forff

pimavanserin, trofiff netide and our other drugrr
exploring and developing pimavanserin forff

Forward-looking statements can be identififf ed by the use of forff ward-looking words such as “believes,” “expects,”
“hopes,” “may,” “will,” “plans,” “intends,” “estimates,” “could,” “should,” “would,” “continue,” “seeks,” “aims,” “projects,”
“predicts,” “pro forff ma,” “anticipates,” “potential” or other similar words (including their use in the negative), or by
discussions of futff urt e matters such as the benefiff ts to be derived frff om NUPLAZID® (pimavanserin), trofiff netide and frff om our
candidates, our strategy
drugr
forff
indications other than
Parkinson’s disease psychosis, our plans and timing with respect to seeking regulatoryrr appr
commercialization of any of our drugr
of clinical trials and other development activities involving pimavanserin, trofiff netide and our other drugr
strategy forff
a
collabor
futff urt e expenses and need forff
These statements include but are not limited to statements under the capta ions “Business,” “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 capta ion “Risk Factors” and
elsewhere in this report could substantially harm our business, results of operations and fiff nancial condition and cause our
results to diffff eff r materially frff om those expressed or implied by our forff ward-looking statements. 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.

ations, our estimates of futff urt e payments, revenues and profiff tabia lity, our estimates regarding our capia tal requirements,
additional fiff nancing, possible changes in legislation, and other statements that are not historical.

ovals, the potential
oval, the progress, timing, results or implications

candidates, our
candidates, our existing and potential futff urt e

candidates that receive regulatoryrr appr

discovering, developing and, if appr

oved, commercializing drugrr

a

a

a

The cautionaryrr statements made in this report are intended to be appl

a

icabla e to all related forff ward-looking statements

a

ar in this report. We urge you not to place undue reliance on these forff ward-looking statements, which

wherever they may appe
speak only as of the date of this report. We undertake no obligation to update any forff ward-looking statements made in this
report to reflff ect events or circumstances aftff er the date of this report or to reflff ect new inforff mation or the occurrence of
unanticipated events, except as required by law.

We faff ce risks and uncertainties related to our business, many of which are beyond our control. In particular, risks

associated with our business include:

Summary of Risk Factors

•

•

Our prospects are highly dependent on the continued successfulff
we cannot maintain or increase sales of NUPLAZID, our business, fiff nancial condition and results of operations
may be materially adversely affff eff cted and the price of our common stock may decline.

commercialization of NUPLAZID. To the extent

Our prospects are also dependent on the success of trofiff netide. To the extent regulatoryrr appr
delayed or not granted or, if appr
oved, trofiff netide is not commercially successfulff
condition and results of operations may be materially adversely affff eff cted and the price of our common stock may
decline.

, our business, fiff nancial

oval of trofiff netide is

a

a

1

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

The terms of the FDA’s appr
with PDP may limit its commercial potential. Additionally, NUPLAZID is still subject to an ongoing post-
marketing commitment.

the treatment of hallucinations and delusions associated

oval of NUPLAZID forff

a

We have historically relied on a limited internal commercial team and a limited network of third-party
distributors and pharmacies to market and sell NUPLAZID, our only commercial product. If this appr
to be effff eff ctive, our commercialization of NUPLAZID may be adversely affff eff cted, and NUPLAZID may not be
profiff tabla e.

a

oach ceases

If we do not obtain regulatoryrr appr
the U.S., we will not be abla e to market pimavanserin forff
commercial revenues.

oval of pimavanserin forff

a

other indications in addition to treatment of PDP in

other indications in the U.S., which will limit our

If we are unabla e to effff eff ctively train and equip our sales forff ce, our abia lity to successfulff
NUPLAZID and trofiff netide, if appr

oved, will be harmed.

a

ly commercialize

NUPLAZID may not gain maximal acceptance among physicians, patients, and the medical community, thereby
limiting our potential to generate revenues.

Our abia lity to generate product revenues will be diminished if NUPLAZID’s coverage frff om payors is decreased
or if patients have unacceptabla y high co-pay amounts.

Delays, suspensions and terminations in our clinical trials could result in increased costs to us and delay our
abia lity to generate product revenues.

Healthcare reforff m measures may negatively impact our abia lity to sell NUPLAZID or our product candidates, if
a
appr

oved, profiff tabla y.

If we are unabla e to attract, retain, and motivate key management, research and development, and sales and
marketing personnel, our drugrr
commercialization plans may be delayed and we may be unabla e to successfulff
develop our product candidates.

development programs, our research and discoveryrr effff orff

ly commercialize our products, or

ts, and our

We expect our net losses to continue forff
when we will become profiff tabla e, if ever.

the next feff w years and are unabla e to predict the extent of futff urt e losses or

If we faff il to obtain the capia tal necessaryrr
development and commercialization of NUPLAZID or successfulff
product candidates.

ff
to fund

our operations, we will be unabla e to successfulff

ly continue the

ly develop and commercialize our other

We expect that our results of operations will flff uctuat
perforff mance frff om period to period.

te, which may make it diffff iff cult to predict our futff urt e

Unfaff vorabla e global economic conditions could adversely affff eff ct our business, fiff nancial condition or results of
operations.

Public health threats, including the continuing COVID-19 pandemic, have impacted our clinical trials and could
have an adverse effff eff ct on our operations and fiff nancial results, or may cause us to modifyff or suspend our fiff nancial
guidance.

ations with third parties to develop and
We previously have depended, and in the futff urt e may depend, on collabor
commercialize selected product candidates other than pimavanserin, and we have limited control over how those
third parties conduct development and commercialization activities forff

such product candidates.

a

We currently depend, and in the futff urt e will continue to depend, on third parties to manufaff cturt e NUPLAZID,
ators with
trofiff netide and any other product candidates. If these manufaff cturt ers faff il to provide us or our collabor
adequate supplies of clinical trial materials and commercial product or faff il to comply with the requirements of
regulatoryrr authorities, we may be unabla e to develop or commercialize NUPLAZID, trofiff netide or any other
product candidates.

a

If we faff il to comply with the obligations in agreements under which we license intellectuat
third parties, we could lose license rights to certain of our product candidates.

l property rights frff om

Our abia lity to compete may decline if we do not adequately protect our proprietaryrr

rights.

2

•

•

If our competitors develop and market products that are more effff eff ctive than NUPLAZID, trofiff netide or our other
product candidates, they may reducd e or eliminate our commercial opportuni

ty.

t

Our stock price historically has been, and is likely to remain, highly volatile.

Item 1. Businii ess.

Company Overview

We are a biopharmaceutical company focff used on the development and commercialization of innovative medicines that

address unmet medical needs in central nervous system (CNS) disorders and rare diseases. We have a portfolff
commercial stage products, in-development product opportuni
signififf cant unmet needs in CNS disorders and rare diseases. In order to achieve signififf cant long-term growth, we will develop
our current portfolff
io, expand our pipeline of early and late-stage programs through strategic business development, and invest
in targeted internal research effff off rts.

ties, and research programs that are designed to address

io of

t

We developed and successfulff

ly commercialized NUPLAZID (pimavanserin), which was appr

a

oved by the U.S. Food

the treatment of hallucinations and delusions associated with Parkinson’s

and Drugrr Administration (FDA) in April 2016 forff
disease psychosis (PDP), and is the fiff rst and only drugr
selective serotonin inverse agonist/tt antagonist, prefeff rentially targeting 5-HT2A receptors with no appr
dopaminergic, histaminergic, or muscarinic receptors. Through this novel mechanism, NUPLAZID demonstrated signififf cant
effff iff cacy in reducing the hallucinations and delusions associated with PDP without negatively impacting motor func
tion in our
Phase 3 pivotal trial. NUPLAZID has the potential to avoid many of the debilitating side effff eff cts of existing antipsychotics,
none of which are appr
pimavanserin.

the treatment of PDP. We hold worldwide commercialization rights to

this condition. NUPLAZID is a
eciabla e affff iff nity forff

oved in the United States forff

oved by the FDA forff

a
appr

a

a

ff

Through its unique mechanism and the clinical studi

t

es conducted to date, we believe that pimavanserin has the

potential to address important unmet medical needs in neurological and psychiatric disorders in addition to PDP. Today we
are evaluating pimavanserin forff
the treatment of the negative symptoms of schizophrenia in a Phase 3 clinical development
program. The negative symptoms of schizophrenia have been associated with poor long-term outcomes and disabia lity even
when the positive symptoms are well-controlled, and today there are no FDA-appr
2019 we announced positive results frff om our pivotal ADVANA CE study
pivotal study,
negative symptoms of schizophrenia who have achieved adequate control of positive symptoms with their existing
antipsychotic treatment. We expect that enrollment in ADVANAA CE-2 will be completed this year and that top-line results will
be availabla e in early 2024.

and in the third quarter of 2020, we initiated a second
ADVANAA CE-2. The Phase 3 program is evaluating the effff iff cacy of pimavanserin in patients with predominantly

oved therapia es. In the four

th quarter of

a

ff

t

t

In addition, we recently announced that we are developing an internally discovered new molecule, ACP-204, which

builds upon the learnings of pimavanserin in the treatment of neuropsychiatric symptoms, and is currently being evaluated in
a Phase 1 clinical program. Upon completion of our Phase 1 work, we plan to initiate studi
ACP-204 in patients with Alzheimer’s disease psychosis (ADP). ACP-204 is a new chemical entity forff which we hold the
worldwide rights.

es evaluating various doses of

t

In August 2018, we acquired an exclusive North American license to develop and commercialize trofiff netide forff Rett

lowing appa

rently normal development forff

syndrome and other indications frff om Neuren Pharmaceuticals Limited (Neuren). Rett syndrome is a debilitating neurological
a
disorder that occurs predominantly in feff males folff
Typically, between six to eighteen months of age, patients experience a period of rapia d decline with loss of purpos
use and spoken communication and inabia lity to independently conduct activities of daily living. Symptoms also include
seizures, disorganized breathing patterns, scoliosis and sleep disturt bar nces. Currently, there are no appr
trofiff netide, an investigational new drugr
treatment of Rett syndrome. We are currently in registration forff
Rett syndrome, a rare genetic neurodevelopmental disorder. If appr
a
appr
a
which
the treatment of Rett syndrome in July 2022 based on the positive results frff om our pivotal Phase 3 Lavender™ studyt
both co-primaryrr endpoints as well as the key secondaryrr
demonstrated statistically signififf cant improvement over placebo forff
endpoint. The FDA fiff led the NDA in September 2022 and assigned a Prescription Drugr User Fee Act (PDUFA) target action
date of March 12, 2023.

this condition. We submitted to the FDA a New Drugr Application (NDA) forff

the fiff rst six months of lifeff .
efulff

oved, trofiff netide would be the fiff rst and only drugrr

oved in the United States forff

oved medicines forff

the treatment of

trofiff netide forff

hand

the

forff

a

r

3

In Januaryrr 2022, we entered into a license and collabor

a

ation agreement with Stoke Therapea utics, Inc. (Stoke) to

discover, develop and commercialize novel RNRR A-based medicines forff
neurodevelopmental diseases of the CNS. The collabor
undisclosed neurodevelopmental target. For the SYNGAP1 program, the two companies will jointly share global research,
development and commercialization responsibilities and share 50/50 in all worldwide costs and futff urt e profiff ts. For the Rett
syndrome (MECP2) and the undisclosed neurodevelopmental program, Stoke will lead research and pre-clinical development
activities, while we will lead clinical development and commercialization activities.

ation includes SYNGAP1 syndrome, Rett syndrome (MECP2), and an

the potential treatment of severe and rare genetic

a

Corporate Inforff mation

We were originally incorpor

r

ated in Vermont in 1993 as Receptor Technologies, Inc. We reincorpor

r

ated in Delaware in

1997 and our headquarters are in San Diego, Califorff nia. We maintain a website at www.acadia.com, to which we regularly
post copies of our press releases as well as additional inforff mation about
Commission (SEC), are availabla e frff ee of charge through our website as soon as reasonabla y practicabla e aftff er being
electronically fiff led with or furff nished to the SEC. Interested persons can subscribe on our website to email alerts that are sent
automatically when we issue press releases, fiff le our reports with the SEC or post certain other inforff mation to our website.
Inforff mation contained in our website does not constitutt e a part of this report or our other fiff lings with the SEC.

us. Our fiff lings with the Securities and Exchange

a

We own or have rights to various trademarks, copyrights and trade names used in our business, including Acadia® and

NUPLAZID®. Our logos and trademarks are the property of Acadia Pharmaceuticals Inc. All other brand names or
trademarks appe
trademarks, trade dress, or products in this report is not intended to, and does not, imply a relationship with, or endorsement
or sponsorship of us, by the trademark or trade dress owners.

aring in this report are the property of their respective holders. Use or display by us of other parties’

a

Our Strategy

Our strategy is to identify,ff develop and commercialize innovative therapia es that address unmet medical needs in CNS

disorders and rare diseases. Key elements of our strategy are to:

•

•

•

•

a

oved by the FDA in April 2016 forff

izii e thtt e successfs uff l commercialill zii atitt on of NUPUU LPP ALL ZIZZ DII

MaxiMM mii
StSS attt ett s. NUPLAZID was appr
associated with PDP. We launched NUPLAZID in the United States in May 2016 and an important objective is
to establa ish NUPLAZID as the standard of care forff PDP. We employ U.S. sales specialists that are focff used on
promoting NUPLAZID to physicians who treat PDP patients, including neurologists, psychiatrists and long-term
care physicians. The NUPLAZID frff anchise has been cash flff ow positive since 2019, and as such we are focff used
on maximizing market share, balancing top-line growth with long-term profiff tabia lity.

thtt e UnUU itii ett d
the treatment of hallucinations and delusions

forff ParPP kirr nii son’s’ disii ease psys chosisii

inii

Delill ver trtt ofiff nii etitt de tott
to the FDA an NDA forff
a
12, 2023. If appr

thtt e markerr

t forff

trofiff netide forff

thtt e trtt eatmtt ent of pat

itt entstt witii htt Retttt sys ndrome.ee In July 2022, we submitted
the treatment of Rett syndrome. Our PDUFA target action date is March

ff

oved, trofiff netide will be the fiff rst FDA-appr

a

oved treatment forff Rett syndrome.

opportunitii ytt
tt
Advance our latll ett -stage
program evaluating pimavanserin forff
expected in early 2024.

itt ve sys mptm omtt

e
inii negat
the treatment of negative symptoms of schizophrenia with top-line results

s of schizii ophrenia. We have an ongoing Phase 3

our earlyll -stage

Developll
development with ACP-204 as a treatment forff ADP and plan to complete Phase 1 in the fiff rst half of 2023. We
es evaluating various doses of ACP-204 in ADP patients later this year.
plan to initiate studi

inii ADPDD and othtt er potett ntitt al inii dicatitt ons. We are currently in Phase 1

opportunitii ytt

t

tt

4

Our Pipeline

NUPUU LPP ALL ZIZZ DII

(pi(( mii avanserinii )n

oved by the FDA in April 2016 forff
Pimavanserin is a new chemical entity that we discovered and that was appr
treatment of hallucinations and delusions associated with PDP. It is the only drugrr
oved in the United States forff
a
appr
condition and is marketed under the tradename NUPLAZID in the United States. NUPLAZID is a selective serotonin inverse
agonist/tt antagonist prefeff rentially targeting the 5-HT2A receptor, a key serotonin receptor that plays an important role in
psychosis. Through this novel mechanism, NUPLAZID demonstrated signififf cant effff iff cacy in reducing the hallucinations and
tion in our Phase 3 pivotal trial. NUPLAZID has the
delusions associated with PDP without negatively impacting motor func
oved by the FDA in
potential to avoid many of the debilitating side effff eff cts of existing antipsychotics, none of which are appr
the treatment of PDP. We hold worldwide commercialization rights to NUPLAZID forff
all indications and have establa ished a
broad patent portfolff
io, which includes numerous issued patents in the United States, Europe, and several additional countries.
NUPLAZID is availabla e in 34 mg capsa ule and 10 mg tabla et dosage forff ms.

this

the

a

a

ff

NUPUU LPP ALL ZIZZ DII as a TrTT eatmtt ent forff Parkrr inson’s Disii ease PsPP ys chosisii

Parkinson’s disease is the second most common neurodegenerative disorder aftff er Alzheimer’s disease. According to

the Parkinson’s Disease Foundation, about
suffff eff r frff om this disease. Approximately 50% of Parkinson’s patients will experience psychosis over the course of their
disease. Parkinson’s disease is more common in people over 60 years of age and the prevalence of this disease is expected to
increase signififf cantly as the population ages.

one million people in the United States and more than 10 million people globally

a

PDP is a debilitating disorder commonly characterized by visual hallucinations and delusions that affff lff icts about
the one million Parkinson’s disease patients in the United States. The development of psychosis in patients with Parkinson’s
disease substantially contributes to the burden of Parkinson’s disease and deeply affff eff cts their quality of lifeff . PDP is
associated with a diminished quality of lifeff , nursing home placement, and increased caregiver stress and burden.

40% of

a

As the fiff rst and only drugrr

appr
oved by the FDA forff
a
NUPLAZID provides an innovative appr
a
avoiding many of the debilitating side effff eff cts of existing antipsychotics.

oach to the treatment of PDP without compromising motor control and potentially

the treatment of hallucinations and delusions associated with PDP,

5

In connection with the FDA appr
a
commitments have been fulff
es in predominantly frff ail and elderly patients, remains ongoing.

oval of NUPLAZID, we have agreed to four
fiff lled within the agreed upon timelines. The four

ff

ff

ff
the four
t
or studi

post-marketing commitments. Three of
th commitment, which requires a study

t

Pimavanserin as a TrTT eatmtt ent forff

e
the NeNN gat

ive Symptm oms of Schizii ophrenia

Schizophrenia is a severe chronic mental illness that involves disturt bar nces in cognition, perception, emotion, and other
aspects of behavior. These disturt bar nces may include positive symptoms, such as hallucinations and delusions, and a range of
negative symptoms, including loss of interest and emotional withdrawal. Schizophrenia is associated with persistent
impairment of a patient’s social func
schizophrenia frff om readjusting to society. As a result, patients with schizophrenia are normally required to be under medical
care forff
population suffff eff rs frff om schizophrenia.

their entire lives. According to the National Institutt e of Mental Health (NIMH), appr

tioning and productivity. Cognitive disturt bar nces oftff en prevent patients with

oximately 1% of the U.S.

a

ff

Most patients with schizophrenia in the United States today are treated with second-generation, or atypical,
antipsychotics, which induce feff wer motor disturt bar nces than typical, or fiff rst-generation, antipsychotics, but still faff il to fulff
address some of the negative symptoms of schizophrenia forff
treatments have either negligible effff eff cts on cognitive symptoms of schizophrenia or may even furff
perforff mance. It is believed that the effff iff cacy of atypical antipsychotics is due to their interactions with dopamine and 5-HT2A
receptors. Despite their commercial success, current antipsychotic drugs
effff iff cacy and severe side effff eff cts. The side effff eff cts associated with these atypical agents may include weight gain, type 2
diabea

ic, sexual and cardiovascular side effff eff cts, movement disturt bar nces or sedation.

have substantial limitations, including inadequate

a signififf cant portion of patients. In addition, currently prescribed

ther impair cognitive

tes, metabol

ly

a

rr

In November 2016, we announced that we initiated ADVANAA CE, a Phase 2 study

t

to evaluate pimavanserin forff

adjunctive treatment in patients with negative symptoms of schizophrenia. Studi
schizophrenia patients suffff eff r frff om prominent negative symptoms. While currently availabla e antipsychotic treatments forff
schizophrenia mainly target positive symptoms, many patients remain func
tionally impaired because of residual negative and
cognitive symptoms that are harder to treat with atypical antipsychotics. The residual negative and cognitive symptoms limit
social func
ff
schizophrenia.

the treatment of the negative symptoms of

tioning. There is currently no drugrr

oved by the FDA forff

es show that about

40% to 50% of

a
appr

a

ff

t

t

a

403 patients were randomized to receive once-daily

ADVANA CE was a Phase 2, 26-week, randomized, double-blind, placebo-controlled, multi-center, international study
designed to examine the effff iff cacy and safeff ty of pimavanserin in patients with schizophrenia who have predominant negative
symptoms while on a stabla e background antipsychotic therapy.
pimavanserin (n=201) or placebo (n=202) as an adjunct treatment to their ongoing antipsychotic in a flff exible dosing regimen.
The starting daily dose of 20 mg of pimavanserin at baseline could have been adjusted to 34 mg or 10 mg during the fiff rst
eight weeks of treatment. 53.8% of patients who were randomized to receive pimavanserin completed the trial on 34 mg,
was the change frff om baseline to week 26 on the
44.7% on 20 mg, and 1.5% on 10 mg. The primaryrr endpoint of the study
NSA-16 total score. In November 2019, we announced positive top-line results frff om the ADVANAA CE study.
In this study,
pimavanserin demonstrated a statistically signififf cant improvement on the study’
to week 26 on the Negative Symptom Assessment-16 (NSA-16) total score, compared to placebo (p=0.043). A greater
improvement in the NSA-16 total score compared to placebo was observed in patients who received the highest pimavanserin
dose of 34 mg (n=107; unadjusted p=0.0065). Pimavanserin did not separate frff om placebo on the key secondaryrr endpoint, the
Personal and Social Perforff mance (PSP) scale. In the third quarter of 2020, we initiated a second pivotal study,
ADVANA CE-2.
will evaluate the effff iff cacy of pimavanserin 34 mg once daily compared to placebo in appr
The Phase 3 study
patients with predominantly negative symptoms of schizophrenia who have achieved adequate control of positive symptoms
with their existing antipsychotic treatment. We anticipate announcing top-line results frff om the Phase 3 ADVANA CE-2 study
in early 2024.

t
s primaryrr endpoint, the change frff om baseline

oximately 386

a

t

t

t

t

t

t

TrTT ofiff nii etitt de as a TrTT eatmtt ent forff Retttt SySS ndrome

Trofiff netide is a novel synthetic analog of the amino‐terminal tripeptide of insulin-like growth faff ctor 1 (IGF-1) designed

to treat the core symptoms of Rett syndrome by reducing neuroinflff ammation and supporting synapta ic func
has been granted FDA Fast Track Statust

n Drugrr Designation in the U.S. and Orpha

rr
and Orpha

ff

r

n Designation in Europe.

tion. Trofiff netide

6

Rett syndrome is a debilitating neurological disorder that occurs primarily in feff males folff

lowing appa

a

rently normal

the fiff rst six months of lifeff . Rett syndrome has been most oftff en misdiagnosed as autism, cerebral palsy, or
development forff
non-specififf c developmental delay. Rett syndrome is caused by mutations on the X chromosome on a gene called MECP2.
on the MECP2 gene that interfeff re with its abia lity to generate a normal
There are more than 200 diffff eff rent mutations found
a
gene product. Rett syndrome occurs worldwide in appr
oximately one of everyrr 10,000 to 15,000 feff male births causing
tion. Typically,
ff
cognitive, sensory,rr
problems in brain func
emotional, motor and autonomic func
between six to eighteen months of age, patients experience a period of rapia d decline with loss of purpos
hand use and
efulff
spoken communication and inabia lity to independently conduct activities of daily living. Symptoms also include seizures,
disorganized breathing patterns, an abnor
there are no appr

mal side-to-side curvaturt e of the spine (scoliosis) and sleep disturt bar nces. Currently,

a
oved medicines appr

the treatment of Rett syndrome.

tion that are responsible forff

oved forff

a

a

ff

ff

r

t

a

In October 2019, we initiated the Phase 3 LAVENDER study,

a randomized, doubu le-blind placebo-controlled studyt
oximately 180 girls and young women 5 to 20 years of age with Rett syndrome. Half of studyt
evaluating trofiff netide in appr
participants will receive trofiff netide and half will receive placebo. Co-primaryrr effff iff cacy endpoints of the study
will measure
symptom improvement using the Rett Syndrome Behavior Questionnaire (RSBQ), a caregiver assessment, and the Clinical
Global Impression Scale-Improvement (CGI-I), a clinician assessment. In December 2021, we announced positive top-line
results frff om the study.
demonstrated a statistically signififf cant improvement over placebo forff
both endpoints. On the RSBQ, change frff om baseline to week 12 was -5.1 vs. -1.7 (p=0.0175; effff eff ct size=0.37). The CGI-I
score at week 12 was 3.5 vs. 3.8 (p=0.0030; effff eff ct size=0.47). Additionally, trofiff netide demonstrated a statistically signififf cant
separation over placebo on the key secondaryrr endpoint, the Communication and Symbolic Behavior Scales Developmental
Profiff le™ Infaff nt-Toddler Checklist–Stt
ocial composite score (CSBS-DP-IT–Social) change frff om baseline to week 12 was -0.1
vs. -1.1 (p=0.0064; effff eff ct size=0.43).

The placebo-controlled study

t

t

t

Studyt

treatment discontinuation rates related to treatment emergent adverse events (TEAEs) were 17.2% in the

trofiff netide group as compared to 2.1% in the placebo group. The most common adverse events were diarrhea (80.6% with
trofiff netide vs. 19.1% with placebo), of which 97.3% in the trofiff netide arm were characterized as mild-to-moderate, and
vomiting (26.9% with trofiff netide vs. 9.6% with placebo), of which 96% in the trofiff netide arm were characterized as mild-to-
moderate. Serious adverse events were observed in 3.2% of studt
Patients completing the LAVENDER studyt
and LILAC-2 extension studi
the LILAC open-labea

es. More than 95% of participants who completed the LAVENDER study

y participants in both the trofiff netide and placebo groups.

ty to continue to receive trofiff netide in the open-labea

had the opportuni

l extension study.

elected to roll-over to

l LILAC

t

t

t

t

We submitted to the FDA an NDA forff

trofiff netide forff

the treatment of Rett syndrome in July 2022. The FDA fiff led the

NDA in September 2022 with a PDUFA target action date of March 12, 2023. Trofiff netide has been granted Fast Track Statust
and Orpha
n Drugrr Designation forff Rett syndrome. Trofiff netide has also been granted Rare Pediatric Disease (RPD)
rr
designation by the FDA. An NDA with Fast Track and/or Orpha
RPD designation we would expect to be awarded a RPD Priority Review Voucher if appr
by the FDA.

oved, subject to fiff nal determination

n Drugr Designation is eligible forff

priority review. With an

a

r

ACPCC -PP 204 as a TrTT eatmtt ent forff Alzll heimii er’s’ Disii ease PsPP ys chosisii

An estimated over 6.0 million people in the United States are living with Alzheimer’s disease dementia and studi

es
oximately 30% of patients, or 1.8 million people, have psychosis, commonly consisting of delusions and

suggest that appr
hallucinations. Approximately 900 thousand patients in the United States are currently treated forff ADP and of those treated,
a
appr

oximately two-thirds are treated with offff -ff labea

l anti-psychotics.

a

t

Symptoms of ADP are oftff en persistent and may occur with increasing frff equency with progression of disease as patients

a

oved treatments forff ADP. Offff -ff labea

become more impaired. Serious consequences have been associated with persistent or severe psychosis in persons with
dementia such as repeated hospital admissions, earlier progression to nursing home care, severe dementia, and death. There
l use of typical and atypical antipsychotics is associated with
are currently no FDA-appr
modest and oftff en equivocal effff iff cacy in these patients. In addition, use of currently availabla e antipsychotics is associated with
a signififf cant acceleration in cognitive decline in patients with dementia as well as numerous offff -ff target toxicities, thus
negatively impacting the primaryrr
the National Institutt e of Mental Health Clinical Antipsychotic Trials of Intervention Effff eff ctiveness–Alzheimer’s Disease
(CATIE-AD) study.
func
ff
func
ff
receptors. Atypical antipsychotics are associated with a number of offff -ff target and dose-limiting side effff eff cts, such as

tion compared to patients on placebo. This pronounced negative impact of currently used antipsychotics on cognitive
tion is believed to be associated with the common pharmacologic property of these drugs

illness. The cognitive effff eff cts of treatment with an atypical antipsychotic were evaluated in

, patients on any atypical antipsychotic had signififf cantly greater rates of decline in cognitive

, namely blocking of dopamine

In this study

r

t

t

7

extrapyr
amidal symptoms, orthostatic hypotension, hematologic abnor
a
effff eff cts. These offff -ff target toxicities are associated with increased risk forff
serious complications in this vulnerabla e patient population. With no appr
ADP and current offff -ff labea
decline and other offff target toxicities, we believe that ADP represents an area of high unmet need.

malities, and metabol

a

a

a

faff lls, infeff ction, aspiration pneumonia, and other
the treatment of patients with
oved therapia es forff

l use of atypical antipsychotics carryirr ng signififf cant morbir dity risks including worsening in cognitive

ic, gastrointestinal and sedative

ACP-204 is a new molecule which is designed to leverage the learnings frff om pimavanserin. For several years we have
sought to build upon our pimavanserin frff anchise by investigating and developing other molecules focff used on the serotonergic
system. Virtuat
lly all of the antipsychotics on the market today are thought to work predominantly through blocking dopamine
and in particular, the dopamine D2 receptor. Pimavanserin is thought to work entirely through serotonin, which we believe
can provide a veryrr diffff eff rent and faff vorabla e safeff ty and tolerabia lity profiff le.

Specififf cally with ACP-204, we believe we may have an opportuni

ty to maximize the effff iff cacy potential, while reducing
the risk of QT prolongation. We are currently in Phase 1 development and plan to complete Phase 1 in the fiff rst half of 2023.
We plan to initiate studi

es evaluating various doses of ACP-204 in ADP patients later this year.

t

t

Antitt sii ense Olill goni

uclell otitt de (A(( SO)O PrPP ograms

In Januaryrr 2022, we entered into a collabor

a

ation with Stoke Therapea utics to discover, develop and commercialize novel

ation includes SYNGAP1, MECP2 (Rett syndrome) and an undisclosed CNS target of mutuat

l interest. The programs

the potential treatment of severe and rare genetic neurodevelopmental diseases of the CNS. The

RNRR A-based medicines forff
collabor
a
are currently in various stages of pre-clinical development.

Competition

We faff ce, and will continue to faff ce, intense competition frff om pharmaceutical and biotechnology companies, as well as
numerous academic and research institutt
ions and governmental agencies, both in the United States and abra oad. We compete,
or will compete, with existing and new products being developed by our competitors. Some of these competitors are pursuing
the development of pharmaceuticals that target the same diseases and conditions that our research and development programs
target.

For example, the use of NUPLAZID forff
, including the generic drugs

rr

r
drugs

the treatment of PDP competes with offff -ff labea

l use of various antipsychotic

quetiapia ne, clozapia ne, risperidone, aripiprazole, and olanzapia ne.

Pimavanserin forff

the treatment of negative symptoms of schizophrenia, if appr

a

oved forff

l use of Vraylar, marketed by Allergan, Rexulti, marketed by Otsuka Pharmaceutical Co., Ltd., Latuda

with offff -ff labea
by Sunovion Pharmaceuticals Inc., Capla yta, marketed by IntraCellular Therapea utics and various generic drugs
quetiapia ne, clozapia ne, risperidone, aripiprazole, and olanzapia ne.

t
, including

r

that indication, would compete
, marketed

Several academic institutt

ions and pharmaceutical companies are currently conducting clinical trials forff

the treatment of

various symptoms of Rett syndrome. Trofiff netide, if appr
with offff -ff labea
including antiepileptics, antipsychotics, antidepressants and benzodiazepines.

oved forff

a

l usage of branded and generic prescription medications targeted at individual symptoms of Rett syndrome,

the treatment of Rett syndrome, would compete indirectly

Other competitors may have a variety of drugs

r

in development or awaiting appr

a

oval frff om the FDA or comparabla e

icabla e disorder. Our competitors may also develop alternative therapia es that could furff

the
forff eign regulatoryrr authorities that could reach the market and become establa ished beforff e we have a product to sell forff
appl
r
any drugs
a
that we may develop. Many of our competitors are using technologies or methods diffff eff rent or similar to ours to identifyff and
validate drugr
signififf cantly greater experience than we do in the folff

targets and to discover novel small molecule drugs

. Many of our competitors and their collabor

ther limit the market forff

rr
lowing:

ators have

a

•

•

•

preclinical studi

t

es and clinical trials of potential pharmaceutical products;

obtaining FDA and other regulatoryrr appr

a

ovals; and

commercializing pharmaceutical products.

8

In addition, many of our competitors and their collabor

a

ators have substantially greater advantages in the folff

lowing

areas:

•

•

•

•

•

capia tal resources;

research and development resources;

manufaff cturt

ing capaa bia lities;

sales and marketing; and

production faff cilities.

Smaller companies also may prove to be signififf cant competitors, particularly through proprietaryrr

research discoveries

a

a

oved or are in advanced development and may develop superior technologies
. We faff ce competition from other

targets and to discover novel small molecule drugs

ative arrangements with pharmaceutical and biotechnology companies, in recruir

ative arrangements with large pharmaceutical and establa ished biotechnology companies. Many of our

and collabor
competitors have products that have been appr
or methods to identifyff and validate drugrr
companies, academic institutt
collabor
a
scientififf c, sales and marketing, and management personnel and forff
either alone or with their collaboa
more affff orff dabla e, or more easily administered than ours and may achieve patent protection or commercialize drugs
than us. Our competitors may also develop alternative therapia es that could furff
develop. Our faff ilure to compete effff eff ctively could have a material adverse effff eff ct on our business.

ions, governmental agencies and other public and private research organizations forff

rators, may succeed in developing technologies or drugs

licenses to additional technologies. Our competitors,

ting and retaining highly qualififf ed

that are more effff eff ctive, safeff r, and

ther limit the market forff

sooner
that we may

rr
any drugs

rr

r

rr

Intellectual Property

intellectuat

l property rights are an essential element of our business. Our strategy is to fiff le patent appl

ications in
that represents an important potential commercial market to us. In addition, we seek

We currently hold 47 issued U.S. patents and a signififf cant number of related issued forff eign patents. We have also
exclusively licensed rights to an additional 28 issued U.S. patents, and a number of related forff eign patents. Patents and other
proprietaryrr
the United States and any other countryrr
to protect our technology and inventions (and improvements to inventions) that are important to the development of our
business. Our patent appl
assays, novel compounds, compositions, forff mulations and methods of treatment. We also rely upon trade secrets, including
technologies that may be used to discover and validate targets, to identifyff and develop novel drugs
or clinical development technologies, among others. We protect our trade secrets by, among other things, requiring
employees and third parties who have access to our proprietaryrr
agreements. We are a party to various license agreements that give us rights to use certain technologies in our research and
development, subject to certain limitations.

technology, including chemical synthetic or manufaff cturt

inforff mation to sign confiff dentiality and nondisclosure

ications claim proprietaryrr

, as well as manufaff cturt

ing methods, drugr

ing

a

a

rr

PiPP mii avanserinii

To date, 36 U.S. patents have been issued to us that relate to pimavanserin, NUPLAZID and methods of use. Fourteen
oved indication, and cover the

of these are Orange Book-listed patents that relate to pimavanserin, NUPLAZID and our appr
general forff mula of the compound, the composition of matter, with claims specififf cally directed to pimavanserin and salts
thereof,ff the specififf c polymorphrr
a
a
appr
oved by the U.S. Patent and Trademark Offff iff ce. The patents covering the
date in 2030, including a patent term extension appr
polymorphr
oved indication are currently set to expire between
2024 and 2028. These patent terms include adjustments made by the U.S. Patent and Trademark Offff iff ce, but not extensions.

oved indication. The composition of matter patent covering pimavanserin and salts thereof currently has an expiration

forff m and the use of pimavanserin or NUPLAZID forff

oved forff mulations, and the use thereof forff

forff m of pimavanserin, the appr

treating our

a
our appr

a

a

In the United States, under the Drugrr

Price Competition and Patent Term Restoration Act of 1984, commonly known as

“Hatch-Waxman,” we are permitted to extend the term of one U.S. patent forff
may be subject to change not only due to potential patent term extensions but also to any terminal disclaimer that reduces
patent term, as well as other faff ctors. Because the U.S. patent laws and judicial interprrr etations thereof change, modififf cations
or new interprr etations of the laws may impact our patent terms.

pimavanserin or the use thereof.ff Patent terms

9

The remaining 22 U.S. patents relating to pimavanserin that have been issued to us cover methods of use of

, among other things, treating AD Psychosis, Alzheimer’s disease indications, schizophrenia, bipolar

pimavanserin forff
disorder, Lewy body dementia, sleep disorders, hallucinations and delusions, other indications and methods of producing
pimavanserin. We also have a signififf cant number of related issued forff eign patents that specififf cally cover pimavanserin and
polymorphs

thereof in Europe and Asia as well as in Australia, Canada, Mexico and other countries.

r

We continue to fiff le and prosecute patent appl

ications directed to pimavanserin, forff mulations of pimavanserin, methods
ing, and to methods of treating various diseases using pimavanserin, either alone or in combination with other

of manufaff cturt
agents, worldwide. For example, in late 2019 and in 2020, we obtained and listed in the Orange Book six additional U.S.
issued patents, two patents directed to method of use forff
34 mg capsa ule forff mulation, each expiring in 2038.

our 10 mg tabla et, expiring in 2037, and four

patents directed to our

a

ff

TrTT ofiff nii etitt de

To date, 10 U.S. patents have been issued and exclusively licensed to us frff om Neuren Pharmaceuticals that relate to
ing and methods of use of trofiff netide. Several U.S. patents would be eligible forff Orange
treating Rett

trofiff netide, methods of manufaff cturt
Book listing, including a patent claiming the use of trofiff netide forff
syndrome has an expiration date in 2032.

treating Rett syndrome. The use patent forff

Under the license agreement with Neuren, we continue to fiff le and prosecute patent appl

a

ications directed to trofiff netide,

forff mulations of trofiff netide, methods of manufaff cturt

ing and methods of treating Rett syndrome using trofiff netide.

Government Regulation

Our business activities, including the manufaff cturt

ing and marketing of NUPLAZID, trofiff netide, if appr

a

oved, and our

potential products and our ongoing research and development activities, are subject to extensive regulation by numerous
governmental authorities in the United States and other countries. Beforff e marketing in the United States, any new drugr
developed by us must undergo rigorous preclinical testing, clinical trials and an extensive regulatoryrr clearance process
implemented by the FDA under the Federal Food, Drug,
things, the development, testing, manufaff cturt e, safeff ty, effff iff cacy, record keeping, labea
promotion, import, export, sale and distribution of biopharmaceutical products. The regulatoryrr
which includes preclinical testing and clinical trials of each product candidate, is lengthy, expensive and uncertain. Moreover,
government coverage and reimbursement policies will both directly and indirectly impact our abia lity to successfulff
commercialize NUPLAZID and any futff urt e appr
impacted by enacted and any appl
pricing measures. In addition, we are subject to
state and feff deral laws, including, among others, anti-kickback laws, faff lse claims laws, data privacy and security laws, and
transparency laws that restrict certain business practices in the pharmaceutical industry.rr

oved products, and such coverage and reimbursement policies will be

and Cosmetic Act, as amended. The FDA regulates, among other

icabla e futff urt e healthcare reforff m and drugrr

ling, storage, appr

oval, advertising,

review and appr

oval process,

ly

a

a

a

a

rr

In the United States, drugrr

product candidates intended forff

human use undergo labor

a

atoryrr and animal testing until

adequate proof of safeff ty is establa ished. Clinical trials forff
new product candidates are then typically conducted in humans in
three sequential phases that may overlap.a Phase 1 trials involve the initial introduction of the product candidate into healthy
human volunteers. The emphasis of Phase 1 trials is on testing forff
ism,
distribution, excretion and clinical pharmacology. Phase 2 involves studi
es in a limited patient population to determine the
initial effff iff cacy of the compound forff
specififf c targeted indications, to determine dosage tolerance and optimal dosage, and to
identifyff possible adverse side effff eff cts and safeff ty risks. Once a compound shows initial evidence of effff eff ctiveness and is found
to have an acceptabla e safeff ty profiff le in Phase 2 evaluations, Phase 3 trials are undertaken to more fulff
outcomes. Beforff e commencing clinical investigations in humans, we or our collabor
Drugr Application (IND), to the FDA.

safeff ty or adverse effff eff cts, dosage, tolerance, metabol

ff
ly evaluate clinical

ators must submit an Investigational New

a

a

t

Regulatoryrr authorities, Institutt

ional Review Boards and Data Monitoring Committees may require additional data
ies to commence, continue or proceed frff om one phase to another, and could demand that the

es be discontinued or suspended at any time if there are signififf cant safeff ty issues. Clinical testing must also meet

beforff e allowing the clinical studt
studi
t
requirements forff
and good clinical practices (GCPs). Additionally, the manufaff ctut re of our drugr
current good manufaff cturt

clinical trial registration, institutt

ing practices (GMPs).

ional review board oversight, inforff med consent, health inforff mation privacy,

product must be done in accordance with

10

a

a

ies. Generating the

oval to market a
each indication forff which the

led. The data and inforff mation are submitted to the FDA in the forff m of a New Drugr Application (NDA),

To establa ish a new product candidate’s safeff ty and effff iff cacy, the FDA requires companies seeking appr
product to submit extensive preclinical and clinical data, along with other inforff mation, forff

an NDA takes many years and requires the expenditurt e of substantial resources.

lowing submission of the NDA. If deemed suffff iff ciently complete to permit a substantive review, the FDA will “fiff le” the
e to fiff le any NDA that it deems incomplete or not properly reviewabla e. The FDA has establa ished

drugr
product will be labea
which must be accompanied by payment of a signififf cant user feff e unless a waiver or exemption appl
required data and inforff mation forff
Inforff mation generated in this process is susceptible to varyirr ng interprr etations that could delay, limit or prevent regulatoryrr
appr
oval at any stage of the process. The faff ilure to demonstrate adequately the quality, safeff ty and effff iff cacy of a product
a
candidate under development would delay or prevent regulatoryrr appr
and FDA regulations, each NDA submitted forff FDA appr
folff
NDA. The FDA can refusff
internal goals of eight months frff om submission forff
maja or advances in treatment or provide a treatment where no adequate therapya
standard review of NDAs. However, the FDA is not legally required to complete its review within these periods, these
perforff mance goals may change over time and the review is oftff en extended by FDA requests forff
l appr
clarififf cation. Moreover, the outcome of the review, even if generally faff vorabla e, may not be an actuat
a
“complete response letter” that describes additional work that must be done beforff e the NDA can be appr
a
appr
a
the product unless the manufaff cturt
been conducted to determine compliance with GCPs and data integrity. The FDA’s review of an NDA may also involve
review and recommendations by an independent FDA advisoryrr committee, particularly forff
bound by the recommendation of an advisoryrr committee.

priority review of NDAs that cover new product candidates that offff eff r
exists, and 12 months frff om submission forff

oving an NDA, the FDA can choose to inspect the faff cilities at which the product is manufaff cturt ed and will not appr

oval is given an internal administrative review within 60 days

oval of the product candidate. Under appl

ing faff cility complies with GMPs. The FDA may also audit sites at which clinical trials have

novel indications. The FDA is not

oval but a
oved. Beforff e

additional inforff mation or

icabla e laws

ove

the

a

a

a

a

In addition, delays or reje ections may be encountered based upon changes in regulatoryrr policy, regulations or statutt es

governing product appr

a

oval during the period of product development and regulatoryrr agency review.

t

Beforff e receiving FDA appr

a

ators must demonstrate through

oval to market a potential product, we or our collabor

a
es that the potential product is safeff and effff eff ctive in the patient population that will

adequate and well-controlled clinical studi
be treated. In addition, under the Pediatric Research Equity Act (PREA), an NDA or supplement to an NDA must contain
data or a plan to collect such data to assess the safeff ty and effff eff ctiveness of the drugr
pediatric subpopulations and to support dosing and administration forff
a
safeff and effff eff ctive, unless a waiver appl
limited to those disease states and conditions forff which the product is appr
unappr
a
management, including post-marketing, or Phase 4, studi
payment of a signififf cant annual program user feff e and continuing review and periodic inspections by the FDA. Discoveryrr of
previously unknown problems with a product, manufaff cturt er or faff cility may result in restrictions on the product or
manufaff cturt er, including labea

a
oved. Marketing or promoting a drugrr
oved indication is generally prohibited. Furthermore, FDA appr
oval may entail ongoing requirements forff
a

the claimed indications in all relevant
each pediatric subpopulation forff which the product is

ling changes, warning letters, costly recalls or withdrawal of the product frff om the market.

oval of a potential product is granted, this appr

oval will be
forff
an
risk

oval is obtained, each marketed product, is subject to

ies. If regulatoryrr appr

es. Even if appr

forff

a

a

a

t

Any drugr

is likely to produce some toxicities or undesirabla e side effff eff cts in animals and in humans when administered

suffff iff ciently long periods of time. Unacceptabla e toxicities or side effff eff cts may occur at any

at suffff iff ciently high doses and/or forff
dose level at any time in the course of studi
known as toxicological studi
toxicity or side effff eff ct could cause us or regulatoryrr authorities to interrupt
product candidates. Further, such unacceptabla e toxicity or side effff eff cts could ultimately prevent a potential product’s appr
by the FDA or forff eign regulatoryrr authorities forff
acceptance, even if the product is appr

es, or during clinical trials of our potential products. The appe
a

es in animals designed to identifyff unacceptabla e effff eff cts of a product candidate,

t the development of any of our
oval

a
ling claims and market

any or all targeted indications or limit any labea

arance of any unacceptabla e

, limit, delay or abor

oved.

a

a

r

t

t

In addition, as a condition of appa

roval, the FDA may require an appl

a

icant to develop a risk evaluation and mitigation
ling to ensure that the benefiff ts of

strategy (REMS). A REMS uses risk minimization strategies beyond the profeff ssional labea
the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the
population likely to use the producd t, seriousness of the disease, expected benefiff t of the product, expected duration of
treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity. REMS can
include medication guides, physician communication plans forff
(ETASU). ETASU may include, but are not limited to, special training or certififf cation forff
dispensing only under certain circumstances, special monitoring, and the use of patient registries. The FDA may require a
REMS beforff e appr
a
requirement forff

oval if it becomes aware of a serious risk associated with use of the product. The

a REMS can materially affff eff ct the potential market and profiff tabia lity of a product.

healthcare profeff ssionals, and elements to assure safeff use

prescribing or dispensing,

oval or post-appr

a

11

We and our collabor

a

ators and contract manufaff cturt ers also are required to comply with the appl

a

icabla e FDA GMP

regulations. GMP regulations include requirements relating to quality control and quality assurance as well as the
corresponding maintenance of records and documentation. Manufaff cturt
These faff cilities must be appr
oved beforff e we can use them in commercial manufaff cturt
maintain ongoing compliance foff r commercial product manufaff ctut re. The FDA may conclude that we or our collabor
contract manufaff cturt ers are not in compliance with appl
which may result in delay or faff ilure to appr
penalties.

requirements,
a
ications, warning letters, product recalls and/or imposition of fiff nes or
a
ove appl

ing of our potential products and must
ators or

icabla e GMP requirements and other FDA regulatoryrr

ing faff cilities are subject to inspection by the FDA.

a

a

a

If a product is appr

a

oved, we must also comply with post-marketing requirements, including, but not limited to,

compliance with advertising and promotion laws enforff ced by various government agencies, including the FDA’s Offff iff ce of
Prescription Drugr
e laws, including anti-kickback
and faff lse claims laws, healthcare inforff mation privacy and security laws, post-marketing safeff ty surveillance, and disclosure of
payments or other transfeff rs of value to healthcare profeff ssionals and entities. In addition, we are subject to other feff deral and
state regulation including, forff

Promotion, and through such laws as feff deral and state anti-frff aud and abus

example, the implementation of corpor

ate compliance programs.

a

r

In order to distribute products commercially, we must comply with state laws that require the registration of

manufaff cturt ers and wholesale distributors of pharmaceutical products in a state, including, in certain states, manufaff cturt ers and
distributors who ship products into the state even if such manufaff cturt ers or distributors have no place of business within the
state. Some states also impose requirements on manufaff cturt ers and distributors to establa ish the pedigree of product in the
chain of distribution, including some states that require manufaff cturt ers and others to adopt new technology capaa bla e of
tracking and tracing product as it moves through the distribution chain.

a

Outside of the United States, our abia lity to market a product is contingent upon receiving a marketing authorization
opriate regulatoryrr authorities. The requirements governing the conduct of clinical trials, marketing

frff om the appr
authorization, pricing and reimbursement varyrr widely frff om countryrr
adequate evidence of safeff ty, quality and effff iff cacy has been presented, marketing authorization will be granted. This forff eign
. In addition,
regulatoryrr appr
icabla e post-marketing requirements, including safeff ty surveillance, anti-frff aud and abus
forff eign regulations may include appl
e
laws, and implementation of corpor
ate compliance programs and reporting of payments or other transfeff rs of value to
healthcare profeff ssionals and entities.

oval process involves all of the risks associated with FDA marketing appr

If the regulatoryrr authority is satisfiff ed that

oval discussed above

to country.rr

a

a

a

a

a

rr

CovCC erage and Reimii bursrr ement

Sales of NUPLAZID and of trofiff netide or our other product candidates, if appr

a

oved, depend and will depend, in part,

a drugr

product does not imply that an adequate reimbursement rate will be appr

on the extent to which such products will be covered by third-party payors, such as government health care programs,
commercial insurance and managed healthcare organizations. These third-party payors are increasingly limiting coverage
and/or reducing reimbursements forff medical products and services. A third-party payor’s decision to provide coverage forff
drugr
oved. Further, one payor’s determination to
provide coverage forff
Coverage policies and third-party payor reimbursement rates may change at any time. In addition, the U.S. government, state
legislaturt es and forff eign governments have continued implementing cost-containment programs, including price controls,
restrictions on reimbursement and requirements forff
ion of generic products. Adoption of price controls and cost-
containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could
furff
not cover NUPLAZID, trofiff netide, if appr
products, and have a material adverse effff eff ct on our sales, results of operations and fiff nancial condition.

ther limit our net revenue and results. Decreases in third-party payor reimbursement or a decision by a third-party payor to

product does not ensure that other payors will also provide coverage forff

oved products could reduce physician usage of our

oved, or any other futff urt e appr

substitutt

the drugrr

product.

a

a

a

a

In the United States, the Medicare Part D program provides a voluntaryrr outpat

tient drugrr

benefiff t to Medicare

coverage under Medicare Part D, but the individual Part D

certain products. NUPLAZID is availabla e forff
benefiff ciaries forff
plans offff eff r coverage subject to various faff ctors such as those described above
historically included “all or substantially all” drugs
forff mularies: anticonvulsants, antidepressants, antineoplastics, antipsychotics, antiretrovirals, and immunosuppressants, the
Centers forff Medicare & Medicaid Services (CMS), has in the past proposed, but not adopted, changes to this policy. If this
policy is changed in the futff urt e and if CMS no longer considers the antipsychotic class to be of “clinical concern”, Medicare
Part D plans would have signififf cantly more discretion to reduce the number of products covered in that class, including
coverage of NUPLAZID. Furthermore, private third-party payors oftff en folff
low Medicare coverage policies and payment
limitations in setting their own coverage policies.

lowing designated classes of “clinical concern” on their

. In addition, while Medicare Part D plans have

in the folff

a

r

12

HeHH altll htt care Laws and Regue

latll

itt ons

We are subject to healthcare regulation and enforff cement by the feff deral government and the states and forff eign
governments in which we conduct our business. The healthcare laws and regulations that may affff eff ct our abia lity to operate
include the folff

lowing:

•

•

•

•

•

The feff deral Anti-Kickback Statutt e makes it illegal forff
indirectly, solicit, receive, offff eff r, or pay any remuneration that is in exchange forff
business, including the purchase, order, lease of any good, faff cility, item or service forff which payment may be
made under a feff deral healthcare program, such as Medicare or Medicaid. The term “remuneration” has been
broadly interprr eted to include anything of value.

any person or entity to knowingly and willfulff

or to induce the refeff rral of

ly, directly or

Federal faff lse claims and faff lse statement laws, including the feff deral civil False Claims Act, and civil monetaryrr
penalties laws, prohibit, among other things, any person or entity frff om knowingly presenting, or causing to be
presented, forff
or services, including drugs

oval by, feff deral programs, including Medicare and Medicaid, claims forff

payment to, or appr
r

, that are faff lse or frff audulent.

a

items

The U.S. feff deral Health Insurance Portabia lity and Accountabia lity Act of 1996 (HIPAA), created additional
feff deral criminal statutt es that prohibit among other actions, knowingly and willfulff
execute, a scheme to defrff aud any healthcare benefiff t program, including private third-party payors or making any
faff lse, fiff ctitious or frff audulent statement in connection with the deliveryrr of or payment forff
items or services.

ly executing, or attempting to

healthcare benefiff ts,

HIPAA, as amended by the Health Inforff mation Technology forff Economic and Clinical Health Act of 2009
(HITECH), and their implementing regulations, imposes obligations on covered entities, including certain
healthcare providers, health plans, and healthcare clearinghouses, and their respective business associates that
create, receive, maintain or transmit individually identififf abla e health inforff mation forff
or on behalf of a covered
entity as well as their covered subcontractors, with respect to safeff guarding the privacy, security and transmission
of individually identififf abla e health inforff mation. In addition, the European Union (EU) and United Kingdom (UK)
have each establa ished their own data security and privacy legal frff amework, including but not limited to the EU’s
General Data Protection Regulation (EU) 2016/79 and the so-called “UK GDPR” (together, the GDPR), which
contain provisions specififf cally directed at the processing of health inforff mation, higher sanctions than previously
appl
icabla e data protection laws and extra-territoriality measures intended to bring non-EU/-UK companies’
a
processing operations under the scope of these regulations in certain circumstances (including where the relevant
processing relates to the monitoring of behaviors of individuals in the EU/UK – such as in the context of the
conduct of a clinical trial). We currently conduct clinical trials in the EU and the UK and will need to be
compliant with these requirements. We anticipate that over time we may expand our business operations to
include additional operations in the EU and/or UK. With such expansion, we would be subject to increased
governmental regulation in the territories in which we might operate, including the GDPR.

The feff deral Physician Payments Sunshine Act requires certain manufaff cturt ers of drugs
, devices, biologics and
medical supplies forff which payment is availabla e under Medicare, Medicaid or the Children’s Health Insurance
Program, with specififf c exceptions, to report annually to CMS inforff mation related to payments or other transfeff rs
of value made to physicians (as defiff ned to include doctors of medicine, dentists, optometrists, podiatrists and
chiropractors by such law), other healthcare profeff ssionals (such as physician assistants and nurse practitioners),
and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate
faff mily members.

rr

Also, many states have similar laws and regulations, such as anti-kickback and faff lse claims laws that may be broader in

a

y regardless of payor, in addition to items and services reimbursed under Medicaid and other state

scope and may appl
programs. Additionally, we may be subject to state laws that require pharmaceutical companies to comply with the feff deral
government’s and/or pharmaceutical industry’rr
to report inforff mation related to payments and other transfeff rs of value to physicians and other healthcare providers or
marketing expenditurt es, state laws that require drugr manufaff cturt ers to report inforff mation on the pricing of certain drugs
, state
r
and local laws that require the registration of pharmaceutical sales representatives, as well as state and forff eign laws governing
the privacy and security of health inforff mation, many of which diffff eff r frff om each other in signififf cant ways and oftff en are not
preempted by HIPAA.

s voluntaryrr compliance guidelines, state laws that require drugr manufaff cturt ers

13

If we are found

ff

to be in violation of any of these laws or any other feff deral or state regulations, we may be subject to

signififf cant administrative, civil and/or criminal penalties, damages, fiff nes, disgorgement, imprisonment, exclusion frff om
feff deral health care programs, additional reporting requirements and/or oversight, and the curtailment or restrucr
operations.

turt

ing of our

Additionally, to the extent that our product is sold in a forff eign country,rr we may be subject to similar forff eign laws.

HeHH altll htt care Refe orff mrr

The United States and some forff eign jurisdictions are considering or have enacted a number of legislative and
regulatoryrr proposals to change the healthcare system in ways that could affff eff ct our abia lity to sell our products profiff tabla y. By
way of example, in March 2010, Patient Protection and Affff orff dabla e Care Act, as amended by the Health Care and Education
Reconciliation Act (collectively, the ACA) was signed into law, which intended to broaden access to health insurance, reduce
or constrain the growth of healthcare spending, enhance remedies against frff aud and abus
e, add transparency requirements forff
the healthcare and health insurance industries, impose taxes and feff es on the health industryrr and impose additional health
policy reforff ms.

a

Among the provisions of the ACA of importance to NUPLAZID, trofiff netide and our other product candidates are:

•

•

•

•

•

•

•

•

an annual, nondeductible feff e on any entity that manufaff cturt es or imports specififf ed branded prescription drugs
biologic agents, appor
healthcare programs;

tioned among these entities according to their market share in certain government

a

r

and

an increase in the statutt oryrr minimum rebates a manufaff cturt er must pay under the Medicaid Drugr Rebate Program
to 23.1% and 13.0% of the average manufaff cturt er price forff

branded and generic drugs

, respectively;

r

extension of a manufaff cturt er’s Medicaid rebate liabia lity to covered drugs
enrolled in Medicaid managed care organizations;

r

dispensed to individuals who are

expansion of eligibility criteria forff Medicaid programs by, among other things, allowing states to offff eff r Medicaid
coverage to certain individuals with income at or below 133% of the feff deral poverty level, thereby potentially
increasing a manufaff cturt er’s Medicaid rebate liabia lity;

a Medicare Part D coverage gapa discount program, in which manufaff cturt ers must now agree to offff eff r 70% point-
of-ff sale discounts to negotiated prices of appl
period, as a condition forff

to eligible benefiff ciaries during their coverage gapa

icabla e brand drugs
r
tient drugs

to be covered under Medicare Part D;

a manufaff cturt er’s outpat

a

rr

expansion of the entities eligible forff

discounts under the Public Health Service pharmaceutical pricing program;

a requirement to annually report drugr

samples that manufaff cturt ers and distributors provide to physicians; and

a Patient-Centered Outcomes Research Institutt e to oversee, identifyff priorities in, and conduct comparative
clinical effff eff ctiveness research, along with fundi

such research.

ng forff

ff

r
purpos

There have been executive, judicial and Congressional challenges to certain aspects of the ACA. For example, on June
17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitut tional in its
entirety because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effff eff ct in its current forff m.
Prior to the U.S. Supreme Court rulr
ing, on Januaryrr 28, 2021, President Biden issued an executive order that initiated a special
es of obtaining health insurance coverage through the ACA marketplt ace. The executive order
enrollment period forff
also instrucr
ted certain governmental agencies to review and reconsider their existing policies and rulr es that limit access to
healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work
requirements, and policies that create unnecessaryrr barriers to obtaining access to health insurance coverage through Medicaid
or the ACA. On August 16, 2022, President Biden signed the Inflff ation Reduction Act of 2022 (IRARR ) into law, which among
other things, extends enhanced subsidies forff
individuals purchasing health insurance coverage in ACA marketplt aces through
plan year 2025. The IRARR also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by
signififf cantly lowering the benefiff ciaryrr maximum out-of-ff pocket cost and creating a new manufaff cturt er discount program. It is
possible that the ACA will be subject to judicial or Congressional challenges in the futff urt e. It is unclear how such challenges
and the healthcare reforff m measures of the Biden administration will impact the ACA.

Other legislative changes have been proposed and adopted in the United States since the ACA. Through the process

created by the Budget Control Act of 2011, there are automatic reductions of Medicare payments to providers up to 2% per
turt e
fiff scal year, which went into effff eff ct in April 2013 and, due to subsequent legislative amendments, including the Infrff astrucrr

14

disease 2019 (COVID-19) relief support legislation suspended the 2% Medicare sequester frff om May 1, 2020

Investment and Jobs Act, will remain in effff eff ct through 2031 unless additional Congressional action is taken. However,
coronavirusrr
through March 31, 2022. Under current legislation the actuat
up to 4% in the fiff nal fiff scal year of this sequester. Additionally, on March 11, 2021, President Biden signed the American
rebate cap,a
Rescue Plan Act of 2021 into law, which eliminates the statutt oryrr Medicaid drugr
r
, beginning Januaryrr 1, 2024. In Januaryrr
single source and innovator multiple source drugs
average manufaff cturt er price, forff
2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, furff
reduced Medicare payments to certain providers.

l reduction in Medicare payments will varyrr

currently set at 100% of a drug’

frff om 1% in 2022 to

ther

r

s

r

r
drugs

Prices that outlines principles forff

Moreover, recently there has been heightened governmental scrutr

pricing, review the relationship
under Medicare, and reforff m government

iny over the manner in which manufaff cturt ers set prices
their commercial products. There have been several recent U.S. Congressional inquiries and proposed and enacted feff deral

. For example, in July 2021, the Biden administration released an executive
. In response

forff
and state legislation designed to, among other things, bring more transparency to drugr
between pricing and manufaff cturt er patient programs, reduce the cost of drugs
program reimbursement methodologies forff
order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs
to Biden’s executive order, on September 9, 2021, the U.S. Department of Health and Human Services (HHS) released a
Comprehensive Plan forff Addressing High Drugr
of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to
advance these principles. In addition, the IRARR , among other things, (1) directs HHS to negotiate the price of certain single-
source drugs
and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to
penalize price increases that outpat
ce inflff ation. These provisions will take effff eff ct progressively starting in fiff scal year 2023,
although they may be subject to legal challenges. It is currently unclear how the IRARR will be implemented but is likely to
have a signififf cant impact on the pharmaceutical industry.rr Further, the Biden administration released an additional executive
order on October 14, 2022, directing HHS to submit a report on how the Center forff Medicare and Medicaid Innovation can
be furff
unclear whether this executive order or similar policy initiatives will be implemented in the futff urt e. At the state level,
legislaturt es 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 frff om
other countries and bulk purchasing.

costs forff Medicare and Medicaid benefiff ciaries. However, it is

ther leveraged to test new models forff

pricing reforff m and sets out a variety

lowering drugr

drugr

r

r

We expect that healthcare reforff m measures that may be adopted in the futff urt e may result in more rigorous coverage
criteria and lower reimbursement, and additional downward pressure on the price that we receive forff NUPLAZID and any
futff urt e appr
19 pandemic. We cannot predict what healthcare reforff m initiatives may be adopted in the futff urt e.

oved products. Further, it is possible that additional governmental action will be taken in response to the COVID-

a

Manufacff

turing and Distribution

We currently outsource, and plan to continue to outsource, manufaff cturt

ing activities forff NUPLAZID, as well as forff

trofiff netide and our other existing and futff urt e product candidates forff
manufaff cturt
development of pimavanserin without devoting the substantial resources and capia tal required to build manufaff cturt
faff cilities.

ing strategy will enabla e us to direct our fiff nancial resources to our commercial activities and to the ongoing

development and commercial purpos

ing

r

es. We believe this

We licensed worldwide intellectuat

l property rights related to pimavanserin in certain indications to Acadia

Pharmaceuticals GmbH, our wholly-owned Swiss subsidiaryrr
has been manufaff cturt ed in Switzerland forff
over 10 years and we anticipate continuing to manufaff cturt e in Switzerland. Acadia
GmbH manages the worldwide supply chain of our pimavanserin API, and maintains suffff iff cient materials to manufaff cturt e our
API beyond our one-year production plan.

(Acadia GmbH). Our active pharmaceutical ingredient (API)

Acadia GmbH has contracted with Siegfrff ied AG (Siegfrff ied), to manufaff cturt e our API to be used in NUPLAZID forff

ing agreement, Acadia GmbH has agreed to purchase frff om Siegfrff ied specififf ed

commercial sale. Under the manufaff cturt
percentages of our commercial requirements of API forff
futff urt e on additional services under the manufaff cturt
activities. The term of the manufaff cturt
automatically renew forff
unless the manufaff cturt
agreement prior to expiration upon an uncured material breach by the other party, upon the dissolution or liquidation of the

the United States and Europe. The parties may also agree in the
ing agreement with respect to non-commercial supply or development
a two-year term and will

subsequent two-year terms unless either party provides timely notice of its intent not to renew, or
ing agreement is terminated earlier pursuant to its terms. Either party may terminate the manufaff cturt

ing agreement ended in December 2021 and renewed forff

ing

15

ntment of any receiver, trusr

other party, the commencement of insolvency procedures that are not dismissed within a certain period of time, the
tee or assignee to take possession of the properties of the other party or the cessation of all
a
appoi
or substantially all of the other party's business operations, upon certain continuing patent infrff ingement, regulatoryrr
litigation
or other legal proceedings involving the manufaff cturt e of our API, upon a continuing forff ce maja eure affff eff cting the other party,
or if no services are currently being provided under the manufaff cturt
development services under the manufaff cturt
reasonabla e effff orff
manufaff cturt
manufaff cturt

ts to achieve the goals of such services faff il. Acadia GmbH also may terminate any services under the

any reason on 90 days’ prior notice to Siegfrff ied, subject to the requirements of the

ing agreement, the parties may terminate such services by mutuat

ing agreement. Additionally, if the parties agree on

ing agreement forff
ing agreement.

l agreement if

product forff

product forff

commercial use in the United States. Under the

We have contracted with Patheon Pharmaceuticals Inc. (Patheon), to manufaff cturt e NUPLAZID 10 mg tabla et and 34 mg
ing

commercial use in the United States. We have also contracted with a second contract manufaff cturt

ing agreement with Patheon, we have agreed to purchase frff om Patheon a specififf ed percentage of our commercial

the United States. Under the agreement, Patheon will also perforff m specififf ed validation
ing agreement ends in the fiff rst quarter of 2023 and will automatically renew forff

capsa ule drugr
organization to manufaff cturt e NUPLAZID 34 mg drugrr
manufaff cturt
requirements of NUPLAZID forff
services. The term of the manufaff cturt
subsequent two-year terms unless either party provides timely notice of its intent not to renew, or unless the manufaff cturt
agreement is terminated early pursuant to its terms. Each party may terminate the manufaff cturt
expiration upon the uncured material breach by the other party, upon
event of a continuing forff ce maja eure event affff eff cting the other party. The manufaff cturt
provide notice to Patheon that we no longer require manufaff cturt
Additionally, we may terminate the manufaff cturt
any action or raises any objection that prevents us frff om continuing to commercialize NUPLAZID or takes an enforff cement
ing site that relates to NUPLAZID or could reasonabla y be expected to adversely affff eff ct
action against Patheon’s manufaff cturt
Patheon’s abia lity to supply NUPLAZID, if we determine to discontinue commercialization of NUPLAZID forff
effff iff cacy reasons, or if Patheon uses any debarred person in perforff ming its service obligations under the manufaff cturt
agreement. We also may terminate the manufaff cturt
Patheon may terminate the manufaff cturt
manufaff cturt

ing agreement forff
ing agreement if we assign the manufaff cturt

ing agreement prior to
cy or insolvency of the other party or in the
ing agreement will also terminate if we

any other reason on three years’ prior notice to Patheon.
ing agreement or any of our rights under the

ing agreement, subject to certain limitations, if any regulatoryrr authority takes

ing services because NUPLAZID has been discontinued.

ing agreement to a Patheon competitor.

safeff ty or
ing

the bankrupt

ing

u

r

We sell NUPLAZID to a limited number of specialty pharmacies (SPs), and specialty distributors (SDs), which we

collectively refeff r to as our customers. SPs subsequently dispense NUPLAZID to patients based on the fulff
prescription and SDs subsequently sell NUPLAZID to government faff cilities, long-term care pharmacies, and in-patient
hospital pharmacies. Four customers, each based in the United States, accounted forff
forff
related to the distribution of NUPLAZID, including warehousing, customer service, order-taking, invoicing, collections, and
shipment and returt ns processing.

the year ended December 31, 2022. We have retained third-party service providers to perforff m a variety of func

oximately 73% of our total revenue

fiff llment of a

tions

a
appr

ff

We have contracted with manufaff cturt ers to produce supplies of trofiff netide to support the development program and forff
trofiff netide products at specififf ed prices and
subsequent two-year
ing agreement with Patheon

commercial sale. Under these agreements, we have the right to purchase API forff
volumes. The term of the latest to expire agreement will end in 2027 and will automatically renew forff
terms unless either party provides timely notice of its intent not to renew. Under the manufaff cturt
described above

, we also have the right to purchase trofiff netide products forff

commercial use.

a

Under the manufaff cturt
commercial use.

products forff

ing agreement with Patheon described above

a

, we also have the right to purchase trofiff netide

If any other product candidate is appr

a

to contract with a third party to manufaff cturt e such products forff

Sales and Marketing

oved by the FDA or other regulatoryrr agencies forff

commercial sale, we will need
commercial sale in the U.S. and/or in such other jurisdictions.

We have U.S. sales specialists that are focff used on promoting NUPLAZID to physicians who treat PDP patients,

including neurologists, psychiatrists and long-term care physicians. This sales forff ce is supported by an experienced sales
leadership team. Our experienced commercial team is comprised of experienced profeff ssionals in marketing, key account
management, patient access services, commercial operations, and sales forff ce planning and management. In addition, our
commercial infrff astrucr
compliance.

ing, health outcomes, medical affff aff irs, quality control, and

turt e includes capaa bia lities in manufaff cturt

16

We launched NUPLAZID in May 2016, and our focff us is to continue to establa ish NUPLAZID as the standard of care

patients with PDP. In order to help us achieve this goal, we are continuing to increase awareness of NUPLAZID’s
forff
benefiff ts in PDP with a prescriber and patient education campaign consisting of key opinion leader speaker programs,
attendance at medical meetings, digital outreach, multimedia campaigns, and direct-to-patient programs.

In selected markets outside of the United States in which NUPLAZID may be appr
commercialize NUPLAZID independently or by establa ishing one or more strategic alliances.

a

oved, if any, we may choose to

We have begun expanding our commercial team to support the commercialization of trofiff netide.

Long-Lived Assets

Our tangible long-lived assets are comprised of intangible assets and property and equipment. Our property and
equipment totaled $6.0 million, $8.0 million, and $9.2 million as of December 31, 2022, 2021 and 2020, respectively. All of
our tangible long-lived assets are located in the United States. Our intangible assets, comprised of right-of-ff use assets and
other intangibles acquired, totaled $55.6 million, $58.3 million and $48.4 million as of December 31, 2022, 2021 and 2020,
respectively.

Employees and Human Capital

EmEE plm oyees. At December 31, 2022, we had a total of 513 employees, 511 of whom were fulff

l-time. We employ

physicians, scientists and profeff ssionals in research and development, clinical, regulatory,rr manufaff cturt
fiff nance, legal and other func
certain instances in order to maximize our employment flff exibility in light of our business needs. Additionally, when we think
it is in the best interest of our business, we will rely upon external advisers and consultants rather than our employees.

tions that are important to our business. We also will continue to use temporaryrr workers in

ing, marketing, sales,

ff

EE

EmEE plm oyee Engage
ment,t Benefe iff tstt & Development. We believe that our futff urt e success is dependent upon our abia lity to
t, hire and retain exceptional employees. We provide our employees with competitive cash compensation, opportuni

recruir
to own equity, and an employee benefiff t program that promotes well-being, including wellness programs, healthcare,
retirement planning and paid vacation time. We also provide employees with opportuni
growth, including leadership development and tuit
evaluate our level of employee engagement, we regularly conduct employee surveys.

ties to continue their education and
tion reimbursement. In order to receive feff edback frff om our employees and

t

t

ties

Diversrr itytt ,yy Equitytt & IncII

lusion. We value diversity, equity, and inclusion across our workforff ce, in our communities, and

in the work that we do. We will continue to focff us on diversity, equity, and inclusion initiatives that support a culturt e that is
centered on belonging while aligning with our shared corpor

ate mission and values.

rr

Item 1A. Risii k FacFF tortt

srr .

YouYY

the folff
should consider carefe ulff
e
inforff mation contained in thisii Annual Repor
risii kskk actuallyll occursrr , our business, fiff nancial condition, resultstt of operations, and futff ure growth prospes
materiallyll and adversrr elyll affff eff cted. InII

lowing inforff mation about the risii kskk described below,w together with the other
t and in our other public fiff lings, in evaluating our business. IfII any of the folff

these circumstances, the markrr ekk t price of our common stock would likekk lyll decline.

ctstt wouldl

likekk lyll be

lyll

lowing

Risks Related to Our Business

ctstt are highi

Our prospes
cannot mainii
matett riallll yll adversrr elyll affff eff ctett d and thtt e price of our common stoctt k may declill nii e.ee

lyll depeee ndent on thtt e contitt nii ued successfs uff l commercialill zii atitt on of NUPUU LPP ALL ZIZZ DII . ToTT thtt e extee ett nt we
taitt nii or inii crease salell s of NUPUU LPP ALL ZIZZ DII ,D our businii ess,s fiff nii ancial conditii itt on and resultll stt of operatitt ons may be

NUPLAZID is our only drugrr

that has been appr

a

oved forff

sale and it has only been appr

a

oved forff

the treatment of

hallucinations and delusions associated with PDP, in the U.S. since April 2016. In recent years, we have focff used most of our
activities and resources on NUPLAZID, because we believe that our prospects are highly dependent on, and the vast maja ority
of the value of our company relates to, our abia lity to continue the successfulff

commercialization of NUPLAZID in the U.S.

Continued successfulff

commercialization of NUPLAZID is subject to many risks, and there is no guarantee that we will

be abla e to maintain or increase sales of NUPLAZID or to successfulff
oved
indications beyond PDP. There are numerous examples of faff ilures to meet high expectations of market potential, including

ly commercialize NUPLAZID forff

additional appr

a

17

ly

in developing our commercial team, there

additional indications. Even if we are successfulff

ther expand and develop the team in order to successfulff

, including a number of faff ctors that are outside our control. Because no drugr
has previously
the treatment of hallucinations and delusions associated with PDP, it is especially diffff iff cult to

by pharmaceutical companies with more experience and resources than us. While we have establa ished our commercial team
and have hired our U.S. sales forff ce, we may need to furff
commercialize NUPLAZID forff
are many faff ctors that could negatively impact our sales of NUPLAZID or cause the continued commercialization of
NUPLAZID to be unsuccessfulff
oved by the FDA forff
a
been appr
estimate NUPLAZID’s market potential forff
oved indication and potential additional indications, if any. The continued
commercial success of NUPLAZID currently depends on the extent to which patients and physicians recognize and diagnose
PDP and accept and adopt NUPLAZID as a treatment forff
know whether our or others’ estimates in this regard will be accurate. We have changed, and may continue to change, the
price of NUPLAZID frff om time to time. Physicians may not prescribe NUPLAZID and patients may be unwilling to use
NUPLAZID if coverage is not provided, coverage changes in the futff urt e or reimbursement is inadequate to cover a signififf cant
portion of the cost. Additionally, any negative publicity related to NUPLAZID, or negative development forff NUPLAZID in
our post-marketing commitments, in clinical development in additional indications, or in regulatoryrr processes in other
jurisdictions, may adversely impact the commercial results and potential of NUPLAZID. Thus, signififf cant uncertainty
remains regarding the commercial potential of NUPLAZID.

hallucinations and delusions associated with PDP, and we do not

a
its appr

If the continued commercialization of NUPLAZID or futff urt e sales are less successfulff

than expected or perceived as

nting, our stock price could decline signififf cantly and the long-term success of the product and our company could be

a
disappoi
harmed.

ctstt are alsll o depeee ndent on thtt e success of trtt ofiff nii etitt de.ee ToTT thtt e extee ett nt regue

Our prospes
ed
or not grantett d or,r ifi approved, trtt ofiff nii etitt de isii not commerciallll yll successfs uff l,ll our businii ess,s fiff nii ancial conditii itt on and resultll stt of
operatitt ons may be matett riallll yll advdd ersrr elyll affff eff ctett d and thtt e price of our common stoctt k may declill nii e.ee

yr approval of trtt ofiff nii etitt de isii delayll

latll ortt

The research, testing, manufaff cturt

ing, labea

a
ling, appr

oval, sale, import, export, marketing, and distribution of

pharmaceutical product candidates are subject to extensive regulation by the FDA and other regulatoryrr authorities in the U.S.
and other countries. We have focff used a signififf cant portion of our activities and resources on the development of trofiff netide,
and we believe our prospects are also dependent on our abia lity to obtain regulatoryrr appr
commercialize trofiff netide in the U.S. The regulatoryrr appr
many risks, including those discussed in other risk faff ctors, and trofiff netide may not receive appr
results or timing of regulatoryrr
actions or decisions related to trofiff netide do not meet our or others’ expectations, the market price of our common stock
could decline signififf cantly.

fiff lings, the regulatoryrr process, regulatoryrr developments, commercialization, or other activities,

commercialization of trofiff netide is subject to

oval frff om the FDA. If the

oval and successfulff

and successfulff

oval forff

ly

a

a

a

In December 2021, we announced positive results frff om our pivotal Phase 3 LAVENDER study.

t

t
The study

demonstrated a statistically signififf cant improvement over placebo forff
endpoint. We submitted to the FDA an NDA forff
accepted the NDA fiff ling in September 2022 with a PDUFA target action date of March 12, 2023.

trofiff netide forff

the treatment of Rett syndrome in July 2022.The FDA

both co-primaryrr endpoints as well as key secondaryrr

The FDA retains complete discretion in deciding whether to appr

a

ove the NDA forff

trofiff netide and there are many

components to an NDA fiff ling beyond the effff iff cacy and safeff ty data provided to the FDA. For example, the FDA will review
our internal systems and processes, as well as those of our vendors, related to our development of trofiff netide, including those
pertaining to our clinical trials and manufaff cturt
trofiff netide forff

ing processes. No assurances can be given that the FDA will appr

the treatment of Rett syndrome, or that if appr

ly commercialize trofiff netide.

oved, we will successfulff

ove

a

a

ThTT e tett rmrr
may lill mii

s of thtt e FDFF ADD ’s’ approval of NUPUU LPP ALL ZIZZ DII
itii itii stt commercial potett ntitt al.ll Additii itt onallll yll ,yy NUPUU LPP ALL ZIZZ DII

thtt e trtt eatmtt ent of hallll ucinii atitt ons and delusions associatett d witii htt PDPP PDD
titt nii g commitii mtt ent.tt

isii stitt lii lll subject tott an ongoinii g post-tt markerr

forff

The scope and terms of the FDA’s appr

a

oval of NUPLAZID may limit our abia lity to commercialize NUPLAZID and,

thereforff e, our abia lity to generate substantial sales revenues. The FDA has appr
hallucinations and delusions associated with PDP. The labea
patients with DRP treated with antipsychotic drugs
oved forff
the treatment of patients with DRP unrelated to the hallucinations and delusions associated with PDP. This “boxed” warning
may discourage physicians frff om prescribing NUPLAZID to patients diagnosed with PDP, including those with dementia.

the treatment of
oved NUPLAZID only forff
l forff NUPLAZID also contains a “boxed” warning that elderly

are at an increased risk of death, and that NUPLAZID is not appr

a

a

r

In connection with the FDA appr

a

oval, we agreed to four

ff

post-marketing commitments (PMCs): (i) a randomized

withdrawal trial of pimavanserin 34 mg/day compared to placebo, (ii) a placebo-controlled trial (or trials) of pimavanserin 34

18

eight weeks in at least 500 predominantly frff ail and elderly subjects, (iii) a drug-

mg/day forff
the effff eff ct of a strong CYP3A4 inducer on the exposure to pimavanserin, and (iv) re-analysis of tissue samples frff om certain
previously conducted preclinical studi
elderly subjects is in process and expected to be completed in accordance with the timeline agreed with the FDA. Failure to
complete the remaining PMC may result in regulatoryrr action by the FDA. The results of any post-marketing study
the FDA to update the labea

t
es or require risk mitigation plans.

fiff lled three PMCs; the PMC covering a trial (or trials) in frff ail and

l and/or cause the FDA to request additional studi

interaction study

es. We have fulff

drugrr

to measure

may cause

rr

t

t

t

The manufaff cturt

ing processes, labea

ling, packaging, distribution, adverse event reporting, storage, advertising,
promotion and recordkeeping forff NUPLAZID will also continue to be subject to extensive and ongoing regulatoryrr
requirements. These requirements include submissions of safeff ty and other post-marketing inforff mation and reports,
registration, as well as continued compliance with cGMPs, good clinical practices, international council forff
guidelines and good labor
a
nonclinical and clinical development and forff

atoryrr practices, each of which are regulations and guidelines enforff ced by the FDA forff

any clinical trials that we conduct post-appr

oval.

a

harmonization
all of our

Discoveryrr of any issues post-appr

a

oval, including any safeff ty concerns, such as unexpected side effff eff cts or drug-

r

drugrr

interaction problems, adverse events of unanticipated severity or frff equency, or concerns over misuse or abus
e of the product,
problems with the faff cilities where the product is manufaff cturt ed, packaged or distributed, or faff ilure to comply with regulatoryrr
requirements, may result in, among other things, restrictions on NUPLAZID or on us, including:

a

•

•

•

•

•

•

•

•

withdrawal of appr

a

oval, addition of warnings or narrowing of the appr

a

oved indication in the product labea

l;

requirement of a Risk Evaluation and Mitigation Strategy to mitigate the risk of offff -ff labea
where the FDA may believe that the potential risks of use may outweigh its benefiff ts;

l use in populations

voluntaryrr or mandatoryrr

recalls;

warning letters;

suspension of any ongoing clinical studi

t

es;

refusff
a
appl

al by the FDA or other regulatoryrr authorities to appr
ications fiff led by us, or suspension or revocation of product appr

a
ove pending appl
ovals;

a

a

ications or supplements to appr

a

oved

restrictions on operations, including restrictions on the marketing or manufaff cturt
imposition of costly new manufaff cturt

ing requirements; or

ing of the product or the

seizure or detention, or refusff

al to permit the import or export of products.

If any of these actions were to occur, we may have to discontinue the commercialization of NUPLAZID, limit our sales

and marketing effff orff
t
clinical studi

es, and/or discontinue or change any other ongoing or planned
es, which in turt n could result in signififf cant expense and delay or limit our abia lity to generate sales revenues.

ts, conduct furff

ther post-appr

oval studi

a

t

itii ett d number of pat
NUPUU LPP ALL ZIZZ DII has onlyll been studidd ed inii a lill mii
ell
commercialill zii e NUPUU LPP ALL ZIZZ DII ,D itii isii becominii g availii abl
we do not know whethtt er thtt e resultll stt of NUPUU LPP ALL ZIZZ DII use inii
consisii tett nt witii htt

thtt e resultll stt frff om our clill nii ical studies.

tott a much larll ger
such larll ger

ff

ll

itt entstt and inii

itii ett d populatll

lill mii
r number of pat
r number of pat

itt ons. As we contitt nii ue tott
itt entstt and inii broader populatll
itt entstt and broader populatll

ff
ff

itt ons,s and
itt ons wilii lll be

Prior to commencing our commercial launch of NUPLAZID in May 2016, NUPLAZID was administered only to a

t

es, including our successfulff

pivotal -020 Phase 3 trial
the treatment of PDP. We do not know whether the results, when broader populations are exposed to
es of
oval. For instance, we have an ongoing post-marketing commitment to the
es in predominantly frff ail and elderly patients. New data relating to NUPLAZID, including

limited number of patients and in limited populations in clinical studi
with NUPLAZID forff
NUPLAZID, including results related to safeff ty and effff iff cacy, will be consistent with the results frff om the clinical studi
NUPLAZID that served as the basis forff
t
FDA to conduct a study
frff om adverse event reports and post-marketing studi
frff om other ongoing clinical studi
withdrawal of NUPLAZID frff om the market. The FDA and regulatoryrr authorities in other jurisdictions may also consider the
indications other than in PDP and/or in other jurisdictions, or
new data in reviewing NUPLAZID marketing appl
impose additional post-appr
oval requirements. If any of these actions were to occur, it could result in signififf cant expense and
delay or limit our abia lity to generate sales revenues.

es in the U.S. (including our ongoing post-marketing commitment), and

es, may result in changes to the product labea

l and may adversely affff eff ct sales, or result in

ications forff

t
or studi

a
its appr

a

a

t

t

t

19

icallll yll relill ed on a lill mii

WeWW have hisii tortt
t and sellll NUPUU LPP ALL ZIZZ DII ,D our onlyll commercial product.tt IfII thtt
pharmrr acies tott markerr
commercialill zii atitt on of NUPUU LPP ALL ZIZZ DII may be adversrr elyll affff eff ctett d, and NUPUU LPP ALL ZIZZ DII may not be profiff tii abl

tett rnal commercial tett am and a lill mii

-
irii d-par
isii approach ceases tott be efe fff eff ctitt ve,e our

itii ett d netwtt orkrr of thtt

tytt disii trtt ibutortt

itii ett d inii

ell .ee

tt

srr and

NUPLAZID is our only drugrr

that has been appr

a

oved forff

sale by any regulatoryrr body, and it became availabla e forff

prescription in the U.S. in May 2016. We employ our own internal specialty sales forff ce to commercialize NUPLAZID forff
treatment of PDP as part of our commercialization strategy in the U.S. If we receive marketing appr
pimavanserin in
any other indication, we will need to increase our U.S. sales forff ce signififf cantly, and expand our commercial, medical affff aff irs
and general and administrative support func
tions to support commercialization forff
other pharmaceutical and biotechnology companies to recruir
expensive and time consuming, and we cannot be certain that we will be abla e to successfulff
tional teams.
develop our sales forff ce and related func

t, hire, train and retain such personnel. These effff orff

that indication. We will be competing with

ly expand, refiff ne and furff

ts will be
ther

oval forff

the

a

ff

ff

Additionally, our strategy in the U.S. includes distributing NUPLAZID solely through a limited network of third-party

specialty distributors and specialty pharmacies. While we have entered into agreements with each of these distributors and
pharmacies to distribute NUPLAZID in the U.S., they may not perforff m as agreed or they may terminate their agreements
with us. Also, we may need to enter into agreements with additional distributors or pharmacies, and there is no guarantee that
we will be abla e to do so on commercially reasonabla e terms or at all. In the event we are unabla e to maintain, or expand, if
needed, our commercial team, including our U.S. sales forff ce, or maintain and, if needed, expand, our network of third-party
specialty distributors and specialty pharmacies, our abia lity to continue commercializing NUPLAZID would be limited, and
NUPLAZID may not be profiff tabla e.

IfII we do not obtaitt nii
we wilii lll not be ablell

regue
latll ortt
tott markerr

oval of pi

yr appr
a
t pimii avanserinii

ff mii avanserinii

forff

forff

othtt er inii dicatitt ons inii

othtt er inii dicatitt ons inii additii itt on tott
thtt e U.SUU .,SS which wilii lll lill mii

trtt eatmtt ent of PDPP PDD inii
itii our commercial revenues.

thtt e U.SUU .,SS

a
a

the treatment of hallucinations and delusions

any other indications, and it has not been appr

oved in the U.S. by the FDA forff
oved by the FDA forff
any other indication. In order to market pimavanserin forff

While pimavanserin has been appr
associated with PDP, it has not been appr
this indication or forff
other jurisdiction forff
oval forff
other jurisdictions, we must obtain regulatoryrr appr
jurisdictions, and we may never be abla e to obtain such appr
a
hallucinations and delusions associated with PDP does not ensure that NUPLAZID will be appr
other indication. For example, foff llowing the successfulff
sNDA to the FDA forff
that the FDA had completed its review of the appl
Februar
delusions associated with ADP. On August 4, 2022 we received a CRL frff om the FDA regarding our ADP sNDA
resubmission. At this time, we are not planning to conduct any additional studi

the treatment of DRP on June 3, 2020. On April 2, 2021, we received a CRL frff om the FDA, indicating
oved in its present forff m. In
ication and determined that it could not be appr
ryrr 2022, we resubmitted the aforff ementioned sNDA refiff ning the proposed indication to treatment of hallucinations and

each of those indications and in each of the appl
oval. Approval of NUPLAZID by the FDA forff

other indications or in
icabla e
the treatment of

completion of our Phase 3 HARMONY study,

pimavanserin in ADP.

oved by the FDA forff

we submitted an

oved in any

es forff

any

a

a

a

a

a

a

t

t

We initiated a Phase 3 program forff

pimavanserin as an adjunctive treatment forff maja or depressive disorder (MDD) in

April 2019. In July 2020, we announced that our Phase 3 CLARITY study,
placebo-controlled studi
plan on initiating any additional Phase 3 studi
inhibitor (SSRI)/ serotonin-norepinephrine reuptake inhibitor (SNRI) drugs

r

t

t

es, did not achieve statistical signififf cance on the primaryrr endpoint. As a result, at this time we do not
adjunctive use with selective serotonin reuptake

es to evaluate pimavanserin forff

t

which combined two identical, double-blind,

forff

the treatment of MDD.

We initiated the Phase 3 ADVANA CE-2 study

of pimavanserin forff
schizophrenia in August 2020. We project completing the enrollment this year with top-line results in the fiff rst half of 2024.
There is no guarantee that our ongoing study
jurisdictions will appr

, or that the FDA or any regulatoryrr authority in forff eign

the treatment of the negative symptoms of

ove pimavanserin forff

will be successfulff

that indication.

a

t

t

The research, testing, manufaff cturt

ing, labea

a
ling, appr

oval, sale, import, export, marketing, and distribution of

pharmaceutical product candidates are subject to extensive regulation by the FDA and other regulatoryrr authorities in the U.S.
to country.rr We will be required to comply with diffff eff rent
and other countries, whose regulations diffff eff r frff om countryrr
regulations and policies of the jurisdictions where we seek appr
our product candidates, and we have not yet
a
identififf ed all of the requirements that we will need to satisfyff
other jurisdictions. This will require additional time, expertise and expense, including the potential need to conduct additional
studi
other jurisdictions beyond the work that we have conducted to support our NDA submission
t
in PDP. If we do not receive marketing appr

any other indication, we will never be abla e to

es or development work forff

to submit NUPLAZID forff

oval forff NUPLAZID forff

other indications or in

oval forff

oval forff

a
appr

a

20

commercialize NUPLAZID forff
may not be successfulff

in commercializing those opportuni

t

ties.

any other indication in the U.S. Even if we do receive additional regulatoryrr appr

a

ovals, we

If the results or timing of regulatoryrr

fiff lings, the regulatoryrr process, regulatoryrr developments, clinical trials or

t

es, or other activities, actions or decisions related to NUPLAZID do not meet our or others’ expectations, the

preclinical studi
market price of our common stock could decline signififf cantly and the long-term success of the product and our company
could be harmed.

IfII we are unablell
trtt ofiff nii etitt de,e ifi approved, wilii lll be harmrr ed.

tott efe fff eff ctitt velyll

trtt ainii and equipii our salell s forff

ce,e our abilii ill tii ytt

tott successfs uff llll yll commercialill zii e NUPUU LPP ALL ZIZZ DII and

NUPLAZID is the fiff rst drugr

a
appr

oved by the FDA forff

the treatment of hallucinations and delusions associated with

a

a

trofiff netide forff

icabla e laws in marketing NUPLAZID forff

PDP, and the FDA fiff led our NDA forff
the treatment of Rett syndrome in September 2022. As a result, we are
and will continue to be required to expend signififf cant time and resources to train our sales forff ce to be credible, persuasive,
the treatment of hallucinations and delusions associated
and compliant with appl
with PDP and trofiff netide, if appr
oved, forff
physicians in long-term care faff cilities and other healthcare providers, as appr
consistent and appr
oved, are being delivered to our potential
a
customers by our sales forff ce. If we are unabla e to effff eff ctively train our sales forff ce and equip them with current, effff eff ctive
materials, including medical and sales literaturt e to help them inforff m and educate potential customers about
NUPLAZID and trofiff netide, if appr
NUPLAZID and trofiff netide, if appr
product revenues.

oved, and their proper administration, our effff orff
oved, could be put in jeopardy, which would negatively impact our abia lity to generate

the treatment of Rett syndrome to neurologists, psychiatrists, pharmacists,
opriate. In addition, we must ensure that

NUPLAZID and trofiff netide, if appr

opriate messages about

ly commercialize

ts to successfulff

the benefiff ts of

a
a

a

a

a

a

NUPUU LPP ALL ZIZZ DII may not gainii maximii al acceptee antt
our potett ntitt al tott generatett revenues.

ce among phyh sicians,s patitt entstt ,s and thtt e medical communitii ytt ,yy thtt ereby lill mii

itii itt nii g

The degree of market acceptance by physicians, healthcare profeff ssionals and third-party payors of NUPLAZID, and

any other product forff which we obtain regulatoryrr appr
faff ctors, including:

a

oval, and our profiff tabia lity and growth, will depend on a number of

•

•

•

•

•

•

•

•

•

•

•

the abia lity to provide acceptabla e evidence of safeff ty and effff iff cacy;

the scope of the appr

a

oved indication(s) forff

the product;

the inclusion of any warnings or contraindications in the product labea

l;

the relative convenience and ease of administration;

the prevalence and severity of any adverse side effff eff cts;

the availabia lity of alternative treatments;

the willingness of the target patient population to tryrr new therapia es and of physicians to prescribe these therapia es,
and our abia lity to increase awareness of our appr

oved products through marketing effff orff

ts;

a

pricing and cost effff eff ctiveness, which may be subject to regulatoryrr control;

effff eff ctiveness of our or our collabor

a

ators’ sales and marketing strategy;

publicity concerning us, our products or competing products and treatments; and

our abia lity to obtain suffff iff cient third-party insurance coverage or adequate reimbursement levels.

If a product does not provide a treatment regimen that is at least as benefiff cial as the current standard of care or
otherwise does not provide patient benefiff t, that product will not achieve market acceptance and will not generate suffff iff cient
revenues to achieve or maintain profiff tabia lity.

With respect to NUPLAZID specififf cally, successfulff

commercialization will depend on whether and to what extent

physicians, long-term care faff cilities and pharmacies, over whom we have no control, determine to utilize NUPLAZID.
NUPLAZID is availabla e to treat hallucinations and delusions associated with PDP, an indication forff which no other FDA-
appr
oved pharmaceutical treatment currently exists. Because of this, it is particularly diffff iff cult to estimate NUPLAZID’s
a
market potential and how physicians, payors and patients will respond to changes in the price of NUPLAZID. Additionally,

21

the near- and long-term market potential of NUPLAZID, and a variety of assumptions directly

the growth of NUPLAZID net sales was negatively impacted due to the COVID-19 pandemic, and the continuing effff eff cts of
COVID-19 on NUPLAZID net sales are diffff iff cult to assess or predict at this time. Industryrr sources and analysts have a
divergence of estimates forff
impact the estimates forff NUPLAZID’s market potential, including assumptions regarding the prevalence of PDP, the rate of
diagnosis of PDP, the prevalence and rate of hallucinations and delusions in patients diagnosed with PDP, the rate of
physician adoption of NUPLAZID, the potential impact of payor restrictions regarding NUPLAZID, and patient adherence
and compliance rates. Small diffff eff rences in these assumptions can lead to widely divergent estimates of the market potential
of NUPLAZID. For example, certain research suggests that patients with Parkinson’s disease may be hesitant to report
symptoms of PDP to their treating physicians forff
to mental illness. Research also suggests that physicians who typically treat patients with Parkinson’s disease may not ask
or identifyff symptoms of PDP. For these reasons, even if PDP occurs in high rates among patients with Parkinson’s
a
about
disease, it may be underdiagnosed. Even if PDP is diagnosed, physicians may not prescribe treatment forff
delusions associated with PDP, and if they do prescribe treatment, they may prescribe other drugs
appr
oved in PDP, instead of NUPLAZID. In addition, even if NUPLAZID is prescribed forff
a
and delusions associated with PDP, issues may arise with respect to patient adherence and compliance rates. If patients do not
adhere to the recommended dosing of NUPLAZID, patients and physicians may believe that NUPLAZID is less effff eff ctive,
and as a result they may stop taking it and prescribing it.

hallucinations and
, even though they are not
the treatment of hallucinations

a variety of reasons, including appr

societal stigmas relating

ehension about

a

a

r

oved forff

The labea
are at an increased risk of death, and that NUPLAZID is not appr

l forff NUPLAZID also contains a “boxed” warning that elderly patients with DRP treated with antipsychotic
a

drugs
the treatment of patients with DRP unrelated
r
to the hallucinations and delusions associated with PDP. There has also been attention to publicly reported deaths of patients
that were prescribed NUPLAZID, and the FDA conducted an evaluation of availabla e inforff mation about
September 20, 2018 the FDA issued a statement concluding: “The U.S. FDA has completed a review of all post marketing
reports of deaths and serious adverse events (SAEs) reported with the use of NUPLAZID. Based on an analysis of all
availabla e data, FDA did not identifyff any new or unexpected safeff ty fiff ndings with NUPLAZID, or fiff ndings that are
l. Aftff er a thorough review, FDA’s
inconsistent with the establa ished safeff ty profiff le currently described in the drugr
conclusion remains unchanged that the drug’
patients with hallucinations and delusions of
s benefiff ts outweigh its risks forff
Parkinson’s disease psychosis.” Although the FDA did not identifyff any new or unexpected safeff ty risks, the FDA indicated
that some potentially concerning prescribing patterns were observed, such as the concomitant use of other antipsychotic
drugs
that can cause QT prolongation, a potential cause of heart rhythm disorder. The FDA reminded healthcare
r
providers to be aware of the risks described in the NUPLAZID prescribing inforff mation and that none of the other
antipsychotic medications are appr
unfounde

d, may discourage physicians frff om prescribing or patients frff om taking NUPLAZID.

the treatment of PDP. Regardless, perceptions that NUPLAZID is unsafeff , even if

NUPLAZID. On

oved forff

r
or drugs

labea

a

a

r

ff

The commercial success of NUPLAZID depends on acceptance by patients and physicians, and there are a number of

faff ctors that could skew our or others’ estimates about
acceptance of patients and physicians, or if our estimates are inaccurate, these events could negatively impact our business,
results of operations, fiff nancial condition and prospects.

prescribing behaviors and market adoption. If we faff il to gain the

a

Our abilii ill tii ytt
patitt entstt have unacceptee abl

tt

yll highi

-
co-pay

amountstt .

tott generatett product revenues wilii lll be dimii

inii

isii hed ifi NUPUU LPP ALL ZIZZ DII ’s’ coverage frff om payorsrr isii decreased or ifi

Patients who are prescribed medicine forff

the treatment of their conditions generally rely on third-party payors,

including governmental healthcare programs, such as Medicare and Medicaid, managed care organizations and commercial
. Coverage and adequate
payors, among others, to reimburse all or part of the costs associated with their prescription drugs
reimbursement frff om third-party payors is critical to product acceptance. Coverage decisions may depend upon clinical and
economic standards that disfaff vor drugr
become availabla e. Even with coverage forff NUPLAZID, or other products we may market, the resulting reimbursement
payment rates might not be adequate or may require co-payments that patients fiff nd unacceptabla y high. Patients may not use
NUPLAZID if coverage is not provided or reimbursement is inadequate to cover a signififf cant portion of its cost.

products when lower cost therapea utic alternatives are already availabla e or subsequently

r

In addition, the market forff NUPLAZID depends signififf cantly on access to third-party payors’ drugr

forff mularies, or lists
of medications forff which third-party payors provide coverage and reimbursement. The industryrr competition to be included in
such forff mularies oftff en leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may
refusff
less costly alternative is availabla e, even if not appr

in their forff mularies or otherwise restrict patient access to a branded drugr when a

the indication forff which NUPLAZID is appr

e to include a particular branded drugr

oved forff

oved.

a

a

22

Third-party payors, whether governmental or commercial, are developing increasingly sophisticated methods of

a

opriate. Selling NUPLAZID at less than an optimized price would impact our revenues and could impact our

controlling healthcare costs. The current environment is putting pressure on companies to price products below what they
may feff el is appr
overall success as a company. We have changed, and may continue to change, the price of NUPLAZID frff om time to time,
however, we do not know if the price we have selected, or may select in the futff urt e, forff NUPLAZID is or will be the
optimized price. Additionally, we do not know whether and to what extent third-party payors will react to any possible futff urt e
changes in the price of NUPLAZID. In the U.S., no uniforff m policy of coverage and reimbursement forff
among third-party payors. Further, one payor’s determination to provide coverage and reimbursement forff
ensure that other payors will also provide coverage and reimbursement forff
reimbursement forff NUPLAZID may diffff eff r signififf cantly frff om payor to payor. As a result, the coverage determination process
is oftff en a time-consuming and costly process that will require us to provide scientififf c and clinical support forff
NUPLAZID to each payor separately, with no assurance that coverage will be obtained. Coverage policies and third-party
payor reimbursement rates may change at any time. Thereforff e, even if faff vorabla e coverage and reimbursement statust
attained, less faff vorabla e coverage policies and reimbursement rates may be implemented in the futff urt e. If we are unabla e to
, NUPLAZID or any other products we may market to third-party payors,
obtain coverage of,ff and adequate payment levels forff
physicians may limit how much or under what circumstances they will prescribe or administer them and patients may decline
to purchase them. This in turt n could affff eff ct our abia lity to successfulff
may market, and thereby adversely impact our profiff tabia lity, results of operations, fiff nancial condition, and futff urt e success.

ly commercialize NUPLAZID, or any other products we

products exists
a product does not

the product. Thereforff e, coverage and

the use of

drugrr

is

WeWW are solell lyll respons

siblell

forff

thtt e developmll

ent and commercialill zii atitt on ofo pff

imii avanserinii

.

l responsibility forff

the pimavanserin program throughout the world. We expect our research and

additional indications, we would need to add signififf cant resources, and possibly raise additional capia tal, in
ther commercialize pimavanserin, and to conduct the necessaryrr sales and marketing activities, and to conduct

continued development of pimavanserin to be substantial. We are currently undertaking ongoing
pimavanserin, including clinical trials of pimavanserin forff

We have fulff
development costs forff
development work forff
of appr
oval forff
a
order to furff
furff
hallucinations and delusions associated with PDP in the U.S. using our specialty sales forff ce focff used primarily on
neurologists, a small group of psychiatrists, and pharmacists and physicians in long-term care faff cilities who treat PDP
patients. If we are appr
a
more strategic alliances in the futff urt e forff
U.S. and abra oad, we might not be abla e to realize the fulff

ther development activities. Our current strategy is to continue to commercialize NUPLAZID forff

oved to commercialize NUPLAZID in markets outside of the U.S., we may need to establa ish one or

e. Without futff urt e additional resources or collabor

indications other than in PDP. In the event

l value of NUPLAZID.

ation partners in the

the treatment of

that purpos

a

r

Furthermore, even though NUPLAZID is appr
forff

a
PDP, a faff ilure in a subsequent pimavanserin study
any additional studi
forff
we are unabla e to develop pimavanserin forff
and that could have a material adverse effff eff ct on our futff urt e revenues and our success as a company.

the treatment of hallucinations and delusions associated with PDP or could lead to it being withdrawn frff om the market. If
other indications, we may not be abla e to maximize the potential of the compound

the treatment of hallucinations and delusions associated with
in schizophrenia, or
ly market NUPLAZID

another indication, including our ongoing study

es, or a faff ilure in our post-marketing studi

es could harm our abia lity to successfulff

oved forff

t

t

t

t

Drugu developmll

ent isii a lonll

ee
g, expe

nsive and unprn edictabl

ell process witii htt a highi

tt

risii k of fff aiff

lii ure.ee

Preclinical testing and clinical trials are long, expensive and unpredictabla e processes that can be subject to delays. It
and

may take several years to complete the preclinical testing and clinical development necessaryrr
delays or faff ilure can occur at any stage. Preliminary,rr
predict fiff nal results and such results may change as more patient data become availabla e and are subject to audit and
verififf cation procedures that could result in material changes in the fiff nal results. In addition, success in preclinical testing and
early clinical trials does not ensure that later clinical trials will be successfulff
. A number of companies in the pharmaceutical
and biotechnology industries have suffff eff red signififf cant setbat
earlier trials.

initial, top-line or interim results of clinical trials do not necessarily

cks in advanced clinical trials even aftff er promising results in

to commercialize a drug,

rr

Our drugr

development programs are at various stages of development and the historical rate of faff ilures forff

product

candidates is extremely high. In faff ct, we had an unsuccessfulff Phase 3 trial with NUPLAZID in 2009. An unfaff vorabla e
outcome in any of our ongoing or futff urt e development effff orff
maja or set-back forff
the program and forff
the post-marketing studi
eliminate this program and could have a material adverse effff eff ct on us and the value of our common stock.

es may require us to delay, devote additional substantial resources to, reduce the scope of,ff or

us, generally. In particular, an unfaff vorabla e outcome in our NUPLAZID program or in

ts or in the post-marketing studi

es forff NUPLAZID could be a

t

t

23

In addition, based on positive top-line results frff om CLARITY, a Phase 2 studyt

evaluating pimavanserin as an

adjunctive treatment forff MDD, we initiated our Phase 3 CLARITY program, consisting of two Phase 3 studi
and CLARITY-3, evaluating pimavanserin as an adjunctive treatment with SSRI/SNRI drugs
results observed in the Phase 2 CLARITY study,
primaryrr endpoint. In July 2019, we announced top-line results frff om the Phase 3 ENHANA CE studyt
as a treatment in inadequate response schizophrenia. In this studt
either the primaryrr endpoint or the key secondaryrr endpoint.

es, CLARITY-2
forff MDD. Despite the positive
did not achieve statistical signififf cance on the

y, pimavanserin did not achieve statistical signififf cance on

our Phase 3 CLARITY study,

evaluating pimavanserin

r

t

t

t

Following the successfulff

completion of our Phase 3 HARMONY study,

t

we submitted an sNDA to the FDA forff

the treatment of DRP on June 3, 2020. On April 2, 2021, we received a CRL indicating that the FDA had
ryrr 2022,

pimavanserin forff
completed its review of the appl
we resubmitted the aforff ementioned DRP sNDA with updated labea
ling forff
associated with ADP to the FDA based on previously submitted studi
t
CRL frff om the FDA regarding our submission of the sNDA. At this time, we are not planning to conduct any additional
t
studi

oved in its present forff m. In Februar
a
the treatment of hallucinations and delusions
es and new analyses. On August 4, 2022, we received a

the treatment of hallucinations and delusions associated with ADP.

ication and determined that it could not be appr

pimavanserin forff

es forff

a

We are currently conducting several studi

es, including early stage studi
as ACP-204, which is akin to pimavanserin, and may conduct additional studi

t
t

es of an internally-developed compound known
es in the futff urt e.

t

In connection with clinical trials, we faff ce risks that:

•

•

•

•

a product candidate may not prove to be effff iff cacious or safeff ;

patients may die or suffff eff r other adverse effff eff cts forff
candidate being tested;

reasons that may or may not be related to the product

the results may not be consistent with positive results of earlier trials; and

the results may not meet the level of statistical signififf cance required by the FDA or other regulatoryrr agencies.

If we do not successfulff

ly complete preclinical and clinical development, we will be unabla e to market and sell products

derived frff om our product candidates and to generate product revenues. Even if we do successfulff
those results are not necessarily predictive of results of additional trials that may be needed beforff e an NDA may be submitted
in development, only a small percentage result in the submission of an NDA to the
to the FDA. Of the large number of drugs
FDA and even feff wer are appr

ly complete clinical trials,

commercialization.

r
oved forff

a

s,s suspes nsions and tett rmrr

Delayll
generatett product revenues.

inii atitt ons inii our clill nii

ical trtt ialsll couldll resultll inii

inii creased coststt

tott us and delayll

our abilii ill tii ytt

tott

The commencement of clinical trials can be delayed forff

a variety of reasons, including delays in:

•

•

•

•

•

•

•

demonstrating suffff iff cient safeff ty and effff iff cacy to obtain regulatoryrr appr

a

oval to commence a clinical trial;

reaching agreement on acceptabla e terms with prospective contract research organizations (CROs) and clinical
trial sites;

manufaff cturt

ing suffff iff cient quantities of a product candidate;

obtaining clearance frff om the FDA to commence clinical trials pursuant to an Investigational New Drugrr
a
appl

ication;

obtaining appr
and local regulations (e.g., EU Clinical Trials Regulation (EU No. 536/2014));

oval to conduct clinical trials in countries outside the United States pursuant to evolving regional

a

obtaining institutt

ional review board appr

a

oval to conduct a clinical trial at a prospective clinical trial site; and

tment, which is a func

patient recruir
the protocol, the proximity of patients to clinical trial sites, the availabia lity of effff eff ctive treatments forff
disease and the eligibility criteria forff

tion of many faff ctors, including the size of the patient population, the naturt e of
the relevant

the clinical trial.

ff

24

Once a clinical trial has begun, it may be delayed, suspended or terminated due to a number of faff ctors, including:

•

•

•

•

•

•

•

•

•

•

competition forff
allocate to other programs;

internal and external resources, including clinical sites and study

t

patients, that we may choose to

ongoing discussions with regulatoryrr authorities regarding the scope or design of our clinical trials or requests by
them forff

supplemental inforff mation with respect to our clinical trial results;

imposition of clinical holds by regulatoryrr authorities or institutt

ional review boards;

faff ilure to conduct clinical trials in accordance with regulatoryrr

requirements;

inabia lity to monitor patients adequately during or aftff er treatment;

diffff iff culty monitoring multiple studyt

sites;

patient enrollment, which is a func
the protocol, the proximity of patients to clinical trial sites, the availabia lity of effff eff ctive treatments forff
disease and the eligibility criteria forff

tion of many faff ctors, including the size of the patient population, the naturt e of
the relevant

the clinical trial;

ff

lower than anticipated screening or retention rates of patients in clinical trials;

serious adverse events or side effff eff cts experienced by participants; and

insuffff iff cient supply or defiff cient quality of product candidates or other materials necessaryrr
clinical trials.

forff

the conduct of our

In addition, enrollment and retention of patients in, or the abia lity to receive results frff om, clinical trials could be
ed by geopolitical or macroeconomic developments. For example, as a result of the ongoing conflff ict between Ukraine

disrupt
r
and RusRR sia, we experienced temporaryrr delays in accessing historical records of certain clinical trial sites located in RusRR sia.
Also, as a result of the COVID-19 pandemic, we temporarily paused enrollment of new patients in our ongoing clinical trials,
as well as the commencement of new trials. However, we have re-initiated enrollment in clinical trials on a study-
and site-by-site basis. It is possible that futff urt e enrollment in these studi
es, could be impacted
due to the same or similar geopolitical or macroeconomic developments. If patients withdraw frff om our trials, miss scheduled
doses or folff
due to such developments, the integrity of data frff om our trials may be compromised or not accepted by the FDA or other
regulatoryrr authorities, which would represent a signififf cant setbat

low trial protocols, or if our trial results are otherwise disrupt

low-up visits or otherwise faff il to folff

es, or enrollment in futff urt e studi

icabla e program.

ed or disputed

t
by-study

a
the appl

ck forff

rr

t

t

t

Many of these faff ctors may also ultimately lead to denial of regulatoryrr appr

a

oval of a current or potential product

candidate. If we experience delays, suspensions or terminations in a clinical trial, the commercial prospects forff
product candidate will be harmed, and our abia lity to generate product revenues will be delayed.

the related

IfII we are unablell
persrr onnel,ll our drugu developmll
ed and we may be unablell
delayll

tott atttt rtt act,tt retatt inii , and motitt vatett keye management,tt research and developmll
ent programs,s our research and disii coveryr efe fff orff
tott successfs uff llll yll commercialill zii e our productstt ,s or developll

tstt ,s and our commercialill zii atitt on planll

our product candidatett s.

ent,tt and salell s and markerr

titt nii g
s may be

Our success depends on our abia lity to attract, retain, and motivate highly qualififf ed management, scientififf c, and

ts forff

pimavanserin and trofiff netide, and commercial activities forff NUPLAZID. We faff ce competition forff

commercial personnel. In particular, our development programs depend on our abia lity to attract and retain highly skilled
development personnel, especially in the fiff elds of CNS disorders, including neuropsychiatric and related disorders. We are
currently hiring, and in the futff urt e we expect to need to continue to hire, additional personnel as we expand our research and
development effff orff
experienced scientists, clinical operations personnel, commercial and other personnel frff om numerous companies and
qualififf ed personnel is particularly intense in the San Diego,
academic and other research institutt
qualififf ed
Califorff nia area. Many of the other biotechnology and pharmaceutical companies with whom we compete forff
personnel have greater fiff nancial and other resources, diffff eff rent risk profiff les and longer histories in the industryrr
They also may provide more diverse opportuni
may be more appe
retain high quality personnel, the rate and success at which we can develop and commercialize products and product
candidates will be limited. If we are unabla e to attract and retain the necessaryrr personnel, it will signififf cantly impede our
commercialization effff orff
objectives.

aling to high quality candidates than that which we have to offff eff r. If we are unabla e to continue to attract and

oved, and the achievement of our research and development

career advancement. Some of these characteristics

ts forff NUPLAZID and trofiff netide, if appr

ties and better chances forff

ions. Competition forff

than we do.

a

a

t

25

All of our employees are “at will” employees, which means that any employee may quit at any time and we may
terminate any employee at any time. We do not carryrr “key person” insurance covering members of senior management.

IfII we receive approval of NUPUU LPP ALL ZIZZ DII
tott contitt nii ue tott
couldll adversrr elyll affff eff ct our resultll stt of operatitt ons.

inii crease thtt e sizii e of our organr

inii additii itt onal inii dicatitt ons,s or apa ppp roval of trtt ofiff nii etitt de inii Retttt sys ndrome,e we may need

izii atitt on. WeWW may encountett r difi fff iff cultll itt es witii htt managinii g our growthtt

, which

As of December 31, 2022, we employed appr
to support our development and commercialization effff orff
responsibilities on members of management, including the need to identify,ff
retain existing employees, and may take time away frff om runni
commercialization of our product candidates.

a

r

oximately 510 employees. Our current infrff astrucr

turt e may be inadequate

ts and expected growth. Futurt e growth will impose signififf cant added

t, and integrate additional employees and
ng other aspects of our business, including development and

recruir

Our futff urt e fiff nancial perforff mance and our abia lity to commercialize NUPLAZID and any other product candidates that

receive regulatoryrr appr
effff eff ctively. In particular, as we commercialize NUPLAZID, we will need to support the training and ongoing activities of our
sales forff ce. To that end, we must be abla e to:

oval and to compete effff eff ctively will depend, in part, on our abia lity to manage any futff urt e growth

a

•

•

•

•

manage our development effff orff

ts effff eff ctively;

integrate additional management, administrative and manufaff cturt

ing personnel;

develop our marketing and sales organization; and

maintain suffff iff cient administrative, accounting and management inforff mation systems and controls.

We may not be abla e to accomplish these tasks or successfulff

ly manage our operations and, accordingly, may not achieve

our research, development, and commercialization goals. Our faff ilure to accomplish any of these goals could harm our
fiff nancial results and prospects.

ll

lii tott develop,
itii ett d. Even ifi we obtaitt nii

IfII we faiff
lill mii
realill zii e thtt e antitt cipat

tstt
righi
ett d benefe iff tii stt .

ii

acquirii e or inii -lill cense othtt er product candidatdd ett s or productstt ,s our businii ess and prospes

ctstt wouldll be

tott othtt er product candidatett s or productstt ,s we wilii lll inii cur a varietytt of coststt and may never

A key element of our strategy is to develop, acquire or in-license businesses, technologies, product candidates or

the treatment of neurological disorders, or forff

development and commercial capaa bia lities and expertise and our abia lity to identify,ff

products that we believe are a strategic fiff t with our business. The success of this strategy depends in large part on the
combination of our regulatory,rr
acquire or in-license clinically-enabla ed product candidates forff
indications that complement or augment our current product candidates, or that otherwise fiff t into our development or
strategic plans on terms that are acceptabla e to us. Identifyiff ng, selecting and acquiring or in-licensing promising product
candidates requires substantial technical, fiff nancial and human resources expertise, and we have limited experience in
identifyiff ng acquisition targets, successfulff
technologies, services or products into our current infrff astrucr
in-license of a particular product candidate, potentially resulting in a diversion of our management’s time and the expenditurt e
of our resources with no resulting benefiff t. If we are unabla e to identify,ff
candidates frff om third parties on terms acceptabla e to us, our business and prospects will be limited. In particular, if we are
unabla e to add additional commercial products to our portfolff
organization that we have assembled forff

ly completing proposed acquisitions and integrating any acquired businesses,

select and acquire or license suitabla e product

the marketing and sale of NUPLAZID.

ts to do so may not result in the actuat

io, we may not be abla e to successfulff

ly leverage our commercial

l acquisition or

therapea utic

turt e. Effff orff

select and

The process of integrating any acquired business, technology, service, or product may result in unforff eseen operating
diffff iff culties and expenditurt es and may divert signififf cant management attention frff om our ongoing business operations. As a
result, we will incur a variety of costs in connection with an acquisition and may never realize its anticipated benefiff ts.
Moreover, any product candidate we identify,ff
icabla e, and extensive clinical
t
development or regulatoryrr effff orff
testing and appr
icabla e forff eign regulatoryrr authorities. All product candidates are prone to the risk of
faff ilure that is inherent in pharmaceutical product development, including the possibility that the product candidate will not be
shown to be suffff iff ciently safeff and/or effff eff ctive forff
any such products that are appr
accepted in the marketplt ace or be more effff eff ctive or desired than other commercially availabla e alternatives.

select and acquire or license may require additional, time-consuming

oval by regulatoryrr authorities. In addition, we cannot assure you that

oved will be manufaff cturt ed or produced economically, successfulff

ts prior to commercial sale, including preclinical studi

ly commercialized or widely

oval by the FDA and appl

a
es, if appl

a
appr

a

a

a

26

In addition, if we faff il to successfulff

ly commercialize and furff

ther develop NUPLAZID or other product candidates, there

is a greater likelihood that we will faff il to successfulff
prospects would thereforff e be harmed.

ly develop a pipeline of other product candidates, and our business and

WeWW expe
ee
we wilii lll become profiff tii abl

ct our net losll
tt

ell ,e ifi ever.rr

ses tott contitt nii ue forff

thtt e nextee

feff w yearsrr and are unablell

tott predict thtt e extee ett nt of fff uff ture losll

ses or when

We have experienced signififf cant net losses since our inception. As of December 31, 2022, we had an accumulated

a

defiff cit of appr
oximately $2.4 billion. We expect to incur net losses over the next feff w years as we invest in the
commercialization of NUPLAZID and advance our development programs, including developing additional internal systems
and infrff astrucr
expenses in the coming years. Thus, our futff urt e operating results and profiff tabia lity may flff uctuat
will need to generate signififf cant revenues to achieve and maintain profiff tabia lity and positive cash flff ow on a sustained basis.

turt e and hiring additional personnel. We also expect such investments and advancements will increase our

te frff om period to period, and we

We expect that our revenues over the next feff w years will be entirely dependent on our abia lity to generate product sales.

Substantially all of our revenues since May 2016 were frff om net product sales of NUPLAZID. To the extent that we cannot
generate signififf cant revenues frff om the sale of NUPLAZID to cover our expenses, including the signififf cant expenses
associated with commercializing NUPLAZID and continuing to develop pimavanserin in additional indications, we may
never achieve profiff tabia lity and/or may have to reduce our commercialization and/or research and development activities to
become profiff tabla e, which would harm our futff urt e growth prospects. Additionally, to obtain revenues frff om product candidates
other than NUPLAZID, we must succeed, either alone or with others, in developing, obtaining regulatoryrr appr
manufaff cturt
may never generate revenues frff om our commercialization of NUPLAZID, or frff om other product candidates that may be
a
appr

ing and marketing compounds with signififf cant market potential. We may never succeed in these activities and

oved, that are signififf cant enough to achieve profiff tabia lity.

oval forff

a

,

lii tott obtaitt nii

thtt e capitii altt necessaryr tott

fuff nd our operatitt ons,s we wilii lll be unablell

tott successfs uff llll yll contitt nii ue thtt e

ent and commercialill zii atitt on of NUPUU LPP ALL ZIZZ DII or successfs uff llll yll developll

and commercialill zii e our othtt er product

IfII we faiff
developmll
candidatett s.

We have consumed substantial amounts of capia tal since our inception. Our cash, cash equivalents, and investment
securities totaled $416.8 million at December 31, 2022. While we believe that our existing cash resources will be suffff iff cient to
our cash requirements through at least the next twelve months, we may require signififf cant additional fiff nancing in the
ff
fund
futff urt e to continue to fundff
a result of,ff many faff ctors including:

our operations. Our futff urt e capia tal requirements will depend on, and could increase signififf cantly as

•

•

•

•

•

•

•

•

•

•

the progress in, and the costs of,ff our ongoing and planned development activities forff
marketing studi
activities forff NUPLAZID, and other research and development programs;

es forff NUPLAZID to be conducted over the next several years, ongoing and planned commercial

pimavanserin, post-

t

the costs of our development activities forff
candidates;

trofiff netide, our early-stage pipeline programs and any other product

the costs of commercializing NUPLAZID, including the maintenance and development of our sales and
marketing capaa bia lities;

the costs of establa ishing, or contracting forff

, sales and marketing capaa bia lities forff

other product candidates;

the amount of U.S. product sales frff om NUPLAZID;

the costs of preparing appl
and in additional indications other than in PDP, and forff
support review of such appl

regulatoryrr appr

ications forff

ications;

a

a

a

ovals forff NUPLAZID in jurisdictions other than the U.S.,
other product candidates, as well as the costs required to

the costs of manufaff cturt

ing and distributing NUPLAZID forff

commercial use in the U.S.;

our abia lity to obtain regulatoryrr appr
jurisdictions other than the U.S. or in additional indications other than in PDP, or frff om trofiff netide, our early-stage
pipeline programs and any other product candidates;

, and subsequently generate product sales frff om, NUPLAZID in

oval forff

a

the costs of acquiring additional product candidates or research and development programs;

the scope, prioritization and number of our research and development programs;

27

•

•

•

•

•

•

the abia lity of our collabor
a
payments under our collabor
these agreements;

a

ators and us to reach the milestones and other events or developments triggering

ation or license agreements, or our collabor

a

ators’ abia lity to make payments under

our abia lity to enter into new collabor

a

ation and license agreements;

the extent to which we are obligated to reimburse collabor
ation agreements;
costs under collabor

a

a

ators or collabor

a

ators are obligated to reimburse us forff

the costs involved in fiff ling, prosecuting, enforff cing, and defeff nding patent claims and other intellectuat
rights;

l property

the costs of maintaining or securing manufaff cturt
production of pimavanserin, trofiff netide or other product candidates; and

ing arrangements and supply forff

clinical or commercial

the costs associated with litigation, including the costs incurred in defeff nding against any product liabia lity claims
that may be brought against us related to NUPLAZID.

Unless and until we can generate signififf cant cash frff om our operations, we expect to satisfyff our futff urt e cash needs

ff

a

ations, public or private sales of our

ng, or by licensing all or a portion of our product candidates or technology. In the past,

through our existing cash, cash equivalents and investment securities, strategic collabor
securities, debt fiff nancings, grant fundi
periods of turt moil and volatility in the fiff nancial markets have adversely affff eff cted the market capia talizations of many
biotechnology companies, and generally made equity and debt fiff nancing more diffff iff cult to obtain. For example, as a result of
geopolitical and macroeconomic developments, including the ongoing conflff ict between Ukraine and RusRR sia, related
sanctions, the COVID-19 pandemic and actions taken to slow its spread, the global credit and fiff nancial markets have
experienced extreme volatility and disrupt
confiff dence, declines in economic growth, increases in unemployment rates and uncertainty about
events, coupled with other faff ctors, may limit our access to additional fiff nancing in the futff urt e. This could have a material
adverse effff eff ct on our abia lity to access suffff iff cient fundi
on acceptabla e terms, or at all. If funds
more of our research or development programs or our commercialization effff orff
greater or all rights to product candidates at an earlier stage of development or on less faff vorabla e terms than we would
otherwise choose. Additional fundi
the price of our stock.

ions, including diminished liquidity and credit availabia lity, declines in consumer
economic stabia lity. These

ng will be availabla e to us
are not availabla e, we will be required to delay, reduce the scope of,ff or eliminate one or

ng, if obtained, may signififf cantly dilute existing stockholders and could negatively impact

ng. We cannot be certain that additional fundi

ts. We also may be required to relinquish

a

ff

ff

r

ff

ff

WeWW expe
ee
period tott period.

ct thtt at our resultll stt of operatitt ons wilii lll flff uctuatett ,e which may make itii difi fff iff cultll tott predict our fuff ture perfr orff mrr ance frff om

Our operating results have flff uctuat

ted in the past and are likely to do so in futff urt e periods. Some of the faff ctors that could

cause our operating results to flff uctuat

te frff om period to period include:

•

•

•

•

•

•

•

•

the success of our commercialization of NUPLAZID in the U.S. forff
associated with PDP;

the treatment of hallucinations and delusions

the impact of geopolitical and macroeconomic developments, such as general political, health and economic
conditions, including the Ukraine-RusRR sia conflff ict, the COVID-19 pandemic, economic slowdowns, recessions,
inflff ation, rising interest rates and tightening of credit markets on our business;

the impact of the COVID-19 pandemic on our business, including the abia lity of our fiff eld sales forff ce to meet with
healthcare providers, visit physician’s offff iff ces, hospitals and other healthcare faff cilities (including long-term care
and skilled nursing faff cilities);

the statust

and cost of our post-marketing commitments forff NUPLAZID;

the variation in our gross-to-net adjustments frff om quarter to quarter, primarily because of the flff uctuat
share of the donut hole forff Medicare Part D patients;

tion in our

the statust

and cost of development and commercialization of pimavanserin forff

indications other than in PDP;

the statust
developed under our collabor

a

ations;

and cost of development and commercialization of our product candidates, including compounds being

whether we acquire or in-license additional product candidates or products, and the statust
commercialization of such product candidates or products;

of development and

28

•

•

•

•

•

•

•

•

•

whether we generate revenues or reimbursements by achieving specififf ed research, development or
commercialization milestones under any agreements or otherwise receive potential payments under these
agreements;

whether we are required to make payments due to achieving specififf ed milestones under any licensing or similar
agreements or otherwise make payments under these agreements;

the incurrence of preclinical or clinical expenses that could flff uctuat
including reimbursement obligations pursuant to our collabor

a

ation agreements;

te signififf cantly frff om period to period,

the initiation, termination, or reduction in the scope of our collabor
a
collabor

ations;

a

ations or any disputes regarding these

the timing of our satisfaff ction of appl

a

icabla e regulatoryrr

requirements;

the rate of expansion of our clinical development, other internal research and development effff orff
commercial and commercial effff orff

ts;

ts, and pre-

the effff eff ct of competing technologies and products and market developments;

the costs associated with litigation, including the costs incurred in defeff nding against any product liabia lity claims
that may be brought against us related to NUPLAZID; and

general and industry-rr

specififf c economic conditions.

We believe that comparisons frff om period to period of our fiff nancial results are not necessarily meaningfulff

and should

not be relied upon as indications of our futff urt e perforff mance.

From time to time, we provide guidance relating to our expectations forff NUPLAZID net sales and certain expense line

items based on estimates and the judgment of management. If,ff forff
materially frff om our guidance, we may have to revise our previously announced fiff nancial guidance. If we change, update or
faff il to meet any element of such guidance, our stock price could decline.

l net sales or expenses diffff eff r

any reason, our actuat

ChCC anges inii
taxtt
on our businii ess,s cash flff owll

s or regue

lawll

,w fiff nii ancial conditii itt on or resultll stt of operatitt ons.

latll

itt ons thtt at are applill ed adversrr elyll

tott us or our customtt

ersrr may have a matett rial adversrr e efe fff eff ct

New income, sales, use or other tax laws, statutt es, rulrr es, regulations or ordinances could be enacted at any time, which

a

ied adversely to us. For example, legislation enacted

could adversely affff eff ct our business operations and fiff nancial perforff mance. Further, existing tax laws, statutt es, rulr es,
regulations or ordinances could be interprrr eted, changed, modififf ed or appl
in 2017 inforff mally titled the Tax Cuts and Jobs Act, the Coronavirusr Aid, Relief,ff and Economic Security Act and the
Inflff ation Reduction Act enacted many signififf cant changes to the U.S. tax laws. Effff eff ctive Januaryrr 1, 2022, the Tax Cuts and
Jobs Act of 2017 eliminated the option to deduct research and development expenses forff
r
and requires taxpayers to capia talize and subsequently amortize such expenses over fiff ve years forff
in the United States and over 15 years forff
Department of the Treasuryrr
ication of this provision to a smaller subset of our research
a
and development expenses or the provision is defeff rred, modififf ed, or repealed by Congress, we expect a decrease in our cash
flff ows frff om operations and an offff sff etting similarly sized increase in our net defeff rred tax assets over these amortization periods.
The actuat
expenses we will incur and whether we conduct our research and development activities inside or outside the United States.
Futurt e guidance frff om the Internal Revenue Service and other tax authorities with respect to such legislation may affff eff ct us,
and certain aspects of such legislation could be repealed or modififf ed in futff urt e legislation. In addition, it is uncertain if and to
what extent various states will conforff m to feff deral tax laws. Futurt e tax reforff m legislation could have a material impact on the
value of our defeff rred tax assets, could result in signififf cant one-time charges, and could increase our futff urt e U.S. tax expense.

l impact of this provision will depend on multiple faff ctors, including the amount of research and development

research activities conducted outside the United States. Unless the United States

es in the year incurred
research activities conducted

issues regulations that narrow the appl

tax purpos

Our abilii ill tii ytt
itii ett d.
lill mii

tott use net operatitt nii g losll

ses and certaitt nii othtt er taxtt

atttt rtt ibui

ell
tett s tott offff sff et fuff ture taxabl

tt

inii come or taxe

tt

s may be

Portions of our net operating loss carryfrr orff wards could expire unused and be unavailabla e to offff sff et futff urt e income tax

liabia lities. Under current law, feff deral net operating losses incurred in tax years beginning aftff er December 31, 2017, may be
carried forff ward indefiff nitely, but the deductibility of such feff deral net operating losses is limited to 80% of taxabla e income. It
is uncertain if and to what extent various states will conforff m to feff deral tax laws. In addition, under Sections 382 and 383 of
the Internal Revenue Code of 1986, as amended (the Code), and corresponding provisions of state law, if a corpor

ation

r

29

rr

undergoes an “ownership change,” which is generally defiff ned as a greater than 50 percent change, by value, in its equity
ation’s abia lity to use its pre-change net operating loss carryfrr orff wards and other
ownership over a three-year period, the corpor
pre-change tax attributes to offff sff et its post-change income or taxes may be limited. We have experienced ownership changes
in the past and we may experience additional ownership changes in the futff urt e as a result of subsequent shiftff s in our stock
ownership, some of which may be outside of our control. If an ownership change occurs and our abia lity to use our net
operating loss carryfrr orff wards is materially limited, it would harm our futff urt e operating results by effff eff ctively increasing our
futff urt e tax obligations. In addition, at the state level, there may be periods during which the use of net operating loss
carryfrr orff wards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a
result, if we earn net taxabla e income, we may be unabla e to use all or a material portion of our net operating loss carryfrr orff wards
and other tax attributes, which could potentially result in increased futff urt e tax liabia lity to us and adversely affff eff ct our futff urt e
cash flff ows.

TaxTT

ell
authtt oritii itt es couldll reallll ocll atett our taxabl

tt

inii come among our subsidiaries,s which couldll

inii crease our overallll taxtt

lill abilii ill tii ytt .yy

In 2015, we licensed worldwide intellectuat

l property rights related to pimavanserin in certain indications to Acadia

pimavanserin, include building a platforff m forff

(Acadia GmbH), and in July 2020 we licensed additional related

the establa ishment of Acadia GmbH, and the licensing of worldwide intellectuat

Pharmaceuticals GmbH, our wholly owned Swiss subsidiaryrr
rights to Acadia GmbH. Our goals forff
property rights forff
long-term operational and fiff nancial effff iff ciencies, including
tax-related effff iff ciencies. Futurt e changes in U.S. and non-U.S. tax laws, including implementation of international tax reforff m
relating to the tax treatment of multinational corpor
effff iff ciencies that we hoped to achieve by establa ishing this operational strucrr
turt e. Additionally, taxing authorities, such as the
U.S. Internal Revenue Service, may audit and otherwise challenge these types of arrangements, and have done so with other
companies in the pharmaceutical industry.rr
l property rights forff
intellectuat
affff eff ct our business.

If any such changes in tax law are enacted, or our licensing of worldwide

ations, if enacted, may reduce or eliminate any potential fiff nancial

is otherwise challenged, this could materially adversely

pimavanserin to our Swiss subsidiaryrr

r

l

UnUU fn avff orablell global

ll

economic conditii itt ons couldll adversrr elyll affff eff ct our businii ess,s fiff nii ancial conditii itt on or resultll stt of operatitt ons.

Our results of operations could be adversely affff eff cted by general conditions in the U.S. and global economies, the U.S.

r

and global fiff nancial markets and adverse macroeconomic developments. U.S. and global market and economic conditions
have been, and continue to be, disrupt
ed and volatile due to many faff ctors, including the ongoing COVID-19 pandemic and
actions taken to slow its spread, material shortages and related supply chain challenges, geopolitical developments such as
the conflff ict between Ukraine and RusRR sia and related sanctions, and increasing inflff ation rates and the responses by central
banking authorities to control such inflff ation, among others. General business and economic conditions that could affff eff ct our
business, fiff nancial condition or results of operations include flff uctuat
markets, liquidity of the global fiff nancial markets, the availabia lity and cost of credit, investor and consumer confiff dence, and
the strength of the economies in which we, our collabor

ators, our manufaff cturt ers and our suppliers operate.

tions in economic growth, debt and equity capia tal

a

A severe or prolonged global economic downturt n could result in a variety of risks to our business. For example,
inflff ation rates, particularly in the United States, have increased recently to levels not seen in years, and increased inflff ation
r costs), reduced liquidity and limits on our abia lity to access
may result in increases in our operating costs (including our laboa
credit or otherwise raise capia tal on acceptabla e terms, if at all. In addition, the U.S. Federal Reserve has raised, and may again
raise, interest rates in response to concerns about
in fiff nancial markets may have the effff eff ct of furff
in Europe, which is undergoing a continued severe economic
prolonged global economic downturt n are particularly truer
crisis. A weak or declining economy could also strain our suppliers and manufaff cturt ers, possibly resulting in supply and
clinical trial disrupt
current economic climate and fiff nancial market conditions could adversely impact our business.

inflff ation, which coupled with reduced government spending and volatility
ther increasing economic uncertainty and heightening these risks. Risks of a

ion. Any of the forff egoing could harm our business and we cannot anticipate all of the ways in which the

a

rr

Publill c healtll htt
adversrr e efe fff eff ct on our operatitt ons and fiff nii ancial resultll stt ,s or may cause us tott modifi yff or suspes nd our fiff nii ancial guidance.ee

thtt reatstt ,s inii cludinii g thtt e contitt nii uinii g COC VIVV DII -19 pandemic,c have imii pacm tett d our clill nii

ical trtt ialsll and couldll have an

The COVID-19 pandemic has had a maja or impact on the fiff nancial markets, the global economy and the economies of
particular countries or regions, and led to, among other things, travel restrictions, quarantines, “work-at-home” and “shelter-
in-place” orders imposed by authorities and the extended shutdown of certain non-essential businesses in the U.S. throughout
the world, including in countries where we have planned or active clinical trials. In an effff orff
of our employees, our community, and our stakeholders, we have developed dynamic pandemic and workplace health
policies appl

icabla e to all of our employees. These policies are localized based on current COVID-19 conditions, regulatoryrr

t to protect the health and safeff ty

a

30

guidance, public health and scientififf c recommendations, and feff deral, state, and local laws. We have reopened our offff iff ces to
tion. We may faff ce several challenges or
allow employees to returt n, but will continue to closely monitor the COVID-19 situat
disrupt
ions upon a returt n back to the workplace, including re-integration challenges by our employees and distractions to
r
management related to such transition. The effff eff cts and duration of such measures could have a material adverse impact on
our business, results of operations, fiff nancial condition and prospects.

Our sales forff ce had physical access to hospitals, clinics, long-term care and skilled nursing faff cilities, healthcare
providers and pharmacies curtailed, and we are still assessing the effff eff cts such curtailment had on our sales or may have on
our futff urt e sales. Currently, healthcare providers are conducting patient visits in-person and through telemedicine and our
sales forff ce has been abla e to call upon medical clinics, hospitals, long-term care faff cilities and skilled nursing faff cilities either in
person in accordance with appl
our fiff eld employees to faff cilitate remote meetings with healthcare providers that are unabla e to meet in-person, we cannot
ensure that these methods will be effff eff ctive. Additionally, patients who are currently using NUPLAZID or who are eligible to
use NUPLAZID, may be unabla e to meet with their healthcare providers in person, which may reduce the number of
prescription refiff lls or new patient starts, affff eff cting our revenues both in our currently appr
impacting our anticipated launches in other indications, if appr

icabla e regulatoryrr guidance and local policies or virtuat

lly. While digital tools are availabla e to

oved indication and potentially

oved.

a

a

a

Our clinical trials were impacted by the COVID-19 pandemic as we temporarily paused enrollment in our ongoing

clinical trials as well as commencement of new trials, and experienced delays in our data collection and site monitoring
activities While we have re-initiated enrollment in clinical trials and related activities on a study-
basis, it is possible that our studi

es could be impacted due to COVID-19 in the futff urt e.

t
by-study

and site-by-site

t

t

Since the beginning of the pandemic the growth of sales of NUPLAZID have been negatively impacted by ongoing

conditions related to the pandemic, including a reduction in patient offff iff ce visits, continuing reduced occupancy rates at long-
term care faff cilities, and reduced access to healthcare profeff ssionals. While we observed incremental improvements in some of
these faff ctors since 2021, their levels are still below where they were pre-pandemic. It remains diffff iff cult to predict the duration
of the pandemic’s impact and the pace of,ff and no assurances can be given that the pandemic will not continue to have
additional negative impacts on our business, results of operations, fiff nancial condition and prospects.

-

ThTT e geo-pol
sanctitt ons imii posm ed on Russia, has caused signi

ill tii itt cal turmrr oilii resultll itt nii g frff om Russia’s’ inii vasion of UkrUU ainii e,e inii cludinii g thtt e widesprs

ead and signi

ifi iff cant economic

ifi iff cant disii ruptu itt ons of our clill nii

ical trtt ial actitt vitii itt es inii Russia and UkrUU ainii e.ee

We have engaged clinical research organizations (CROs) to conduct clinical trials worldwide. Certain of our trials have
ting and screening were not complete at the time

ions, including
ther new enrollment of patients at our clinical trial sites in Ukraine and RusRR sia. Existing patients may

a limited number of clinical sites in RusRR sia and Ukraine where patient recruir
of RusRR sia’s militaryrr aggression in Ukraine. The resulting geo-political turt moil has caused signififf cant disrupt
the suspension of furff
have been evacuated or relocated faff r frff om clinical sites, making it diffff iff cult forff
personnel and/or CRO personnel may be unavailabla e or otherwise unabla e to conduct clinical trial activities. Furthermore, the
widespread sanctions imposed on RusRR sia have affff eff cted clinical sites in RusRR sia managed by our CROs. In addition, clinical
sites, their personnel and patients may not be abla e to continue in the trials and we may need to suspend or terminate the trials
in RusRR sia. While we have a limited number of clinical sites in Ukraine and RusRR sia, these signififf cant disrupt
suspension/termination of clinical trial activities could potentially delay the completion of enrollment in our clinical trials and
complicate the analysis of data, as affff eff cted clinical sites might not be abla e to have their data be validated or protocol
assessments may be missed. Even if data collection can be completed, the FDA may be unabla e to audit clinical trial sites in
ther delay our clinical development and the potential authorization
Ukraine or RusRR sia. Interrupt
or appr
a
product sales and generate revenues.

oval of our product candidates, which could materially increase our costs and adversely affff eff ct our abia lity to commence

participation in our clinical trials. Site

ions of clinical trials may furff

ions and the

r

r

r

Earthtt quake or fiff ri e damage tott our facff
businii ess.

ilii ill tii itt es couldll delayll

our research and developmll

ent efe fff orff

tstt and adversrr elyll affff eff ct our

Our headquarters and research and development faff cilities in San Diego are located in a seismic zone, and we faff ce the
ive to our operations and result in delays in our research and

possibility of one or more earthquakes, which could be disrupt
development effff orff
possibility of futff urt e fiff res in the area. In the event of an earthquake or fiff re, if our faff cilities or the equipment in our faff cilities is
signififf cantly damaged or destroyed forff
damaged equipment in a timely manner and our business, fiff nancial condition, and results of operations could be materially
damages resulting frff om earthquakes. While we do have fiff re insurance
and adversely affff eff cted. We do not have insurance forff

ts. In addition, while our faff cilities have not been adversely impacted by local wildfiff res, there is the

any reason, we may not be abla e to rebuild or relocate our faff cilities or replace any

r

31

forff
development effff orff

our property and equipment located in San Diego, any damage sustained in a fiff re could cause a delay in our research and

ts and our results of operations could be materially and adversely affff eff cted.

Our businii ess inii volvll es the use of hazardous materials, and we and our third-party manufacturers and suppliers must
comply with environmental, health and safety laws and regulations, which can be expensive and restrict how we do, or
interrupt our, business.

Our research and development activities and our third-party manufacturers’ and suppliers’ activities involve the

generation, storage, use and disposal of hazardous materials, including the components of our products and product
candidates and other hazardous compounds and wastes. We and our manufacturers and suppliers are subject to
environmental, health and safety laws and regulations governing, among other matters, the use, manufacture, generation,
storage, handling, transportation, discharge and disposal of these hazardous materials and wastes and worker health and
safety. In some cases, these hazardous materials and various wastes resulting from their use are stored at our and our
manufacturers’ facilities pending their use and disposal. We cannot eliminate the risk of contamination or injury, which could
result in an interruption of our commercialization efforts, research and development efforts and business operations, damages
and significant cleanup costs and liabilities under applicable environmental, health and safety laws and regulations. We also
cannot guarantee that the safety procedures utilized by our third-party manufacturers for handling and disposing of these
materials and wastes generally comply with the standards prescribed by these laws and regulations. We may be held liable for
any resulting damages costs or liabilities, which could exceed our resources, and state or federal or other applicable
authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental,
health and safety laws and regulations are complex, change frequently and have tended to become more stringent. We cannot
predict the impact of such changes and cannot be certain of our future compliance. Failure to comply with these
environmental, health and safety laws and regulations may result in substantial fines, penalties or other sanctions. We do not
currently carry hazardous waste insurance coverage.

Risks Related to Our Relationships with Third Parties

ll
WeWW previouslyll have depeee nded, and inii
commercialill zii e selell ctett d product candidatett s othtt er thtt an pimii avanserinii
, and we have lill mii
partitt es conduct developmll

ent and commercialill zii atitt on actitt vitii itt es forff

thtt e fuff ture may depeee nd, on collll abor

atitt ons witii htt

such product candidatett s.

irii d partitt es tott developll

thtt
itii ett d contrtt ol over how thtt ose thtt iri d

and

In the past, we have selectively entered into collabor

ation agreements with third parties. We relied on our collabor

a

financial resources and forff

forff
we had limited control over the amount and timing of resources that our collabor
may choose to rely on collabor
candidates, or forff

ations in the futff urt e forff

the commercialization of NUPLAZID in certain territories outside of the U.S.

and commercialization expertise forff

a

a

certain portions of our pimavanserin program or other product

ators
selected product candidates and
ators devoted to our product candidates. We

a
development, regulatory,rr

Our collabor
technologies because they:

a

ators may faff il to develop or effff eff ctively commercialize products using our product candidates or

•

•

•

•

•

•

•

do not have suffff iff cient resources or decide not to devote the necessaryrr
as limited cash or human resources or a change in strategic focff us;

resources due to internal constraints such

may not properly maintain, enforff ce or defeff nd our intellectuat
inforff mation in a manner that could jeopardize or invalidate our proprietaryrr
litigation;

l property rights or may use our proprietaryrr

inforff mation or expose us to potential

terminate the arrangement or allow it to expire, which would delay the development and commercialization and
may increase the cost of developing and commercializing our products or product candidates;

may sell, transfeff r or divest assets or programs related to our partnered product or product candidates;

may not pursue furff
arrangement;

ther development and commercialization of products resulting frff om the strategic collabor

a

ation

decide to pursue a competitive product developed outside of the collabor

a

ation; or

cannot obtain the necessaryrr

regulatoryrr appr

a

ovals.

a
Collabor
new collabor

a

search forff

ations are complex and time-consuming to negotiate and document. We also will faff ce competition in our

ators, if we seek a new partner forff

our pimavanserin program or other programs. Given the current

32

economic and industryrr environment, it is possible that competition forff
have been a signififf cant number of recent business combinations among large pharmaceutical companies that have resulted in
a reduced number of potential fuff turt e collabor
basis, on acceptabla e terms, or at all. If we are unabla e to fiff nd new collabor
our programs alone.

a
ations, we may not be abla e to continue advancing

ators. We may not be abla e to negotiate additional collabor

ators may increase. In addition, there

ations on a timely

new collabor

a

a

a

IfII confn lff ill ctstt arisii e witii htt our collll abor

ll

atortt

srr ,s thtt eye may act inii

thtt eirii selfll -ff inii

tett reststt ,s which may be adversrr e tott our inii

tett reststt .

Conflff icts may arise in our collabor

a

ations due to one or more of the folff

lowing:

•

•

•

•

•

•

•

disputes or breaches with respect to payments that we believe are due under the appl
particularly in the current environment when companies, including large establa ished ones, may be seeking to
reduce external payments;

icabla e agreements,

a

disputes on strategy as to what development or commercialization activities should be pursued under the
a
appl

icabla e agreements;

disputes as to the responsibility forff
a
appl

icabla e collabor

a

ation, including the payment of costs related thereto;

conducting development and commercialization activities pursuant to the

disagreements with respect to ownership of intellectuat

l property rights;

unwillingness on the part of a collabor
commercialization activities, or to permit public disclosure of these activities;

ator to keep us inforff med regarding the progress of its development and

a

delay or reduction of a collabor
candidates; or

a

ator’s development or commercialization effff orff

ts with respect to our product

termination or non-renewal of the collabor

a

ation.

Conflff icts arising with our collabor

a

ators could impair the progress of our product candidates, harm our reputation, result

in a loss of revenues, reduce our cash position, and cause a decline in our stock price.

In addition, in our past collabor

a

ations, we generally have agreed not to conduct independently, or with any third party,

ations we
any research that is directly competitive with the research conducted under the appl
establa ish in the futff urt e may have the effff eff ct of limiting the areas of research that we may pursue, either alone or with others.
Conversely, the terms of any collabor
developing, either alone or with others, products in related fiff elds that are competitive with the products or potential products
that are the subject of these collabor
a
collabor
withdrawal of support forff

ators or to which our
ators to competing products and their

ators have rights, may result in the allocation of resources by our collabor

our product candidates or may otherwise result in lower demand forff

ation we may establa ish in the futff urt e might not restrict our collabor

ations. Competing products, either developed by our collabor

icabla e program. Any collabor

our potential products.

ators frff om

a

a

a

a

a

a

a

WeWW relyll on thtt
and delayll

irii d partitt es tott conduct our clill nii

ical trtt ialsll and perfr orff mrr

datatt collll ell ctitt on and analyll sisii ,s which may resultll inii coststt

s thtt at prevent us frff om successfs uff llll yll commercialill zii inii g product candidd datett s.

Although we design and manage our current preclinical studi

t
our product candidates on our own. We rely on CROs, medical institutt

to conduct clinical trials forff
a
and contract labor
rely on third parties to assist with our preclinical studi
metabol
a
as a result of the COVID-19 pandemic and thereforff e may be unabla e to provide the level of service that we have received in
the past.

es, including studi
ism, and excretion of product candidates. Some of these third parties may experience shutdowns or other disrupt

atories to perforff m data collection and analysis and other aspects of our clinical trials. In addition, we also
ion,

es regarding biological activity, safeff ty, absa orptr

es and clinical trials, we currently do not have the abia lity

ions, clinical investigators,

ions

r

t

t

Our preclinical activities or clinical trials may be delayed, suspended, or terminated if:ff

•

•

•

these third parties do not successfulff
expected deadlines;

ly carryrr out their contractuat

l duties or faff il to meet regulatoryrr obligations or

these third parties need to be replaced; or

the quality or accuracy of the data obtained by these third parties is compromised due to their faff ilure to adhere to
our clinical protocols or regulatoryrr

requirements or forff

other reasons.

33

Failure to perforff m by these third parties may increase our development costs, delay our abia lity to obtain regulatoryrr
oval, and delay or prevent the commercialization of our product candidates. We currently use several CROs to perforff m

a
appr
services forff
es and clinical trials. While we believe that there are numerous alternative sources to provide
these services, in the event that we seek such alternative sources, we may not be abla e to enter into replacement arrangements
without delays or additional expenditurt es, any of which could affff eff ct our business, results of operations, fiff nancial condition
and prospects.

our preclinical studi

t

Even ifi we or our collll abor
faiff

ll
othtt er reasons.

lii forff

atortt

srr successfs uff llll yll complm ell tett

thtt e clill nii

ical trtt ialsll of prff

oduct candidatett s,s thtt e product candidatett s may

Of the large number of product candidates in development, only a small percentage result in the submission of an NDA

fiff ling to regulatoryrr authorities in other jurisdictions, and even feff wer are appr

to the FDA or comparabla e regulatoryrr
marketing. We cannot assure you that, even if clinical trials are completed, either we or our collabor
ications forff
appl
a
a
reviewed and appr
successfulff
candidates, such as pimavanserin, may faff il forff

ly complete the clinical trials of product candidates and appl

required authorizations to manufaff cturt e and/or market potential products or that any such appl

ication will be
ators
a
such required authorizations, the product

opriate regulatoryrr authorities in a timely manner, if at all. Even if we or our collabor

other reasons, including the possibility that the product candidates will:

ators will submit

oved by the appr

oved forff

y forff

a

a

a

a

a

•

•

•

•

•

faff il to receive the regulatoryrr clearances required to market them as drugs

r

;

be subject to proprietaryrr

rights held by others requiring the negotiation of a license agreement prior to marketing;

be diffff iff cult or expensive to manufaff cturt e on a commercial scale;

have adverse side effff eff cts that make their use less desirabla e; or

faff il to compete with product candidates or other treatments commercialized by competitors.

WeWW currentltt yll depeee nd, and inii
and anyn othtt er product candidatett s. IfII thtt ese manufu acff
clill nii
be unablell

ical trtt ial matett rialsll and commercial product or faiff

tott developll

thtt e fuff ture wilii lll contitt nii ue tott depeee nd, on thtt

turersrr faiff
lii tott complm yll witii htt

iri d partitt es tott manufu acff
lii tott provide us or our collll abor

ture NUPUU LPP ALL ZIZZ DII ,D trtt ofiff nii etitt de
srr witii htt adequatett supplu
atortt
latll ortt
thtt e requirii ementstt of regue

yr authtt oritii itt es,s we may

ill es of

ll

or commercialill zii e NUPUU LPP ALL ZIZZ DII ,D trtt ofiff nii etitt de or anyn othtt er product candidatett s.

We have no manufaff cturt

ing faff cilities and only limited experience as an organization in the manufaff cturt

r
ing of drugs
ation
ing processes. We have contracted with third-party manufaff cturt ers to produce, in collabor

a

or in

designing drug-
with us, NUPLAZID, trofiff netide and our other product candidates.

rr manufaff cturt

product forff

commercial use in the U.S. Additionally, we have contracted with Siegfrff ied

We have contracted with Patheon Pharmaceuticals Inc. to manufaff cturt e NUPLAZID 10 mg tabla et and 34 mg capsa ule
ing organization to
product forff

commercial use in the U.S. We have also contracted with a second contract manufaff cturt

drugr
manufaff cturt e NUPLAZID 34 mg drugrr
AG to manufaff cturt e active pharmaceutical ingredient (API), to be used in the manufaff cturt e of NUPLAZID drugr
commercial use. However, we have not entered into any agreements with any alternate suppliers forff
product or NUPLAZID API, and we may faff ce delays or increased costs in our supply chain that could jeopardize the
commercialization of NUPLAZID. While we currently have suffff iff cient API and NUPLAZID fiff nished product on hand to
continue our commercial and clinical operations as planned, depending on the effff eff cts of geopolitical and macroeconomic
developments and whether such developments cause disrupt
ions, we may faff ce such delays or costs in futff urt e years. If any
third party in our supply or distribution chain forff materials or fiff nished product is adversely impacted by geopolitical and
macroeconomic developments, such as the ongoing conflff ict between Ukraine and RusRR sia or the COVID-19 pandemic,
r
including staffff iff ng shortages, production slowdowns and disrupt
rr
limiting our abia lity to manufaff cturt e and distribute NUPLAZID forff
our
clinical trials and research and development operations. Additionally, if NUPLAZID is appr
jurisdictions outside the U.S., we will need to contract with a third party to manufaff cturt e such products forff
the U.S. and/or in such other jurisdictions. We may not be abla e to enter into such contracts in a timely manner or on
acceptabla e terms, if at all.

ions in deliveryrr systems, our supply chain may be disrupt

commercial sales and our product candidates forff

10 mg NUPLAZID drugr

commercial sale in

commercial sale in

product forff

oved forff

ed,

a

r

We have contracted with manufaff cturt ers to produce clinical supplies of trofiff netide to support the development program.

If trofiff netide or any other product candidate is appr
will need to contract with a third party to manufaff cturt e such products forff
jurisdictions. We may not be abla e to enter into such a contract in a timely manner or on acceptabla e terms, if at all.

commercial sale, we
commercial sale in the U.S. and/or in such other

oved by the FDA or other regulatoryrr agencies forff

a

34

Even though we have agreements with Patheon forff

the manufaff cturt e of NUPLAZID 10 mg tabla et and agreements with

a

product, and with Siegfrff ied forff

the manufaff cturt e of 34 mg capsa ule drugr

commercial use, and even if we successfulff

ly enter into long-term agreements with other

Patheon and another manufaff cturt er forff
of NUPLAZID API forff
manufaff cturt ers, the FDA may not appr
ove the faff cilities of such manufaff cturt ers, the manufaff cturt ers may not perforff m as agreed,
or the manufaff cturt ers may terminate their agreements with us. Presently, we have only one supplier of API, two suppliers forff
the 10mg tabla et of NUPLAZID. If any of the forff egoing circumstances occur, we may
the 34 mg capsa ule and one supplier forff
ing faff cilities, which would signififf cantly impact our abia lity to develop, maintain or obtain,
need to fiff nd alternative manufaff cturt
as appl
or market NUPLAZID or trofiff netide or any other product candidates. While we believe
icabla e, regulatoryrr appr
a
that there will be alternative sources availabla e to manufaff cturt e NUPLAZID and trofiff netide and any other product candidates,
in the event that we seek such alternative sources, we may not be abla e to enter into replacement arrangements without delays
or additional expenditurt es. We cannot estimate these delays or costs with certainty but, if they were to occur, they could
cause a delay in our development and commercialization effff orff

the manufaff cturt e

oval forff

ts.

a

a

a

oval by the FDA. If any of our third-party manufaff cturt ers are unabla e to successfulff

oved by the FDA pursuant to inspections that will be conducted prior to any grant of

The manufaff cturt ers of NUPLAZID and trofiff netide and any other product candidates, including Patheon and Siegfrff ied,
are obliged to operate in accordance with FDA-mandated cGMPs, and we have limited control over the abia lity of third-party
manufaff cturt ers to maintain adequate quality control, quality assurance and qualififf ed personnel to ensure compliance with
cGMPs. In addition, the faff cilities used by our third-party manufaff cturt ers to manufaff cturt e NUPLAZID and trofiff netide and any
other product candidates must be appr
regulatoryrr appr
conforff ms to our specififf cations and the FDA’s strict regulatoryrr
abla e to secure or maintain appr
manufaff cturt ers to establa ish and folff
in clinical trials or in obtaining regulatoryrr appr
of NUPLAZID and trofiff netide and any other product candidate that receives regulatoryrr appr
commercialization of NUPLAZID, or lead to signififf cant delays in the launch and commercialization of trofiff netide or any
other products we may have in the futff urt e. Failure by our third-party manufaff cturt ers or us to comply with appl
icabla e
regulations could result in sanctions being imposed on us, including fiff nes, injunctions, civil penalties, faff ilure of the
government to grant pre-market appr
products, operating restrictions, and criminal prosecutions.

low cGMPs or to document their adherence to such practices may lead to signififf cant delays
oval

oval of product candidates, or result in issues maintaining regulatoryrr appr
oval, negatively impact our

ly manufaff cturt e material that
inspection, they will not be

ing faff cilities. Additionally, a faff ilure by any of our third-party

, delays, suspension or withdrawal of appr

requirements, or pass regulatoryrr

ovals, seizures or recalls of

the manufaff cturt

oval of drugs

oval forff

a

a

a

a

a

a

a

r

The manufaff cturt e of pharmaceutical products requires signififf cant capia tal investment, including the development of

ing diffff iff culties due to resource constraints or as a result of labor

ing techniques and process controls. Manufaff cturt ers of pharmaceutical products oftff en encounter

advanced manufaff cturt
diffff iff culties in production. These problems include diffff iff culties with production costs and yields, quality control, including
stabia lity of the product, quality assurance testing, shortages of qualififf ed personnel, as well as compliance with strictly
enforff ced feff deral, state and forff eign regulations. We cannot assure you that any issues relating to the manufaff cturt e of
NUPLAZID or trofiff netide or any other product candidates will not occur in the futff urt e. Additionally, our manufaff cturt ers may
disputes or unstabla e political
experience manufaff cturt
environments. If our manufaff cturt ers were to encounter any of these diffff iff culties, or otherwise faff il to comply with their
contractuat
candidates to patients in clinical trials, would be jeopardized. Any delay or interrupt
demand forff NUPLAZID and any other appr
affff eff ct our abia lity to gain market acceptance forff
trial supplies could delay the completion of clinical trials, increase the costs associated with maintaining clinical trial
programs and, depending upon the period of delay, require us to commence new clinical trials at additional expense or
terminate clinical trials completely.

l obligations, our abia lity to commercialize NUPLAZID in the U.S., or provide trofiff netide or any other product
ion in our abia lity to meet commercial
oved products will result in the loss of potential revenues and could adversely

these products. In addition, any delay or interrupt

ion in the supply of clinical

a

a

rr

r

Failures or diffff iff culties faff ced at any level of our supply chain could materially adversely affff eff ct our business and delay
or impede the development and commercialization of NUPLAZID or trofiff netide or any other product candidates and could
have a material adverse effff eff ct on our business, results of operations, fiff nancial condition and prospects.

If we fail to comply with the obligations in agreements under which we license intellectual property rights from third
parties, we could lose license rights to certain of our product candidates.

In August 2018, we entered into a license agreement with Neuren, and obtained exclusive North American rights to
develop and commercialize trofiff netide forff Rett syndrome and other indications. In Januaryrr 2022, we entered into a license
and collabor
potential treatment of severe and rare genetic neurodevelopmental diseases of the CNS.

ation agreement with Stoke to discover, develop and commercialize novel RNRR A-based medicines forff

the

a

35

Our agreements with Neuren and Stoke impose, and we expect that future agreements where we in-license intellectual

property will impose, various development, regulatory and/or commercial diligence obligations, payment of milestones
and/or royalties and other obligations. If we fail to comply with our obligations under these agreements, or we are subject to
bankruptcy-related proceedings, the licensor may have the right to terminate the license, in which event we would not be able
to market products covered by the license.

Disputes may arise between us and our licensors regarding intellectual property subject to a license agreement,

including:

•

•

•

•

the scope of rights granted under the license agreement and other interpretation-related issues;

whether and the extent to which our technology and processes infringe on intellectual property of the licensor
that is not subject to the licensing agreement;

our right to sublicense patents and other rights to third parties;

our diligence obligations with respect to the use of the licensed technology in relation to our development and
commercialization of our product candidates, and what activities satisfy those diligence obligations;

our right to transfer or assign the license; and

the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our
licensors and us and our partners.

If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current

licensing arrangements on acceptable terms, we may not be able to successfully develop and commercialize the related
product candidates, which would have a material adverse effect on our business.

WeWW may not be ablell
imii paim rii
couldll

tott contitt nii ue or fuff llll yll expl

ee

oill

tii our collll abor

ll

atitt ons witii htt outstt ide scientitt fi iff c and clill nii

ical advisii orsrr ,s which

thtt e progress of our clill nii

ical trtt ialsll and our research and developmll

ent efe fff orff

tstt .

We work with scientififf c and clinical advisors at academic and other institutt
disorders. They assist us in our research and development effff orff
advisors are not our employees and may have other commitments that would limit their futff urt e availabia lity to us. Although our
scientififf c and clinical advisors generally agree not to engage in competing work, if a conflff ict of interest arises between their
work forff
delay the development or commercialization of our product candidates.

another entity, we may lose their services, which may impair our reputation in the industryrr and

ts and advise us with respect to our clinical trials. These

ions who are experts in the fiff eld of CNS

us and their work forff

Risks Related to Our Intellectual Property

Our abilii ill tii ytt

tott compem tett may declill nii e ifi we do not adequatett lyll protett ct our proprietartt

yr righi

tstt .

Our commercial success depends on obtaining and maintaining intellectuat

l property rights to our products and product

a

challenges to, or misappr

ly defeff nding these rights against third-party

opriation of,ff our intellectual property could enabla e competitors to quickly

ss our technological achievements, thus eroding our competitive position in our market. To protect our

l property, we rely on a combination of patents, trade secret protection and contracts requiring confiff dentiality and

candidates, including NUPLAZID, and technologies, as well as successfulff
challenges. Successfulff
duplicate or surparr
intellectuat
ly challenged, we may faff ce generic competition prior to the expiration dates of our
nondisclosure. If our patents are successfulff
U.S. Orange Book listed patents. In addition, potential competitors have in the past and may in the futff urt e fiff le an Abbreviated
New Drugrr Application (ANAA DA) with the FDA forff
oval prior to the expiration
of our patents. In response, we have fiff led complaints against these companies alleging infrff ingement of certain of our Orange
Book-listed patents covering NUPLAZID. For a more detailed description of these matters, see section capta ioned “Legal
Proceedings” elsewhere in this report. While we intend to defeff nd the validity of such patents vigorously, and will seek to use
all appr
a
decrease in the revenue and income derived frff om NUPLAZID would have an adverse effff eff ct on our results of operations.

opriate methods to prevent their infrff ingement, such effff orff

ts are expensive and time consuming. Any substantial

generic versions of NUPLAZID, seeking appr

a

36

With regard to patents, although we have fiff led numerous patent appl

a
ications resulted in an issued patent, or they resulted in an issued patent that is susceptible to

not all of our patent appl
challenge by a third party. Our abia lity to obtain, maintain, and/or defeff nd our patents covering our product candidates and
technologies is uncertain due to a number of faff ctors, including:

ications worldwide with respect to pimavanserin,

a

•

•

•

•

•

•

•

•

•

•

•

•

we may not have been the fiff rst to make the inventions covered by our pending patent appl
patents;

a

ications or issued

we may not have been the fiff rst to fiff le patent appl
upon;

a

ications forff

our product candidates or the technologies we rely

others may develop similar or alternative technologies or design around our patent claims to produce competitive
products that faff ll outside of the scope of our patents;

our disclosures in patent apa plications may not be suffff iff cient to meet the statutt oryrr

requirements forff

patentabia lity;

we may not seek or obtain patent protection in all countries that will eventuat
opportuni

ty;

t

lly provide a signififf cant business

any patents issued to us or our collabor
provide us with any competitive advantages, or are easily susceptible to challenges by third parties;

ators may not provide a basis forff

commercially viabla e products, may not

a

our proprietaryrr

technologies may not be patentabla e;

changes to patent laws that limit the exclusivity rights of patent holders or make it easier to render a patent
invalid;

recent decisions by the U.S. Supreme Court limiting patent-eligible subject matter;

litigation regarding our patents may include challenges to the validity, enforff ceabia lity, scope and term of one or
more patents;

the passage of The Leahy-Smith America Invents Act (the America Invents Act), introduced new procedures forff
challenging pending patent appl

ications and issued patents; and

a

technology that we may in-license may become important to some aspects of our business; however, we
generally would not control the patent prosecution, maintenance or enforff cement of any such in-licensed
technology.

Even if we have or obtain patents covering our product candidates or technologies, we may still be barred frff om
making, using and selling our product candidates or technologies because of the patent rights of others. Others have or may
have fiff led, and in the futff urt e are likely to fiff le, patent appl
therapea utic products that are similar or identical to ours. There are many issued U.S. and forff eign patents relating to genes,
nucleic acids, polypeptides, chemical compounds or therapea utic products, and some of these may encompass reagents utilized
compounds or compounds that we desire to commercialize. Numerous U.S. and forff eign
in the identififf cation of candidate drugr
ications owned by others exist in the area of CNS disorders and the other fiff elds in
issued patents and pending patent appl
which we are developing products. These could materially affff eff ct our frff eedom to operate. Moreover, because patent
appl
a
in issued patents that our product candidates or technologies may infrff inge. These patent appl
patent appl

ications, unknown to us, that may later result
ications may have priority over

ications can take many years to issue, there may be currently pending appl

ications covering compounds, assays, genes, gene products or

ications fiff led by us.

a

a

a

a

a

We regularly conduct searches to identifyff patents or patent appl

a

ications that may prevent us frff om obtaining patent

ications. Disputes may arise regarding the ownership or inventorship of our inventions. For appl

our proprietaryrr compounds or that could limit the rights we have claimed in our patents and patent

protection forff
appl
a
claims are entitled to a priority date beforff e March 16, 2013, an interfeff rence proceeding can be provoked by a third-party or
institutt ed by the U.S. Patent and Trademark Offff iff ce (U.S. PTO), to determine who was the fiff rst to invent the invention at
issue. It is diffff iff cult to determine how such disputes would be resolved. Applications containing a claim not entitled to priority
beforff e March 16, 2013, are not subject to interfeff rence proceedings due the change brought by the America Invents Act to a
“fiff rst-to-fiff le” system. However, a derivation proceeding can be brought by a third-party alleging that the inventor derived the
invention frff om another.

ications in which all

a

37

Periodic maintenance feff es on any issued patent are due to be paid to the U.S. PTO and forff eign patent agencies in

ication process. While an inadvertent lapsa

several stages over the lifeff time of the patent. The U.S. PTO and various forff eign governmental patent agencies require
compliance with a number of procedural, documentary,rr
appl
a
accordance with the appl
patent or patent appl
events that could result in abaa ndonment or lapsa
ication include, but are not limited to, faff ilure to
e of a patent or patent appl
respond to offff iff cial actions within prescribed time limits, non-payment of feff es and faff ilure to properly legalize and submit
forff mal documents. In such an event, our competitors might be abla e to enter the market, which would have a material adverse
effff eff ct on our business.

a
e of the
ication, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance

e can in many cases be cured by payment of a late feff e or by other means in
tions in which noncompliance can result in abaa ndonment or lapsa

feff e payment and other similar provisions during the patent

icabla e rulr es, there are situat

a

a

Some of our academic institutt

ional licensors, research collabor

a

ators and scientififf c advisors have rights to publish data

and inforff mation to which we have rights. We generally seek to prevent our collabor
discoveries until we have the opportuni
relatively short periods to review a proposed publication and fiff le a patent appl
confiff dentiality of our technology and other confiff dential inforff mation in connection with our collabor
receive patent protection or protect our proprietaryrr

inforff mation may be impaired.

ty to fiff le patent appl

a

a

a

a

t

ication. If we cannot maintain the

ators frff om disclosing scientififf c

ications on such discoveries, but in some cases, we are limited to

ations, then our abia lity to

ConCC fn iff dentitt alill tii ytt agreementstt witii htt emplm oyll
othtt er proprietartt
compem tett .ee

yr inii fn orff mrr atitt on and may not adequatett lyll protett ct our inii

ees and othtt ersrr may not adequatett lyll prevent disii closll ure of our trtt ade secretstt and
itii our abilii ill tii ytt

tett llll ell ctual propertytt ,yy which couldll

lill mii

tott

r

a

, we rely

l property assignment agreements with our

discoveryrr and development of small molecule drugs

technology and processes. However, trade secrets are

ators, sponsored researchers, and other advisors. These

ate partners, employees, consultants, outside scientififf c collabor

Because we operate in the highly technical fiff eld of drugr
in part on trade secret protection in order to protect our proprietaryrr
diffff iff cult to protect. We enter into confiff dentiality, nondisclosure, and intellectuat
corpor
r
agreements generally require that the other party keep confiff dential and not disclose to third parties all confiff dential
inforff mation developed by the party or made known to the party by us during the course of the party’s relationship with us.
These agreements also generally provide that inventions conceived by the party in the course of rendering services to us will
be our exclusive property. However, these agreements may not be honored and may not effff eff ctively assign intellectuat
l
property rights to us. Enforff cing a claim that a party illegally obtained and is using our trade secrets is diffff iff cult, expensive and
time consuming and the outcome is unpredictabla e. In addition, courts outside the U.S. may be less willing to protect trade
secrets. We also have not entered into any noncompete agreements with any of our employees. Although each of our
employees is required to sign a confiff dentiality agreement with us at the time of hire, we cannot guarantee that the confiff dential
inforff mation will be maintained in the course of futff urt e employment with any of our competitors. If
naturt e of our proprietaryrr
we are unabla e to prevent unauthorized material disclosure of our intellectuat
l property to third parties, we will not be abla e to
establa ish or maintain a competitive advantage in our market, which could materially adversely affff eff ct our business, operating
results and fiff nancial condition.

A disii pus
tett concerninii g thtt e inii fn rff inii gement or misii appropriatitt on of our proprietartt
couldll be titt mii e-consuminii g and costltt yll ,yy and an unfn avff orablell outctt ome couldll harmrr

our businii ess.

yr righi

tstt or thtt e proprietartt

yr righi

tstt of othtt ersrr

There is a substantial amount of litigation involving patents and other intellectuat

and pharmaceutical industries, as well as administrative proceedings forff
proceedings beforff e the U.S. PTO or oppositions and other comparabla e proceedings in forff eign jurisdictions.

l property rights in the biotechnology
challenging patents, including post-issuance review

Central provisions of the America Invents Act went into effff eff ct on September 16, 2012 and on March 16, 2013. The

a

ications are being fiff led, prosecuted and litigated. For example, the America Invents Act enacted

America Invents Act includes a number of signififf cant changes to U.S. patent law. These changes include provisions that
affff eff ct the way patent appl
proceedings involving post-issuance patent review procedures, such as inter partes review (IPR), and post-grant review, that
allow third parties to challenge the validity of an issued patent in frff ont of the U.S. PTO Patent Trial and Appeal Board. Each
proceeding has diffff eff rent eligibility criteria and diffff eff rent patentabia lity challenges that can be raised. IPRs permit any person
(except a party who has been litigating the patent forff more than a year) to challenge the validity of the patent on the grounds
that it was anticipated or made obvious by prior art. Patents covering pharmaceutical products have been subject to attack in
IPRs frff om generic drugr
. If it is within nine months of the issuance of the challenged patent,
a third party can petition the U.S. PTO forff
post-grant review, which can be based on any invalidity grounds and is not limited
to prior art patents or printed publications.

companies and frff om hedge funds

ff

38

In post-issuance proceedings, U.S. PTO rulrr es and regulations generally tend to faff vor patent challengers over patent

owners. For example, unlike in district court litigation, claims challenged in post-issuance proceedings are given their
broadest reasonabla e meaning, which increases the chance a claim might be invalidated by prior art or lack support in the
patent specififf cation. As another example, unlike in district court litigation, there is no presumption of validity forff
patent, and thus, a challenger’s burden to prove invalidity is by a preponderance of the evidence, as opposed to the
heightened clear and convincing evidence standard. As a result of these rulrr es and others, statistics released by the U.S. PTO
show a high percentage of claims being invalidated in post-issuance proceedings. Moreover, with feff w exceptions, there is no
standing requirement to petition the U.S. PTO forff
have not been charged with infrff ingement or that lack commercial interest in the patented subject matter can still petition the
U.S. PTO forff
challenged and ultimately not provide us with suffff iff cient protection against competitive products or processes.

review of an issued patent. Thus, even where we have issued patents, our rights under those patents may be

inter partes review or post-grant review. In other words, companies that

an issued

We may be exposed to futff urt e litigation by third parties based on claims that our product candidates, technologies or
l property rights of others. In particular, there are many patents relating to specififf c genes,

activities infrff inge the intellectuat
nucleic acids, polypeptides or the uses thereof to identifyff product candidates. Some of these may encompass genes or
polypeptides that we utilize in our drugrr
to infrff inge any
such patents, and such patents are held to be valid and enforff ceabla e, we may have to pay signififf cant damages or seek licenses
to such patents. A patentee could prevent us frff om using the patented genes or polypeptides forff
development of drugr
compounds are found
signififf cant damages or seek licenses to such patents. A patentee could prevent us frff om making, using or selling the patented
compounds.

compounds. There are also many patents relating to chemical compounds and the uses thereof.ff If our
to infrff inge any such patents, and such patents are held to be valid and enforff ceabla e, we may have to pay

development activities. If our drugr

development activities are found

the identififf cation or

ff

ff

In addition to the patent infrff ingement lawsuits that we have recently initiated against the fiff lers of ANAA DAs pertaining to

NUPLAZID, we may need to resort to litigation to enforff ce other patents issued to us, protect our trade secrets or determine
the scope and validity of third-party proprietaryrr
employed by other companies involved in one or more areas similar to the activities conducted by us. Either we or these
opriation or other similar claims as a result of their prior
a
individuals may be subject to allegations of trade secret misappr
affff iff liations. If we become involved in litigation, it could consume a substantial portion of our managerial and fiff nancial
resources, regardless of whether we win or lose. We may not be abla e to affff orff d the costs of litigation. Any legal action against
us or our collabor

rights. From time to time, we may hire scientififf c personnel forff merly

ators could lead to:

a

•

•

•

payment of damages, which could potentially be trebled if we are found
patent rights;

ff

to have willfulff

ly infrff inged a party’s

injunctive or other equitabla e relief that may effff eff ctively block our abia lity to furff
sell products; or

ther develop, commercialize, and

we or our collabor
acceptabla e terms, or at all.

a

ators having to enter into license arrangements that may not be availabla e on commercially

As a result, we could be prevented frff om commercializing current or futff urt e products.

Furthermore, because of the substantial amount of pre-trial document and witness discoveryrr

required in connection

l property litigation, there is a risk that some of our confiff dential inforff mation could be compromised by

with intellectuat
disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or
investors perceive these results to be negative, it could have a substantial adverse effff eff ct on the trading price of our common
stock.

ThTT e patett nt applill catitt ons of phff
questitt ons,s which, ifi detett rmrr

armrr aceutitt cal and biotett chnology

ll

inii ed adversrr elyll

tott us,s couldll negat

e

itt velyll

companm

ies inii volvll e highi
imii pacm t our patett nt positii itt on.

lyll complm ell xee lell gal

e

and facff

tual

The strength of patents in the pharmaceutical and biotechnology fiff eld can be highly uncertain and involve complex

l questions. For example, some of our patent appl

a
legal and faff ctuat
patentabia lity of gene sequences and the use of gene sequences has been seriously undermined by recent decisions of the U.S.
Supreme Court. The U.S. PTO’s interprrr etation of the Supreme Court’s decisions and the standards forff
forff
certainty. Patents, if issued, may be challenged, invalidated or circumvented. U.S. patents and patent appl

th are uncertain and could change in the futff urt e. Consequently, the issuance and scope of patents cannot be predicted with

ications may cover the uses of gene sequences. The

patentabia lity it sets

ications may also be

a

39

a

, and U.S. patents may be subject to reexamination and post-issuance

ication or loss or reduction in the scope of one or more of the claims of the patent or patent appl

subject to interfeff rence proceedings as mentioned above
proceedings in the U.S. PTO (and forff eign patents may be subject to opposition or comparabla e proceedings in the
corresponding forff eign patent offff iff ce), which proceedings could result in either loss of the patent or denial of the patent
appl
ication. Similarly,
a
opposition or invalidity proceedings could result in loss of rights or reduction in the scope of one or more claims of a patent
in forff eign jurisdictions. In addition, such interfeff rence, reexamination, post-issuance and opposition proceedings may be
costly. Accordingly, rights under any issued patents may not provide us with suffff iff cient protection against competitive
products or processes.

a

l property rights, including patents and patent appl

In addition, changes in or diffff eff rent interprr etations of patent laws in the U.S. and forff eign countries may permit others to
use our discoveries or to develop and commercialize our technology and products without providing any compensation to us
or may limit the number of patents or claims we can obtain. In particular, there have been proposals to shorten the exclusivity
periods availabla e under U.S. patent law that, if adopted, could substantially harm our business. The product candidates that
we are developing are protected by intellectuat
product candidates becomes a marketabla e product, we will rely on our exclusivity under patents to sell the compound and
recoup our investments in the research and development of the compound. If the exclusivity period forff
then our abia lity to generate revenues without competition will be reduced and our business could be materially adversely
impacted. The laws of some countries do not protect intellectuat
l property rights to the same extent as U.S. laws and those
countries may lack adequate rulr es and procedures forff
including many in Europe, do not grant patent claims directed to methods of treating humans and, in these countries, patent
protection may not be availabla e at all to protect our product candidates. In addition, U.S. patent laws may change which could
prevent or limit us frff om fiff ling patent appl
exclusivity periods that are availabla e to patent holders. For example, the America Invents Act (2012) included a number of
signififf cant changes to U.S. patent law. These included changes to transition frff om a “fiff rst-to-invent” system to a “fiff rst-to-fiff le”
system and to the way issued patents are challenged. These changes may faff vor larger and more establa ished companies that
ication fiff ling and prosecution. It is still not clear what, if any, impact the
have more resources to devote to patent appl
a
America Invents Act will ultimately have on the cost of prosecuting our patent appl
a
based on our discoveries and our abia lity to enforff ce or defeff nd our issued patents.

ications or patent claims to protect our products and/or technologies or limit the

l property rights. For example, some countries,

ications, our abia lity to obtain patents

defeff nding our intellectuat

ications. If any of our

patents is shortened,

a

a

If we faff il to obtain and maintain patent protection and trade secret protection of our product candidates, proprietaryrr

technologies and their uses, we could lose our competitive advantage and competition we faff ce would increase, reducing our
potential revenues and adversely affff eff cting our abia lity to attain or maintain profiff tabia lity.

Risks Related to Government Regulation and Our Industry

HeHH altll htt care refe orff mrr measures may negat
tt
profiff tii abl

yll .yy

e

itt velyll

imii pacm t our abilii ill tii ytt

tott sellll NUPUU LPP ALL ZIZZ DII or our product candidatett s,s ifi approved,

In both the U.S. and certain forff eign jurisdictions, there have been a number of legislative and regulatoryrr proposals to
change the healthcare system in ways that could impact our abia lity to sell NUPLAZID, and any other potential products, as
described in greater detail in the Government Regulation section of our Annual Report.

r
drugs

a
any appr

rebates forff

For example, the Patient Protection and Affff orff dabla e Care Act of 2010, as amended by the Health Care and Education
Reconciliation Act of 2010 (collectively the ACA), as well as other healthcare reforff m measures that may be adopted in the
futff urt e, may result in more rigorous coverage criteria and in additional downward pressure on the price that we may receive
forff
oved product, including NUPLAZID. With respect to pharmaceutical products, the ACA, among other things,
covered by Medicaid and made changes to the coverage requirements
expanded and increased industryrr
under Medicare Part D, Medicare’s prescription drugrr
benefiff ts program. There have been legal and political challenges to
certain aspects of the ACA. Furthermore, on June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural
grounds that argued the ACA is unconstitutt
Moreover, prior to the U.S. Supreme Court rulrr
initiated a special enrollment period forff
rr
purpos
which began on Februar
governmental agencies to review and reconsider their existing policies and rulr es that limit access to healthcare, including
among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and
policies that create unnecessaryrr barriers to obtaining access to health insurance coverage through Medicaid or the ACA.
Further, on August 16, 2022, President Biden signed the Inflff ation Reduction Act of 2022 (IRARR ) into law, which among other
individuals purchasing health insurance coverage in ACA marketplt aces through plan
things, extends enhanced subsidies forff

ional in its entirety because the “individual mandate” was repealed by Congress.
ing, on Januaryrr 28, 2021, President Biden issued an executive order that
es of obtaining health insurance coverage through the ACA marketplt ace,

ryrr 15, 2021 and remained open through August 15, 2021. The executive order also instrucrr

ted certain

40

year 2025. The IRARR also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by signififf cantly
lowering the benefiff ciaryrr maximum out-of-ff pocket cost and through a newly establa ished manufaff cturt er discount program. It is
possible that the ACA will be subject to judicial or Congressional challenges in the futff urt e. It is unclear how any such
challenges and additional healthcare reforff m measures of the Biden administration will impact the ACA and our business.

Other legislative changes have been proposed and adopted in the U.S. since the ACA. Through the process created by
the Budget Control Act of 2011, there are automatic reductions of Medicare payments to providers up to 2% per fiff scal year,
which went into effff eff ct in April 2013 and, due to subsequent legislative amendments, including the Infrff astrucr
turt e Investment
and Jobs Act, will remain in effff eff ct through 2031 unless additional Congressional action is taken. However, COVID-19
pandemic relief legislation suspended the 2% Medicare sequester frff om May 1, 2020 through March 31, 2022. Under current
frff om 1% in 2022 to up to 4% in the fiff nal fiff scal year of this
legislation the actuat
sequester. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which
eliminates the statutt oryrr Medicaid drugr
source and innovator multiple source drugs
the American Taxpayer Relief Act of 2012, which, among other things, furff
providers, and increased the statutt e of limitations period forff
to fiff ve years. In addition, Congress is considering additional health reforff m measures as part of the budget reconciliation
process.

single
, beginning Januaryrr 1, 2024. In Januaryrr 2013, President Obama signed into law

the government to recover overpar yments to providers frff om three

l reduction in Medicare payments will varyrr

ther reduced Medicare payments to certain

s average manufaff cturt er price, forff

currently set at 100% of a drug’

rebate cap,a
r

r

An expansion in the government’s role in the U.S. healthcare industryrr may increase existing congressional or

r

a

rr
drugs

under Medicare, and reforff m

Prices that outlines principles forff

providers using NUPLAZID or any

products, lower reimbursements forff

oval, reduce product utilization and adversely affff eff ct our business and

iny on price increases, such as the ones we have implemented forff NUPLAZID, cause general

. For example, in July 2021, the Biden administration released
. In response to Biden’s executive order, on

governmental agency scrutr
downward pressure on the prices of prescription drugr
other product forff which we obtain regulatoryrr appr
results of operations. There have been several recent U.S. presidential executive orders, Congressional inquiries and proposed
and enacted feff deral and state legislation designed to, among other things, bring more transparency to drugr
pricing, review the
relationship between pricing and manufaff cturt er patient programs, reduce the cost of drugs
government program reimbursement methodologies forff
an executive order that included multiple provisions aimed at prescription drugs
September 9, 2021, the Department of Health and Human Services (HHS) released a Comprehensive Plan forff Addressing
High Drugr
pricing reforff m. The plan sets out a variety of potential legislative policies
that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. In addition,
the IRARR , among other things, (1) directs HHS to negotiate the price of certain single-source drugs
under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpat
inflff ation. These provisions will take effff eff ct progressively starting in fiff scal year 2023, although they may be subject to legal
challenges. It is currently unclear how the IRARR will be implemented but is likely to have a signififf cant impact on the
pharmaceutical industry.rr Further, the Biden administration released an additional executive order on October 14, 2022,
directing HHS to submit a report on how the Center forff Medicare and Medicaid Innovation can be furff
new models forff
or similar policy initiatives will be implemented in the futff urt e. Individual states in the U.S. have also increasingly passed
legislation and implemented regulations designed to control pharmaceutical 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 frff om other countries and bulk purchasing.

costs forff Medicare and Medicaid benefiff ciaries. It is unclear whether these this executive order

and biologics covered

ther leveraged to test

lowering drugr

drugr

ce

r

r

The implementation of cost-containment measures or other healthcare reforff ms may prevent us frff om being abla e to

generate revenue, attain profiff tabia lity, or commercialize NUPLAZID or any other products forff which we may receive
regulatoryrr appr
pandemic.

oval. It is also possible that additional governmental action may be taken in response to the COVID-19

a

WeWW are subject,tt dirii ectltt yll and inii diri ectltt yll ,yy tott
frff aud and abuse lawll
lawll
securitii ytt

sw ,s falff
s. IfII we are unablell

sll e claill mii

feff deral,ll stattt ett and forff

healtll htt care lawll

s and regue

latll

itt ons,s inii cludinii g healtll htt care

s lawll

s,s phyh sician payment trtt anspar
tott complm yll ,yy or have not fuff llll yll complm ill ed, witii htt

encyc lawll

s and healtll htt

such lawll

s,s we couldll

inii fn orff mrr atitt on privacyc and
e substantt

facff

titt al penaltll itt es.

eigni
s

Our operations are directly, and indirectly through our customers and third-party payors, subject to various U.S. feff deral

and state healthcare laws and regulations, including, without limitation, the U.S. feff deral Anti-Kickback Statutt e, the U.S.
feff deral False Claims Act, and physician payment sunshine laws and regulations. These laws may impact, among other things,
our clinical research, sales, marketing, grants, charitabla e donations, and education programs and constrain the business or
fiff nancial arrangements with healthcare providers, physicians, charitabla e founda
generally, and other parties that have the abia lity to directly or indirectly inflff uence the prescribing, ordering, marketing, or

tions that support Parkinson’s disease patients

ff

41

ators, partners or service providers are or may become subject to data privacy and security regulation by both the
y to our

distribution of our products forff which we obtain marketing appr
a
collabor
U.S. feff deral government and the states in which we conduct our business, including laws and regulations that appl
processing of personal data or the processing of personal data on our behalf.ff Finally, we may be subject to additional
healthcare, statutt oryrr and regulatoryrr
we conduct our business. The laws that may affff eff ct our abia lity to operate include:

requirements and enforff cement by forff eign regulatoryrr authorities in jurisdictions in which

oval. In addition, we and any current or potential futff urt e

a

a

•

•

•

•

•

•

•

the U.S. feff deral Anti-Kickback Statutt e, which prohibits, among other things, persons or entities frff om knowingly
ly soliciting, offff eff ring, receiving or paying any remuneration (including any kickback, bribe, or certain
and willfulff
rebates), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in returt n forff
, either the refeff rral
of an individual, or the purchase, lease, order or recommendation of any good, faff cility, item or service, forff which
payment may be made, in whole or in part, under U.S. feff deral and state healthcare programs such as Medicare
and Medicaid. A person or entity does not need to have actuat
violate it in order to have committed a violation;

l knowledge of the statutt e or specififf c intent to

the U.S. feff deral civil and criminal faff lse claims laws, including the civil False Claims Act, which can be enforff ced
through civil whistleblower or qui tam actions, and civil monetaryrr penalties laws, which impose criminal and
, among other things, knowingly presenting, or causing to be presented
civil penalties on individuals or entities forff
to the U.S. feff deral government, claims forff
payment or appr
making a faff lse statement to avoid, decrease or conceal an obligation to pay money to the U.S. feff deral
government. In addition, the government may assert that a claim including items and services resulting frff om a
violation of the U.S. feff deral Anti-Kickback Statutt e constitutt es a faff lse or frff audulent claim forff
False Claims Act;

oval that are faff lse or frff audulent or frff om knowingly

es of the

rr
purpos

a

, among other things, knowingly and willfulff

the U.S. feff deral Health Insurance Portabia lity and Accountabia lity Act of 1996 (HIPAA), which imposes criminal
and civil liabia lity forff
ly executing, or attempting to execute, a scheme
to defrff aud any healthcare benefiff t program or obtain, by means of faff lse or frff audulent pretenses, representations, or
promises, any of the money or property owned by, or under the custody or control of,ff any healthcare benefiff t
ly faff lsifyiff ng, concealing or
program, regardless of the payor (e.g., public or private) and knowingly and willfulff
covering up by any trick or device a material faff ct or making any materially faff lse statement, in connection with
the deliveryrr of,ff or payment forff
Statutt e, a person or entity does not need to have actuat
order to have committed a violation;

, healthcare benefiff ts, items or services. Similar to the U.S. feff deral Anti-Kickback
l knowledge of the statutt e or specififf c intent to violate it in

HIPAA, and its implementing regulations, and as amended again by the Final HIPAA Omnibus RulRR e,
Modififf cations to the HIPAA Privacy, Security, Enforff cement and Breach Notififf cation RulRR es Under the Health
Inforff mation Technology forff Economic and Clinical Health Act (HITECH) and the Genetic Inforff mation
Nondiscrimination Act; Other Modififf cations to the HIPAA RulRR es, published in Januaryrr 2013, which imposes
certain obligations, including mandatoryrr contractuat
l terms, with respect to safeff guarding the privacy, security and
transmission of individually identififf abla e health inforff mation on covered entities subject to the rulr e, such as health
plans, healthcare clearinghouses and certain healthcare providers as well as their business associates, individuals
or entities that perforff m certain services involving the use or disclosure of individually identififf abla e health
inforff mation on behalf of a covered entity and their subcontractors that use, disclose or otherwise process
individually identififf abla e health inforff mation;

the U.S. Federal Food, Drugr
misbranding of drugs

r

, biologics and medical devices;

and Cosmetic Act (FDCA), which prohibits, among other things, the adulteration or

r

, devices, biologics and medical supplies forff which payment is availabla e under Medicare,

the U.S. feff deral physician payment transparency requirements, sometimes refeff rred to as the “Physician Payments
Sunshine Act”, which was enacted as part of the ACA and its implementing regulations and requires certain
manufaff cturt ers of drugs
Medicaid, or the Children’s Health Insurance Program to report annually to the Centers forff Medicare and
Medicaid Services (CMS) inforff mation related to certain payments and other transfeff rs of value made to physicians
(as defiff ned to include doctors of medicine, dentists, optometrists, podiatrists and chiropractors under such law),
other healthcare profeff ssionals (such as physician assistants and nurse practitioners), and teaching hospitals, as
well as inforff mation regarding ownership and investment interests held by physicians and their immediate faff mily
members; and

analogous state and local laws and regulations, including: state anti-kickbk ack and faff lse claims laws, which may
appl
a
arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including

y to our business practices, including but not limited to, research, distribution, sales and marketing

42

private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’rr
voluntaryrr compliance guidelines and the relevant compliance guidance promulgated by the U.S. feff deral
government, or otherwise restrict payments that may be made to healthcare providers and other potential refeff rral
sources; state and local laws and regulations that require drugrr manufaff cturt ers to fiff le reports relating to pricing and
marketing inforff mation, which requires tracking giftff s and other remuneration and items of value provided to
healthcare profeff ssionals and entities and/or the registration of pharmaceutical sales representatives; and state laws
governing the privacy and security of health inforff mation in certain circumstances, many of which diffff eff r frff om
ts.
each other in signififf cant ways and oftff en are not preempted by HIPAA, thus complicating compliance effff orff

s

Ensuring that our internal operations and futff urt e business arrangements with third parties comply with appl

a

icabla e

ff

ff

ff

a

to be in violation of any of the laws described above

iny, and we could faff ce action if a feff deral or state governmental

tions that support Parkinson’s disease patients generally
or any other governmental

y to us, we may be subject to signififf cant penalties, including civil, criminal and
ff

healthcare laws and regulations could involve substantial costs. It is possible that governmental authorities will conclude that
icabla e frff aud and
our business practices do not comply with current or futff urt e statutt es, regulations or case law interprrr eting appl
a
abus
tions are a current
e or other healthcare laws and regulations. For example, contributions to third-party charitabla e founda
a
area of signififf cant governmental and congressional scrutr
authority were to conclude that our charitabla e contributions to founda
are not compliant. If our operations are found
laws and regulations that may appl
administrative penalties, damages, fiff nes, exclusion frff om U.S. government-funde
Medicaid, disgorgement, imprisonment, contractuat
requirements and/or oversight, and the curtailment or restrucrr
party payors directly and our customers make the ultimate decision on how to submit claims, frff om time-to-time, forff
NUPLAZID, and any other product candidates that may be appr
oved, we may provide reimbursement guidance to patients
a
and healthcare providers. If a government authority were to conclude that we provided improper advice and/or encouraged
reimbursement, we could faff ce action against us by government authorities. If any of the
the submission of a faff lse claim forff
physicians or other providers or entities with whom we expect to do business is found
a
laws, they may be subject to criminal, civil or administrative sanctions, including exclusions frff om government-funde
healthcare programs and imprisonment. If any of the above
and our results of operations. In addition, the appr
candidates that may be appr
a
mentioned above

oved, outside the U.S. will also likely subject us to forff eign equivalents of the healthcare laws

l damages, reputational harm, diminished profiff ts, additional reporting

occur, it could adversely affff eff ct our abia lity to operate our business

oval and commercialization of NUPLAZID, or any other product

ing of our operations. Moreover, while we do not bill third-

d healthcare programs, such as Medicare and

to be not in compliance with appl

, among other forff eign laws.

turt

d

a

a

a

a

ff

ff

icabla e

WeWW are subject tott strtt inii gent and evolvll inii g U.SUU .SS and forff
othtt er oblill gat
couldll
repuee

lell ad tott regue
itt onal harmrr

latll ortt
; losll

tattt

i

i

itt ons relatll ett d tott datatt privacyc and securitii ytt .yy Our actual or perceived faiff

eigni

lawll

s,s regue

latll

itt ons,s rulell s,s contrtt actual oblill gat
lii ure tott complm yll witii htt

itt ons,s polill cies and
itt ons
i
such oblill gat

i

yr inii vestitt gat
s of revenue or profiff tii stt ; and othtt er adversrr e businii ess consequences.

itt ons or actitt ons; lill tii itt gat

i

itt on; fiff nii es and penaltll itt es; didd sii ruptu itt ons of our businii ess operatitt ons;

In the ordinaryrr course of business, we collect, receive, store, process, generate, use, transfeff r, disclose, make accessible,

protect, secure, dispose of,ff transmit, and share (collectively, processing) personal data and other sensitive inforff mation,
including proprietaryrr and confiff dential business data, trade secrets, intellectuat
participants in connection with clinical trials, sensitive third-party data, business plans, transactions, fiff nancial inforff mation
and medical inforff mation collected by our patient access management team (collectively, sensitive data). Our data processing
activities may subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance,
industryrr standards, external and internal privacy and security policies, contractuat
to data privacy and security.

l requirements, and other obligations relating

l property, data we collect about

trial

a

a

ng laws). For example, HIPAA, as amended by HITECH,

In the United States, feff deral, state, and local governments have enacted numerous data privacy and security laws,
including data breach notififf cation laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal
Trade Commission Act), and other similar laws (e.g., wiretappi
imposes specififf c requirements relating to the privacy, security, and transmission of individually identififf abla e health
inforff mation. For example, the Califorff nia Consumer Privacy Act of 2018 (CCPA) requires businesses to provide specififf c
disclosures in privacy notices and honor requests of Califorff nia residents to exercise certain privacy rights. The CCPA
provides forff
recover signififf cant statutt oryrr damages. Although the CCPA exempts some data processed in the context of clinical trials, the
CCPA may increase compliance costs and potential liabia lity with respect to other personal data we may maintain about
Califorff nia residents. In addition, the Califorff nia Privacy Rights Act of 2020 (CPRARR ), which became operative Januaryrr 1,
2023, expands the CCPA’s requirements, including appl
employees and establa ishing a new regulatoryrr agency to implement and enforff ce the law. Other states, such as Virginia and
Colorado, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well

civil penalties of up to $7,500 per violation and allows private litigants affff eff cted by certain data breaches to

ying to personal inforff mation of business representatives and

a

a

43

as at the feff deral and local levels. While these states, like the CCPA, also exempt some data processed in the context of
clinical trials, these developments furff
and the third parties upon whom we rely.

ts and increase legal risk and compliance costs forff

ther complicate compliance effff orff

us

Outside the United States, an increasing number of laws, regulations, and industryrr standards may govern data privacy

and security. For example, the EU GDPR, UK GDPR, Brazil’s General Data Protection Law (Lei Geral de Proteção de
Dados Pessoais, or LGPD) (Law No. 13,709/2018), and China’s Personal Inforff mation Protection Law (PIPL) impose strict
requirements forff
processing personal data. For example, companies may faff ce temporaryrr or defiff nitive bans on data processing
and other corrective actions; fiff nes of up to 20 million Euros under the EU GDPR / 17.5 million pounds sterling under the UK
GDPR or 4% of annual global revenue, whichever is greater; or private litigation related to processing of personal data
brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

In addition, we may be unabla e to transfeff r personal data frff om Europe and other jurisdictions to the United States or
other countries due to data localization requirements or limitations on cross-border data flff ows. Europe and other jurisdictions
have enacted laws requiring data to be localized or limiting the transfeff r of personal data to other countries. In particular, the
European Economic Area (EEA) and the UK have signififf cantly restricted the transfeff r of personal data to the United States
and other countries whose privacy laws it believes are inadequate. Other jurisdictions may adopt similarly stringent
interprr etations of their data localization and cross-border data transfeff r laws. Although there are currently various
mechanisms that may be used to transfeff r personal data frff om the EEA and UK to the United States in compliance with law,
such as the EEA and UK’s standard contractuat
assurance that we can satisfyff or rely on these measures to lawfulff
lawfulff manner forff
requirements forff
limiting our abia lity to conduct clinical trial activities in Europe and elsewhere, the interrupt
operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at signififf cant
expense, increased exposure to regulatoryrr actions, substantial fiff nes and penalties, the inabia lity to transfeff r data and work with
partners, vendors and other third parties, and injunctions against our processing or transfeff rring of personal data necessaryrr
to
operate our business. Some European regulators have ordered certain companies to suspend or permanently cease certain
transfeff rs of personal data to recipients outside Europe forff
limitations. Additionally, companies that transfeff r personal data to recipients outside of the EEA and/or UK to other
jurisdictions, particularly to the United States, are subject to increased scrutr
activist groups.

us to transfeff r personal data frff om the EEA, the UK, or other jurisdictions to the United States, or if the
a legally-compliant transfeff r are too onerous, we could faff ce signififf cant adverse consequences, including by

l clauses, these mechanisms are subject to legal challenges, and there is no

allegedly violating the EU GDPR’s cross-border data transfeff r

ly transfeff r personal data to the United States. If there is no

iny frff om regulators individual litigants and

ion or degradation of our

r

In addition to data privacy and security laws, we may be contractuat

lly subject to industryrr standards adopted by industryrr

l obligations
groups and may become subject to such obligations in the futff urt e. We may also be bound by other contractuat
related to data privacy and security, and our effff orff
. We may publish
privacy policies, marketing materials, and other statements, such as compliance with certain certififf cations or self-ff regulatoryrr
principles, regarding data privacy and security. If these policies, materials or statements are found
to be defiff cient, lacking in
transparency, deceptive, unfaff ir, or misrepresentative of our practices, we may be subject to investigation, enforff cement actions
by regulators, or other adverse consequences.

ts to comply with such obligations may not be successfulff

ff

Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating
ications and interprr etations, which

regulatoryrr uncertainty. Additionally, these obligations may be subject to diffff eff ring appl
may be inconsistent or conflff ict among jurisdictions. Preparing forff
signififf cant resources and may necessitate changes to our services, inforff mation technologies, systems, and practices and to
those of any third parties that process personal data on our behalf.ff

and complying with these obligations requires us to devote

a

We may at times faff il (or be perceived to have faff iled) in our effff orff

ts to comply with our data privacy and security

ts, our personnel or third parties on whom we rely on may faff il to comply with such

obligations. Moreover, despite our effff orff
obligations, which could negatively impact our business operations. If we or the third parties on which we rely faff il, or are
perceived to have faff iled, to address or comply with appl
consequences, including but not limited to: government enforff cement actions (e.g., investigations, fiff nes, penalties, audits,
inspections, and similar); litigation (including class-action claims); additional reporting requirements and/or oversight; bans
on processing personal data; and orders to destroy or not use personal data. Any of these events could have a material
adverse effff eff ct on our reputation, business, or fiff nancial condition, including but not limited to loss of customers; inabia lity to
process personal data or to operate in certain jurisdictions; limited abia lity to develop or commercialize our products;
expenditurt e of time and resources to defeff nd any claim or inquiry;rr
model or operations.

adverse publicity; or substantial changes to our business

icabla e data privacy and security obligations, we could faff ce signififf cant

a

44

lii tott complm yll witii htt our repee ortitt nii g and payment oblill gat

i

itt ons under thtt e MeMM dicaid Drugu Rebatett PrPP ogram or othtt er

thtt e U.SUU .,SS we couldll be subject tott additii itt onal reimii bursrr ement requirii ementstt ,s fiff nii es,s

s which couldll have a matett rial adversrr e efe fff eff ct on our businii ess,s resultll stt of operatitt ons

IfII we faiff
governmentaltt
sanctitt ons and expos
and fiff nii ancial conditii itt on.

pricinii g programs inii
ee

ure under othtt er lawll

We participate in the Medicaid Drugrr Rebate Program, as administered by CMS, and other feff deral and state government

rr

pricing programs in the U.S., and we may participate in additional government pricing programs in the futff urt e. These
programs generally require us to pay rebates or otherwise provide discounts to government payors in connection with drugs
that are dispensed to benefiff ciaries/recipients of these programs. In some cases, such as with the Medicaid Drugr Rebate
Program, the rebates are based on pricing that we report on a monthly and quarterly basis to the government agencies that
administer the programs. Pricing requirements and rebate/discount calculations are complex, varyrr among products and
programs, and are oftff en subject to interprr etation by governmental or regulatoryrr agencies and the courts. The requirements of
these programs, including, by way of example, their respective terms and scope, change frff equently. For example, on March
11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutt oryrr Medicaid
rebate cap,a
drugr
multiple source drugs
complexity of compliance will be time consuming. Invoicing forff
lag of up to several months between the sales to which rebate notices relate and our receipt of those notices, which furff
forff
complicates our abia lity to accurately estimate and accruer
individual states. Thus, there can be no assurance that we will be abla e to identifyff all faff ctors that may cause our discount and
rebate payment obligations to varyrr
l results may diffff eff r signififf cantly frff om our estimated
allowances forff
business, results of operations and fiff nancial condition.

, beginning Januaryrr 1, 2024. Responding to current and futff urt e changes may increase our costs, and the
rebates is provided in arrears, and there is frff equently a time

discounts and rebates. Changes in estimates and assumptions may have a material adverse effff eff ct on our

currently set at 100% of a drug’
rr

rebates related to the Medicaid program as implemented by

s average manufaff cturt er price (AMP), forff

frff om period to period, and our actuat

single source and innovator

ther

r

In addition, the HHS Offff iff ce of Inspector General and other Congressional, enforff cement and administrative bodies have

errors associated with our submission of pricing data and forff

products, including, but not limited to the methodologies used by
compliance with reporting requirements under the Medicaid Drugr

recently increased their focff us on pricing requirements forff
manufaff cturt ers to calculate AMP, and best price (BP), forff
Rebate Program. We are liabla e forff
government payors. For example, faff ilure to submit monthly/quarterly AMP and BP data on a timely basis could result in
signififf cant civil monetaryrr penalties forff
disclosures and/or to identifyff overpar yments could result in allegations against us under the civil False Claims Act and other
laws and regulations. Any required refunds
enforff cement action would be expensive and time consuming and could have a material adverse effff eff ct on our business, results
of operations and fiff nancial condition. In addition, in the event that the CMS were to terminate our rebate agreement, no
feff deral payments would be availabla e under Medicaid or Medicare forff

each day the submission is late beyond the due date. Failure to make necessaryrr

to the U.S. government or responding to a government investigation or

any overcharging of

our covered outpat

tient drugs

ff

rr

.

ThTT e FDFF ADD grantett d markerr
PDPP PDD ,PP and we couldll
ll
labe

l” uses.

facff

titt nii g approval of NUPUU LPP ALL ZIZZ DII

thtt e trtt eatmtt ent of hallll ucinii atitt ons and delusions associatett d witii htt

e lill abilii ill tii ytt

ifi a regue

latll ortt

inii es thtt at we are promotitt nii g NUPUU LPP ALL ZIZZ DII

forff

anyn “offff -ff

forff
yr authtt oritii ytt detett rmrr

A company may not promote “offff -ff labea

l” uses forff

its drugr

products. An offff -ff labea
a

l use is the use of a product forff

an
uses in other

a

a

offff -ff labea

oved labea

oved by the appl

l in the U.S. or forff

to have promoted offff -ff labea

icabla e regulatoryrr agencies. Physicians, on the other hand, may

l uses. Although the FDA and other regulatoryrr agencies do not regulate a physician’s choice of

treatment made in the physician’s independent medical judgment, they do restrict promotional communications frff om
l uses of products forff which marketing clearance has
l use of its product may be subject to signififf cant liabia lity,

indication or patient population that is not described in the product’s FDA-appr
jurisdictions that diffff eff r frff om those appr
prescribe products forff
drugr
pharmaceutical companies or their sales forff ce with respect to offff -ff labea
not been issued. A company that is found
ff
including civil and criminal sanctions. We intend to comply with the requirements and restrictions of the FDA and other
regulatoryrr agencies with respect to our promotion of NUPLAZID and any other products we may market, but we cannot be
sure that the FDA or other regulatoryrr agencies will agree that we have not violated their restrictions. As a result, we may be
subject to criminal and civil liabia lity. In addition, our management’s attention could be diverted to handle any such alleged
violations. A signififf cant number of pharmaceutical companies have been the target of inquiries and investigations by various
U.S. feff deral and state regulatory,rr
investigative, prosecutorial and administrative entities in connection with the promotion of
oved uses and other sales practices, including the Department of Justice (DOJ), and various U.S.
a
unappr
products forff
Attorneys’ Offff iff ces, the HHS Offff iff ce of Inspector General, the FDA, the Federal Trade Commission and various state
Attorneys General offff iff ces. These investigations have alleged violations of various U.S. feff deral and state laws and regulations,
including claims asserting antitrusr
Marketing Act, anti-kickback laws, and other alleged violations in connection with the promotion of products forff

t violations, violations of the FDCA, the civil False Claims Act, the Prescription Drugrr
a
unappr

oved

45

uses, pricing and Medicare and/or Medicaid reimbursement. If the FDA, DOJ, or any other governmental agency initiates an
enforff cement action against us, or if we are the subject of a qui tam suit and it is determined that we violated prohibitions
relating to the promotion of products forff
damage awards and other sanctions such as consent decrees and corpor
activities would be subject to ongoing scrutr
icabla e laws and regulations.
Any such fiff nes, awards or other sanctions would have an adverse effff eff ct on our revenue, business, fiff nancial prospects, and
reputation.

oved uses, we could be subject to substantial civil or criminal fiff nes or
ate integrity agreements pursuant to which our

iny and monitoring to ensure compliance with appl

a
unappr

a

r

ChCC anges at thtt e FDFF ADD and othtt er governrr ment agencies couldll delayll
commercialill zii ed inii a titt mii elyll manner or othtt erwisii e prevent thtt ose agencies frff om perfr orff mrr
operatitt on of our businii ess may relyll ,yy which couldll negat

imii pacm t our businii ess.

itt velyll

e

or prevent new productstt frff om beinii g develope

ll

d or

inii g normrr al fuff nctitt ons on which thtt e

The abia lity of the FDA to review and appr

a

ove new products can be affff eff cted by a variety of faff ctors, including

ff

government budget and fundi
regulatory,rr
government fundi
development activities is subject to the political process, which is inherently flff uid and unpredictabla e.

and policy changes. Average review times at the agency have flff uctuat
ff

ng of other government agencies on which our operations may rely, including those that fund

ng levels, abia lity to hire and retain key personnel and accept payment of user feff es, and statutt ory,rr

ted in recent years as a result. In addition,

research and

ff

r
Disrupt

ions at the FDA and other agencies may also slow the time necessaryrr

forff

new drugs

r

to be reviewed and/or

oved by necessaryrr government agencies, which would adversely affff eff ct our business. For example, over the last several

appr
a
years, including beginning on December 22, 2018 and ending on Januaryrr 25, 2019, the U.S. government has shut down
several times and certain regulatoryrr agencies, such as the FDA, have had to furff
lough critical government employees and stop
critical activities. If repeated or prolonged government shutdowns occur, it could signififf cantly impact the abia lity of the FDA
to timely review and process our regulatoryrr submissions, and negatively impact other government operations on which we
rely, which could have a material adverse effff eff ct on our business.

WeWW are subject tott strtt inii gent regue
frff om our product candidatett s,s which couldll delayll

itt on inii connectitt on witii htt

latll

thtt e markerr

titt nii g of NUPUU LPP ALL ZIZZ DII and anyn othtt er productstt derived

thtt e developmll

ent and commercialill zii atitt on of our productstt .

The pharmaceutical industryrr

is subject to stringent regulation by the FDA and other regulatoryrr agencies in the U.S. and

a

by comparabla e authorities in other countries. Neither we nor our collabor
including NUPLAZID, in the U.S. until it has completed rigorous preclinical testing and clinical trials and an extensive
regulatoryrr clearance process implemented by the FDA. Satisfaff ction of regulatoryrr
depends upon the type, complexity and novelty of the product, and requires substantial resources. Even if regulatoryrr appr
is obtained, the FDA and other regulatoryrr agencies may impose signififf cant restrictions on the indicated uses, conditions forff
use, labea
including additional research and development and clinical trials. These limitations may limit the size of the market forff
product or result in the incurrence of additional costs. Any delay or faff ilure in obtaining required appr
ovals could have a
material adverse effff eff ct on our abia lity to generate revenues frff om the particular product candidate.

ling, advertising, promotion, and/or marketing of such products, and requirements forff

ators can market a pharmaceutical product,

requirements typically takes many years,

oval studi

a
post-appr

the

es,

a

a

t

oval

Outside the U.S., the abia lity to market a product is contingent upon receiving appr

a

oval frff om the appr

a

opriate regulatoryrr

authorities. The requirements governing the conduct of clinical trials, marketing authorization, pricing, and reimbursement
varyrr widely frff om countryrr
opriate regulatoryrr authority is satisfiff ed that adequate evidence of
safeff ty, quality, and effff iff cacy has been presented will it grant a marketing authorization. Approval by the FDA does not
automatically lead to the appr
outside the U.S. will not automatically lead to FDA appr

oval by regulatoryrr authorities outside the U.S. and, similarly, appr

to country.rr Only aftff er the appr

oval by regulatoryrr authorities

oval.

a

a

a

a

In addition, U.S. and forff eign government regulations control access to and use of some human or other tissue samples

in our research and development effff orff
ts. U.S. and forff eign government agencies may also impose restrictions on the use of
data derived frff om human or other tissue samples. Accordingly, if we faff il to comply with these regulations and restrictions,
the commercialization of our product candidates may be delayed or suspended, which may delay or impede our abia lity to
generate product revenues.

IfII our compem titt tii ortt
candidatett s,s thtt eye may reduce or elill mii

srr developll

and markerr

inii atett our commercial opportunitii ytt .yy

t productstt

thtt at are more efe fff eff ctitt ve thtt an NUPUU LPP ALL ZIZZ DII ,D trtt ofiff nii etitt de or our othtt er product

Competition in the pharmaceutical and biotechnology industries is intense and expected to increase. We faff ce
competition frff om pharmaceutical and biotechnology companies, as well as numerous academic and research institutt

ions and

46

governmental agencies, both in the U.S. and abra oad. Some of these competitors have products or are pursuing the
development of drugs

that target the same diseases and conditions that are the focff us of our drugrr

development programs.

r

quetiapia ne, clozapia ne, risperidone, aripiprazole, and olanzapia ne. Pimavanserin forff

the treatment of PDP competes with offff -ff labea

For example, the use of NUPLAZID forff
, including the generic drugs

rr

drugs
r
treatment of negative symptoms of schizophrenia, if appr
Vraylar, marketed by Allergan, Rexulti, marketed by Otsuka Pharmaceutical Co., Ltd., Latuda
Pharmaceuticals Inc., Capla yta, marketed by IntraCellular Therapea utics and various generic drugs
r
clozapia ne, risperidone, aripiprazole, and olanzapia ne. In addition, trofiff netide, if appr
labea
antiepileptics, antipsychotics, antidepressants and benzodiazepines. Several academic institutt
companies are currently conducting clinical trials forff

oved forff

a

a

t

the treatment of various symptoms of Rett syndrome.

l use of various antipsychotic
the

l use of
, marketed by Sunovion
, including quetiapia ne,

l usage of branded and generic prescription medications targeted at individual symptoms of Rett syndrome, including

that indication, would compete with offff -ff labea

ions and pharmaceutical

oved would compete indirectly with offff -ff

Many of our competitors and their collabor

a

ators have signififf cantly greater experience than we do in the folff

lowing:

•

•

•

•

•

identifyiff ng and validating targets;

screening compounds against targets;

preclinical studi

t

es and clinical trials of potential pharmaceutical products;

obtaining FDA and other regulatoryrr appr

a

ovals; and

commercializing pharmaceutical products.

In addition, many of our competitors and their collabor

a

ators have substantially greater capia tal and research and

ing, sales and marketing capaa bia lities, and production faff cilities. Smaller companies also

oved or are in advanced development and may develop superior technologies or methods to identifyff and validate drugrr

development resources, manufaff cturt
may prove to be signififf cant competitors, particularly through proprietaryrr
with large pharmaceutical and establa ished biotechnology companies. Many of our competitors have products that have been
a
appr
targets and to discover novel small molecule drugs
developing drugs
patent protection or commercialize drugs
furff
effff eff ct on our business.

sooner than us. Our competitors may also develop alternative therapia es that could
that we may develop. Our faff ilure to compete effff eff ctively could have a material adverse

that are more effff eff ctive, safeff r, more affff orff dabla e, or more easily administered than ours and may achieve

. Our competitors, either alone or with their collabor

research discoveries and collabor

ther limit the market forff

rr
r
any drugs

ators, may succeed in

ation arrangements

a

a

r

r

oduct lill abilii ill tii ytt

IfII prff
commercialill zii atitt on of NUPUU LPP ALL ZIZZ DII or anyn othtt er product forff which we obtaitt nii
commercialill zii atitt on of our product candidatett s.

suitii stt are broughu t againii st us,s we may inii cur substantt

lawll

titt al lill abilii ill tii itt es and may be requirii ed tott
yr approval,ll or developmll

latll ortt

regue

lill mii
itii
ent or

We faff ce an inherent risk of product liabia lity as a result of the commercial sales of NUPLAZID in the U.S. and the

ff

a

to be otherwise unsuitaba le forff

lowing commercial launch of NUPLAZID in
oved, or if we engage in the clinical testing of new product candidates or commercialize any

clinical testing of our product candidates, and will faff ce an even greater risk folff
additional jurisdictions, if appr
additional products. For example, we may be sued if NUPLAZID or any other product we develop allegedly causes injuryrr or
is found
of defeff cts in manufaff cturt
or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfulff
defeff nd ourselves against product liabia lity claims, we may incur substantial liabia lities or be required to limit
commercialization of our product candidates. Even successfulff
resources. Regardless of the merits or eventuat

administration in humans. Any such product liabia lity claims may include allegations
ing, defeff cts in design, a faff ilure to warn of dangers inherent in the product, negligence, strict liabia lity

defeff nse would require signififf cant fiff nancial and management

l outcome, liabia lity claims may result in:

ly

•

•

•

•

•

•

decreased demand forff

our products or product candidates that we may develop;

injuryrr

to our reputation;

withdrawal of clinical trial participants;

initiation of investigations by regulators;

costs to defeff nd the related litigation;

a diversion of management’s time and our resources;

47

•

•

•

•

•

•

substantial monetaryrr awards to trial participants or patients;

product recalls, withdrawals or labea

ling, marketing or promotional restrictions;

loss of revenue;

exhaustion of any availabla e insurance and our capia tal resources;

the inabia lity to commercialize our products or product candidates; and

a decline in our stock price.

Although we currently have product liabia lity insurance that covers our clinical trials and the commercialization of

a

oved forff

commercial sale. This insurance may be prohibitively expensive or may not fulff

NUPLAZID, we may need to increase and expand this coverage, including if we commence larger scale trials and if other
product candidates are appr
ly cover
our potential liabia lities. Inabia lity to obtain suffff iff cient insurance coverage at an acceptabla e cost or otherwise to protect against
potential product liabia lity claims could prevent or inhibit the commercialization of products that we or our collabor
develop. If we determine that it is prude
increased coverage on acceptabla e terms or at all. Our insurance policies also have various exclusions, and we may be subject
to a product liabia lity claim forff which we have no coverage. Our liabia lity could exceed our total assets if we do not prevail in a
lawsuit frff om any injuryrr caused by our drugr
business and results of operations.

nt to increase our product liabia lity coverage, we may be unabla e to obtain such

products. Product liabia lity claims could have a material adverse effff eff ct on our

ators

a

rr

IfII our inii fn orff mrr atitt on tett chnology
couldll expe
ee
i
inii vestitt gat
disii ruptu itt ons of our businii ess operatitt ons,s and a losll

or thtt ose of thtt
rience adversrr e consequences resultll itt nii g frff om such comprm omisii e,e inii cludinii g but not lill mii
i
, lill tii itt gat

itt ons or actitt ons,s inii tett rruptu itt ons tott operatitt ons or clill nii
s of customtt

ical trtt ialsll ,s repuee
ersrr or salell s.

iri d partitt es uponu

sys stett ms or data,tt

itt onal harmrr

tattt

ll

which we relyll ,yy are or were comprm omisii ed, we

itii ett d tott regue
itt on, fiff nii es and penaltll itt es,s

yr
latll ortt

In the ordinaryrr course of our business, we , or the third parties upon which we rely, process, collect, receive, store, use,
confiff dential, and sensitive data,

transmit, transfeff r, make accessible, protect, secure, dispose of,ff disclose and share proprietary,rr
including personal data (such as health-related data), intellectuat

l property, and trade secrets.

Cyberattacks, malicious internet-based activity, online and offff lff ine frff aud and other similar activities threaten the
confiff dentiality, integrity, and availabia lity of our sensitive inforff mation and inforff mation technology systems, and those of the
third parties upon which we rely. These threats are prevalent, continue to rise, and are becoming increasingly diffff iff cult to
detect. These threats come frff om a variety of sources, including traditional computer “hackers,” threat actors, personnel
misconduct or error (such as through theftff or misuse), organized criminal threat actors, sophisticated nation-states, and
nation-state-supported actors. Some actors now engage and are expected to continue to engage in cyber-attacks, including
without limitation nation-state actors forff
During times of war and other maja or conflff icts, we and the third parties upon which we rely may be vulnerabla e to a
heightened risk of these attacks, including retaliatoryrr cyber-attacks, that could materially disrupt
supply chain, and abia lity to producd e, sell and distribute our goods and services.

geopolitical reasons and in conjunction with militaryrr conflff icts and defeff nse activities.

our systems and operations,

r

We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to,

social engineering attacks (including through phishing attacks), malicious code (such as virusrr
(including as a result of advanced persistent threat intrusrr
personnel misconduct or error, ransomware attacks, supply-chain attacks, softff ware bugs, server malfunc
hardware faff ilures, loss of data or other inforff mation technology assets, adware, telecommunications faff ilures, earthquakes, fiff re,
flff ood, and other similar threats.

ions), denial-of-ff service attacks (such as credential stuft

fff iff ng),
tion, softff ware or

es and worms), malware

ff

Ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are

ions, delays, or outages in our operations,
ion of clinical trials, loss of data (including data related to clinical trials) and income, signififf cant extra expenses to
ff

becoming increasingly prevalent and severe and can lead to signififf cant interrupt
disrupt
r
restore data or systems, reputational harm and the diversion of funds
of a ransomware attack, but we may be unwilling or unabla e to make such payments (including, forff
laws or regulations prohibit such payments). The COVID-19 pandemic and our partially remote workforff ce poses increased
risks to our inforff mation technology systems and data, as more of our employees work frff om home, utilizing network
connections outside our premises. Futurt e or past business transactions (such as acquisitions or integrations) could expose us
to additional cybersecurity risks and vulnerabia lities, as our systems could be negatively affff eff cted by vulnerabia lities present in
acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found

. Extortion payments may alleviate the negative impact

example, if appl

icabla e

a

ff

r

48

during due diligence of such acquired or integrated entities, and it may be diffff iff cult to integrate companies into our
inforff mation technology environment and security program.

rr

ion and authentication technology, employee email, content deliveryrr

We rely on third-party service providers and technologies to operate critical business systems to process sensitive
suppliers, data center
ff

inforff mation in a variety of contexts, including, without limitation, cloud-based infrff astrucrr
tions. Our
faff cilities, encrypt
abia lity to monitor these third parties’ inforff mation security practices is limited, and these third parties may not have adequate
inforff mation security measures in place. In addition, supply-chain attacks have increased in frff equency and severity, and we
cannot guarantee that third parties’ infrff astrucr
compromised. For example, in May 2021, a key drugrr
however, to date we found

turt e in our supply chain or our third-party partners’ supply chains have not been
supplier notififf ed us of a ransomware attack on our supplier’s systems;

no indication that our personal data was exposed.

to customers, and other func

turt e, drugrr

ff

Any of the previously identififf ed or similar threats could cause a security incident or other interrupt

ion that could result

, or accidental acquisition, modififf cation, destrucrr

in unauthorized, unlawfulff
access to our sensitive inforff mation or our inforff mation technology systems, or those of the third parties upon whom we rely. A
security incident or other interrupt
products.

our abia lity (and that of third parties upon whom we rely) to provide our

ion, disclosure of,ff or

ion could disrupt

r

r

rr
tion, loss, alteration, encrypt

rr

We may expend signififf cant resources, funda

ff

mentally change our business activities and practices (including our

to protect against security incidents. Certain data privacy and security obligations may require us to

clinical trials) to tryrr
implement and maintain specififf c security measures or industry-rr
standard or reasonabla e security measures to protect our
inforff mation technology systems and sensitive inforff mation. While we have implemented security measures designed to
protect against security incidents, there can be no assurance that these measures will be effff eff ctive. We may be unabla e in the
futff urt e to detect vulnerabia lities in our inforff mation technology systems (including our products) because such threats and
techniques change frff equently, are oftff en sophisticated in naturt e, and may not be detected until aftff er a security incident has
occurred. Further, we may experience delays in developing and deploying remedial measures designed to address any such
identififf ed vulnerabia lities.

Applicabla e data privacy and security obligations may require us to notifyff

relevant stakeholders of security incidents.

Such disclosures are costly, and the disclosure or the faff ilure to comply with such requirements could lead to adverse
consequences. If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced
a security incident, we may experience adverse consequences. These consequences may include: government enforff cement
actions (forff
example, investigations, fiff nes, penalties, audits, and inspections); additional reporting requirements and/or
oversight; restrictions on processing sensitive inforff mation (including personal data); litigation (including class claims);
indemnififf cation obligations; negative publicity; reputational harm; monetaryrr
(including availabia lity of data); fiff nancial loss; and other similar harms. Security incidents and attendant consequences may
cause customers to stop using our products, deter new customers frff om using our products, and negatively impact our abia lity
to grow and operate our business.

ions in our operations

diversions; interrupt

ff
fund

rr

Our contracts may not contain limitations of liabia lity, and even where they do, there can be no assurance that
limitations of liabia lity in our contracts are suffff iff cient to protect us frff om liabia lities, damages, or claims related to our data
privacy and security obligations.

In addition, our insurance coverage may not be adequate or suffff iff cient in type or amount to protect us frff om or to

mitigate liabia lities arising out of our privacy and security practices. The successfulff
against us that exceeds our availabla e insurance coverage, or results in changes to our insurance policies (including premium
increases or the imposition of large deductible or co-insurance requirements), could have an adverse effff eff ct on our business.

assertion of one or more large claims

Risks Related to Our Common Stock

Our stoctt k price hisii tortt

icallll yll has been, and isii

lill keii

lyll

tott remainii

, highi

lyll volatll

itt lii ell .ee

The market prices forff

securities of biotechnology companies in general, and drugr

discoveryrr and development

companies in particular, have been highly volatile and may continue to be highly volatile in the futff urt e. From the period
between Januaryrr 3, 2022 to Februar
share to a high of $27.50 per share. Furthermore, especially as we and our market capia talization have grown, the price of our
common stock has been increasingly affff eff cted by quarterly and annual comparisons with the valuations and recommendations

ryrr 24, 2023, the closing price of our common stock has ranged frff om a low of $13.01 per

49

of the analysts who cover our business. The folff
have a signififf cant impact on the market price of our common stock:

lowing faff ctors, in addition to other risk faff ctors described in this section, may

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

the success of our commercialization of NUPLAZID in the U.S. forff
associated with PDP;

the treatment of hallucinations and delusions

the statust
developed under our collabor

a

ations;

and cost of development and commercialization of our product candidates, including compounds being

whether we acquire or in-license additional product candidates or products, and the statust
commercialization of such product candidates or products;

of development and

the statust
including ADP, and in jurisdictions other than the U.S.;

and cost of development and commercialization of pimavanserin forff

indications other than in PDP,

any other communications or guidance frff om the FDA or other regulatoryrr authorities that pertain to NUPLAZID
or our product candidates;

the statust

and cost of our post-marketing commitments forff NUPLAZID;

the initiation, termination, or reduction in the scope of our collabor
regarding our collabor

ations;

a

a

ations or any disputes or developments

market conditions or trends related to biotechnology and pharmaceutical industries, or the market in general;

announcements of technological innovations, new products, or other material events by our competitors or us,
including any new products that we may acquire or in-license;

disputes or other developments concerning our proprietaryrr and intellectuat

l property rights;

changes in, or faff ilure to meet, securities analysts’ or investors’ expectations of our fiff nancial perforff mance;

our faff ilure to meet appl
Nasdaq Stock Market;

a

icaba le Nasdaq listing standards and the possible delisting of our common stock frff om the

additions or departurt es of key personnel;

discussions of our business, products, fiff nancial perforff mance, prospects, or stock price by the fiff nancial and
scientififf c press and online investor communities such as blogs and chat rooms;

public concern as to, and legislative action with respect to, genetic testing or other research areas of
biopharmaceutical companies, the pricing and availabia lity of prescription drugs
rr
deliveryrr

, or the safeff ty of drugs

techniques;

rr

and drugr

regulatoryrr developments in the U.S. and in forff eign countries;

changes in the strucr

turt e of healthcare payment systems;

the announcement of,ff or developments in, any litigation matters;

ions caused by geopolitical or macroeconomic developments or other business interrupt

disrupt
rr
example, the ongoing conflff ict between Ukraine and RusRR sia, related sanctions and the COVID-19 pandemic; and

ions, including, forff

r

economic and political faff ctors, including but not limited to economic and fiff nancial crises, wars, terrorism, and
political unrest.

In the past, folff

lowing periods of volatility in the market price of a particular company’s securities, securities class

action litigation has oftff en been brought against that company. For example, we, and certain of our current and forff mer offff iff cers
and directors, are subject to numerous lawsuits related to prior statements about
oval
the treatment of hallucinations and delusions associated with DRP, as described in “Legal Proceedings”.
of pimavanserin forff
If we are not successfulff
in defeff nse of these claims, we may have to make signififf cant payments to, or other settlements with,
our stockholders and their attorneys. Even if such claims are not successfulff
divert our management’s attention and resources, which could have a material adverse effff eff ct on our business, operating
results or fiff nancial condition.

, the litigation could result in substantial costs and

NUPLAZID and our sNDA seeking appr

a

a

50

IfII we or our stoctt kholdell
declill nii e.ee

rsrr sellll substantt

titt al amountstt of our common stoctt k, thtt e markerr

t price of our common stoctt k may

A signififf cant number of shares of our common stock are held by a small number of stockholders. Sales of a signififf cant

the shares of our common stock held by entities affff iff liated with one of our principal stockholders and

these rights. Under the registration rights agreement, we have agreed that, if at any time and frff om time

number of shares of our common stock, or the expectation that such sales may occur, could signififf cantly reduce the market
price of our common stock. In connection with our March 2014 public offff eff ring of common stock, we agreed to provide resale
registration rights forff
two of our directors, Julian C. Baker and Dr. Stephen R. Biggar, which we refeff r to as the Baker Entities. In connection with
our Januaryrr 2016 public offff eff ring of common stock, we entered into a forff mal registration rights agreement with the Baker
Entities to provide forff
to time, the Baker Entities demand that we register their shares of our common stock forff
would be obligated to effff eff ct such registration. On May 3, 2019, we fiff led a registration statement covering the sale of up to
40,203,111 shares of our common stock, which includes 489,269 shares of our common stock issuabla e upon the exercise of
warrants that were owned by the Baker Entities as of April 29, 2019, and which represented appr
oximately 28 percent of our
outstanding shares at the time. Our registration obligations under this registration rights agreement, which cover all shares
now held or later acquired by the Baker Entities, will be in effff eff ct forff
up to 10 years, and include our obligation to faff cilitate
certain underwritten public offff eff rings of our common stock by the Baker Entities in the futff urt e. If the Baker Entities sell a
large number of our shares, or the market perceives that the Baker Entities intend to sell a large number of our shares, this
could adversely affff eff ct the market price of our common stock. We also may elect to sell frff om time to time an indeterminate
number of shares on our own behalf pursuant to a registration statement or in a private placement. Our stock price may
decline as a result of the sale of the shares of our common stock included in any of these registration statements or futff urt e
fiff nancings.

resale under the Securities Act, we

a

IfII our offff iff cersrr ,s diri ectortt
management and operatitt ons,s actitt nii g inii

srr ,s and larll ger

st stoctt kholdell

thtt eiri best inii

rsrr choose tott act toge

tt
tett reststt and not necessarilii yll

thtt er,r thtt eye may be ablell

tott signi

ifi iff cantltt yll

thtt ose of our othtt er stoctt kholdell

inii fn lff uence our
rsrr .

Our directors, executive offff iff cers and holders of 5% or more of our outstanding common stock and their affff iff liates
benefiff cially own a substantial portion of our outstanding common stock. As a result, these stockholders, acting together, have
a
the abia lity to signififf cantly inflff uence all matters requiring appr
board members, amendments to our certififf cate of incorpor
ation, going-private transactions, and the appr
other business combination transactions. The interests of this group of stockholders may not always coincide with our
interests or the interests of other stockholders and they may act in a manner that advances their best interests and not
necessarily those of our other stockholders.

oval by our stockholders, including the election of all of our
oval of mergers or

a

r

Antitt -ii take
tt
complm ill catett d and may make thtt e removal and replee acll

over provisii ions inii our chartett r documentstt and under Delawll

ement of our dirii ectortt

srr and management more difi fff iff cultll .tt

are lawll may make an acquisii itii itt on of us more

Our amended and restated certififf cate of incorpor

r

ation and amended and restated bylaws contain provisions that may

delay or prevent a change in control, discourage bids at a premium over the market price of our common stock and adversely
affff eff ct the market price of our common stock and the voting and other rights of the holders of our common stock. These
provisions may also make it diffff iff cult forff
provisions:

stockholders to remove and replace our board of directors and management. These

•

•

•

•

•

•

establa ish that members of the board of directors may be removed only forff
stockholders owning at least a maja ority of our capia tal stock;

cause upon the affff iff rmative vote of

authorize the issuance of “blank check” prefeff rred stock that could be issued by our board of directors to increase
the number of outstanding shares and prevent or delay a takeover attempt;

limit who may call a special meeting of stockholders;

establa ish advance notice requirements forff
matters that can be acted upon at stockholder meetings;

nominations forff

election to the board of directors or forff

proposing

prohibit our stockholders frff om making certain changes to our amended and restated certififf cate of incorpor
or amended and restated bylaws except with 662/3% stockholder appr

oval; and

a

r

ation

provide forff

a board of directors with staggered terms.

51

We are also subject to provisions of the Delaware corpor

r

ation law that, in general, prohibit any business combination

oved in advance by our board of directors. Although we believe these provisions collectively provide forff

with a benefiff cial owner of 15% or more of our common stock forff
appr
a
to receive higher bids by requiring potential acquirors to negotiate with our board of directors, they would appl
offff eff r may be considered benefiff cial by some stockholders.

three years unless the holder’s acquisition of our stock was
an opportuni
ty
y even if the

a

t

WeWW do not inii
appreciatitt on forff

anyn returnrr on your inii vestmtt ent.tt

tett nd tott pay dividends on our common stoctt k inii

thtt e forff

eseeablell

fuff ture; as such, you must relyll on stoctt k

To date, we have not paid any cash dividends on our common stock, and we do not intend to pay any dividends in the
the development and growth of our business. For
eciation of our common stock,

forff eseeabla e futff urt e. Instead, we intend to retain any futff urt e earnings to fund
this reason, the success of an investment in our common stock, if any, will depend on the appr
which may not occur. There is no guarantee that our common stock will appr
stock may not realize a returt n on his or her investment.

eciate, and thereforff e, a holder of our common

a

a

ff

General Risk Factors

Our management has broad disii cretitt on over thtt e use of our cash and we may not use our cash efe fff eff ctitt velyll ,yy which couldll
adversrr elyll affff eff ct our resultll stt of operatitt ons.

Our management has signififf cant flff exibility in appl
ate
es that do not increase our market value, or in ways with which our stockholders may not agree. We may use our cash

ying our cash resources and could use these resources forff

rr
corpor

a

es that do not yield a signififf cant returt n or any returt n at all forff

our stockholders, which may

purpos
rr
resources forff
r
corpor
cause our stock price to decline.

ate purpos

r

WeWW have inii curred, and expe
rr
corpor

ee
atett governance and othtt er matttt ett rsrr .

ct tott contitt nii ue tott

inii cur,r signi

ifi iff cant coststt as a resultll of lawll

s and regue

latll

itt ons relatll

itt nii g tott

Laws and regulations affff eff cting public companies, including provisions of the Dodd-Frank Wall Street Reforff m and

Consumer Protection Act that was enacted in July 2010, the provisions of the Sarbar nes-Oxley Act of 2002 (SOX), and rulr es
adopted or proposed by the SEC and by The Nasdaq Stock Market, have resulted in, and will continue to result in, signififf cant
costs to us as we evaluate the implications of these rulr es and respond to their requirements. In the futff urt e, if we are not abla e to
issue an evaluation of our internal control over fiff nancial reporting, as required, or we or our independent registered public
accounting fiff rm determine that our internal control over fiff nancial reporting is not effff eff ctive, this shortcoming could have an
adverse effff eff ct on our business and fiff nancial results and the price of our common stock could be negatively affff eff cted. New
rulr es could make it more diffff iff cult or more costly forff
us to obtain certain types of insurance, including director and offff iff cer
liabia lity insurance, and we may be forff ced to accept reduced policy limits and coverage or incur substantially higher costs to
obtain the coverage that is the same or similar to our current coverage. The impact of these events could also make it more
diffff iff cult forff
executive offff iff cers. We cannot predict or estimate the total amount of the costs we may incur or the timing of such costs to
comply with these rulrr es and regulations.

us to attract and retain qualififf ed persons to serve on our board of directors and board committees, and as our

Adversrr e securitii itt es and creditii markerr

t conditii itt ons may signi

ifi iff cantltt yll affff eff ct our abilii ill tii ytt

.ll
tott raisii e capitii altt

Historically, turt moil and volatility in the fiff nancial markets (including recent volatility as a result of geopolitical and

macroeconomic developments such as the ongoing conflff ict between Ukraine and RusRR sia and the COVID-19 pandemic) have
adversely affff eff cted the market capia talizations of many biotechnology companies, and generally made equity and debt
fiff nancing more diffff iff cult to obtain. These events, coupled with other faff ctors, may limit our access to fiff nancing in the futff urt e.
ng on acceptabla e terms, or at all, and our stock price
This could have a material adverse effff eff ct on our abia lity to access fundi
may suffff eff r furff

ther as a result.

ff

Item 1B. UnUU resolvll ed StSS aftt

fff ComCC mentstt .

This item is not appl

a

icabla e.

52

Item 2. PrPP opertitt es.

As of December 31, 2022, our primaryrr

faff cility consists of appr

a

oximately 98,000 square feff et of offff iff ce space in San

Diego, Califorff nia. We also lease a faff cility in Princeton, New Jersey that covers appr
space, which is leased through Januaryrr 2025.

a

oximately 25,000 square feff et of offff iff ce

Item 3. Legal

e

PrPP oceedinii gs.

a

judgments of noninfrff ingement and invalidity. On September 22, 2020, we fiff led our answer to

judgments of noninfrff ingement and invalidity regarding certain of our Orange Book-listed patents

atories Private Ltd. and its affff iff liate MSN Pharmaceuticals, Inc., and (iii) Zydus Pharmaceuticals (USA) Inc. and
the District

On July 24, 2020, we fiff led complaints against (i) Aurobindo Pharma Limited and its affff iff liate Aurobindo Pharma USA,
Inc. and (ii) Teva Pharmaceuticals USA, Inc. and its affff iff liate Teva Pharmaceutical Industries Ltd., and on July 30, 2020, we
fiff led complaints against (i) Hetero Labsa Limited and its affff iff liates Hetero Labsa Limited Unit-V and Hetero USA Inc., (ii)
MSN Labor
its affff iff liate Cadila Healthcare Limited. These complaints, which were fiff led in the United States District Court forff
of Delaware, allege infrff ingement of certain of our Orange Book-listed patents covering NUPLAZID. The cases have been
assigned to the Honorabla e Richard G. Andrews. On September 1, 2020, Aurobindo fiff led its answer and counterclaims
seeking declaratoryrr
Aurobindo’s counterclaims. On August 31, 2020, Teva fiff led its answer and counterclaims seeking declaratoryrr
judgments of
noninfrff ingement and invalidity. On September 21, 2020, we fiff led our answer to Teva’s counterclaims. On October 5, 2020,
judgments of noninfrff ingement and invalidity. On October 26,
Hetero fiff led its answer and counterclaims seeking declaratoryrr
2020, we fiff led our answer to Hetero’s counterclaims. On September 30, 2020, MSN fiff led its answer and counterclaims
seeking declaratoryrr
covering NUPLAZID. On November 5, 2020, we fiff led our fiff rst amended complaint against MSN in the United States District
Court forff
the District of Delaware, alleging infrff ingement of certain of our Orange Book-listed patents covering NUPLAZID.
On November 19, 2020, MSN fiff led its answer and counterclaims seeking declaratoryrr
invalidity regarding certain of our Orange Book-listed patents covering NUPLAZID. On December 10, 2020, we fiff led our
answer to MSN’s counterclaims. On November 2, 2020, Zydus fiff led its answer and counterclaims seeking declaratoryrr
judgments of noninfrff ingement and invalidity. On November 23, 2020, we fiff led our answer to Zydus’s counterclaims. On
December 8, 2020, the parties’ joint proposed scheduling order was entered by Judge Andrews. On April 7, 2021, we fiff led
our fiff rst amended complaints against Hetero and Teva and our second amended complaint against MSN, to include an
additional Orange Book-listed patent covering NUPLAZID. On April 8, 2021, we fiff led our fiff rst amended complaint against
Zydus and on April 9, 2021, we fiff led our fiff rst amended complaint against Aurobindo. On April 20, 2021, MSN fiff led its
answer, affff iff rmative defeff nses, and counterclaims to our second amended complaint, seeking declaratoryrr
noninfrff ingement and invalidity regarding certain of our Orange Book-listed patents covering NUPLAZID. On April 21,
2021, Teva fiff led its answer, affff iff rmative defeff nses, and counterclaims to our fiff rst amended complaint, seeking declaratoryrr
judgments of noninfrff ingement and invalidity. On April 22, 2021, Zydus fiff led its answer, affff iff rmative defeff nses, and
counterclaims to our fiff rst amended complaint, seeking declaratoryrr

judgments of noninfrff ingement and invalidity.

judgments of noninfrff ingement and

judgments of

On April 22, 2021, Aurobindo fiff led its answer, affff iff rmative defeff nses, and counterclaims to our fiff rst amended complaint,

judgments of noninfrff ingement and invalidity. On May 11, 2021, we fiff led our answer to MSN’s

seeking declaratoryrr
counterclaims. On May 12, we fiff led our answer to Teva’s counterclaims. On May 13, we fiff led our answer to Zydus’s
counterclaims and our answer to Aurobindo’s counterclaims. A joint trial in the matters is scheduled forff May 15, 2023. We
entered into an agreement effff eff ctive April 22, 2021 with Hetero settling all claims and counterclaims in the litigation. The
agreement allows Hetero to launch its generic pimavanserin product on July 27, 2038, subject to certain triggers forff
launch. The Hetero case was dismissed by joint agreement on May 3, 2021.

earlier

On August 27, 2021, we fiff led our second amended complaint against Zydus to include an additional Orange Book-

tion Chart. On October 1, 2021, we fiff led our answer to Zydus’s

listed patent covering NUPLAZID. On September 10, 2021, Zydus fiff led its answer, affff iff rmative defeff nses, and counterclaims
to our second amended complaint, seeking declaratoryrr
judgments of noninfrff ingement and invalidity. Also on September 10,
2021, the parties fiff led their Joint Claim Construcr
counterclaims. On November 30, 2021, we fiff led a stipulation and proposed order to dismiss two of our Orange Book-listed
patents covering NUPLAZID against Teva, which was ordered by the Court on December 1, 2021. On Januaryrr 28, 2022, the
parties fiff led their Joint Claim Construcr
claim construcrr
our construcrr
2022, we fiff led a stipulation and proposed order to dismiss one patent against MSN, which was ordered by the Court on
March 1, 2022. On March 10, 2022, we fiff led a stipulation and proposed order to dismiss one patent against Teva, which was
ordered by the Court on March 10, 2022. On March 22, 2022, we fiff led a stipulation and proposed order to dismiss seven
patents against Aurobindo, which was ordered by the Court on March 22, 2022. On March 30, 2022, we fiff led a stipulation

tion. On April 6, 2022, the Court issued a Memorandum Opinion construir ng several terms at issue, adopting
ryrr 28,

tion on two terms, and one agreed-upon construcr

ryrr 23, 2022, the Court heard oral argument on

tion on two terms, Defeff ndants’ construcr

tion Brief and Appendix. On Februarr

tion. On Februarr

53

and proposed order to dismiss two patents against Zydus, which was ordered by the Court on March 31, 2022. On April 22,
2022, we fiff led a stipulation and proposed order of non-infrff ingement against Aurobindo regarding certain of our Orange
Book-listed patents covering NUPLAZID, which was ordered by the Court on April 22, 2022. On April 26, 2022, we fiff led a
stipulation and proposed order of non-infrff ingement against MSN regarding certain of our Orange Book-listed patents
covering NUPLAZID, which was ordered by the Court on April 26, 2022. On April 26, 2022, we fiff led a stipulation and
proposed order of non-infrff ingement against Teva regarding certain of our Orange Book-listed patents covering NUPLAZID,
which was ordered by the Court on April 27, 2022. On May 10, 2022, we fiff led our second amended complaint against Teva
to include an additional Orange Book-listed patent covering NUPLAZID. On May 18, 2022, we fiff led a stipulation and
proposed order of non-infrff ingement against Zydus regarding certain of our Orange Book-listed patents covering NUPLAZID,
which was ordered by the Court on May 19, 2022. On May 24, 2022, Teva fiff led its answer, affff iff rmative defeff nses, and
counterclaims to our second amended complaint, seeking declaratoryrr
certain of our Orange Book-listed patents covering NUPLAZID. On June 1, 2022, we fiff led our second amended complaint
against Aurobindo alleging infrff ingement of certain of our Orange Book-listed patents covering NUPLAZID. On June 2,
2022, we fiff led our third amended complaint against Zydus alleging infrff ingement of certain of our Orange Book-listed patents
covering NUPLAZID. On June 14, 2022, we fiff led our answer to Teva’s counterclaims. June 15, 2022, Aurobindo fiff led its
answer, affff iff rmative defeff nses, and counterclaims to our second amended complaint, seeking declaratoryrr
noninfrff ingement and invalidity regarding certain of our Orange Book-listed patents covering NUPLAZID. On June 16, 2022,
Zydus fiff led its answer, affff iff rmative defeff nses, and counterclaims to our third amended complaint, seeking declaratoryrr
judgments of noninfrff ingement and invalidity regarding certain of our Orange Book-listed patents covering NUPLAZID. On
July 6, 2022, we fiff led our answer to Aurobindo’s counterclaims.

judgments of noninfrff ingement and invalidity regarding

judgments of

On September 7, 2022, the consolidated cases were reassigned to the Honorabla e Judge Gregoryrr B. Williams. On
September 30, 2022, we fiff led a stipulation and proposed order to stay the claims currently asserted against Teva and forff Teva
to be bound by the result of the litigation rendered against the remaining Defeff ndants, which was ordered by the Court on
October 4, 2022. On October 21, 2021, we fiff led complaints against Aurobindo, MSN and Zydus in the United States District
Court forff

the District of Delaware alleging infrff ingement of an additional Orange Book-listed patent covering NUPLAZID.

On April 19, 2021, a purpor

rr

ted stockholder of us fiff led a putative securities class action complaint (capta ioned Marechal

a

oval of pimavanserin forff

the Southern District of Califorff nia

v. Acadia Pharmaceuticals, Inc., Case No. 21-cv-0762) in the U.S. District Court forff
against us and certain of our current executive offff iff cers. The complaint generally alleges that defeff ndants violated Sections
10(b) and 20(a) of the Securities Exchange Act of 1934 by faff iling to disclose that the materials submitted in support of our
the treatment of hallucinations and delusions associated with dementia-related
sNDA seeking appr
psychosis contained statistical and design defiff ciencies and that the FDA was unlikely to appr
forff m. The complaint seeks unspecififf ed monetaryrr damages and other relief.ff On September 29, 2021, the Court issued an order
designating lead plaintiffff and lead counsel. On December 10, 2021, lead plaintiffff fiff led an amended complaint. Defeff ndants
fiff led a motion to dismiss the amended complaint on Februar
motion to dismiss on April 18, 2022, and Defeff ndants fiff led a reply on June 2, 2022. On September 27, 2022, the Court issued
an order denying Defeff ndants’ motion to dismiss. Defeff ndants fiff led their answer to the amended complaint on October 19,
2022, and fiff led a motion forff
the motion forff

ryrr 15, 2022. Lead plaintiffff fiff led an opposition to Defeff ndants’

reconsideration on October 25, 2022. On Februar

ryrr 3, 2023, the Court issued an order denying

ove the sNDA in our current

reconsideration.

a

We currently believe that none of the forff egoing claims or actions pending against us as of December 31, 2022 is likely

to have, individually or in the aggregate, a material adverse effff eff ct on our business, liquidity, fiff nancial position, or results of
operations. Given the unpredictabia lity inherent in litigation, however, we cannot predict the outcome of these matters. We are
unabla e to estimate possible losses or ranges of losses that may result frff om these matters, and thereforff e we have not accruer d
any amounts in connection with these matters other than attorneys’ feff es incurred to date.

Item 4. MiMM nii e SafSS eff tytt Disii closll ures.

This item is not appl

a

icabla e.

54

PART II

Item 5. MarMM kerr

t forff Regie sii trtt ant’s’ ComCC mon Equitii ytt ,yy Relatll ett d StSS octt kholdell

r MatMM ttt ett rsrr and IsII suer Purchases of Equitii ytt SeSS curitii itt es.

Market Inforff mation

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

Holders

As of Februarr

ryrr 21, 2023, there were 162,230,184 shares of common stock outstanding held by appr

a

oximately 32

stockholders of record. Many stockholders hold their shares in street name and thus, the actuat
of such shares is not known or included in the forff egoing number; however, we believe that there are appr
benefiff cial owners of our common stock.

l number of benefiff cial owners
oximately 49,000

a

Dividends

To date, we have not paid any cash dividends on our common stock, and we do not intend to pay any dividends in the

forff eseeabla e futff urt e. Instead, we intend to retain any futff urt e earnings to fund

ff

the development and growth of our business.

Securities Authorized forff

Issuance Under Equity Compensation Plans

The inforff mation required by this Item regarding equity compensation plans is incorpor

r

ated herein by refeff rence to Item

12 of Part III of this Annual Report on Form 10-K.

Purchases of Equity Securities by the Issuer and Affff iff liated Purchasers

None.

Recent Sales of Unregistered Securities

a
Not appl

icabla e.

Perforff mance Graph

The folff

lowing grapha

shows a comparison of the total cumulative returt ns of an investment of $100 in cash frff om

December 31, 2017 through December 31, 2022 in (i) our common stock, (ii) the Nasdaq Biotechnology Index, and (iii) the
Nasdaq U.S. Benchmark TR Index. The comparisons in the grapha
be indicative of the possible futff ut re perforff mance of our common stock. The grapha
reinvested (to date, we have not declared any dividends).

are required by the SEC and are not intended to forff ecast or

assumes that all dividends have been

55

Item 6. [Reserved]

Item 7. ManMM agement’s’ Disii cussion and Analyll sisii of FiFF nii ancial ConCC ditii itt on and Resultll stt of OpeOO ratitt ons.

t

a

a

a

ties forff

The folff

candidates, our strategy forff

discovering, developing and, if appr

candidates that receive regulatoryrr appr

ovals, the potential commercialization of any of our drugr

the
candidates, the potential market
candidates, our strategy forff
the commercialization of NUPLAZID, our plans forff
indications other than Parkinson’s disease psychosis, trofiff netide as a treatment forff

lowing discussion and analysis of our consolidated fiff nancial condition and results of operations should be read
in conjunction with our consolidated fiff nancial statements and related notes included elsewhere in this report. Past operating
results are not necessarily indicative of results that may occur in futff urt e periods. This discussion contains forff ward-looking
statements, which involve a number of risks and uncertainties. Such forff ward-looking statements include statements about
benefiff ts to be derived frff om NUPLAZID® (pimavanserin), trofiff netide and frff om our other drugrr
opportuni
pimavanserin and our drugrr
exploring and developing pimavanserin forff
Rett syndrome, ACP-204 as a treatment forff ADP and our ASO programs, our plans and timing with respect to seeking
regulatoryrr appr
progress, timing, results or implications of clinical trials and other development activities involving pimavanserin, trofiff netide
candidates,
and our other drugr
ations, our estimates of futff urt e payments, revenues and profiff tabia lity, our estimates
our existing and potential futff urt e collabor
regarding our capia tal requirements, futff urt e expenses and need forff
additional fiff nancing, the potential or expected impacts of
geopolitical and macroeconomic developments, possible changes in legislation, and other statements that are not historical
faff cts, including statements which may be preceded by the words “believes,” “expects,” “hopes,” “may,” “will,” “plans,”
“intends,” “estimates,” “could,” “should,” “would,” “continues,” “seeks,” “aims,” “projects,” “predicts,” “pro forff ma,”
“anticipates,” “potential” or similar words. In addition, statements that “we believe” and similar statements reflff ect our beliefsff
and opinions on the relevant subject. These statements are based upon inforff mation availabla e to us as of the date of this report,
and while we believe such inforff mation forff ms a reasonabla e basis forff
incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiryrr
of,ff all potentially availabla e relevant inforff mation. These statements are inherently uncertain. For forff ward-looking statements,
we claim the protection of the Private Securities Litigation Reforff m Act of 1995. Readers of this report are cautioned not to
place undue reliance on these forff ward-looking statements, which speak only as of the date on which they are made. We
undertake no obligation to update or revise publicly any forff ward-looking statements. Forward-looking statements are not
guarantees of perforff mance. Actuat
l results or events may diffff eff r materially frff om those anticipated in our forff ward-looking
statements as a result of various faff ctors, including those set forff
report. Inforff mation in the folff
year.

th under the section capta ioned “Risk Factors” elsewhere in this

such statements, such inforff mation may be limited or

the year ended December 31 of the indicated

oved, commercializing drugrr

a yearly period means forff

lowing discussion forff

into, or review

oval, the

a

a

Overview

Background

We are a biopharmaceutical company focff used on the development and commercialization of innovative medicines that

address unmet medical needs in CNS disorders and rare diseases. We have a portfolff
development product opportuni
disorders and rare diseases. In order to achieve signififf cant long-term growth, we will develop our current portfolff
our pipeline of early and late-stage programs through strategic business development, and invest in targeted internal research
effff orff

io of commercial stage products, in-
ties, and research programs that are designed to address signififf cant unmet needs in CNS

io, expand

ts.

t

We developed and successfulff

ly commercialized NUPLAZID (pimavanserin), which was appr

a

oved by the FDA, in

a

the treatment of hallucinations and delusions associated with PDP, and is the fiff rst and only drugr

this condition. NUPLAZID is a selective serotonin inverse agonist/tt antagonist, prefeff rentially targeting 5-

April 2016 forff
the United States forff
HT2Areceptors with no appr
mechanism, NUPLAZID demonstrated signififf cant effff iff cacy in reducing the hallucinations and delusions associated with PDP
tion in our Phase 3 pivotal trial. NUPLAZID has the potential to avoid many of the
ff
without negatively impacting motor func
debilitating side effff eff cts of existing antipsychotics, none of which are appr
the treatment of PDP. We
hold worldwide commercialization rights to pimavanserin. NUPLAZID is availabla e in 34 mg capsa ules and 10 mg tabla ets
dosage forff ms.

dopaminergic, histaminergic, or muscarinic receptors. Through this novel

oved by the FDA forff

eciabla e affff iff nity forff

oved in

a
appr

a

We are currently in registration forff
trofiff netide, an investigational new drugrr
genetic neurodevelopmental disorder. If appr
a
forff
syndrome and other indications frff om Neuren in August of 2018. We submitted to the FDA an NDA forff

this condition. We acquired an exclusive North American license to develop and commercialize trofiff netide forff Rett
trofiff netide forff

oved, trofiff netide would be the fiff rst and only drugr

the treatment of Rett syndrome, a rare

oved in the United States

a
appr

the

forff

56

treatment of Rett syndrome in July 2022 based on the positive results frff om our pivotal Phase 3 Lavender™ studyt
demonstrated statistically signififf cant improvement over placebo forff
endpoint. The FDA fiff led the NDA in September 2022 and assigned a PDUFA target action date of March 12, 2023.

both co-primaryrr endpoints as well as the key secondaryrr

which

Through its unique mechanism and the clinical studi

t

es conducted to date, we believe that pimavanserin has the

potential to address important unmet medical needs in neurological and psychiatric disorders in addition to PDP. Today we
are evaluating pimavanserin forff
the treatment of the negative symptoms of schizophrenia in a Phase 3 clinical development
program. The negative symptoms of schizophrenia have been associated with poor long-term outcomes and disabia lity even
when the positive symptoms are well-controlled, and today there are no FDA-appr
2019 we announced positive results frff om our pivotal ADVANA CE study
pivotal study,
negative symptoms of schizophrenia who have achieved adequate control of positive symptoms with their existing
antipsychotic treatment. We projo ect completing the enrollment this year with top-line results in early 2024.

and in the third quarter of 2020, we initiated a second
ADVANAA CE-2. The Phase 3 program is evaluating the effff iff cacy of pimavanserin in patients with predominantly

oved therapia es. In the four

th quarter of

a

ff

t

t

In addition, we recently announced that we are developing an internally discovered new molecule, ACP-204, which

builds upon the learnings of pimavanserin in the treatment of neuropsychiatric symptoms, and is currently being evaluated in
a Phase 1 clinical program. Upon completion of our Phase 1 work, we plan to initiate studi
ACP-204 in patients with Alzheimer’s disease psychosis. ACP-204 is a new chemical entity forff which we hold the
worldwide rights.

es evaluating various doses of

t

In Januaryrr 2022, we entered into a license and collabor

a

ation agreement with Stoke to discover, develop and

the potential treatment of severe and rare genetic neurodevelopmental
ation includes SYNGAP1 syndrome, Rett syndrome (MECP2), and an undisclosed

commercialize novel RNRR A-based medicines forff
diseases of the CNS. The collabor
neurodevelopmental target. For the SYNGAP1 program, the two companies will jointly share global research, development
and commercialization responsibilities and share 50/50 in all worldwide costs and futff urt e profiff ts. For the Rett syndrome
(MECP2) and the undisclosed neurodevelopmental program, Stoke will lead research and pre-clinical development activities,
while we will lead clinical development and commercialization activities.

a

We have incurred substantial operating losses since our inception due in large part to expenditurt es forff

our research and

development activities. As of December 31, 2022, we had an accumulated defiff cit of $2.4 billion. Contingent on the level of
business development activities we may complete as well as pipeline programs we may advance, we may continue to incur
operating losses forff
a
appr

the next feff w years as we incur signififf cant research and development costs and costs forff

oval and commercialization of trofiff netide forff

the treatment of Rett syndrome.

potential

ImII pacm t of COC VIVV DII -19 on our Businii ess

As a result of the COVID-19 pandemic, there have been changes in the practice of medical care and medical education.

For example, many health care providers initially expanded their utilization of telemedicine to conduct patient visits, and in
many regions within the United States the abia lity of our commercial and medical fiff eld teams to call upon medical clinics,
hospitals, long-term care faff cilities and skilled nursing faff cilities was restricted or converted to virtuat
access our customers both in person and virtuat
through telemedicine and our sales forff ce has been abla e to call upon medical clinics, hospitals, long-term care faff cilities and
lly.
skilled nursing faff cilities either in person in accordance with appl
a
Most medical congresses, an important means forff medical education, are being conducted both in person and virtuat
lly and
enrollment in clinical trials is being assessed based on local COVID-19 conditions and regional regulation and public health
guidance.

lly. Currently, health care providers are conducting patient visits in-person and

icabla e regulatoryrr guidance and local policies or virtuat

l access. We continue to

In an effff orff

t to protect the health and safeff ty of our employees, our community, and our stakeholders, we have developed

dynamic pandemic and workplace health policies appl
current COVID-19 conditions, regulatoryrr guidance, public health and scientififf c recommendations, and feff deral, state, and
local laws. Some examples of these policies include a mandatoryrr COVID-19 vaccination policy and increasing systemic
precautions in our offff iff ces. In addition, we have expanded our wellness programs to support the overall health and wellbeing
of our employees.

icabla e to all of our employees. These policies are localized based on

a

Since the beginning of the pandemic, we have been abla e to provide an uninterrupt

r

ed supply of NUPLAZID to patients.

We are monitoring our supply chain closely and do not anticipate disrupt
NUPLAZID to patients.

r

ions in our abia lity to continue delivering

57

Since the beginning of the pandemic the growth of sales of NUPLAZID have been negatively impacted by ongoing

conditions related to the pandemic, including a reduction in patient offff iff ce visits, continuing reduced occupancy rates at long-
term care faff cilities, and reduced access to healthcare profeff ssionals. While we observed incremental improvements in some of
these faff ctors since 2021, their levels are still meaningfulff
predict the duration of the pandemic’s impact and the pace of recovery,rr
will not continue to have additional negative impacts on our business, results of operations, fiff nancial condition and prospects.

ly below where they were pre-pandemic. It remains diffff iff cult to

and no assurances can be given that the pandemic

Financial Operations Overview

PrPP oduct and ColCC lll abor

ll

atitt ve Revenues

Product sales, net consist of sales of NUPLAZID, our fiff rst and only commercial product to date. The FDA appr
the treatment of hallucinations and delusions associated with PDP, and we launched the

a

oved

NUPLAZID in April 2016 forff
product in the United States in May 2016.

CosCC t of PrPP oduct SalSS ell s

Cost of product sales consists of third-party manufaff cturt

ing costs, frff eight, and indirect overhead costs associated with

sales of NUPLAZID. Cost of product sales may also include period costs related to certain inventoryrr manufaff cturt
excess or obsolete inventoryrr adjustment charges, unabsa orber d manufaff cturt
ing and overhead costs, and manufaff cturt
variances.

ing services,
ing

License FeFF es and Royaltll itt es

License feff es and royalties consist of milestone payments expensed or capia talized and subsequently amortized under our
2006 license agreement with the Ipsen Group. License feff es and royalties also include royalties of 2% due to the Ipsen Group
based upon net sales of NUPLAZID. This obligation terminated in October 2021.

Research and Developmll

ent ExpEE enses

Our research and development expenses have consisted primarily of feff es paid to external service providers, salaries and

t

es of pimavanserin forff

oval of NUPLAZID, we committed to conduct four

related personnel expenses, faff cilities and equipment expenses, and other costs incurred related to pre-commercial product
candidates. We charge all research and development expenses to operations as incurred. Our research and development
activities have focff used on pimavanserin, trofiff netide, ACP-204 and other early-stage programs. We currently are responsible
all costs incurred in the ongoing development of pimavanserin and we expect to continue to make substantial investments
forff
the treatment of the negative symptoms of schizophrenia. In connection with the FDA
in clinical studi
appr
a
placebo-controlled eight-week study
safeff ty databaa
costs incurred forff
t
Rett syndrome in July 2022, at this time, due to the risks in the regulatoryrr and appr
the costs we might incur forff
the NDA. In addition, we expect to incur increased research and development expenses as a result of advancement of our
early-stage development pipeline programs.

ff
es in predominantly frff ail and elderly patients that would add to the NUPLAZID
all

se by exposing an aggregate of at least 500 patients to NUPLAZID, remains ongoing. We are responsible forff
es. While we submitted an NDA to the FDA forff

any additionally required development activities to support the review and potential appr

the treatment of
oval processes, it is diffff iff cult to estimate

th commitment, a randomized,

these post-marketing studi

post-marketing studi

trofiff netide forff

es. The four

t
or studi

oval of

a

a

ff

t

t

We use external service providers to manufaff cturt e our product candidates and forff

the maja ority of the services perforff med

in connection with the preclinical and clinical development of pimavanserin, trofiff netide, and our early-stage programs.
Historically, we have used our internal research and development resources, including our employees and discoveryrr
turt e, across several projo ects and many of our costs have not been attributabla e to a specififf c project. Accordingly, we
infrff astrucr
have not reported our internal research and development costs on a project basis. To the extent that external expenses are not
attributabla e to a specififf c project, they are included in other early-stage programs.

58

The folff

lowing tabla e summarizes our research and development expenses forff

the years ended December 31, 2022, 2021,

and 2020 (in thousands):

Costs of external service providers:
NUPLAZID (pimavanserin)
Trofiff netide
Early stage programs
Upfrff ont and milestone payments*
Subtotal
Internal costs
Stock-based compensation
Total research and development expenses
_____________________

Years Ended December 31,
2021

2020

2022

$

$

62,746
62,300
64,786
88,741
278,573
60,422
22,580
361,575

$

$

73,696
39,814
35,964
10,999
160,473
56,973
21,969
239,415

$

$

96,705
47,614
14,691
72,666
231,676
56,140
31,314
319,130

* Includes upfrff ont and milestone consideration as well as transaction costs associated with acquired in-process research and
development.

Although NUPLAZID was appr

a

oved by the FDA forff

the treatment of hallucinations and delusions associated with
requirements and clinical development, we are unabla e to estimate

oval and commercialization of trofiff netide forff

the negative symptoms
the treatment of Rett syndrome,

roval timelines, probabia lity of success, and development costs varyrr widely. While our current

ther development of our early-stage pipeline programs. Due to these same faff ctors, we are unabla e to

the ongoing or additional development of pimavanserin forff
a

PDP, at this time, due to the risks inherent in regulatoryrr
with certainty the costs we will incur forff
of schizophrenia, to support the potential appr
as well as the furff
determine with any certainty the anticipated completion dates forff
development and regulatoryrr appa
development effff orff
the treatment of the negative
symptoms of schizophrenia and the development of ACP-204, we anticipate that we will make determinations as to which
programs to pursue and how much fundi
ng to direct to each program on an ongoing basis in response to the scientififf c and
clinical success of each product candidate, as well as an ongoing assessment of the commercial potential of each opportuni
and our fiff nancial position. We cannot forff ecast with any degree of certainty which product opportuni
futff urt e collabor
arrangements would affff eff ct our development plans and capia tal requirements. Similarly, we are unabla e to estimate with
certainty the costs we will incur forff
of NUPLAZID.

ts are primarily focff used on advancing the development of pimavanserin forff

es that we committed to conduct in connection with FDA appr

ative or licensing arrangements, when such arrangements will be secured, if at all, and to what degree any such

our current research and development programs. Clinical

ties will be subject to

post-marketing studi

oval

ty

a

a

ff

t

t

t

We expect our research and development expenses continue to be substantial as we conduct studi

t

es pursuant to our

post-marketing commitments and pursue the development of pimavanserin forff
trofiff netide forff
the treatment of Rett syndrome as well as the furff
programs. The lengthy process of completing clinical trials and supporting development activities and seeking regulatoryrr
a
appr
completing clinical trials, or in obtaining regulatoryrr appr
increase and, in turt n, have a material adverse effff eff ct on our results of operations.

ties requires the expenditurt e of substantial resources. Any faff ilure by us or delay in
ovals, could cause our research and development expenses to

the negative symptoms of schizophrenia and
ther development of ACP-204 and other early-stage pipeline

our product opportuni

oval forff

a

t

SeSS llll ill nii g, GeG neral and Adminii

isii trtt atitt ve ExpeEE

nses

Our selling, general and administrative expenses consist of salaries and other related costs, including stock-based

our commercial personnel, including our specialty sales forff ce, our medical education
ff

compensation expense, forff
profeff ssionals, and our personnel serving in executive, fiff nance, business development, and business operations func
tions. Also
included in selling, general and administrative expenses are feff es paid to external service providers to support our commercial
activities associated with NUPLAZID, profeff ssional feff es associated with legal and accounting services, costs associated with
patents and patent appl
that support Parkinson’s disease patients generally. Changes in selling, general and administrative expenses in futff urt e periods
a
are subject to the evolving PDP market dynamics, the regulatoryrr and appr
development of pimavanserin in additional indications other than PDP.

l property and charitabla e donations to independent charitabla e founda

oval processes of trofiff netide and our furff

our intellectuat

ications forff

tions

ther

a

ff

59

Critical Accounting Policies and Estimates

A summaryrr of the signififf cant accounting policies is provided in Note 2 to our Consolidated Financial Statements.

The preparation of fiff nancial statements in accordance with GAAP requires us to make estimates and assumptions that

affff eff ct the reported amounts of assets and liabia lities, the disclosure of assets and liabia lities at the date of the fiff nancial
statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an
ongoing basis. Our estimates are based on historical experience and on various other assumptions and faff ctors that we believe
to be reasonabla e under the circumstances, the results of which forff m the basis forff making judgments about
the carryirr ng values
of assets and liabia lities and the reported amounts of revenues and expenses that are not readily appa
Actuat

l results may diffff eff r frff om those estimates under diffff eff rent assumptions and conditions.

a
rent frff om other sources.

a

Management considers an accounting estimate to be critical if:ff

•

•

it requires a signififf cant level of estimation uncertainty; and

changes in the estimate are reasonabla y likely to have a material effff eff ct on our fiff nancial condition or results of
operations.

We believe the folff

lowing critical accounting policies and estimates describe the more signififf cant judgments and

estimates used in the preparation of our consolidated fiff nancial statement.

PrPP oduct SalSS ell s,s NeNN t

We sell our product through SPs and SDs. SPs dispense product to a patient based on the fulff

fiff llment of a prescription

and SDs sell product to government faff cilities, long-term care pharmacies, or in-patient hospital pharmacies. Product shipping
and handling costs are included in cost of product sales.

We recognize revenue frff om product sales at the net sales price (the “transaction price”) which includes estimates of
variabla e consideration forff which reserves are establa ished and reflff ects each of these as either a reduction to the related account
receivabla e or as an accruerr d liabia lity, depending on how the amount payabla e is settled. Overall, these reserves reflff ect our best
estimates of the amount of consideration to which we are entitled based on the terms of the contract. Actuat
consideration ultimately received may diffff eff r frff om our estimates. If actuat
need to adjust our estimates, which would affff eff ct net revenue in the period of adjustment. The folff
allowances involve a substantial degree of judgment:

frff om estimates, we may
lowing sales discounts and

l results in the futff urt e varyrr

l amounts of

Rebates: Allowances forff

rebates include mandated discounts under the Medicaid Drugr Rebate Program and the

the current quarter’s activity, plus an accruar

benefiff t. Rebates are amounts owed aftff er the fiff nal dispensing of the product to a benefiff t

l agreements with, or statutt oryrr
requirements pertaining to, Medicaid and
rebates is based on statutt oryrr discount rates and expected utilization. Our

expected utilization of rebates is based on historical data received frff om the SPs and SDs since product launch.
l balance consists of an estimate of the amount expected
prior quarters’ unpaid rebates still estimated to be
rebates also include amounts due under the Inflff ation Reduction act of 2022 forff Medicare Part D unit

Medicare Part D prescription drugrr
plan participant and are based upon contractuat
Medicare benefiff t providers. The allowance forff
estimates forff
Rebates are generally invoiced and paid in arrears so that the accruar
to be incurred forff
incurred. Allowances forff
sales with appl
a
twelve months on October 1 of each year, with the initial appl
period AMP price is Januaryrr 1, 2021 through September 30, 2021. Our estimates are based Medicare Part D sales as a
percentage of gross sales and the rate AMP forff
the current period will be in excess the benchmark period. We regularly
monitor our estimates and record adjustments when rebate trends, rebate programs and contract terms, legislative changes, or
other signififf cant events indicate that a change in the estimates is appr
materially frff om actuat
which could also materially affff eff ct our balance sheet and results of operations.

icabla e period will be
icabla e period beginning on October 1, 2022. The benchmark

l rebates. However, subsequent changes in estimates may result in a material change in our accruar

ce inflff ation over the benchmark period. The appl

opriate. To date, our estimates have not diffff eff red

icabla e period AMP increases that outpat

l balance forff

ls,

a

a

a

CharCC

ger backskk : Chargebacks are discounts and feff es that relate to contracts with government and other entities
purchasing frff om the SDs at a discounted price. The SDs charge back to us the diffff eff rence between the price initially paid by
the SDs and the discounted price paid to the SDs by these entities. We also incur group purchasing organization feff es forff
transactions through certain purchasing organizations. We estimate sales with these entities and accruer
chargebacks and organization feff es, based on the appl

anticipated
l terms. To date, our estimates have not diffff eff red

icabla e contractuat

forff

a

60

materially frff om the actuat
material change in our accruar

l chargebacks and organization feff es. However, subsequent changes in estimates may result in a

ls, which could also materially affff eff ct our balance sheet and results of operations.

Research and Developmll

ent Accrualsll

We estimate certain costs and expenses and accruerr

forff

these liabia lities as part of our process of preparing fiff nancial

of the trial or services provided, and the invoices received frff om our external service providers. In the case of

statements. Examples of areas in which subjective judgments may be required include, among other things, costs associated
with services provided by contract organizations forff
ing of our product candidates and
clinical trials, and personnel related expenses. We accruer
the statust
clinical trials, a portion of the estimated cost normally relates to the projected cost to treat a patient in the trials, and this cost
is recognized based on the number of patients enrolled in the trial. Other indirect costs are generally recognized on a straight-
line basis over the estimated period of the study.
estimates have not diffff eff red materially frff om the actuat
a material change in our accruar

ls, which could also materially affff eff ct our balance sheet and results of operations

l costs incurred. However, subsequent changes in estimates may result in

costs incurred as the services are being provided by monitoring

l costs become known to us, we adjust our accruar

preclinical development, manufaff cturt

ls. To date, our

As actuat

forff

t

StSS octt k-B- ased ComCC pem nsatitt on

The faff ir value of each employee stock option and each employee stock purchase plan right granted is estimated on the

grant date under the faff ir value method using the Black-Scholes valuation model, which requires us to make a number of
assumptions including the estimated expected lifeff of the award and related volatility. The faff ir value of restricted stock units is
estimated based on the market price of our common stock on the date of grant. The estimated faff ir values of stock options,
purchase plan rights, and regular restricted stock units are then expensed over the vesting period. For restricted stock units
requiring satisfaff ction of both market and service conditions, the estimated faff ir values are generally expensed over the longest
of the explicit, implicit and derived service periods. Perforff mance-based stock awards vest upon the achievement of certain
pre-defiff ned company-specififf c perforff mance-based criteria. Expense related to these perforff mance-based stock awards is
generally recognized ratabla y over the expected perforff mance period once the pre-defiff ned perforff mance-based criteria forff
vesting becomes probabla e. See also Item 15 of Part IV, “Notes to Consolidated Financial Statements—Note 2—Summaryrr of
Signififf cant Accounting Policies” forff
compensation.

ther discussion of our assumptions and estimates related to our stock-based

furff

Results of Operations

FlFF uctuatitt ons inii OpeOO ratitt nii g Resultll stt

Our results of operations have flff uctuat

ted signififf cantly frff om period to period in the past and are likely to continue to do
the forff eseeabla e futff urt e

the treatment of Rett syndrome, our development of pimavanserin forff

ther development of the early-stage pipeline programs and the progress and timing of expenditurt es

so in the futff urt e. We anticipate that our quarterly and annual results of operations will be impacted forff
by several faff ctors, including the progress and timing of expenditurt es related to our commercial activities associated with
NUPLAZID and the extent to which we generate revenue frff om product sales, our potential appr
of trofiff netide forff
schizophrenia, our furff
related to studi
t
allowances to varyrr
of purchases eligible forff
impacted by potential futff urt e price increases and other faff ctors. We cannot predict with certainty what the fulff
macroeconomic developments, including the ongoing conflff ict between Ukraine and RusRR sia and the COVID-19 pandemic,
may have on our business, results of operations, fiff nancial condition and prospects. Due to these flff uctuat
the period-to-period comparisons of our operating results are not a good indication of our futff urt e perforff mance.

tions in our Medicare Part D Coverage Gapa liabia lity and the volume
government mandated discounts and rebates, as well as changes in discount percentages that may be

es of NUPLAZID in PDP pursuant to our post-marketing commitments. Further, we expect our sales

frff om quarter to quarter due to flff uctuat

oval and commercialization

the negative symptoms of

tions, we believe that

l impact that

a

ComCC parm isii on of thtt e YeYY arsrr EnE ded December 31, 2022 and 2021

Product Sales, NeNN t

Product sales, net, comprised of NUPLAZID, were $517.2 million and $484.1 million in 2022 and 2021, respectively.

Product sales, net forff
primarily due to a higher average gross selling price of NUPLAZID in 2022 as compared to 2021.

the year ended December 31, 2022 increased as compared to the year ended December 31, 2021

61

The folff

lowing tabla e provides a summaryrr of activity with respect to our sales allowances and accruar

ls forff

the year ended

December 31, 2022 (in thousands):

Balance at December 31, 2021

Provision related to current period sales
Credits/pa/ yments forff
Credits/pa/ yments forff

current period sales
prior period sales

Balance at December 31, 2022

CosCC t of Product Sales

Distribution
Fees,
Discounts &
Chargebacks

$

$

8,467
80,836
(69,913)
(8,467)
10,923

$

$

Co-Pay
Assistance

(202)
3,087
(3,427)
202
(340)

Rebates, Data
Fees & Returns
15,717
$
51,872
(25,826)
(15,717)
26,046

$

Total
23,982
135,795
(99,166)
(23,982)
36,629

$

$

Cost of product sales was $10.2 million and $10.8 million in 2022 and 2021, respectively, or appr

oximately 2% of
product sales, net in both years. The cost of product sales as a percentage of product sales, net stayed flff at during 2022 as
compared to 2021.

a

License FeFF es and Royalties

License feff es and royalties were $0 and $8.3 million in 2022 and 2021, respectively, and in 2021 include royalties due

to the Ipsen Group of two percent of net sales of NUPLAZID and amortization related to the milestone paid to the Ipsen
Group upon FDA appr
primaryrr

a
the decrease in license feff es and royalties during 2022 as compared to 2021.
reason forff

oval of NUPLAZID in 2016. The royalty obligation terminated in October 2021 which was the

Research and Development ExEE pex nses

Research and development expenses increased to $361.6 million in 2022, including $22.6 million in stock-based
compensation, frff om $239.4 million in 2021, including $22.0 million in stock-based compensation. The increase in research
and development expenses was mainly due to the $60 million upfrff ont payment made to Stoke forff
collabor
a
well as increased costs of our development activities forff

ation agreement and the $10 million milestone to Neuren in 2022 upon acceptance of the trofiff netide NDA fiff ling, as

trofiff netide, ACP-204 and other early-stage programs.

the license and

Selling, General and Adminisii trative ExEE pex nses

Selling, general and administrative expenses decreased to $369.1 million in 2022, including $44.5 million in stock-
based compensation expense, frff om $396.0 million in 2021, including $40.4 million in stock-based compensation expense.
The decrease in selling, general and administrative expenses was primarily related to the continued reduction and
optimization of commercial spend related to NUPLAZID, leading to a reduction in overall advertising and promotional costs,
offff sff et by investments in preparing forff

the launch of trofiff netide.

ComCC parm isii on of thtt e YeYY arsrr EnE ded December 31, 2021 and 2020

Product Sales, NeNN t

Product sales, net, comprised of NUPLAZID, were $484.1 million and $441.8 million in 2021 and 2020, respectively.

Product sales, net forff
primarily due to a higher average gross selling price of NUPLAZID in 2021 as compared to 2020 as well as the growth in
NUPLAZID unit sales of appr

the year ended December 31, 2021 increased as compared to the year ended December 31, 2020

oximately 3% in 2021 as compared to 2020.

a

62

The folff

lowing tabla e provides a summaryrr of activity with respect to our sales allowances and accruar

ls forff

the year ended

December 31, 2021 (in thousands):

Balance at December 31, 2020

Provision related to current period sales
Credits/pa/ yments forff
Credits/pa/ yments forff

current period sales
prior period sales

Balance at December 31, 2021

CosCC t of Product Sales

Distribution
Fees,
Discounts &
Chargebacks

$

$

4,221
72,011
(63,544)
(4,221)
8,467

$

$

Co-Pay
Assistance

(152)
1,794
(1,996)
152
(202)

Rebates, Data
Fees & Returns
14,116
$
40,490
(24,773)
(14,116)
15,717

$

Total
18,185
114,295
(90,313)
(18,185)
23,982

$

$

Cost of product sales was $10.8 million and $10.2 million in 2021 and 2020, respectively, or appr

oximately 2% of
product sales, net in both years. The cost of product sales as a percentage of product sales, net stayed flff at during 2021 as
compared to 2020.

a

License FeFF es and Royalties

License feff es and royalties were $8.3 million and $10.3 million in 2021 and 2020, respectively, and include royalties

due to the Ipsen Group of two percent of net sales of NUPLAZID and amortization related to the milestone paid to the Ipsen
Group upon FDA appr
primaryrr

a
the decrease in license feff es and royalties during 2021 as compared to 2020.
reason forff

oval of NUPLAZID in 2016. The royalty obligation terminated in October 2021 which was the

Research and Development ExEE pex nses

Research and development expenses decreased to $239.4 million in 2021, including $22.0 million in stock-based
compensation expense, frff om $319.1 million in 2020, including $31.3 million in stock-based compensation expense. The
decrease in research and development expenses was due to a decrease of $71.2 million in external costs and a decrease of
$8.4 million in personnel and related costs resulting frff om attrition. The decrease in external costs was primarily due to the
$52.8 million in upfront consideration and transaction costs paid forff
the M1 PAM program in 2020.
payment to Vanderbir

the acquisition of CerSci and $10.0 million upfront

lt University forff

Selling, General and Adminisii trative ExEE pex nses

Selling, general and administrative expenses increased to $396.0 million in 2021, including $40.4 million in stock-
based compensation expense, frff om $388.7 million in 2020, including $50.5 million in stock-based compensation expense.
The increase in selling, general and administrative expenses was primarily due to an increase of $16.4 million in personnel
and related costs, partially offff sff et by a decrease of $10.1 million in stock compensation expense.

Liquidity and Capital Resources

We have funde

ff

d our operations primarily through sales of our equity securities, payments received under our

ation agreements, debt fiff nancings, interest income, and, since 2016, with revenues frff om sales of NUPLAZID. We
te in futff urt e periods depending on the levels of spend forff

our

a
collabor
anticipate that the level of cash used in our operations will flff uctuat
ongoing and planned commercial activities forff NUPLAZID, our potential appr
the treatment of Rett syndrome, our ongoing and planned development activities forff
of schizophrenia, studi
development activities forff
expect that our cash, cash equivalents, and investment securities will be suffff iff cient to fund
least the next 12 months.

a

ff

t

es to be conducted pursuant to our post-marketing commitments, our ongoing and planned

the early-stage pipeline programs and any potential futff urt e business development activities. We

oval and commercialization of trofiff netide forff

pimavanserin forff

the negative symptoms

our planned operations through at

63

We may require signififf cant additional fiff nancing in the futff urt e to fund

ff

our operations. Our futff urt e capia tal requirements

will depend on, and could increase signififf cantly as a result of,ff many faff ctors, including:

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

the progress in, and the costs of,ff our ongoing and planned development activities forff
marketing studi
commercial activities forff NUPLAZID;

pimavanserin, post-
es forff NUPLAZID to be conducted over the next several years, and ongoing and planned

t

the costs of our development activities forff

trofiff netide forff

the treatment of Rett syndrome;

the costs of our development activities forff ACP-204 and our other early-stage pipeline programs;

the costs of commercializing NUPLAZID, including the maintenance and development of our sales and
marketing capaa bia lities;

the costs of establa ishing, or contracting forff

, sales and marketing capaa bia lities forff

other product candidates;

the amount of U.S. product sales frff om NUPLAZID;

the costs of preparing appl
PDP and forff

a

ications forff

regulatoryrr appr

a

ovals forff NUPLAZID in additional indications other than

other product candidates, as well as the costs required to support review of such appl

a

ications;

the costs of manufaff cturt

ing and distributing NUPLAZID forff

commercial use in the U.S.;

the costs of manufaff cturt

ing and distributing trofiff netide forff

potential commercial use in the U.S.;

our abia lity to obtain regulatoryrr appr
the negative symptoms of schizophrenia, frff om trofiff netide forff
and frff om our other product candidates;

oval forff

a

, and subsequently generate product sales frff om, pimavanserin forff
the treatment of Rett syndrome, frff om ACP-204

the costs of acquiring additional product candidates or research and development programs;

the scope, prioritization and number of our research and development programs;

the abia lity of our collabor
payments under our collabor
a
these agreements;

a

ators and us to reach the milestones and other events or developments triggering

ation or license agreements, or our collabor

a

ators’ abia lity to make payments under

our abia lity to enter into new collabor

a

ation and license agreements;

the extent to which we are obligated to reimburse collabor
forff

costs under collabor

ation agreements;

a

a

ators or collabor

a

ators are obligated to reimburse us

the costs involved in fiff ling, prosecuting, enforff cing, and defeff nding patent claims and other intellectuat
rights;

l property

the costs of maintaining or securing manufaff cturt
pimavanserin, trofiff netide or other product candidates; and

ing arrangements forff

clinical or commercial production of

the costs associated with litigation, including the costs incurred in defeff nding against any product liabia lity claims
that may be brought against us related to NUPLAZID.

Unless and until we can generate signififf cant cash frff om our operations, we expect to satisfyff our futff urt e cash needs

a

through our existing cash, cash equivalents and investment securities, public or private sales of our securities, debt
fiff nancings, or strategic collabor
ations. In the past, periods of turt moil and volatility in the fiff nancial markets have adversely
affff eff cted the market capia talizations of many biotechnology companies, and generally made equity and debt fiff nancing more
diffff iff cult to obtain. For example, due to macroeconomic developments, including the Ukraine-RusRR sia conflff ict, the COVID-19
pandemic and actions taken to slow its spread, the global credit and fiff nancial markets have experienced extreme volatility and
disrupt
ions, including diminished liquidity and credit availabia lity, declines in consumer confiff dence, declines in economic
r
growth, increases in unemployment rates and uncertainty about
may limit our access to additional fiff nancing in the futff urt e. We cannot be certain that additional fundi
on acceptabla e terms, or at all. If adequate funds
of,ff or eliminate one or more of our research or development programs or our commercialization effff orff
required to relinquish greater or all rights to product candidates at an earlier stage of development or on less faff vorabla e terms
than we would otherwise choose. Additional fundi
negatively impact the price of our stock.

economic stabia lity. These events, coupled with other faff ctors,
ng will be availabla e to us
ff
are not availabla e when needed, we will be required to delay, reduce the scope

ng, if obtained, may signififf cantly dilute existing stockholders and could

ts. We also may be

a

ff

ff

64

We have invested a substantial portion of our available cash in money market funds, U.S. treasury notes, and high

quality, marketable debt instruments of corporations and government sponsored enterprises in accordance with our
investment policy. Our investment policy defines allowable investments and establishes guidelines relating to credit quality,
diversification, and maturities of our investments to preserve principal and maintain liquidity. All investment securities have
a credit rating of at least Aa3/AA- or better, or P-1/A-1 or better, as determined by Moody’s Investors Service or Standard &
Poor’s. Our investment portfolio has not been adversely impacted by the disruptions in the credit markets that have occurred
in the past. However, if there are future disruptions in the credit markets, there can be no assurance that our investment
portfolio will not be adversely affected.

MatMM erial CasCC h Requirementstt

Our material cash requirements in the short and long term consist of the operational, manufaff cturt

ing, and capia tal

expenditurt es, a portion of which contain contractuat
with our current fiff nancial resources together with our anticipated receipts frff om product sales. On a long-term basis, we
manage futff urt e cash requirements relative to our long-term business plans.

l or other obligations. We plan to fund

our material cash requirements

ff

Our primaryrr uses of cash and operating expenses relate to paying employees and consultants, administering clinical

trials, marketing our products, and providing technology and faff cility infrff astrucrr
investments in our offff iff ce and labor

faff cilities to enabla e continued expansion of our business.

atoryrr

a

turt e to support our operations. We also make

The folff

lowing is a summaryrr of our long-term contractuat

l obligations as of December 31, 2022 (in thousands):

Operating leases
Other long-term contractuat
Total

l obligations

Total
$ 73,391
2,000
$ 75,391

Less than
1 Year

$

9,562
1,000
$ 10,562

1-3 Years
$ 18,304
1,000
$ 19,304

3-5 Years
$ 16,838
—
$ 16,838

More than
5 Years
$ 28,687
—
$ 28,687

In addition to operating leases, we enter into certain other long-term commitments forff

goods and services that are

periods greater than one year. To the extent these long-term commitments are noncancelabla e, they are
tabla e. We also enter into short-term agreements with various vendors and suppliers of goods and
a

outstanding forff
reflff ected in the above
services in the normal course of operations through purchase orders or other documentation, or that are undocumented except
forff
payments upon deliveryrr of goods and services. The naturt e of the work being conducted under these agreements is such that,
in most cases, the services may be stopped on short notice. In such event, we would not be liabla e forff
agreement and thereforff e these amounts are not reflff ected in the above

an invoice. Such short-term agreements are generally outstanding forff

periods less than a year and are settled by cash

l amount of the

the fulff

tabla e.

a

a

We have entered into various collabor

ation, licensing and merger agreements which generally include upfrff ont license
feff es, development and commercial milestone payments upon achievement of certain clinical and commercial development
and annual net sales milestones, as well as royalties calculated as a percentage of product revenues, with rates that varyrr by
agreement. As of December 31, 2022, we may be required to make milestone payments up to $1.6 billion in the aggregate.
These payments are contingent upon achieving futff urt e development, regulatoryrr and commercial milestones. We are also
required to make royalty payments in connection with the sale of products developed under those agreements. We have not
included any such milestone or royalty payments in the above
collabor
a
treatment of severe and rare genetic neurodevelopmental diseases of the CNS. Under the terms of the agreement, we may be
required to pay up to $907.5 million in milestone payments based on the achievement of certain clinical and commercial
development and annual net sales milestones.

ation agreement with Stoke to discover, develop and commercialize novel RNRR A-based medicines forff

tabla e. In Januaryrr 2022, we entered into a license and

the potential

a

CasCC h FlFF owsww

At December 31, 2022, we had $416.8 million in cash, cash equivalents, and investment securities, compared to $520.7
million at December 31, 2021. This $103.9 million decrease in cash, cash equivalents, and investment securities during 2022
was primarily due to net cash used in operating activities, offff sff et in part by cash proceeds frff om the exercise of employee stock
options.

65

Net cash used in operating activities decreased to $114.0 million in 2022 compared to $125.7 million in 2021 and
$136.2 million in 2020. The decrease in net cash used in operating activities in 2022 relative to 2021 was primarily due to an
increase in our net revenues as well as decreased sales and marketing costs, partially offset by increased research and
development costs. The decrease in net cash used in operating activities in 2021 relative to 2020 was due to an increase in our
net revenues as well as decreased research and development costs and sales and marketing costs.

Net cash provided by investing activities totaled $73.2 million in 2022 compared to net cash used in investing activities

of $71.1 million in 2021 and net cash provided by investing activities of $192.5 million in 2020. The increase in net cash
provided by investing activities in 2022 compared to 2021 was primarily dud e to increased net maturt
securities. The increase in net cash used in investing activities in 2021 compared to 2020 was primarily due to increased net
purchases of investment securities.

ities of investment

Net cash provided by fiff nancing activities decreased to $8.2 million in 2022 compared to $18.2 million in 2021 and
$81.0 million in 2020. The decrease in net cash provided by fiff nancing activities in 2022 relative to 2021 and in 2021 relative
to 2020 was primarily due to a decrease in proceeds resulting frff om the exercise of employee stock options.

OfO fff -ff Balance Sheet Arrangementstt

To date, we have not had any relationships with unconsolidated entities or fiff nancial partnerships, such as entities

refeff rred to as strucr
sheet arrangements or other contractuat
fiff nancing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

r
the purpos
es. As such, we are not materially exposed to any

e entities, which are establa ished forff

turt ed fiff nance or special purpos

lly narrow or limited purpos

e of faff cilitating offff -ff balance

r

r

Recent Accounting Pronouncements

See Item 15 of Part IV, “Notes to Consolidated Financial Statements—Note 2—Summaryrr of Signififf cant Accounting

Policies.”

Item 7A. Quantitt tii attt

itt ve and Qualill tii attt

itt ve Disii closll ures About MarMM kerr

t Risii k

Interest Rate Risk

ents of corpor

We invest our excess cash in investment-grade, interest-bearing securities. The primaryrr objective of our investment
. U.S. treasuryrr
activities is to preserve principal and liquidity. To achieve this objective, we invest in money market funds
l
ises with contractuat
notes, and high quality marketabla e debt instrumr
ity dates of generally less than one year. All investment securities have a credit rating of at least Aa3/AA- or better, or
maturt
P-1/A-1 or better, as determined by Moody’s Investors Service or Standard & Poor’s. We do not have any direct investments
in auction-rate securities or securities that are collateralized by assets that include mortgages or subprime debt. If a 10 percent
change in interest rates were to have occurred on December 31, 2022 and 2021, this change would not have had a material
effff eff ct on the faff ir value of our investment portfolff
io as of each such date. Although we are seeing, and expect to continue to
see, increased interest rates, due to our investment in investment-grade, interest-bearing securities, as of the date of this
Annual Report on Form 10-K, we do not expect anticipated changes in interest rates to have a material effff eff ct on our interest
rate risk in futff urt e reporting periods.

ff
ations and government sponsored enterprr

r

Item 8. FiFF nii ancial StSS attt ett mentstt and Supplu

ell mentartt

yr Data.tt

The consolidated fiff nancial statements required pursuant to this item are included in Item 15 of this report and are

presented beginning on page F-1.

Item 9. ChCC anges inii and Disii agreementstt WiWW tii htt Accountantt

tstt on Accountitt nii g and FiFF nii ancial Disii closll ure.ee

None.

66

Item 9A. ConCC trtt olsll and PrPP ocedures.

Disii closure ContCC rolsll and Procedures

We maintain disclosure controls and procedures that are designed to ensure that inforff mation required to be disclosed in

a

opriate, to allow timely decisions regarding required disclosure. In designing and

our periodic and current reports that we fiff le with the SEC is recorded, processed, summarized and reported within the time
periods specififf ed in the SEC’s rulr es and forff ms, and that such inforff mation is accumulated and communicated to our
management, including our Chief Executive Offff iff cer and Chief Financial Offff iff cer (our principal executive offff iff cer and principal
fiff nancial offff iff cer, respectively), as appr
evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how
well designed and operated, can provide only reasonabla e and not absa olute assurance of achieving the desired control
objectives. In reaching a reasonabla e level of assurance, management necessarily was required to appl
evaluating the cost-benefiff t relationship of possible controls and procedures. In addition, the design of any system of controls
is based in part upon certain assumptions about
the likelihood of futff urt e events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential futff ut re conditions; over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effff eff ctive control system, misstatements due to error or frff aud may occur and not be detected.

y its judgment in

a

a

As of December 31, 2022, we carried out an evaluation, under the supervision and with the participation of our

management, including our Chief Executive Offff iff cer and Chief Financial Offff iff cer, of the effff eff ctiveness of the design and
operation of our disclosure controls and procedures, as defiff ned in RulRR es 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended. Based on this evaluation, our Chief Executive Offff iff cer and Chief Financial Offff iff cer
concluded that our disclosure controls and procedures were effff eff ctive at the reasonabla e assurance level as of December 31,
2022.

MM
Manage

ment’s Repor

e

t on IntII ernal ContCC rol Over FiFF nancial Repor

e

ting

Our management is responsible forff

establa ishing and maintaining adequate internal control over fiff nancial reporting.

Internal control over fiff nancial reporting is a process designed by, or under the supervision and with the participation of,ff our
Chief Executive Offff iff cer and Chief Financial Offff iff cer (our principal executive offff iff cer and principal fiff nancial offff iff cer,
respectively), and effff eff cted by our board of directors, management and other personnel, to provide reasonabla e assurance
regarding the reliabia lity of fiff nancial reporting and the preparation of fiff nancial statements forff
with accounting principles generally accepted in the United States of America.

external purpos

es in accordance

r

As of December 31, 2022, our management assessed the effff eff ctiveness of our internal control over fiff nancial reporting,
th by the

as defiff ned in RulRR es 13a-15(f)ff and 15d-15(f)ff under the Exchange Act of 1934, as amended, using the criteria set forff
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework
(2013). Based on this assessment, management, under the supervision and with the participation of our Chief Executive
Offff iff cer and Chief Financial Offff iff cer, concluded that, as of December 31, 2022, our internal control over fiff nancial reporting
was effff eff ctive based on those criteria.

The effff eff ctiveness of our internal control over fiff nancial reporting as of December 31, 2022 has been audited by Ernst &

Young LLP, an independent registered public accounting fiff rm, as stated in its report, which is included herein.

CC
Change

s in IntII ernal ContCC rol Over FiFF nancial Repor

e

ting

An evaluation was also perforff med under the supervision and with the participation of our management, including our

Chief Executive Offff iff cer and Chief Financial Offff iff cer(our principal executive offff iff cer and principal fiff nancial offff iff cer,
respectively), of any changes in our internal control over fiff nancial reporting that occurred during our last fiff scal quarter and
that has materially affff eff cted, or is reasonabla y likely to materially affff eff ct, our internal control over fiff nancial reporting. That
evaluation did not identifyff any change in our internal control over fiff nancial reporting that occurred during our latest fiff scal
quarter and that has materially affff eff cted, or is reasonabla y likely to materially affff eff ct, our internal control over fiff nancial
reporting.

67

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of
Acadia Pharmaceuticals Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Acadia Pharmaceuticals Inc.’s internal control over fiff nancial reporting as of December 31, 2022, based on
criteria establa ished in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 frff amework) (the COSO criteria). In our opinion, Acadia Pharmaceuticals Inc. (the Company)
maintained, in all material respects, effff eff ctive internal control over fiff nancial reporting as of December 31, 2022, based on the
COSO criteria.

We also have audited, in accordance with the standards of the Publu ic Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of Acadia Pharmaceuticals Inc. as of December 31, 2022 and 2021, the related
consolidated statements of operations, comprehensive loss, cash flff ows and stockholders’ equity forff
the period ended December 31, 2022, and the related notes and the fiff nancial statement schedule listed in the Index at Item
ryrr 27, 2023 expressed an unqualififf ed opinion thereon.
15(a)2 and our report dated Februar

each of the three years in

Basis forff Opinion

The Company’s management is responsible forff maintaining effff eff ctive internal control over fiff nancial reporting and forff
its
assessment of the effff eff ctiveness of internal control over fiff nancial reporting included in the accompanying Management’s
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over fiff nancial reporting based on our audit. We are a public accounting fiff rm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. feff deral securities laws and the appl
rulr es and regulations of the Securities and Exchange Commission and the PCAOB.

a

icabla e

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perforff m
the audit to obtain reasonabla e assurance about
whether effff eff ctive internal control over fiff nancial reporting was maintained in
all material respects.

a

Our audit included obtaining an understanding of internal control over fiff nancial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effff eff ctiveness of internal control based on the assessed risk,
and perforff ming such other procedures as we considered necessaryrr
in the circumstances. We believe that our audit provides a
reasonabla e basis forff

our opinion.

Defiff nition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over fiff nancial reporting is a process designed to provide reasonabla e assurance regarding the
es in accordance with generally
reliabia lity of fiff nancial reporting and the preparation of fiff nancial statements forff
accepted accounting principles. A company’s internal control over fiff nancial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonabla e detail, accurately and faff irly reflff ect the transactions and
dispositions of the assets of the company; (2) provide reasonabla e assurance that transactions are recorded as necessaryrr
permit preparation of fiff nancial statements in accordance with generally accepted accounting principles, and that receipts and
expenditurt es of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonabla e assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effff eff ct on the fiff nancial statements.

external purpos

to

r

Because of its inherent limitations, internal control over fiff nancial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effff eff ctiveness to futff urt e periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

San Diego, Califorff nia
Februar

ryrr 27, 2023

68

Item 9B. Othtt er InII fn orff mrr atitt on

None.

Item 9C. Disii closll ure Regar

e

dinii g ForFF eigni

Jurisii dictitt ons thtt at PrPP event InII spes

ctitt ons

a
Not appl

icabla e.

Item 10. Dirii ectortt

srr ,s ExeEE cutitt ve OfO fff iff cersrr and CorCC por

rr

PART III

atett Governance.

The inforff mation required by this Item and not set forff

th below will be set forff

th in the section headed “—Election of

Directors,” “Inforff mation Regarding the Board of Directors and Corpor
Reports,” if any, in our defiff nitive Proxy Statement forff
May 1, 2023 (our “Proxy Statement”) and is incorpor

rr

r

ated in this report by refeff rence.

ate Governance” and “Delinquent Section 16(a)

our 2023 Annual Meeting of Stockholders to be fiff led with the SEC by

We have adopted a code of ethics forff

directors, offff iff cers (including our principal executive offff iff cer, principal fiff nancial
offff iff cer and principal accounting offff iff cer) and employees, known as the Code of Business Conduct and Ethics. The Code of
Business Conduct and Ethics is availabla e on our website at http:tt
of our Investors page. We will promptly disclose on our website (i) the naturt e of any amendment to the policy that appl
our principal executive offff iff cer, principal fiff nancial offff iff cer, principal accounting offff iff cer or controller, or persons perforff ming
similar func
to one of these specififf ed individuals, the name of such person who is granted the waiver and the date of the waiver.
Stockholders may request a frff ee copy of the Code of Business Conduct and Ethics frff om our compliance department c/o
Acadia Pharmaceuticals Inc., 12830 El Camino Real, Suite 400, San Diego, CA 92130.

tions and (ii) the naturt e of any waiver, including an implicit waiver, frff om a provision of the policy that is granted

ate Governance section
ies to

//// w// ww.acadia.com under the Corpor

a

ff

r

Item 11. ExeEE cutitt ve ComCC pem nsatitt on.

The inforff mation required by this Item will be set forff

th in the section headed “Executive Compensation” in our Proxy

Statement and is incorpor

rr

ated in this report by refeff rence.

Item 12. SeSS curitii ytt Ownersrr hipii of CeCC rtaitt nii Benefe iff cial Ownersrr and ManMM agement and Relatll ett d StSS octt kholdell

r MatMM ttt ett rsrr .

The inforff mation required by this Item will be set forff
Owners and Management” in our Proxy Statement and is incorpor

r

ated in this report by refeff rence.

th in the section headed “Security Ownership of Certain Benefiff cial

Inforff mation regarding our equity compensation plans will be set forff

th in the section headed “Executive Compensation”

in our Proxy Statement and is incorpor

rr

ated in this report by refeff rence.

Item 13. CeCC rtaitt nii Relatll

itt onshipsii

and Relatll ett d TrTT ansactitt ons,s and Dirii ectortt

InII depeee ndence.

The inforff mation required by this Item will be set forff
r

our Proxy Statement and is incorpor

ated in this report by refeff rence.

th in the section headed “Transactions With Related Persons” in

Item 14. PrPP inii cipal

ii

Accountantt

t FeFF es and SeSS rvices.

The inforff mation required by this Item will be set forff

Independent Registered Public Accounting Firm” in our Proxy Statement and is incorpor

th in the section headed “—Ratififf cation of Selection of
rr

ated in this report by refeff rence.

69

Item 15. Exhibits and Financial Statement Schedules.

(a)(( Documentstt

fiff led as part of thisii repor

e

t.

PART IV

1. The folff

lowing fiff nancial statements of Acadia Pharmaceuticals Inc. and Report of Ernst & Young LLP, Independent

Registered Public Accounting Firm, are included in this report:

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) ........................................................
Consolidated Balance Sheets
Consolidated Statements of Operations....................................................................................................................
Consolidated Statements of Comprehensive Loss....................................................................................................
Consolidated Statements of Cash Flows...................................................................................................................
Consolidated Statements of Stockholders’ Equity ...................................................................................................
Notes to Consolidated Financial Statements ............................................................................................................

Page Number
F-1
F-3
F-4
F-5
F-6
F-7
F-8

2. List of fiff nancial statement schedules:

Schedule II – Valuation and Qualifyiff ng Accounts

Schedules not listed above
the fiff nancial statements or notes thereto.

a

have been omitted because they are not appl

a

icabla e or the required inforff mation is shown in

3. List of Exhibits required by Item 601 of Regulation S-K. See part (b) below.

(b)(( ExEE hibitstt .

Exhibit
Number

Description

3.1

3.2

3.3

4.1

4.2

4.3

10.1a

10.2a

10.3a

10.4a

Amended and Restated Certificate of Incorporation, as Amended (incorporated by reference to Exhibit 3.1 to the
Registrant’s Quarterly Report on Form 10-Q, filed August 6, 2015).

Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K, filed February 25, 2021).

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on
Form 8-K, filed September 12, 2013).

Form of common stock certificate of the Registrant (incorporated by reference to Exhibit 4.1 to Registration
Statement No. 333-52492).

Form of Amended and Restated Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.2 to
the Registrant’s Annual Report on Form 10-K, filed February 26, 2019).

Description of the Registrant’s Common Stock (incorporated by reference to Exhibit 4.3 to the Registrant’s
Annual Report on Form 10-K, filed February 27, 2020).

Form of Indemnity Agreement for directors and officers (incorporated by reference to Exhibit 10.1 to
Registration Statement No. 333-113137).

2004 Equity Incentive Plan and forms of agreement thereunder (incorporated by reference to Exhibit 10.3 to
Registration Statement No. 333-113137).

2010 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly
Report on Form 10-K, filed August 9, 2022).

Forms of agreement under the 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the
Registrant’s Annual Report on Form 10-K, filed February 29, 2016).

70

10.5a

10.6a

10.7a

a

10.9a

10.10a

10.11a

10.12a

a

10.14a

10.15a

10.16b

2004 Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 99.1 to the Registrant’s
Current Report on Form 8-K, filed June 29, 2020).

Offerings under the 2004 Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 10.6
to the Registrant’s Annual Report on Form 10-K, filed February 28, 2017).

Employment Agreement, dated September 1, 2015, between the Registrant and Stephen Davis (incorporated by
reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K, filed September 3, 2015).

Employment Offer Letter, dated October 28, 2015, between the Registrant and Srdjan Stankovic (incorporated
by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K, filed February 29, 2016).

Employment Offer Letter, dated June 26, 2018, between the Registrant and Brendan Teehan (incorporated by
reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K, filed March 1, 2022).

Employment Offer Letter, dated July 2, 2018, between the Registrant and Austin D. Kim (incorporated by
reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed November 6, 2018).

Employment Offer Letter, dated April 28, 2020, between the Registrant and Mark Schneyer (incorporated by
reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K, filed March 1, 2022).

Employment Offer Letter, dated December 19, 2022, between the Registrant and Doug Williamson.

Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 99.2 to the Registrant’s
Current Report on Form 8-K, filed June 29, 2020).

Management Severance Benefit Plan (incorporated by reference to Exhibit 99.1 to the Registrant’s Current
Report on Form 8-K, filed December 15, 2015).

Amended and Restated Change in Control Severance Benefit Plan (incorporated by reference to Exhibit 99.2 to
the Registrant’s Current Report on Form 8-K, filed December 15, 2015).

Master Manufacturing Services Agreement and Product Agreement, dated August 3, 2015, by and between the
Registrant and Patheon Pharmaceuticals Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s
Quarterly Report on Form 10-Q, filed November 5, 2015).

b

First Amendment to Product Agreement, dated April 25, 2016, by and between the Registrant and Patheon
Pharmaceuticals Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-
Q, filed August 4, 2016).

10.18b

10.19b

c

10.21c

10.22c

10.23c

Second Amendment to Product Agreement, dated October 6, 2016, by and between the Registrant and Patheon
Pharmaceuticals Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-
Q, filed November 7, 2016).

Third Amendment to Product Agreement, dated December 11, 2017, by and between the Registrant and Patheon
Pharmaceuticals Inc (incorporated by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-
K, filed February 27, 2018.

Master Services Agreement, dated December 15, 2016, by and between Acadia Pharmaceuticals GmbH and
Siegfried AG and its affiliates, and Attachment #1, Attachment #2 and Attachment #3 (incorporated by reference
to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed November 3, 2022).

Change Order #1 to Master Services Agreement Attachment #1, dated January 3, 2017, by and between Acadia
Pharmaceuticals GmbH and Siegfried AG (incorporated by reference to Exhibit 10.2 to the Registrant’s
Quarterly Report on Form 10-Q, filed November 3, 2022).

Attachment #4, Attachment #5 and Attachment #6, each dated May 12, 2017, to the Master Services Agreement,
dated December 15, 2016, by and between Acadia Pharmaceuticals GmbH and Siegfried AG and its affiliates
(incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q, filed November 3,
2022).

Attachment #7, dated September 30, 2020, to the Master Services Agreement, dated December 15, 2016, by and
between Acadia Pharmaceuticals GmbH and Siegfried AG and its affiliates (incorporated by reference to Exhibit
10.1 to the Registrant’s Quarterly report on Form 10-Q, filed November 4, 2020).

71

10.24

10.25

10.26 b

10.27b

10.28c

10.29c

10.30 a

a

a

Registration Rights Agreement, dated January 6, 2016, between the Registrant and the investors listed on
Schedule A thereto (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K,
filed January 7, 2016).

Assignment of Brann Intellectual Property Rights, dated January 29, 1997, by Mark R. Brann in favor of the
Registrant (incorporated by reference to Exhibit 10.17 to Registration Statement No. 333-52492).

License Agreement, dated August 6, 2018, by and between the Registrant and Neuren Pharmaceuticals Ltd.
(incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K, filed February 27,
2019).

Lease Agreement, effective October 4, 2018, by and between the Registrant and Kilroy Realty, L.P.
(incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K, filed February 27,
2019).

First Amendment to Office Lease, dated December 23, 2019, between the Registrant and Kilroy Realty, L.P.
(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly report on Form 10-Q, filed May 8, 2020).

Second Amendment to Office Lease, dated March 12, 2020, between the Registrant and Kilroy Realty, L.P.
(incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly report on Form 10-Q, filed May 8, 2020).

Acadia Pharmaceuticals Inc. 2023 Inducement Plan (incorporated by reference to Exhibit 99.1 to Registration
Statement No. 333-269611).

Forms of Stock Option Grant Notice and Stock Option Agreement under Acadia Pharmaceuticals Inc. 2023
Inducement Plan (incorporated by reference to Exhibit 99.2 to Registration Statement No. 333-269611).

Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under Acadia
Pharmaceuticals Inc. 2023 Inducement Plan (incorporated by reference to Exhibit 99.3 to Registration Statement
No. 333-269611).

10.33c

Lease Agreement, effective May 15, 2018, by and between the Registrant and Boston Properties Limited
Partnership.

21.1

23.1

24.1

31.1

31.2

32.2

101

List of subsidiaries of the Registrant.

Consent of Independent Registered Public Accounting Firm.

Power of Attorney (see signature page hereto).

Certification of Stephen Davis, Chief Executive Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Mark Schneyer, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-
14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

Certification of Stephen Davis, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Certification of Mark Schneyer, Executive Vice President 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.

lowing fiff nancial statements frff om this Annual Report, forff matted in iXBRL (Inline Extensible Business

The folff
Reporting Language), are fiff led herewith: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of
Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Cash Flows,
(v) Consolidated Statements of Stockholders’ Equity, and (vi) Notes to Consolidated Financial Statements.

104

Cover Page Interactive Data File (forff matted as inline XBRL and contained in Exhibit 101)

a Indicates management contract or compensatoryrr plan or arrangement.

b We have requested or received confiff dential treatment of certain portions of this agreement, which have been omitted and
fiff led separately with the SEC pursuant to RulRR e 406 under the Securities Act of 1933, as amended, or RulRR e 24b-2 of the
Securities Exchange Act of 1934, as amended.

72

c Pursuant to Item 601(b)(10) of Regulation S-K, certain portions of this exhibit have been omitted (indicated by “[***]” or
“[…***…]”) because the Company has determined that the inforff mation is both not material and is the type that the Company
treats as private or confiff dential.

Item 16. ForFF mrr

10-K- Summaryr

None.

73

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly

caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

Date: Februar

ryrr 27, 2023

ACADIA PHARMACEUTICALS INC.

/s/ STEPHEN R. DAVIS
Stephen R. Davis
Chief Executive Offff iff cer
(on behalf of the registrant and as the registrant’s
Principal Executive Offff iff cer)

74

KNKK OW ALL PERSONS BY THESE PRESENTS, that each individual whose signaturt e appe
nts Stephen R. Davis his truer

ars below constitutt es and
him and in his or
attorney-in-faff ct and agent, with fulff
cities, to sign any and all amendments to this Annual Report on Form 10-K, and

and lawfulff
a
appoi
her name, place and stead, in any and all capaa
to fiff le the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-faff ct and agent fulff
thing requisite and necessaryrr
could do in person, hereby ratifyff ing and confiff rming all that said attorney-in-faff ct and agent, or his or her substitutt e or
substitutt es, may lawfulff

l power and authority to do and perforff m each and everyrr act and

ly do or cause to be done by virtuet

ly to all intents and purpos

es as he or she might or

to be done in and about

l power of substitutt

the premises, as fulff

ion, forff

hereof.ff

a

a

rr

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the

folff

lowing persons on behalf of the registrant and in the capaa

cities and on the dates indicated.

Signature

Title

Date

/S/ STEPHEN R. DAVIS

Stephen R. Davis

/S/ MARK C. SCHNEYER

Mark C. Schneyer

/S/

JAMES K. KIHARAR

James K. Kihara

Chief Executive Offff iff cer and Director
(Principal Executive Offff iff cer)

Februarr

ryrr 27, 2023

Executive Vice President and Chief Financial
Offff iff cer (Principal Financial Offff iff cer)

Februarr

ryrr 27, 2023

Vice President, Chief Accounting Offff iff cer and
Controller (Principal Accounting Offff iff cer)

Februarr

ryrr 27, 2023

/S/ STEPHEN R. BIGGAR

Chairman of the Board

Februarr

ryrr 27, 2023

Stephen R. Biggar

/S/

JULIANAA C. BAKER

Director

Februarr

ryrr 27, 2023

Julian C. Baker

/S/ LAURARR A. BREGE

Director

Februarr

ryrr 27, 2023

Laura A. Brege

/S/

JAMES M. DALY

Director

Februarr

ryrr 27, 2023

James M. Daly

/S/ ELIZABETH A. GAROFALO

Director

Februarr

ryrr 27, 2023

Elizabeth A. Garofalff o

/S/ EDMUNUU D P. HARRIGANAA

Director

Februarr

ryrr 27, 2023

Edmund P. Harrigan

/S/ ADORARR NDU

Director

Februarr

ryrr 27, 2023

Adora Ndu

/S/ DANAA IEL B. SOLANAA D

Director

Februarr

ryrr 27, 2023

Daniel B. Soland

75

[THIS PAGE INTENTIONALLY LEFT BLANK]

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of
Acadia Pharmaceuticals Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Acadia Pharmaceuticals Inc. (the Company) as of
December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, cash flff ows and
stockholders’ equity forff
each of the three years in the period ended December 31, 2022, and the related notes and the
fiff nancial statement schedule listed in the Index at Item 15(a)2 (collectively refeff rred to as the “consolidated fiff nancial
statements”). In our opinion, the consolidated fiff nancial statements present faff irly, in all material respects, the fiff nancial
position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flff ows forff
three years in the period ended December 31, 2022, in conforff mity with U.S. generally accepted accounting principles.

each of the

We also have audited, in accordance with the standards of the Publu ic Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over fiff nancial reporting as of December 31, 2022, based on criteria establa ished in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 frff amework), and our report dated Februar

ryrr 27, 2023 expressed an unqualififf ed opinion thereon.

Basis forff Opinion

These fiff nancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s fiff nancial statements based on our audits. We are a pubu lic accounting fiff rm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. feff deral securities laws and the
a
appl

icabla e rulr es and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perforff m
the audit to obtain reasonabla e assurance about
to error or frff aud. Our audits included perforff ming procedures to assess the risks of material misstatement of the fiff nancial
statements, whether due to error or frff aud, and perforff ming procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the fiff nancial statements. Our audits also
included evaluating the accounting principles used and signififf cant estimates made by management, as well as evaluating the
overall presentation of the fiff nancial statements. We believe that our audits provide a reasonabla e basis forff

whether the fiff nancial statements are frff ee of material misstatement, whether due

our opinion.

a

Critical Audit Matter

The critical audit matter communicated below is a matter arising frff om the current period audit of the fiff nancial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the fiff nancial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matter does not alter in any way our opinion on the consolidated fiff nancial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical
audit matter or on the accounts or disclosures to which it relates.

F-1

ion of thett

Descripti
MatMM ter

HowHH WeWW Addressed
the MatMM ter in Our
Audit

Allll owll

ance forff MeMM dicare ParPP t D rebatett s

As described in Note 2 to the consolidated fiff nancial statements under the capta ion “Revenue Recognition”,
the Company establa ishes provisions forff
sales rebates in the same period the related product is sold. At
December 31, 2022, the Company had $24.2 million in sales rebates accruer d, which includes rebates
provided forff Medicare Part D drugrr
estimated its rebates based upon the identififf cation of the products subject to a rebate, the appl
rebate terms and the estimated lag time between the sale and payment of the rebate.

plan. In order to establa ish these sales rebate accruarr

ls, the Company

icabla e price,

a

ls was complex and required signififf cant auditor

ls consider multiple subjective estimates and assumptions. These estimates

Auditing the Medicare Part D sales rebate accruarr
judgment because the accruarr
and assumptions included the estimated inventoryrr
between the sale to the customer and payment of the rebate, and the fiff nal payer related to product sales,
which impacts the appl
Company used both internal and external sources of inforff mation to estimate product in the distribution
channels, payer mix, prescription volumes and historical experience. Management supplemented its
historical data analysis with qualitative adjustments based upon changes in rebate trends, rebate programs
and contract terms, legislative changes, or other signififf cant events which indicate a change in the reserve
a
is appr

icabla e price and rebate terms. In deriving these estimates and assumptions, the

in the distribution channel, which impacts the lag time

opriate.

a

ls forff Medicare Part D rebates. This included testing controls over

We obtained an understanding, evaluated the design, and tested the operating effff eff ctiveness of controls
over the Company’s sales rebate accruarr
management’s review of the signififf cant assumptions described above
calculation. For example, we tested controls over actuat
utilization and payer mix. The testing was inclusive of management’s controls to evaluate the accuracy of
its reserve judgments to actuat
the data used to evaluate and support the signififf cant assumptions was complete, accurate and, where
a
appl

l rebates paid, rebate validation and processing, and controls to ensure that

l sales and the accuracy of forff ecasting expected

icabla e, verififf ed to external data sources.

and inputs into the rebate

a

ls forff Medicare Part D, our audit procedures included, among others,

To test the sales rebate accruarr
understanding and evaluating the signififf cant assumptions and underlying data used in management’s
calculations. Our testing of signififf cant assumptions included a lookback analysis to evaluate the historical
accuracy of management’s estimates by comparing actuat
l activity to previous estimates and perforff med
sensitivity analyses over the subjective assumptions to evaluate the completeness of the reserves. As a
part of our procedures, we evaluated the reasonabla eness of the Company’s assumptions considering recent
sales trends and regulatoryrr

faff ctors.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2015.

San Diego, Califorff nia
Februar

ryrr 27, 2023

F-2

ACADIA PHARMACEUTICALS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

-sale

Assets
Cash and cash equivalents
Investment securities, availabla e-forff
Accounts receivabla e, net
Interest and other receivabla es
Inventoryrr
Prepaid expenses

Total current assets

Property and equipment, net
Operating lease right-of-ff use assets
Restricted cash
Long-term inventoryrr
Other assets

Total assets

Liabilities and stockholders’ equity
Accounts payabla e
Accruer d liabia lities

Total current liabia lities
Operating lease liabia lities
Other long-term liabia lities

Total liabia lities

Commitments and contingencies (Note 9)
Stockholders’ equity:
Prefeff rred stock, $0.0001 par value; 5,000,000 shares authorized at December 31, 2022

and 2021; no shares issued and outstanding at December 31, 2022 and 2021

Common stock, $0.0001 par value; 225,000,000 shares authorized at December 31, 2022

and 2021; 162,064,872 shares and 161,012,695 shares issued and outstanding at
December 31, 2022 and 2021, respectively

Additional paid-in capia tal
Accumulated defiff cit
Accumulated other comprehensive loss

Total stockholders’ equity
Total liabia lities and stockholders’ equity

December 31,

2022

2021

$

$

$

114,846
301,977
62,195
885
6,636
21,398
507,937
6,021
55,573
5,770
4,924
7,587
587,812

12,746
112,884
125,630
52,695
9,074
187,399

147,435
373,271
64,366
978
7,881
23,892
617,823
8,047
58,268
5,770
6,217
3,997
700,122

6,876
89,192
96,068
56,126
7,034
159,228

—

—

16
2,770,923
(2,369,551)
(975)
400,413
587,812

$

16
2,694,646
(2,153,576)
(192)
540,894
700,122

$

$

$

$

The accompanying notes are an integral part of these consolidated fiff nancial statements.

F-3

ACADIA PHARMACEUTICALS INC.
CONSOLIDATED STATEMENTS OF OPERARR TIONS
(in thousands, except per share amounts)

Revenues
Product sales, net
Total revenues
Operating expenses
Cost of product sales
License feff es and royalties
Research and development
Selling, general and administrative

Total operating expenses
Loss frff om operations

Interest income, net
Other income (expense)
Loss beforff e income taxes
Income tax expense

Net loss

Net loss per common share, basic and diluted
Weighted average common shares outstanding, basic and diluted

Years Ended December 31,
2021

2020

2022

$

517,235
517,235

$

484,145
484,145

$

441,755
441,755

10,166
—
361,575
369,090
740,831
(223,596)
6,610
3,542
(213,444)
2,531
(215,975) $
(1.34) $

10,843
8,298
239,415
396,028
654,584
(170,439)
591
2,329
(167,519)
351
(167,870) $
(1.05) $

161,683

160,493

10,211
10,339
319,130
388,661
728,341
(286,586)
6,610
(997)
(280,973)
611
(281,584)
(1.79)
157,331

$
$

The accompanying notes are an integral part of these consolidated fiff nancial statements.

F-4

ACADIA PHARMACEUTICALS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)

Net loss
Other comprehensive (loss) income :

Unrealized loss on investment securities
Foreign currency translation adjustments

Comprehensive loss

Years Ended December 31,
2021
(167,870) $

2022
(215,975) $

$

(789)
6

(235)
7

$

(216,758) $

(168,098) $

2020
(281,584)

(253)
(8)
(281,845)

The accompanying notes are an integral part of these consolidated fiff nancial statements.

F-5

ACADIA PHARMACEUTICALS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Cash flff ows frff om operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation
Amortization of premiums and accretion of discounts on investment

securities

Amortization of intangible assets
(Gain) loss on strategic investment
Depreciation
Loss on disposal of assets
Non-cash in-process research and development
Changes in operating assets and liabia lities:

Accounts receivabla e, net
Interest and other receivabla es
Inventoryrr
Prepaid expenses and other current assets
Operating lease right-of-ff use assets
Other assets
Accounts payabla e
Accruerr d liabia lities
Operating lease liabia lities
Long-term liabia lities

Net cash used in operating activities

Cash flff ows frff om investing activities
Purchases of investment securities
Maturt
ities of investment securities
Net purchases of property and equipment

Net cash provided by (used in) investing activities

Cash flff ows frff om fiff nancing activities
Proceeds frff om issuance of common stock, net of issuance costs

Net cash provided by fiff nancing activities

Effff eff ct of exchange rate changes on cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash
Beginning of year
End of year
Supplemental disclosure of cash flff ow inforff mation:
Cash paid forff
Supplemental disclosure of noncash inforff mation:
Property and equipment purchases in accounts payabla e and accruerr d liabia lities
Value of common stock issued in connection with asset acquisition

income taxes

$

$

$
$

Years Ended December 31,
2021

2022

2020

$

(215,975) $

(167,870) $

(281,584)

68,201

63,615

(2,736)
—
(3,542)
2,026
—
—

2,171
93
2,415
2,494
6,566
(48)
5,870
24,306
(7,916)
2,040
(114,035)

(363,174)
436,415
—
73,241

8,199
8,199
6
(32,589)

2,404
1,108
(2,329)
2,236
—
—

(16,119)
1,057
(4,210)
1,802
6,287
10
(1,617)
(8,455)
(5,433)
1,854
(125,660)

(492,797)
422,817
(1,122)
(71,102)

18,162
18,162
7
(178,593)

153,205
120,616

2,190

$

$

331,798
153,205

1,038

$

$

84,422

1,470
1,477
997
1,455
281
44,280

(12,466)
58
(3,320)
(7,088)
4,280
182
1,271
27,569
(1,769)
2,319
(136,166)

(339,908)
540,004
(7,587)
192,509

80,996
80,996
(8)
137,331

194,467
331,798

1,113

— $
— $

— $
— $

130
44,280

The accompanying notes are an integral part of these consolidated fiff nancial statements.

F-6

ACADIA PHARMACEUTICALS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)

Balances at December 31, 2019
Issuance of common stock in

public offff eff ring, net of
issuance costs

Issuance of common stock frff om
exercise of stock options and
units

Issuance of common stock

pursuant to employee stock
purchase plan

Net loss
Stock-based compensation
Other comprehensive income
Balances at December 31, 2020
Issuance of common stock frff om

exercise of stock options
Issuance of common stock
pursuant to employee
stock purchase plan

Net loss
Stock-based compensation
Other comprehensive income
Balances at December 31, 2021
Issuance of common stock frff om
exercise of stock options and
units

Issuance of common stock
pursuant to employee
stock purchase plan

Net loss
Stock-based compensation
Other comprehensive income
Balances at December 31, 2022

Common Stock

Shares
155,275,300

$

Amount

15

$

Additional
Paid-in
Capital
2,402,945

Accumulated
Defiff cit
$ (1,704,122)

Accumulated
Other
Comprehensive
Income (Loss)
297
$

Total
Stockholders’
Equity

$

699,135

1,156,626

2,827,586

378,259
—
—
—
159,637,771

1,078,074

296,850

—
—
161,012,695

721,652

330,525
—
—
—
162,064,872

$

—

1

—
—
—
—
16

—

—
—
—
—
16

—

—
—
—
—
16

44,280

73,833

—

—

7,162
—
84,443
—
2,612,663

—
(281,584)
—
—
(1,985,706)

12,850

—

5,312

63,821

—
(167,870)
—

2,694,646

(2,153,576)

—

—

—
—
—
(261)
36

—

—

—
(228)
(192)

44,280

73,834

7,162
(281,584)
84,443
(261)
627,009

12,850

5,312
(167,870)
63,821
(228)
540,894

3,705

—

—

3,705

4,494
—
68,078
—
2,770,923

—
(215,975)
—
—
$ (2,369,551)

$

$

—
—
—
(783)
(975)

$

4,494
(215,975)
68,078
(783)
400,413

The accompanying notes are an integral part of these consolidated fiff nancial statements.

F-7

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Business

Acadia Pharmaceuticals Inc. (the Company), based in San Diego, Califorff nia, is a biopharmaceutical company focff used
on the development and commercialization of innovative medicines that address unmet medical needs in CNS disorders and
rare disease. The Company is incorpor

ated in Delaware.

r

In April 2016, the U.S. Food and Drugr Administration (FDA) appr

NUPLAZID®
a
the treatment of hallucinations and delusions associated with Parkinson’s disease psychosis (PDP).

oved the Company’s fiff rst drug,

r

(pimavanserin), forff
NUPLAZID became availabla e forff

prescription in the United States in May 2016.

2. Summary of Signififf cant Accounting Policies

Signififf cant accounting policies folff

lowed in the preparation of these fiff nancial statements are as folff

lows:

PrPP inii ciplii ell s of ConCC solill datitt on

The accompanying consolidated fiff nancial statements include the accounts of the Company and its wholly-owned

subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

UsUU e of EsEE titt mii atett s

The preparation of fiff nancial statements in conforff mity with GAAP requires management to make estimates and
assumptions that affff eff ct the reported amounts of assets and liabia lities, the disclosure of assets and liabia lities at the date of the
fiff nancial statements and the reported amounts of revenues and expenses during the reporting period. Actuat
diffff eff r frff om these estimates.

l results could

CasCC h and CasCC h Equivalell ntstt

The Company considers all highly liquid investments with a maturt

ity date at the date of purchase of three months or

less to be cash equivalents.

The folff

lowing tabla e provides a reconciliation of cash, cash equivalents and restricted cash reported in the consolidated

balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flff ows (in
thousands).

Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted

Twelve Months Ended
December 31, 2022

Twelve Months Ended
December 31, 2021

Beginning of period
147,435
$
5,770

$

End of period

114,846
5,770

Beginning of period
326,028
$
5,770

$

End of period

147,435
5,770

cash shown in the statements of cash flff ows

$

153,205

$

120,616

$

331,798

$

153,205

InII vestmtt ent SeSS curitii itt es

Currently, all of the Company’s investment securities are debt securities. The Company has classififf ed all of its

-sale as the sale of such securities may be required prior to maturt

investment securities as availabla e-forff
ity to implement
management strategies, and accordingly, carries these investments at faff ir value. Unrealized gains and losses, if any, are
reported as a separate component of stockholders’ equity. The cost of investment securities classififf ed as availabla e-forff
adjusted forff
ity. Such amortization and accretion are included in
interest income. Realized gains and losses, if any, are also included in interest income. The cost of securities sold is based on
the specififf c identififf cation method.

amortization of premiums and accretion of discounts to maturt

-sale is

F-8

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

FaiFF ri ValVV ue of FiFF nii ancial InII strtt umentstt

The carryirr ng values of the Company’s fiff nancial instrumr

interest and other receivabla es, restricted cash, and accounts payabla e and accruer d liabia lities, appr
relative short-term naturt e of these instrumr

ents.

ents, consisting of cash and cash equivalents, trade receivabla es,
oximate faff ir value due to the

a

As disclosed in Note 4, the Company classififf es its cash equivalents and availabla e-forff

-sale investment securities within

the faff ir value hierarchy as defiff ned by authoritative guidance:

Level 1 Input

II

stt — Quoted prices forff

identical instrumr

ents in active markets.

stt — Quoted prices forff

II
ents in markets that are not active; and model-derived valuations in which all signififf cant inputs and

ents in active markets; quoted prices forff

similar instrumr

identical or similar

Level 2 Input
instrumr
signififf cant value drivers are observabla e.

II

Level 3 Input
signififf cant value drivers are unobservabla e.

stt — Valuation derived frff om valuation techniques in which one or more signififf cant inputs or

Accountstt Receivablell

Accounts receivabla e are recorded net of customer allowances forff

distribution feff es, prompt payment discounts,

distribution feff es, prompt payment discounts and chargebacks are based on

chargebacks, and credit losses. Allowances forff
l terms. The Company adopted FASB Accounting Standards Codififf cation 326-20, FiFF nancial InsII
contractuat
Losses (ASC 326-20) as of Januaryrr 1, 2020. The Company estimated the current expected credit losses of its accounts
receivabla e by assessing the risk of loss and availabla e relevant inforff mation about
losses, existing contractuat
reasonabla e and supportabla e forff ecast of economic conditions expected to exist throughout the contractuat
receivabla e. Based on its assessment, as of December 31, 2022, the Company determined that an allowance forff
not required.

the collectabia lity, including historical credit
l payment patterns of its customers, individual customer circumstances, and

l payment terms, actuat

trumentstt – CrCC edit

l lifeff of the

credit loss was

a

Although the Company has not historically experienced signififf cant credit losses, the Company’s exposure may

increase due to uncertainties associated with the global economic recession and other disrupt
19 pandemic.

rr

ions resulting frff om the COVID-

yr
InII ventortt

Inventoryrr

is stated at the lower of cost or net realizabla e value under the fiff rst-in, fiff rst-out method (FIFO). The Company

oximates actuat

l costing methodologies to determine the cost basis forff

l costs. Inventoryrr consists of raw material, work in process, and fiff nished goods, including third-party

ing costs, frff eight, and indirect overhead costs. The Company capia talizes inventoryrr costs associated with its

uses a combination of standard and actuat
appr
a
manufaff cturt
products upon regulatoryrr appr
and the futff urt e economic benefiff t is expected to be realized; otherwise, such costs are expensed. Prior to FDA appr
NUPLAZID in April 2016, all costs related to the manufaff cturt
expense in the period incurred.

oval when, based on management’s judgment, futff urt e commercialization is considered probabla e

ing of NUPLAZID were charged to research and development

its inventories which

oval of

a

a

The Company periodically reviews inventoryrr and reduces the carryirr ng value of items to net realizabla e value forff
potentially excess, dated or obsolete inventoryrr based on an analysis of forff ecasted demand compared to quantities on hand and
any fiff rm purchase orders, as well as product shelf lifeff . During the years ended December 31, 2022, 2021 and 2020, the
Company recorded charges of $0.6 million, $1.3 million and $0.4 million, respectively, to reduce certain fiff nished goods and
work in process inventoryrr

to its net realizabla e value.

F-9

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

PrPP opertytt and Equipmii

ent

Property and equipment are recorded at cost and depreciated over their estimated usefulff

lives using the straight-line
method. Leasehold improvements are amortized over the shorter of their estimated usefulff
lives or the term of the lease by use
property, equipment or improvements that
of the straight-line method. Construcr
have not been placed in service. Maintenance and repair costs are expensed as incurred. When assets are retired or sold, the
assets and accumulated depreciation are removed frff om the respective accounts and any gain or loss is recognized. Estimated
usefulff

tion-in-process reflff ects amounts incurred forff

lives by maja or asset categoryrr are as folff

lows:

Machineryrr and equipment
Computers and softff ware
Furniturt e and fiff xturt es

ImII paim rii mrr ent of Long-L- ived Assetstt

Usefuff l Lives

5 to 7 years
3 years
10 years

The Company reviews its long-lived assets forff

impairment whenever events or changes in circumstances indicate that
the carryirr ng amount of an asset may not be recoverabla e. Recoverabia lity is measured by a comparison of the carryirr ng amount
of an asset to estimated undiscounted futff urt e cash flff ows expected to be generated by the asset. If the carryirr ng amount of an
asset exceeds its estimated futff urt e cash flff ows, an impairment charge is recognized by the amount by which the carryirr ng
amount of the asset exceeds the faff ir value of the asset. Through December 31, 2022, no such impairment losses have been
recorded by the Company.

License FeFF es and Royaltll itt es

The Company expenses amounts paid to acquire licenses associated with products under development when the

ultimate recoverabia lity of the amounts paid is uncertain and the technology has no alternative futff urt e use when acquired.
Acquisitions of technology licenses are charged to expense or capia talized based upon management’s assessment regarding the
ultimate recoverabia lity of the amounts paid and the potential forff
technological feff asibility forff
the product availabla e forff

alternative futff urt e use. The Company has determined that
ovals are obtained to make
a

its product candidates is reached when the requisite regulatoryrr appr

sale.

In connection with the FDA appr

a

oval of NUPLAZID in April 2016, the Company made a one-time milestone payment

l property rights that complement its patent portfolff

of $8.0 million pursuant to its 2006 license agreement with the Ipsen Group in which the Company licensed certain
intellectuat
Company capia talized the $8.0 million payment as an intangible asset and is amortizing the asset on a straight-line basis over
the estimated usefulff
expense related to its intangible asset forff
million and $1.5 million forff
ly amortized.
was fulff

lifeff which ended during the year ended December 31, 2021. The Company recorded no amortization

the years ended December 31, 2021 and 2020. As of December 31, 2021, the intangible asset

the year ended December 31, 2022 and recorded amortization expense of $1.1

its serotonin platforff m, including NUPLAZID. The

io forff

Acquisii itii itt ons

The Company accounts forff

acquisitions of an asset or group of similar identififf abla e assets that do not meet the defiff nition

of a business as asset acquisition using the cost accumulation method, whereby the cost of the acquisition, including certain
transaction costs, is allocated to the assets acquired on the basis of their relative faff ir values. No goodwill is recognized in an
asset acquisition. Intangible assets acquired in an asset acquisition forff
use in research and development activities which have
no alternative futff urt e use are expensed as in-process research and development on the acquisition date. Intangible assets
acquired forff
research and development. Futurt e costs to develop these assets are recorded to research and development expense as they are
incurred. Contingent milestone payments associated with asset acquisitions are recognized when probabla e and estimabla e.
These amounts are expensed to research and development if there is no alternative futff urt e use associated with the asset, or
capia talized as an intangible asset if alternative futff urt e use of the asset exists.

use in research and development activities which have an alternative futff urt e use are capia talized as in-process

F-10

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Advertitt sii inii g ExpeEE

nse

In connection with the FDA appr

a

oval and commercial launch of NUPLAZID in 2016, the Company began to incur

advertising costs. Advertising costs are expensed when services are perforff med or goods are delivered. The Company incurred
$5.5 million, $41.8 million and $51.1 million in advertising costs during the years ended December 31, 2022, 2021 and 2020,
respectively, related to NUPLAZID. No advertising costs were capia talized as prepaid expenses at December 31, 2022 or
2021.

Revenue Recognitii itt on

Product Sales, NeNN t

those goods or services. To

lowing fiff ve steps: (i) identifyff

the contract(s) with a customer; (ii) identifyff

contracts with its customers in accordance with Revenue frff om ContCC ractstt with CusCC tomersrr

The Company accounts forff
c 606). The Company recognizes revenue when its customer obtains control of promised goods or services, in an

(T(( opiTT
amount that reflff ects the consideration which the Company expects to receive in exchange forff
arrangements that the Company determines are within the scope of Topic 606, the
determine revenue recognition forff
Company perforff ms the folff
the perforff mance
obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the perforff mance
obligations in the contract; and (v) recognize revenue when (or as) the Company satisfiff es a perforff mance obligation. The
Company only appl
is entitled to in exchange forff
determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract,
determines those that are perforff mance obligations, and assesses whether each promised good or service is distinct. The
Company then recognizes as revenue the amount of the transaction price that is allocated to the respective perforff mance
obligation when (or as) the perforff mance obligation is satisfiff ed. Payment terms diffff eff r by customer, but typically range frff om
31 to 35 days frff om the date of shipment. Revenue forff
the effff eff cts of a
fiff nancing component as the Company expects, at contract inception, that the period between when the Company transfeff rs
control of the product and when the Company receives payment will be one year or less.

ies the fiff ve-step model to contracts when it is probabla e that the Company will collect the consideration it

the goods or services it transfeff rs to the customer. At contract inception, once the contract is

the Company’s product sales has not been adjusted forff

a

The Company’s product sales, net consist of U.S. sales of NUPLAZID. NUPLAZID was appr

a

oved by the FDA in April

2016 and the Company commenced shipments of NUPLAZID to SPs and SDs in late May 2016. SPs dispense product to a
patient based on the fulff
in-patient hospital pharmacies. Product shipping and handling costs are included in cost of product sales.

fiff llment of a prescription and SDs sell product to government faff cilities, long-term care pharmacies, or

The Company recognizes revenue frff om product sales at the net sales price (the “transaction price”) which includes

estimates of variabla e consideration forff which reserves forff
sales discounts and allowance are establa ished and reflff ects each of
these as either a reduction to the related account receivabla e or as an accruerr d liabia lity, depending on how the amount payabla e
is settled. Overall, these reserves reflff ect the Company’s best estimates of the amount of consideration to which the Company
is entitled based on the terms of the contract. The amount of variabla e consideration that is included in the transaction price
may be constrained, and is included in the net sales price only to the extent that it is probabla e that a signififf cant reversal in the
amount of the cumulative revenue recognized will not occur in a futff urt e period. Actuat
received may diffff eff r frff om the Company’s estimates. If actuat
l results in the futff urt e varyrr
to adjust its estimates, which would affff eff ct net revenue in the period of adjustment. The folff
signififf cant categories of sales discounts and allowances:

l amounts of consideration ultimately
frff om estimates, the Company may need

lowing are the Company’s

Disii tribution FeFF es: Distribution feff es include distribution service feff es paid to the SPs and SDs based on a contractuat

lly

fiff xed percentage of the wholesale acquisition cost (WAC), feff es forff
recorded as an offff sff et to revenue based on contractuat

l terms at the time revenue frff om the sale is recognized.

data, and prompt payment discounts. Distribution feff es are

Rebates: Allowances forff

rebates include mandated discounts under the Medicaid Drugr Rebate Program and the

benefiff t. Rebates are amounts owed aftff er the fiff nal dispensing of the product to a benefiff t

Medicare Part D prescription drugrr
plan participant and are based upon contractuat
Medicare benefiff t providers. The allowance forff
utilization. The Company’s estimates forff
and SDs since product launch. Rebates are generally invoiced and paid in arrears so that the accruar
estimate of the amount expected to be incurred forff
unpaid rebates still estimated to be incurred. Allowances forff

expected utilization of rebates are based on historical data received frff om the SPs
l balance consists of an
prior quarters’

l agreements with, or statutt oryrr
rebates is based on statutt oryrr discount rates, estimated payor mix, and expected

rebates also include amounts due under the Inflff ation Reduction

the current quarter’s activity, plus an accruar

requirements pertaining to, Medicaid and

l balance forff

F-11

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

a

icabla e period will be twelve months on October 1 of each year, with the initial appl

act of 2022 forff Medicare Part D unit sales with appl
period. The appl
on October 1, 2022. The benchmark period AMP price is Januaryrr 1, 2021 through September 30, 2021. The Company’s
estimates are based Medicare Part D sales as a percentage of gross sales and the rate AMP foff r the current period will be in
excess the benchmark period.

ce inflff ation over the benchmark
icabla e period beginning

icabla e period AMP increases that outpat

a

a

CharCC

ger backskk : Chargebacks are discounts and feff es that relate to contracts with government and other entities

purchasing frff om the SDs at a discounted price. The SDs charge back to the Company the diffff eff rence between the price
initially paid by the SDs and the discounted price paid to the SDs by these entities. The Company also incurs group
purchasing organization feff es forff
these entities and accruer

transactions through certain purchasing organizations. The Company estimates sales with

anticipated chargebacks and organization feff es, based on the appl

icabla e contractuat

l terms.

s forff

a

Co-CC Payment Assisii tance: The Company offff eff rs co-payment assistance to commercially insured patients meeting certain

eligibility requirements. Co-payment assistance is accruer d forff
program redemption using data provided by third-party administrators.

based on actuat

l program participation and estimates of

th in the appl

product that has been dispensed to a patient. As the Company receives inventoryrr

Product Returns: Consistent with industryrr practice, the Company offff eff rs the SPs and SDs limited product returt nr

rights
damages, shipment errors, and expiring product; provided that the returt n is within a specififf ed period around the product
icabla e individual distribution agreement. The Company does not allow product returt ns

forff
expiration date as set forff
forff
the abia lity to control the amount of product that is sold to the SPs and SDs, it is abla e to make a reasonabla e estimate of futff urt e
potential product returt ns based on this on-hand channel inventoryrr data and sell-through data obtained frff om the SPs and SDs.
In arriving at its estimate forff
product returt ns, the Company also considers historical product returt ns, the underlying product
demand, and industryrr data specififf c to the specialty pharmaceutical distribution industry.rr

reports frff om the SPs and SDs and has

a

Research and Developmll

ent ExpEE enses

Research and development expenses are charged to operations as incurred. Research and development expenses

include costs associated with services provided by contract organizations forff
manufaff cturt
expense, and faff cilities and equipment expenses. The upfrff ont consideration and transaction costs associated with acquired in-
process research and development are also included in the research and development expenses.

ing expenses, and clinical trials, salaries and related personnel expenses including stock-based compensation

preclinical development, pre-commercialization

s forff

The Company accruer

costs incurred as the services are being provided by monitoring the statust

of the trial or
services provided and the invoices received frff om its external service providers. When the Company makes payments in
advance of services being provided, it records those amounts as prepaid expenses on its consolidated balance sheets and
expense them as the services are rendered. In the case of clinical trials, a portion of the estimated cost normally relates to the
projected cost to treat a patient in the trials, and this cost is recognized based on the number of patients enrolled in the trial.
l costs
Other indirect costs are generally recognized on a straight-line basis over the estimated period of the study.
become known, the Company adjusts its accruarr

ls accordingly.

As actuat

t

ConCC centrtt atitt on Risii k

Financial instrumr

ents, which potentially subject the Company to concentrations of credit risk, principally consist of

ff

, U.S. treasuryrr notes, and high quality, marketabla e debt instrumr

cash, cash equivalents, investment securities, accounts receivabla e, and restricted cash. The Company invests its excess cash
primarily in money market funds
government sponsored enterprr
defiff nes allowabla e investments and establa ishes guidelines relating to credit quality, diversififf cation, and maturt
investments to preserve principal and maintain liquidity. All investment securities have a credit rating of at least Aa3/AA- or
better, or P-1/A-1 or better, as determined by Moody’s Investors Service or Standard & Poor’s. Further, the Company
specififf es credit quality standards forff
party.

ises in accordance with the Company’s investment policy. The Company’s investment policy

its customers that are designed to limit the Company’s credit exposure to any single

ents of corpor

ations and

ities of its

r

F-12

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company does not currently have any of its own manufaff ctut ring faff cilities, and thereforff e it depends on an

outsourced manufaff cturt
product candidates forff
drugr
Although there are potential sources of supply other than the Company’s existing suppliers, any new supplier would be
required to qualifyff under appl

ing strategy forff
clinical trials. The Company has contracts in place with two third-party manufaff cturt ers of commercial
a

product and one third-party manufaff cturt er of drugr

the production of NUPLAZID API.

the production of NUPLAZID forff

commercial use and forff

substance that is appr

the production of its

icabla e regulatoryrr

requirements.

oved forff

a

The Company has entered into distribution agreements with a limited number of SPs and SDs, and all of the

a

oximately 73% of the Company’s product revenue and 74% of the Company’s accounts

Company’s product sales are to these customers. For the year ended December 31, 2022, the Company’s four
customers represented appr
receivabla e balance at December 31, 2022. For the year ended December 31, 2021, the Company’s four
represented appr
at December 31, 2021. For the year ended December 31, 2020, the Company’s four
a
appr
31, 2020.

oximately 74% of the Company’s product revenue and 75% of the Company’s accounts receivabla e balance at December

oximately 74% of the Company’s product revenue and 77% of the Company’s accounts receivabla e balance

largest customers represented

largest customers

largest

a

ff

ff

ff

StSS octt k-B- ased ComCC pem nsatitt on

The faff ir value of each employee stock option and each employee stock purchase right granted is estimated on the grant
date under the faff ir value method using the Black-Scholes valuation model. The estimated faff ir value of each stock option and
purchase right is then expensed over the requisite service period, which is generally the vesting period. The folff
weighted-average assumptions were used during these periods:

lowing

Stock Options:
Expected volatility
Risk-frff ee interest rate
Expected dividend yield
Expected lifeff of options in years

Employee Stock Purchase Plan:
Expected volatility
Risk-frff ee interest rate
Expected dividend yield
Expected lifeff

in years

Years Ended December 31,
2021

2020

2022

68%
3%
0%

5.4

64%
1%
0%

5.4

63%
1%
0%

5.5

2022

Years Ended December 31,
2021

2020

62%-82%
1.5%-4.6%

49%-100%
0.0%-0.5%

50%-76%
0.1%-0.2%

0%

0.5-2.0

0%

0.5-2.0

0%

0.5-2.0

ExEE pex
expected volatility.

cted VolVV atilitytt . The Company considers its historical volatility and implied volatility when determining the

Risii k-kk FrFF ee IntII erest Rate. The Company determines its risk-frff ee interest rate assumption based on the U.S. Treasuryrr

yield forff

obligations with contractuat

l terms similar to the expected term of the stock option or purchase right being valued.

ExEE pex

cted Dividend YiYY eld. The Company has never paid any dividends and currently has no plans to do so.

ExEE pex

cted Lifi eff . In determining the expected lifeff

forff

stock options, the Company considers, among other faff ctors, its

historical exercise experience to date as well as the mean time remaining to fulff
mean time remaining to the end of the contractuat
employee stock purchase rights is based upon the terms of each offff eff ring period.

l term of all outstanding options. The estimated lifeff

forff

the Company’s

l vesting of all outstanding options and the

F-13

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ff

The faff ir value of RSUs is estimated based on the closing market price of the Company’s common stock on the date of
grant. RSUs generally vest over a four
-year period. Certain RSUs also have an accelerated vesting clause based on specififf ed
market condition target and continued employment through a minimum vesting period. The faff ir value of RSUs expected to
vest are recognized and amortized on a straight-line basis over the requisite service period, which is generally the vesting
period. For those RSUs requiring satisfaff ction of both market and service conditions, the requisite service period is the longest
of the explicit, implicit and derived service periods. The faff ir value of perforff mance-based stock units (PSUs) is estimated
based on the closing market price of the Company’s common stock on the date of grant. PSUs vest upon the achievement of
certain pre-defiff ned company-specififf c perforff mance-based criteria. Expense related to these PSUs is recognized ratabla y over
vesting becomes probabla e. During the
the expected perforff mance period once the pre-defiff ned perforff mance-based criteria forff
years ended December 31, 2022 and 2021, the Company had a change in estimate related to the achievement of certain
perforff mance-based criteria forff
expenses by appr

perforff mance-based stock awards which resulted in a reduction in stock-based compensation

oximately $0 and $6.8 million.

a

The tabla e below summarizes the total stock-based compensation expense included in the Company’s statements of

operations forff

the periods presented (in thousands):

Cost of product sales
Research and development
Sales, general and administrative

s
InII come TaxeTT

Years Ended December 31,
2021

2022

2020

$

$

1,106
22,580
44,515
68,201

$

$

1,286
21,969
40,360
63,615

$

$

2,632
31,314
50,476
84,422

Current income tax expense or benefiff t represents the amount of income taxes expected to be payabla e or refunda

bla e forff

ff

the current year. A defeff rred income tax asset or liabia lity is computed forff
the fiff nancial reporting and income tax bases of assets and liabia lities and forff
tax credits and loss carryfrr orff wards. Defeff rred income tax expense or benefiff t represents the net change during the year in the
defeff rred income tax asset or liabia lity. Defeff rred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the defeff rred tax assets will not be realized.

the expected futff urt e impact of diffff eff rences between

the expected futff urt e tax benefiff t to be derived frff om

The Company recognizes the impact of a tax position in the fiff nancial statements only if that position is more likely than

not to be sustained upon examination by taxing authorities, based on the technical merits of the position. Any interest and
penalties related to uncertain tax positions will be reflff ected in income tax expense.

NeNN t Loss PePP r ShSS are

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares

the period, without consideration forff

common stock equivalents. Diluted net loss per share is computed by
outstanding forff
the
dividing the net loss by the weighted average number of common shares and common stock equivalents outstanding forff
period determined using the treasuryrr stock method. For purpos
es of this calculation, stock options, employee stock purchase
r
rights, RSUs, and warrants are considered to be common stock equivalents but are not included in the calculations of diluted
net loss per share forff
potentially dilutive securities. More specififf cally, at December 31,
periods presented and there were no reconciling items forff
2022, 2021 and 2020, options, employee stock purchase rights, RSUs, PSUs, and warrants covering a total of appr
oximately
21,185,000 shares, 17,535,000 shares and 19,331,000 shares, respectively, were excluded frff om the calculation of diluted net
loss per share as their effff eff ct would have been anti-dilutive.

the periods presented as their effff eff ct would be antidilutive. The Company incurred net losses forff

all

a

SeSS gme

ee
ent Repor

titt nii g

Management has determined that the Company operates in one business segment which is the development and
the years ended December 31, 2022, 2021 and 2020 were

commercialization of innovative medicines. All revenues forff
generated frff om customers in the United States.

F-14

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3. Investments

The carryirr ng value and amortized cost of the Company’s investments, summarized by maja or security type, consisted of
lowing (in thousands):

the folff

December 31, 2022

U.S. Treasuryrr notes
Government sponsored enterprr
Municipal bonds
Commercial papea

r

ise securities

U.S. Treasuryrr notes
Government sponsored enterprr
Corpor
ate debt securities
r
Commercial papea

r

ise securities

Amortized
Cost
$ 15,956
81,216
20,873
184,923
$ 302,968

Amortized
Cost
$ 140,287
49,512
26,006
157,670

Unrealized
Gains

Unrealized
Losses

$

$

— $
16
—
30
46

$

Estimated
Fair Value
(11) $ 15,945
80,941
(291)
20,775
(98)
184,316
(637)
(1,037) $ 301,977

December 31, 2021

Unrealized
Gains

Unrealized
Losses

$

— $
—
—
9

Estimated
Fair Value
(100) $ 140,187
49,474
(38)
25,984
(22)
157,626
(53)

The Company has classififf ed all of its availabla e-forff

-sale investment securities, including those with maturt

ities beyond

$ 373,475

$

9

$

(213) $ 373,271

one year, as current assets on its consolidated balance sheets based on the highly liquid naturt e of the investment securities
and because these investment securities are considered availabla e forff
2021, all of the Company’s availabla e-forff
Company has classififf ed all equity securities as other assets on its consolidated balance sheets.

use in current operations. As of December 31, 2022 and
ity dates of less than one year. The

-sale investment securities have contractuat

l maturt

At December 31, 2022 and 2021, the Company had 43 and 39 securities, respectively, in an unrealized loss position.
-sale investments that were in an
lowing tabla e presents gross unrealized losses and faff ir value forff

The folff
unrealized loss position as of December 31, 2022 and December 31, 2021, aggregated by investment categoryrr and length of
time that individual securities have been in a continuous loss position (in thousands):

those availabla e-forff

December 31, 2022
.S. Treasuryrr notes

Government sponsored enterprr
Municipal bonds
Commercial papea
Total

r

ise securities

December 31, 2021:
.S. Treasuryrr notes

Government sponsored enterprr
ate debt securities
r
Corpor
Commercial papea
Total

r

ise securities

Less Than 12 Months

12 Months or Greater

Total

Estimated
Fair Value

Unrealized
Losses

Estimated
Fair Value

Unrealized
Losses

Estimated
Fair Value

Unrealized
Losses

$ 15,945
58,254
20,775
135,200
$ 230,174

$

(11) $
(291)
(98)
(637)
$ (1,037) $

$ 140,287
49,512
26,006
75,192
$ 290,997

$

$

(100) $
(38)
(22)
(53)
(213) $

— $
—
—
—
— $

— $
—
—
—
— $

— $ 15,945
58,254
—
—
20,775
— 135,200
— $ 230,174

$

(11)
(291)
(98)
(637)
$ (1,037)

— $ 140,287
49,512
—
26,006
—
—
75,192
— $ 290,997

$

$

(100)
(38)
(22)
(53)
(213)

F-15

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At each reporting date, the Company perforff ms an evaluation of impairment to determine if any unrealized losses are

the result of credit losses. Impairment is assessed at the individual security level. Factors considered in determining whether a
loss resulted frff om a credit loss or other faff ctors include the Company’s intent and abia lity to hold the investment until the
recoveryrr of its amortized cost basis, the extent to which the faff ir value is less than the amortized cost basis, the length of time
and extent to which faff ir value has been less than the cost basis, the fiff nancial condition of the issuer, any historical faff ilure of
the issuer to make scheduled interest or principal payments, any changes to the rating of the security by a rating agency, any
adverse legal or regulatoryrr events affff eff cting the issuer or issuer’s industry,rr
conditions.

any signififf cant deterioration in economic

The Company does not intend to sell the investment in unrealized loss position and it is unlikely that the Company will

be required to sell the investment beforff e the recoveryrr of its amortized cost basis. Based on its evaluation, the Company
determined its year-to-date credit losses related to its availabla e-forff

-sale securities were immaterial at December 31, 2022.

Although the Company has not historically experienced signififf cant losses on its investments, the Company’s exposure

may increase due to uncertainties associated with geopolitical and macroeconomic developments, including, without
limitation, a global economic recession, the Ukraine-RusRR sia conflff ict and related sanctions, and the COVID-19 pandemic.

4. Fair Value Measurements

ff

, U.S. treasuryrr notes, and marketabla e debt instrumr

The Company’s investments include cash equivalents, availabla e-forff
r

-sale investment securities consisting of money
market funds
ations and government sponsored enterprr
accordance with the Company’s investment policy, and equity investments. The Company’s investment policy defiff nes
allowabla e investment securities and establa ishes guidelines relating to credit quality, diversififf cation, and maturt
ities of its
investments to preserve principal and maintain liquidity. All investment securities have a credit rating of at least Aa3/AA- or
better, or P-1/A-1 or better, as determined by Moody’s Investors Service or Standard & Poor’s.

ents of corpor

ises in

The Company’s cash equivalents, availabla e-forff

-sale investment securities, and equity securities are classififf ed within the

faff ir value hierarchy as defiff ned by authoritative guidance. The Company’s investment securities and equity securities
classififf ed as Level 1 are valued using quoted market prices. The Company obtains the faff ir value of its Level 2 fiff nancial
instrumr
ents frff om third-party pricing services. The pricing services utilize industryrr standard valuation models whereby all
signififf cant inputs, including benchmark yields, reported trades, broker/rr dealer quotes, issuer spreads, bids, offff eff rs, or other
market-related data, are observabla e. The Company validates the prices provided by the third-party pricing services by
reviewing their pricing methods and matrices and obtaining market values frff om other pricing sources. Aftff er completing the
validation procedures, the Company did not adjust or override any faff ir value measurements provided by these pricing
services as of December 31, 2022 and 2021, respectively.

In November 2021, the Company establa ished a plan whereby substantially all fulff

l-time employees excluding executive
management are eligible to receive a series of cash bonuses based on achievement of certain conditions as described in more
detail in Note 6 to the consolidated fiff nancial statements included in this Annual Report. The Company estimated the faff ir
value of the cash awards using a Monte Carlo simulation, which utilizes level 3 inputs such as volatility, probabia lities of
success, and other inputs that are not observabla e in active markets. The cash awards are required to be measured at faff ir value
on a recurring basis each reporting period, with changes in the faff ir value recognized as compensation cost over the derived
service period of the awards.

The Company has not transfeff rred any investment securities between the classififf cation levels.

F-16

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The recurring faff ir value measurements of the Company’s cash equivalents, availabla e-forff

-sale investment securities, and

equity securities at December 31, 2022 and 2021 consisted of the folff

lowing (in thousands):

ff

Assetstt
Money market fund
U.S. Treasuryrr notes
Equity securities
Government sponsored enterprr
Municipal bonds
Commercial papea
Total

r

ise securities

Liabilii ill tii itt es
Cash awards
Total

ff

Assetstt
Money market fund
U.S. Treasuryrr notes
Equity securities
Government sponsored enterprr
ate debt securities
r
Corpor
Commercial papea
Total

r

ise securities

Liabilii ill tii itt es
Cash awards
Total

Fair Value Measurements at
Reporting Date Using

Quoted Prices
in Active
Markets forff
Identical
Assets
(Level 1)

Signififf cant
Other
Observable
Inputs
(Level 2)

Signififf cant
Unobservable
Inputs
(Level 3)

December 31, 2022

$

$

$
$

72,578
15,945
7,180
94,803
20,775
184,316
395,597

898
898

$

$

$
$

72,578
15,945
7,180
—
—
—
95,703

$

$

— $
—
—
94,803
20,775
184,316
299,894

$

—
—
—
—
—
—
—

— $
— $

— $
— $

898
898

Fair Value Measurements at
Reporting Date Using

Quoted Prices
in Active
Markets forff
Identical
Assets
(Level 1)

Signififf cant
Other
Observable
Inputs
(Level 2)

Signififf cant
Unobservable
Inputs
(Level 3)

December 31, 2021

$

$

$
$

122,876
140,187
3,638
49,474
25,984
157,626
499,785

603
603

$

$

$
$

122,876
140,187
3,638
—
—
—
266,701

$

$

— $
—
—
49,474
25,984
157,626
233,084

$

—
—
—
—
—
—
—

— $
— $

— $
— $

603
603

Changes in estimated faff ir value of contingent cash awards during the twelve months ended December 31, 2022 are as

folff

lows (in thousands):

Balance as of December 31, 2021
Vesting of awards
Expense forff
feff ited
Change in faff ir value
Balance as of December 31, 2022

$

$

603
1,798
(117)
(1,386)
898

F-17

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. Balance Sheet Details

Inventoryrr consisted of the folff

lowing (in thousands):

Finished goods
Work in process
Raw material

Reported as:
Inventoryrr
Long-term inventoryrr
Total

December 31,

2022

2021

$

$

$

$

1,926
4,427
5,207
11,560

6,636
4,924
11,560

$

$

$

$

1,114
6,767
6,217
14,098

7,881
6,217
14,098

Amount reported as long-term inventoryrr consisted of raw materials as of December 31, 2022 and 2021. The Company

has raw materials beyond its one-year production plan that prevent the Company frff om potential supply interrupt
raw materials maintained beyond the one-year production plan were classififf ed as long-term inventory.rr

r

ion. Those

Property and equipment, net, consisted of the folff

lowing (in thousands):

Computers and softff ware
Leasehold improvements
Furniturt e and fiff xturt es
Machineryrr and equipment

Accumulated depreciation

December 31,

2022

2021

5,873
3,696
4,549
—
14,118
(8,097)
6,021

$

$

5,873
3,696
4,549
113
14,231
(6,184)
8,047

$

$

Depreciation of property and equipment was $2.0 million, $2.2 million, and $1.5 million forff

the years ended

December 31, 2022, 2021, and 2020, respectively. For the year ended December 31, 2022, the Company retired $0.1 million
of fulff
ly depreciated property and equipment. For the year ended December 31, 2021, the Company did not retire any fulff
depreciated property and equipment. During 2020, the Company retired $3.1 million of fulff
equipment.

ly depreciated property and

ly

Accruerr d liabia lities consisted of the folff

lowing (in thousands):

Accruer d research and development services
Accruer d compensation and benefiff ts
Accruer d sales allowances
Accruer d consulting and profeff ssional feff es
Current portion of lease liabia lities
Other

December 31,

2022

2021

$

$

35,048
28,023
26,046
11,377
9,305
3,085
112,884

$

$

27,270
25,896
15,717
9,319
8,304
2,686
89,192

F-18

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. Stockholders’ Equity

StSS octt k OfO fff eff rinii gs

r

In August 2020, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with CerSci
ated (CerSci), pursuant to which one of the Company’s wholly owned subsidiaries merged with and

Therapea utics Incorpor
into CerSci, with CerSci as the surviving corpor
million shares of the Company’s common stock with a value of $44.3 million were issued to CerSci’s forff mer equity holders.
The Company fiff led a registration statement on Form S-3 with the SEC to register the resale of the shares of the Company’s
common stock issued in connection with its acquisition of CerSci.

ation and the Company’s wholly owned subsidiary.rr Approximately 1.2

r

Equitii ytt Awards

The Company’s 2010 Equity Incentive Plan, as amended to date (the 2010 Plan), permits the grant of options to
employees, directors and consultants. In addition, the 2010 Plan permits the grant of stock bonuses, rights to purchase
restricted stock, and other stock awards. The exercise price of options granted under the 2010 Plan cannot be less than 100
percent of the faff ir market value of the common stock on the date of grant and the maximum term of any option is 10 years.
Options granted under the 2010 Plan generally vest over a four
the Company’s 2004 Equity Incentive Plan (the 2004 Plan) at the time of appr
oval of the 2010 Plan were transfeff rred to the
2010 Plan. The 2010 Plan share reserve also has been, and may be, increased by the number of shares that otherwise would
have reverted to the 2004 Plan reserve aftff er June 2010. In June 2015, June 2016, June 2017, June 2018, June 2019 and June
2022, the Company’s stockholders appr
number of shares of common stock authorized forff
issuance under the plan by 5,000,000 shares, 3,000,000 shares, 5,500,000
shares, 6,700,000 shares, 8,300,000 shares and 6,000,000 shares, respectively. At December 31, 2022, there were 32,635,412
shares of common stock authorized forff
Plan.

oved amendments to its 2010 Plan to, among other things, increase the aggregate

issuance, of which 12,108,840 shares were availabla e forff

-year period. All shares that remained eligible forff

new grants under the 2010

grant under

a

a

ff

Stock OptO ions

The 2010 Plan provided forff

the grant of options to employees, directors and consultants. The exercise price of options

granted under the 2010 Plan was at 100 percent of the faff ir market value of the common stock on the date of grant and the
-year period.
maximum term of any option was 10 years. Options granted under the 2010 Plan generally vested over a four

ff

The folff

lowing tabla e summarizes the Company’s stock option activity during the year ended December 31, 2022:

Outstanding at December 31, 2021
Granted
Exercised
Cancelled/forff
Outstanding at December 31, 2022
Vested and exercisabla e at December 31, 2022
Unvested at December 31, 2022

feff ited

Weighted-
Average
Remaining
Contractual
Term
(years)

Weighted-
Average
Exercise
Price

Aggregate
Intrinsic Value
(in thousands)

31.58
22.79
16.32
32.68
29.83
30.70
27.82

5.7
4.5
8.3

$
$
$

1,052
725
327

Number of
Shares

$
15,086,141
3,393,568
$
(226,943) $
(1,913,301) $
$
16,339,465
$
11,386,596
$
4,952,869

The aggregate intrinsic value of options exercisabla e as of December 31, 2022 is calculated as the diffff eff rence between

the exercise price of the underlying options and the closing market price of the Company’s common stock on that date, which
was $15.92 per share. The aggregate intrinsic value of options exercised during the years ended December 31, 2022, 2021,
and 2020 was appr
The Company received $3.7 million and $12.9 million in cash frff om options exercised during the year ended December 31,
2022 and 2021, respectively.

oximately $1.7 million, $8.0 million, and $55.5 million, respectively, determined as of the date of exercise.

a

F-19

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The weighted average per share faff ir value of options granted during the years ended December 31, 2022, 2021, and
oximately $13.66, $24.07, and $24.16, respectively. As of December 31, 2022 and 2021, total unrecognized

a

2020 was appr
compensation cost related to stock options was appr
period over which this cost is expected to be recognized is appr

a

a

oximately $63.9 million and $66.0 million, and the weighted average
oximately 2.7 years and 2.3 years, respectively.

Restricted Stock

The Company grants RSUs and PSUs, both of which are considered restricted stock, pursuant to the 2010 Plan and

satisfiff es such grants through the issuance of new shares. RSUs are share awards that, upon vesting, will deliver to the holder
shares of the Company’s common stock. RSUs generally vest over a four
-year period. Certain RSUs also have an accelerated
vesting clause based on specififf ed market condition target and continued employment through the vesting period. PSUs forff
which the number of shares issuabla e at the end of perforff mance period can reach up to 200% of the shares appr
oved in the
award based on the achievement of certain pre-defiff ned Acadia-specififf c perforff mance criteria and continued employment
through the vesting period.

a

ff

The folff

lowing tabla e summarizes the Company’s restricted stock activity during the year ended December 31, 2022:

Outstanding at December 31, 2021
Granted
Vested
Cancelled/forff
Outstanding at December 31, 2022

feff ited

Weighted
Average Grant
Number of
Date Fair Value
Shares
34.41
$
2,680,790
24.14
2,534,557
$
35.82
(494,709) $
22.92
(533,531) $
29.49
$
4,187,107

Aggregate
Intrinsic Value
(in thousands)

$

48,581

There were 2,055,574 and 1,276,936 PSUs outstanding at December 31, 2022 and 2021, respectively. During the years

ended 2022 and 2021, 986,739 and 918,434 PSUs were granted, respectively, none of which were vested. During the years
ended December 31, 2022 and 2021, total intrinsic value of PSUs outstanding was $32.7 million and $29.8 million,
respectively. Total unrecognized compensation cost related to RSUs was appr
oximately $44.6 million and $39.8 million forff
the years ended December 31, 2022 and 2021, respectively, and the weighted average period over which the cost is expected
to be recognized is appr
PSUs was appr
a
the weighted average remaining contractuat

oximately 2.7 years and 2.3 years, respectively. Total unrecognized compensation cost related to

l term related to outstanding PSUs was 3.0 years and 3.3 years, respectively.

the years ended December 31, 2022 and 2021, respectively, and

oximately $12.7 million and $11.5 million forff

a

a

EmEE plm oyee Stock Purchase Plan

The Company’s 2004 Employee Stock Purchase Plan (the Purchase Plan) became effff eff ctive upon the closing of the

issuance under the plan by 400,000 shares, 600,000 shares and 3,000,000 shares, respectively. At

oved an amendment to the Purchase Plan to, among other things, increase the aggregate number of shares of common

Company’s initial public offff eff ring in June 2004. In June 2016, June 2019 and June 2020, the Company’s stockholders
a
appr
stock authorized forff
December 31, 2022, a total of 5,525,000 shares of common stock had been reserved forff
December 31, 2022, 2,479,620 shares of common stock remained availabla e forff
Eligible employees who elect to participate in an offff eff ring under the Purchase Plan may have up to 15 percent of their
earnings withheld, subject to certain limitations, to purchase shares of common stock pursuant to the Purchase Plan. The
price of common stock purchased under the Purchase Plan is equal to 85 percent of the lower of the faff ir market value of the
common stock at the commencement date of each offff eff ring period or the relevant purchase date.

issuance pursuant to the Purchase Plan.

issuance under the Purchase Plan. At

During the years ended December 31, 2022, 2021, and 2020, a total of 330,525, 296,850, and 377,963 shares of
common stock were issued under the Purchase Plan at average per share prices of $13.60, $17.89, and $18.94, respectively.
The weighted average per share faff ir value of purchase rights granted during the years ended December 31, 2022, 2021, and
2020 was $13.91, $23.97, and $22.47, respectively. During the years ended December 31, 2022, 2021, and 2020, the
Company recorded cash received frff om the exercise of purchase rights of $4.5 million, $5.3 million, and $7.2 million,
respectively.

F-20

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ConCC titt nii gent CasCC h Awards

In November 2021, the Company establa ished a plan whereby substantially all fulff

l-time employees excluding executive

management are eligible to receive a series of cash bonuses over certain periods based on continued employment and the
Company’s stock price reaching a pre-specififf ed target. The maximum potential payout of the cash awards at the grant date
was $15.1 million. The Company has determined that the cash awards were classififf ed as liabia lities pursuant to ASC Topic
718, ComCC pem nsation – Stock ComCC pem nsation. The Company estimates the faff ir value of the awards at each reporting period
using the Monte Carlo simulation, which is recognized as compensation cost over the derived service period. Total faff ir value
of the awards at the grant date was $4.4 million. The maximum potential payout at December 31, 2022 aftff er adjusting forff
forff
compared to $5.6 million at December 31, 2021. The estimated liabia lity included on the December 31, 2022 and 2021
consolidated balance sheet was $0.9 million and $0.6 million. During years ended December 31, 2022 and 2021, the
Company recorded a total of $0.3 million and $0.6 million compensation cost related to the awards.

feff iturt es was $11.8 million. The total faff ir value of the awards at December 31, 2022 was appr

oximately $1.8 million,

a

7. 401(k) Plan

Effff eff ctive Januaryrr 1997, the Company establa ished a defeff rred compensation plan (the 401(k) Plan) pursuant to Section

401(k) of the Internal Revenue Code of 1986, as amended (the Code), whereby substantially all employees are eligible to
contribute up to 60 percent of their pretax earnings, not to exceed amounts allowed under the Code. The Company makes
discretionaryrr contributions to the 401(k) Plan equal to 100 percent of each employee’s pretax contributions up to 5 percent of
his or her eligible compensation, subject to limitations under the Code. The Company’s total contributions to the 401(k) Plan
were $5.1 million, $5.8 million, and $5.1 million forff

the years ended December 31, 2022, 2021, and 2020, respectively.

8. Income Taxes

Domestic and forff eign pre-tax loss is as folff

lows (in thousands):

Domestic
Foreign

Years Ended December 31,
2021
(138,913) $
(28,606)
(167,519) $

2022
(233,216) $
19,772
(213,444) $

$

$

2020
(238,885)
(42,088)
(280,973)

At December 31, 2022, the Company had feff deral, state, and forff eign net operating loss (NOL) carryfrr orff wards of

the years ended December 31, 2022, 2021 and 2020,

oximately $480.2 million, $486.4 million, and $1,130.3 million, respectively. The Company recognized state income tax

a
appr
provisions of $2.5 million, $0.4 million and $0.4 million forff
respectively. The Company recognized forff eign income tax in the amount of $0.2 million forff
2020. These tax liabia lities were associated with minimum taxes and state tax liabia lities in excess of net operating losses in the
current year and a patent box entryrr
(R&D) credit carryfrr orff wards may be subject to a substantial annual limitation due to ownership change limitations that have
occurred or that could occur in the futff urt e, as required by Section 382 of the Code, as well as similar state and forff eign
provisions. These ownership changes may limit the amount of NOL and R&D credit carryfrr orff wards that can be utilized
annually to offff sff et futff urt e taxabla e income and tax, respectively. In general, an “ownership change” as defiff ned by Section 382
of the Code results frff om a transaction or series of transactions over a three-year period resulting in an ownership change of
more than 50 percentage points of the outstanding stock of a company by certain stockholders or pubu lic groups.

tax forff Switzerland. Utilization of the domestic NOL and research and development

the year ended December 31,

The Company previously completed a study

t

to assess whether an ownership change, as defiff ned by Section 382 of the

Code, had occurred frff om the Company’s forff mation through December 31, 2013. Based upon this study,
determined that several ownership changes had occurred. Accordingly, the Company reduced its defeff rred tax assets related to
the feff deral NOL carryfrr orff wards and the feff deral R&D credit carryfrr orff wards that are anticipated to expire unused as a result of
these ownership changes. These tax attributes were excluded frff om defeff rred tax assets with a corresponding reduction of the
valuation allowance with no net effff eff ct on income tax expense or the effff eff ctive tax rate. The Company completed a study
through December 31, 2021 and concluded no additional ownership changes occurred. Futurt e ownership changes may furff
limit the Company’s abia lity to utilize its remaining tax attributes.

the Company

ther

t

t

F-21

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Federal and state NOL carryfrr orff wards of $19.2 million and $143.4 million will expire in 2031 and 2024 respectively
unless utilized. The remaining feff deral and state NOL carryfrr orff wards will begin to expire in 2032 and 2025, respectively. At
December 31, 2022, the Company had feff deral and state charitabla e contribution carryfrr orff wards of $179.8 million which will
begin to expire in 2023 unless utilized. At December 31, 2022, the Company had $74.2 million of feff deral R&D credit
carryfrr orff wards, of which $0.3 million will expire in 2023 unless utilized, and the remaining feff deral R&D credit carryfrr orff wards
will begin to expire in 2024. At December 31, 2022, the Company had state R&D credit carryfrr orff wards of appr
oximately $3.2
million that will begin to expire in 2025 and $19.1 million that have no expiration date. At December 31, 2022, the Company
had forff eign NOL carryfrr orff wards of appr
oximately $266.5 million that will expire in 2023 unless utilized and $4.4 million that
have no expiration date. The Company continues to record the defeff rred tax assets related to these attributes, subject to
valuation allowance, until expiration occurs.

a

a

The components of the defeff rred tax assets are as folff

lows (in thousands):

Defeff rred tax assets

NOL carryfrr orff wards
R&D credit carryfrr orff wards
Stock-based compensation
Charitabla e contributions
Capia talized R&D
Intangibles
Lease liabia lities
Other

Total defeff rred tax assets

Valuation allowance
Defeff rred tax liabia lities
Right-of-ff use assets
Property and equipment

Total defeff rred tax liabia lities

Total net defeff rred tax assets

December 31,

2022

2021

$

$ 225,993
83,074
51,661
42,677
38,507
24,030
14,730
13,770
494,442
(481,210)

(13,203)
(29)
(13,232)

$

— $

229,476
74,702
51,170
41,355
—
6,741
15,550
11,700
430,694
(416,630)

(14,063)
(1)
(14,064)
—

Realization of defeff rred tax assets is dependent upon futff urt e earnings, if any, the timing and amount of which are

a

uncertain. Accordingly, the defeff rred tax assets have been fulff
increased by appr
capia talization of research and development expenses, R&D credits and stock-based compensation and limitation on futff urt e
executive stock compensation, offff sff et in part by the expiration of Switzerland NOLs, and the remeasurement of defeff rred tax
balance forff

oximately $64.6 million in 2022 primarily due to an increase in defeff rred tax assets generated frff om

ly offff sff et by a valuation allowance. The valuation allowance

changes in state tax rates.

An accounting policy may be selected to either (i) treat taxes due on futff urt e U.S. inclusions in taxabla e income related to

global intangible low-taxed income (“GILTI”) as a current-period expense when incurred or (ii) faff ctor such amounts into a
company’s measurement of its defeff rred taxes. We have elected to account forff GILTI as a period cost.

During 2019, Switzerland implemented tax reforff m that is effff eff ctive forff

tax years 2020 and forff ward. As a result, the

Company has remeasured the defeff rred tax assets, primarily comprised of NOL carryfrr orff wards, at the amount and rate in
which it is anticipated they will reverse. The adjustments made to the defeff rred tax assets are offff sff et by a valuation allowance.

F-22

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A reconciliation of income taxes to the amount computed by appl

a

ying the statutt oryrr

feff deral income tax rate to the pretax

loss is summarized as folff

lows (in thousands):

feff deral rate

Amounts computed at statutt oryrr
Stock-based compensation and other permanent diffff eff rences
Write-offff of IP R&D
R&D credits
Change in valuation allowance
State taxes
Contingencies
Foreign rate diffff eff rential
Limitation on executive compensation
Defeff rred rate adjustment
Switzerland tax reforff m
Expiration of attributes
GILTI
Other
Income tax expense

$

$

Years Ended December 31,
2021
(35,179) $
6,696
1,277
(11,727)
36,099
(2,617)
3,879
2,857
1,808
(2,424)
(923)
—
—
605
351

2022
(44,823) $
9,050
2,449
(9,974)
11,227
(2,232)
6,993
(1,971)
3,918
922
—
16,142
10,804
26
2,531

$

$

2020
(59,004)
991
9,565
(17,909)
5,925
(5,038)
2,665
4,208
3,705
2,130
53,045
—
—
328
611

The tax years 2003-2021 remain open to examination by the maja or taxing jurisdictions to which the Company is

subject.

the years ended December 31, 2022, 2021 and 2020, respectively. Due to the valuation allowance

The Company recognizes a tax benefiff t frff om an uncertain tax position when it is more likely than not that the position
will be sustained upon examination. The Company recorded an uncertain tax position reserve of $5.1 million, $4.1 million
and $2.9 million forff
recorded against the Company’s defeff rred tax assets, appr
December 31, 2022 would reduce the annual effff eff ctive tax rate if recognized. The Company does not anticipate that the
amount of unrecognized tax benefiff ts as of December 31, 2022 will signififf cantly change within the next twelve months. The
Company’s practice is to recognize interest and/or penalties related to uncertain income tax positions in income tax expense.
The Company had no material interest and/or penalties accruer d on the Company’s consolidated balance sheets at December
31, 2022 or 2021, respectively. Further, the Company recognized an immaterial amount of interest and/or penalties in the
statement of operations forff
positions.

the years ended December 31, 2022, 2021 and 2020, respectively, related to uncertain tax

oximately $1.2 million of the total unrecognized tax benefiff ts as of

a

The folff

lowing tabla e provides a reconciliation of changes in unrecognized tax benefiff ts (in thousands):

Years Ended December 31,
2021

2020

2022
$ 13,923
5,140
38
(37)
$ 19,064

$

9,843
3,973
140
(33)
$ 13,923

$

$

6,945
2,722
212
(36)
9,843

Balance at beginning of period

Additions related to current period tax positions
Additions related to prior period tax positions
Reductions related to prior period tax positions

Balance at end of period

F-23

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9. Commitments and Contingencies

License and MeMM rger

r Agreementstt

The Company has entered into various collabor

a

ation, licensing and merger agreements which provide the Company

with rights to certain know-how, technology and patent rights. The agreements generally include upfrff ont license feff es,
development and commercial milestone payments upon achievement of certain clinical and commercial development and
annual net sales milestones, as well as royalties calculated as a percentage of product revenues, with rates that varyrr by
agreement. The Company incurred $88.7 million, $11.0 million and $72.7 million in upfrff ont and license payments in the
years ended December 31, 2022, 2021 and 2020, respectively. These upfrff ont and license payments were included in the
research and development expenses in the consolidated statements of operations as there was no alternative futff urt e use
associated with the payments. As of December 31, 2022, the Company may be required to make milestone payments up to
$1.6 billion in the aggregate, of which, $40.0 million may be paid in the next 12 months forff
trofiff netide in North America if the FDA appr

the treatment of Rett syndrome.

the fiff rst commercial sale of

oves trofiff netide forff

a

In May 2018, the Company signed an Exclusivity Deed (the Deed) with Neuren that provided forff

exclusive

1,330,000 shares of Neuren and paid $0.9 million forff

a period of three months frff om the date of the Deed. Under the terms of the Deed, the Company invested $3.1

negotiations forff
million to subscribe forff
Neuren, which was recorded in selling, general and administrative expenses in the consolidated statements of operations in
the second quarter of 2018. At December 31, 2022, the Company continues to hold the equity securities as a strategic
investment in which the Company does not have a controlling interest or signififf cant inflff uence. Publicly held equity securities
are measured using quoted prices in their respective active markets with changes recorded through other expense on the
statements of operations. Net gain on the strategic investments recognized in other income in the consolidated statements of
operations forff
the year
ended December 31, 2021 was $2.3 million and net loss on strategic investments recognized forff
the year ended December 31,
2020 was $1.0 million. As of December 31, 2022 and 2021, the aggregate carryirr ng amount of the Company’s strategic equity
investment was $7.2 million and $3.6 million, respectively, included in other assets on the consolidated balance sheets.

the year ended December 31, 2022 was $3.5 million, net gain on strategic investments recognized forff

the exclusive right to negotiate a deal with

In August 2018, the Company entered into a license agreement with Neuren and obtained exclusive North American
rights to develop and commercialize trofiff netide forff Rett syndrome and other indications. Under the terms of the agreement,
Neuren received an upfrff ont payment of $10.0 million and is eligible to receive milestone payments of up to $455.0 million,
based on the achievement of certain development and annual net sales milestones, including a $40.0 million payment upon
the Company’s fiff rst commercial sale of trofiff netide in North America. In addition, Neuren is eligible to receive tiered,
escalating, double-digit percentage royalties based on net sales. The license agreement was accounted forff
as an asset
acquisition and the upfrff ont cash payment of $10.0 million was recorded in research and development expenses in the
consolidated statements of operations in the third quarter of 2018, as there is no alternative use forff

the asset.

Under the license agreement, Neuren and its non-Company licensees and sublicensees are prohibited frff om developing

or commercializing any other product (including Neuren’s other existing compounds) forff Rett syndrome, or forff
indication being developed pursuant to the agreement, in North America. Furthermore, with respect to Neuren’s development
or commercial activities outside North America, (i) if Neuren is developing trofiff netide forff
Company, Neuren is obligated to use commercially reasonabla e effff orff
any adverse impact on trofiff netide in North America, and (ii) if Neuren is developing trofiff netide forff
Neuren may not undertake such activities if the Company believes, and the joint steering committee determines, they would
be reasonabla y likely to materially adversely affff eff ct the development and commercialization of trofiff netide in North America.

ts to conduct such activities in a manner that minimizes

the same indication as the

a diffff eff rent indication,

any other

In Januaryrr 2022, the Company entered into a license and collabor

a

ation agreement with Stoke to discover, develop and

a

the potential treatment of severe and rare genetic neurodevelopmental
ation includes SYNGAP1 syndrome, Rett syndrome (MECP2), and an undisclosed

commercialize novel RNRR A-based medicines forff
diseases of the CNS. The collabor
neurodevelopmental target. For the SYNGAP1 program, the two companies will jointly share global research, development
and commercialization responsibilities and share 50/50 in all worldwide costs and futff urt e profiff ts. In addition, Stoke is eligible
to receive potential development, regulatory,rr
undisclosed neurodevelopmental program, the Company acquired an exclusive worldwide license to develop and
commercialize MECP2 program and the undisclosed neurodevelopmental program. Stoke will lead research and pre-clinical
development activities, while the Company will lead clinical development and commercialization activities. The Company
will fund
ff
development, regulatory,rr

research and pre-clinical development activities related to these two targets and Stoke is eligible to receive potential

fiff rst commercial sales and sales milestones as well as tiered royalty payments on worldwide sales

fiff rst commercial sales and sales milestones. For the MECP2 program and the

F-24

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

starting in the mid-single digit range and escalating to the mid-teens based on revenue levels. Under the terms of the
as an asset acquisition and
agreement, the Company paid Stoke a $60.0 million upfrff ont payment which was accounted forff
was expensed to research and development in the fiff rst quarter of 2022 as there is no alternative use forff
the asset. The
Company may be required to pay up to an additional $907.5 million in milestones as well as royalties on futff urt e sales.

rr
CorCC por

atett CrCC editii CarCC d PrPP ogram

In connection with the Company’s credit card program, the Company establa ished a letter of credit in 2016 forff

$2.0

million, which has automatic annual extensions and is fulff

ly secured by restricted cash.

FlFF ell et PrPP ogram

In connection with the Company’s flff eet program, the Company establa ished a letter of credit forff
ly secured by restricted cash.

automatic annual extensions and is fulff

$0.4 million, which has

e
Legal

PrPP oceedinii gs

a

judgments of noninfrff ingement and invalidity. On

atories Private Ltd. and its affff iff liate MSN Pharmaceuticals, Inc., and (iii) Zydus

the District of Delaware, allege infrff ingement of certain of the Company’s Orange Book-listed

On July 24, 2020, the Company fiff led complaints against (i) Aurobindo Pharma Limited and its affff iff liate Aurobindo
Pharma USA, Inc. and (ii) Teva Pharmaceuticals USA, Inc. and its affff iff liate Teva Pharmaceutical Industries Ltd., and on July
30, 2020, the Company fiff led complaints against (i) Hetero Labsa Limited and its affff iff liates Hetero Labsa Limited Unit-V and
Hetero USA Inc., (ii) MSN Labor
Pharmaceuticals (USA) Inc. and its affff iff liate Cadila Healthcare Limited. These complaints, which were fiff led in the United
States District Court forff
patents covering NUPLAZID. The cases have been assigned to the Honorabla e Richard G. Andrews. On September 1, 2020,
Aurobindo fiff led its answer and counterclaims seeking declaratoryrr
September 22, 2020, the Company fiff led its answer to Aurobindo’s counterclaims. On August 31, 2020, Teva fiff led its answer
and counterclaims seeking declaratoryrr
judgments of noninfrff ingement and invalidity. On September 21, 2020, the Company
fiff led its answer to Teva’s counterclaims. On October 5, 2020, Hetero fiff led its answer and counterclaims seeking declaratoryrr
judgments of noninfrff ingement and invalidity. On October 26, 2020, the Company fiff led its answer to Hetero’s counterclaims.
On September 30, 2020, MSN fiff led its answer and counterclaims seeking declaratoryrr
invalidity regarding certain of the Company’s Orange Book-listed patents covering NUPLAZID. On November 5, 2020, the
Company fiff led its fiff rst amended complaint against MSN in the United States District Court forff
the District of Delaware,
alleging infrff ingement of certain of the Company’s Orange Book-listed patents covering NUPLAZID. On November 19,
2020, MSN fiff led its answer and counterclaims seeking declaratoryrr
judgments of noninfrff ingement and invalidity regarding
certain of the Company’s Orange Book-listed patents covering NUPLAZID. On December 10, 2020, the Company fiff led its
answer to MSN’s counterclaims. On November 2, 2020, Zydus fiff led its answer and counterclaims seeking declaratoryrr
judgments of noninfrff ingement and invalidity. On November 23, 2020, the Company fiff led its answer to Zydus’s
counterclaims. On December 8, 2020, the parties’ joint proposed scheduling order was entered by Judge Andrews. On April
7, 2021, the Company fiff led its fiff rst amended complaints against Hetero and Teva and its second amended complaint against
MSN, to include an additional Orange Book-listed patent covering NUPLAZID. On April 8, 2021, the Company fiff led its fiff rst
amended complaint against Zydus and on April 9, 2021, the Company fiff led its fiff rst amended complaint against Aurobindo.
On April 20, 2021, MSN fiff led its answer, affff iff rmative defeff nses, and counterclaims to the Company’s second amended
complaint, seeking declaratoryrr
Book-listed patents covering NUPLAZID. On April 21, 2021, Teva fiff led its answer, affff iff rmative defeff nses, and counterclaims
to the Company’s fiff rst amended complaint, seeking declaratoryrr
judgments of noninfrff ingement and invalidity. On April 22,
2021, Zydus fiff led its answer, affff iff rmative defeff nses, and counterclaims to the Company’s fiff rst amended complaint, seeking
declaratoryrr

judgments of noninfrff ingement and invalidity regarding certain of the Company’s Orange

judgments of noninfrff ingement and invalidity.

judgments of noninfrff ingement and

On April 22, 2021, Aurobindo fiff led its answer, affff iff rmative defeff nses, and counterclaims to the Company’s fiff rst

judgments of noninfrff ingement and invalidity. On May 11, 2021, the Company fiff led

amended complaint, seeking declaratoryrr
its answer to MSN’s counterclaims. On May 12, the Company fiff led its answer to Teva’s counterclaims. On May 13, the
Company fiff led its answer to Zydusd ’s counterclaims and its answer to Aurobindo’s counterclaims. A joint trial in the matters
is scheduled forff May 15, 2023. The Company entered into an agreement effff eff ctive April 22, 2021 with Hetero settling all
claims and counterclaims in the litigation. The agreement allows Hetero to launch its generic pimavanserin product on July
earlier launch. The Hetero case was dismissed by joint agreement on May 3, 2021.
27, 2038, subject to certain triggers forff

F-25

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On August 27, 2021, the Company fiff led its second amended complaint against Zydus to include an additional Orange

ryrr

tion. On Februar

tion Chart. On October 1, 2021, the

tion on two terms, Defeff ndants’ construcr

Book-listed patent covering NUPLAZID. On September 10, 2021, Zydus fiff led its answer, affff iff rmative defeff nses, and
counterclaims to the Company’s second amended complaint, seeking declaratoryrr
judgments of noninfrff ingement and
invalidity. Also on September 10, 2021, the parties fiff led their Joint Claim Construcr
Company fiff led its answer to Zydusd ’s counterclaims. On November 30, 2021,the Company fiff led a stipulation and proposed
order to dismiss two of its Orange Book-listed patents covering NUPLAZID against Teva, which was ordered by the Court
on December 1, 2021. On Januaryrr 28, 2022, the parties fiff led their Joint Claim Construcr
tion Brief and Appendix. On Februar
23, 2022, the Court heard oral argument on claim construcr
tion. On April 6, 2022, the Court issued a Memorandum Opinion
tion on two terms,
construir ng several terms at issue, adopting the Company’s construcr
and one agreed-upon construcr
ryrr 28, 2022, the Company fiff led a stipulation and proposed order to dismiss one
patent against MSN, which was ordered by the Court on March 1, 2022. On March 10, 2022, the Company fiff led a stipulation
and proposed order to dismiss one patent against Teva, which was ordered by the Court on March 10, 2022. On March 22,
2022, the Company fiff led a stipulation and proposed order to dismiss seven patents against Aurobindo, which was ordered by
the Court on March 22, 2022. On March 30, 2022, the Company fiff led a stipulation and proposed order to dismiss two patents
against Zydus, which was ordered by the Court on March 31, 2022. On April 22, 2022, the Company fiff led a stipulation and
proposed order of non-infrff ingement against Aurobindo regarding certain of the Company’s Orange Book-listed patents
covering NUPLAZID, which was ordered by the Court on April 22, 2022. On April 26, 2022, the Company fiff led a stipulation
and proposed order of non-infrff ingement against MSN regarding certain of the Company’s Orange Book-listed patents
covering NUPLAZID, which was ordered by the Court on April 26, 2022. On April 26, 2022, the Company fiff led a stipulation
and proposed order of non-infrff ingement against Teva regarding certain of the Company’s Orange Book-listed patents
covering NUPLAZID, which was ordered by the Court on April 27, 2022. On May 10, 2022, the Company fiff led its second
amended complaint against Teva to include an additional Orange Book-listed patent covering NUPLAZID. On May 18,
2022, the Company fiff led a stipulation and proposed order of non-infrff ingement against Zydus regarding certain of the
Company’s Orange Book-listed patents covering NUPLAZID, which was ordered by the Court on May 19, 2022. On May
24, 2022, Teva fiff led its answer, affff iff rmative defeff nses, and counterclaims to the Company’s second amended complaint,
seeking declaratoryrr
patents covering NUPLAZID. On June 1, 2022, the Company fiff led its second amended complaint against Aurobindo alleging
infrff ingement of certain of the Company’s Orange Book-listed patents covering NUPLAZID. On June 2, 2022, the Company
fiff led its third amended complaint against Zydus alleging infrff ingement of certain of the Company’s Orange Book-listed
patents covering NUPLAZID. On June 14, 2022, the Company fiff led its answer to Teva’s counterclaims. June 15, 2022,
Aurobindo fiff led its answer, affff iff rmative defeff nses, and counterclaims to the Company’s second amended complaint, seeking
declaratoryrr
covering NUPLAZID. On June 16, 2022, Zydus fiff led its answer, affff iff rmative defeff nses, and counterclaims to the Company’s
third amended complaint, seeking declaratoryrr
Company’s Orange Book-listed patents covering NUPLAZID. On July 6, 2022, the Company fiff led its answer to Aurobindo’s
counterclaims.

judgments of noninfrff ingement and invalidity regarding certain of the Company’s Orange Book-listed patents

judgments of noninfrff ingement and invalidity regarding certain of the Company’s Orange Book-listed

judgments of noninfrff ingement and invalidity regarding certain of the

On September 7, 2022, the consolidated cases were reassigned to the Honorabla e Judge Gregoryrr B. Williams. On
September 30, 2022, the Company fiff led a stipulation and proposed order to stay the claims currently asserted against Teva
and forff Teva to be bound by the result of the litigation rendered against the remaining Defeff ndants, which was ordered by the
Court on October 4, 2022. On October 21, 2021, the Company fiff led complaints against Aurobindo, MSN and Zydus in the
United States District Court forff
the District of Delaware alleging infrff ingement of an additional Orange Book-listed patent
covering NUPLAZID.

On April 19, 2021, a purpor

rr

ted stockholder of the Company fiff led a putative securities class action complaint (capta ioned

a

Marechal v. Acadia Pharmaceuticals, Inc., Case No. 21-cv-0762) in the U.S. District Court forff
Califorff nia against the Company and certain of the Company’s current executive offff iff cers. The complaint generally alleges that
defeff ndants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by faff iling to disclose that the materials
submitted in support of its sNDA seeking appr
associated with dementia-related psychosis contained statistical and design defiff ciencies and that the FDA was unlikely to
appr
ove the sNDA in its current forff m. The complaint seeks unspecififf ed monetaryrr damages and other relief.ff On September
a
29, 2021, the Court issued an order designating lead plaintiffff and lead counsel. On December 10, 2021, lead plaintiffff fiff led an
ryrr 15, 2022. Lead plaintiffff fiff led
amended complaint. Defeff ndants fiff led a motion to dismiss the amended complaint on Februar
an opposition to Defeff ndants’ motion to dismiss on April 18, 2022, and Defeff ndants fiff led a reply on June 2, 2022. On
September 27, 2022, the Court issued an order denying Defeff ndants’ motion to dismiss. Defeff ndants fiff led their answer to the
amended complaint on October 19, 2022, and fiff led a motion forff
ryrr 3, 2023,
the Court issued an order denying the motion forff

reconsideration on October 25, 2022. On Februarr

the treatment of hallucinations and delusions

oval of pimavanserin forff

the Southern District of

reconsideration.

F-26

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Management currently believes that none of the forff egoing claims or other actions pending against the Company as of
December 31, 2022 is likely to have, individually or in the aggregate, a material adverse effff eff ct on the Company’s business,
liquidity, fiff nancial position, or results of operations. Given the unpredictabia lity inherent in litigation, however, the Company
cannot predict the outcome of these matters. The Company is unabla e to estimate possible losses or ranges of losses that may
result frff om these matters, and thereforff e it has not accruerr d any amounts in connection with these matters other than attorneys’
feff es incurred to date.

10. Leases

The Company leases faff cilities and certain equipment under noncancelabla e operating leases that expire at various dates

through Februarr
property taxes, insurance and normal maintenance costs.

ryrr 2031. Under the terms of the faff cilities leases, the Company is required to pay its proportionate share of

In 2015, the Company entered into a master lease agreement giving the Company the abia lity to lease vehicles under

operating leases with initial terms of 36 months frff om the date of delivery.rr
new master lease agreement was entered into with a new vendor giving the Company the abia lity to lease vehicles under
operating leases with initial terms ranging frff om 12 to 50 months frff om the date of delivery.rr
In 2021, the Company entered into
a new master lease agreement giving the Company the abia lity to lease vehicles under operating leases with initial terms of 60
months frff om the date of delivery.rr

In 2018, the lease agreement was terminated and a

The Company leases faff cilities and certain equipment under noncancelabla e operating leases with remaining lease terms

of 1.0 year to 8.4 years, some of which include options to extend the lease forff
periods were not considered in the determination of the right-of-ff use asset or the lease liabia lity as the Company did not
consider it reasonabla y certain that it would exercise such options.

up to two fiff ve-year terms. These optional

The operating lease costs were as folff

lows (in thousands):

Operating lease cost

2022

Years Ended December 31,
2021

2020

$

8,095

$

8,874

$

6,917

Supplemental cash flff ow inforff mation related to the Company’s leases were as folff

lows (in thousands):

Cash paid forff

amounts included in the measurement of lease liabia lities:

Operating cash flff ows frff om operating leases

Right-of-ff use assets obtained in exchange forff

operating lease obligations:

Years Ended December 31,

2022

2021

$

$

9,083
3,871

5,303
17,272

The balance sheet classififf cation of the Company’s lease liabia lities was as folff

lows (in thousands):

Operating lease liabilities

Current portion included in accruer d liabia lities
Operating lease liabia lities
Total operating lease liabia lities

December 31,
2022

December 31,
2021

$

$

9,305
52,695
62,000

$

$

8,304
56,126
64,430

F-27

ACADIA PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Maturt

ities of lease liabia lities were as folff

lows (in thousands):

Years ending December 31,

2023
2024
2025
2026
2027
Thereaftff er

Total lease payments

Less:

Imputed interest

Total operating lease liabia lities

Operating Leases

$

$

9,562
9,112
9,192
8,556
8,282
28,687
73,391

(11,391)
62,000

Operating lease liabia lities are based on the net present value of the remaining lease payments over the remaining lease

term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the
inforff mation availabla e at the lease commencement date. As of December 31, 2022 and 2021, the weighted average remaining
lease term was 7.9 years and 9.0 years, respectively, and the weighted average discount rate used to determine the operating
lease liabia lity was 4.4% and 4.3%, respectively.

In the four

ff

th quarter of 2018, the Company entered into an agreement to lease the 4th and 5th flff oors of corpor

r

ate offff iff ce

ate offff iff ce space in San Diego, Califorff nia with total minimum lease payments of $25.3 million over an initial term of

oximately 10 years and 7 months. In March 2020, the Company entered into the second amendment to the lease

space in San Diego, Califorff nia with total minimum lease payments of $50.4 million over an initial term of 10 years and 9
months. In Februarr
ryrr 2020, the Company entered into the fiff rst amendment to the lease agreement to lease the 2nd flff oor of
corpor
r
a
appr
agreement which increased the total minimum lease payments of the original corpor
third quarter of 2020, the lease forff
the 4th and 5th flff oors of corpor
right of use asset and related lease liabia lity of $40.3 million. In the fiff rst quarter of 2021, the lease forff
corpor
r
million. In connection with this lease and the amendment, the Company establa ished a letter of credit forff
has automatic annual extensions and is fulff

ate offff iff ce space commenced and the Company capia talized a right of use asset and related lease liabia lity of $19.2

ate offff iff ce space to $51.4 million. In the

ate offff iff ce space commenced and the Company capia talized a

ly secured by restricted cash.

$3.1 million, which

the 2nd flff oor of

r

r

11. Selected Quarterly Financial Data (Unaudited)

The folff

lowing fiff nancial inforff mation reflff ects all normal recurring adjustments, which are, in the opinion of

management, necessaryrr
ended December 31, 2022 and 2021 are as folff

forff

lows (in thousands, except per share data):

a faff ir statement of the results of the interim periods. Summarized quarterly data forff

the years

Revenues
Gross profiff t(1)
Net loss
Basic and diluted net loss per share(2)

Revenues
Gross profiff t(1)
Net loss
Basic and diluted net loss per share(2)

1st
$ 115,468
$ 112,518
$ (113,056) $
(0.70) $
$

Fiscal Year 2022 Quarters

2nd
$ 134,563
$ 131,896

3rd
$ 130,714
$ 128,578

(34,011) $
(0.21) $

(27,183) $
(0.17) $

4th
$ 136,490
$ 134,076

Total
517,235
$
$
507,068
(41,725) $ (215,975)
(1.34)

(0.26) $

Fiscal Year 2021 Quarters

2nd
$ 115,221
$ 112,695

3rd
$ 131,612
$ 127,924

(66,448) $ (43,871) $
(0.27) $

(0.42) $

(14,457) $
(0.09) $

1st
$ 106,554
$ 104,369
$
$

4th
$ 130,758
$ 128,314

$
$
(43,094) $
(0.27) $

Total
484,145
473,302
(167,870)
(1.05)

(1)

(2)

Determined by subtracting cost of product sales frff om product sales, net.

Basic and diluted net loss per common share are computed independently forff
l year based upon
respective average shares outstanding. Thereforff e, the sum of the quarterly net loss per common share amounts may not
equal the annual amounts reported.

each quarter and the fulff

F-28

SCHEDULE II – Valuation and Qualifyiff ng Accounts
(in thousands)

Additions

Deductions

Balance at
Beginning of
Period

Provision
Related to
Current
Period Sales

Actual
Distribution
Fees,
Discounts and
Chargebacks
Related to
Current Period
Sales

Actual
Distribution
Fees,
Discounts and
Chargebacks
Related to
Prior Period
Sales

Balance at
End of Period

distribution feff es, discounts

Allowance forff
and chargebacks:
For the year ended December 31, 2020
For the year ended December 31, 2021
For the year ended December 31, 2022

$
$
$

2,576
4,221
8,467

$
$
$

51,684
72,011
80,836

$
$
$

(47,463) $
(63,544) $
(69,913) $

(2,576) $
(4,221) $
(8,467) $

4,221
8,467
10,923

[THIS PAGE INTENTIONALLY LEFT BLANK]

MANAGEMENT TEAM 

Stephen  R. Davis 
Chief Executive Officer 

Julie Fisher 
Senior Vice President, Marketing and Commercial Strategy 

Austin D. Kim 
Executive Vice President, General Counsel and Secretary 

Parag Meswani 
Senior Vice President, Troﬁnetide – Rare Disease Franchise 

Mark Schneyer 
Executive Vice President, Chief Financial Officer 

Bob Mischler 
Senior Vice President, Strategy and Technology Operations 

Brendan Teehan 
Executive Vice President, Chief Operating Officer, Head of Commercial 

Sanjeev Pathak 
Senior Vice President, Head of Clinical Development 

Doug Williamson 
Executive Vice President, Head of Research and Development 

Rob Ackles 
Senior Vice President, Chief People Officer 

Kathie M. Bishop 
Senior Vice President, Chief Scientiﬁc Officer, Head of Rare Disease 

Ponni Subbiah, M.D., M.P.H. 
Senior Vice President, Global Head of Medical Affairs and Chief 
Medical Officer 

Benir Ruano 
Senior Vice President, Technical Development and Operations 

Holly Valdiviez 
Senior Vice President, Head of Sales 

BOARD OF DIRECTORS 

Stephen  R. Biggar,  M.D., Ph.D. 
Chairman of the Board, Partner 
Baker Brothers Investments 

Julian C. Baker 
Managing Partner 
Baker Brothers Investments 

Laura A. Brege 
Managing Director 
Cervantes Life Science Partners 

Elizabeth Garofalo, M.D. 
Principal 
EAG Pharma  Consulting LLC. 

Edmund P. Harrigan, M.D. 
Former Senior Vice President, Worldwide Safety and Regulatory 
Pﬁzer Inc. 

Adora Ndu, Pharm.D., J.D. 
Director, Chief Regulatory Officer 
BridgeBio 

James M. Daly 
Former Executive Vice President and Chief Commercial Officer 
Incyte Corporation 

Daniel B. Soland 
Senior Vice President and Chief Operating Officer 
Idera Pharmaceuticals 

Stephen  R. Davis 
Chief Executive Officer 
Acadia Pharmaceuticals Inc. 

CORPORATE HEADQUARTERS 
12830 El Camino  Real, Suite 400 
San Diego, CA 92130 
Telephone: (858) 558-2871 
Fax: (858) 212-0513 
www.acadia-pharm.com 

ANNUAL  STOCKHOLDERS’ MEETING 
Acadia Pharmaceuticals’ Virtual Annual 
Stockholders’ Meeting will be held online 
at noon PT on June 1.  See  the enclosed Notice 
of Annual Meeting for details 

STOCK TRANSFER AGENT AND REGISTRAR 
Computershare  Trust Company, N.A. 
462 South 4th Street Suite 1600 
Louisville,  KY 40202 
Telephone: (800) 851-3061 
www.computershare.com/us 

INDEPENDENT  REGISTERED PUBLIC 
ACCOUNTING FIRM 
Ernst & Young LLP 

STOCKHOLDERS’ INQUIRIES 
Stockholders  may obtain copies of our news releases, Securities and Exchange Commission 
ﬁlings, including Forms  10-K, 10-Q, and 8-K, and other company information by accessing our 
website at www.acadia-pharm.com. Stockholders  may also contact Investor Relations at 
(858)558-2871. 

FORWARD-LOOKING STATEMENTS 
Statements in this report that are not strictly historical in nature are 
forward-looking statements. These statements include but are not limited to statements 
related to the potential opportunity for future growth in sales of NUPLAZID; the timing of 
ongoing and future clinical studies for pimavanserin; the development and 
commercialization of DAYBUE troﬁnetide; and guidance for full-year 2023 NUPLAZID net 
sales and certain expense line items. These statements are only predictions based on 
current information and expectations and involve a number of risks and uncertainties. Actual 
events or results may differ materially from those projected in any of such statements due to 
various factors, including the risks and uncertainties inherent in drug development, approval 
and commercialization, and the fact that past results of clinical trials may not be indicative 
of future trial results. For a discussion of these and other factors, please refer to 
Acadia’sannual report on Form  10-K for the year ended December 31, 2022 as well as 
Acadia’s subsequent ﬁlings with the Securities and Exchange Commission. You are 
cautioned not to place undue reliance on these forward-looking statements, which speak 
only as of the date here of. This caution is made under the safe harbor provisions of the 
Private Securities Litigation Reform Act of 1995. All forward-looking statements are qualiﬁed 
in their entirety by this cautionary statement and Acadia undertakes no obligation to revise or 
update this report to reﬂect events or circumstances after the date hereof, except as 
required by law. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acadia Pharmaceuticals Inc.
12830 El Camino Real, Suite 400
San Diego, CA 92130
www.acadia-pharm.com