Neurocrine Biosciences

2 0 2 0   A N N U A L   R E P O R T

Neurocrine Biosciences has four commercial, FDA-approved treatments in the United States and a robust 
pipeline  with  multiple  mid-to-late-stage  programs  focused  on  neurological,  endocrine,  and  psychiatric 
disorders. 

Commercially Available and Pipeline Candidates

COMMERCIALLY
AVAILABLE

PIPELINE

PROGRAM

valbenazine*

NBI-827104 

NBI-921352 

*

‡ 

†

†

Tardive Dyskinesia

Parkinson’s Disease

Endometriosis

Uterine Fibroids

INDICATION

PHASE 1

PHASE 2

PHASE 3

Chorea in Huntington Disease

Registrational

Rare Pediatric Epilepsy: CSWS

Rare Pediatric Epilepsy: SCN8A-DEE

crinecerfont

Congenital Adrenal Hyperplasia (Adults)

Registrational

crinecerfont 

Congenital Adrenal Hyperplasia (Pediatric)

Registrational

elagolix†

Polycystic Ovary Syndrome

luvadaxistat (NBI-1065844)§

Negative Symptoms of Schizophrenia

NBI-1065845
(cid:1510)

NBI-1065846
(cid:1510)

Treatment-Resistant Depression

Anhedonia in Depression

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SCN8A-DEE = SCN8A Developmental and Epileptic Encephalopathy
CSWS = Epileptic Encephalopathy with Continuous Spikes and Waves During Sleep
Neurocrine Biosciences has global rights unless otherwise noted. 
*Mitsubishi Tanabe Pharma has commercialization rights in East Asia. ‡ Under license from Bial. †AbbVie has global commercialization rights.  §Takeda has co-commercialization option following the ongoing Phase II.  

Takeda has co-commercialization rights with option to opt out following certain development milestones.

(cid:1510)

Neurocrine Biosciences is a neuroscience-focused, biopharmaceutical company dedicated to discovering, 
developing  and  delivering  life-changing  treatments  for  people  with  serious,  challenging  and  under-
addressed  neurological,  endocrine  and  psychiatric  disorders.  The  company's  diverse  portfolio  includes 
FDA-approved  treatments  for  tardive  dyskinesia,  Parkinson's  disease,  endometriosis*,  and  uterine 
fibroids*,  and  clinical  programs  in  multiple  therapeutic  areas.  For  nearly  three  decades,  Neurocrine 
Biosciences  has  specialized  in  targeting  and  interrupting  disease-causing  mechanisms  involving  the 
the  nervous  and  endocrine  systems.  For  more 
interconnected  pathways  of 
information, 
visit neurocrine.com, and follow the company on LinkedIn.  (*in collaboration with AbbVie) 

Dear Fellow Shareholders, 

I’ll begin this year’s shareholder letter, much as I did in last year’s, by expressing my hope that you, your 
families and your friends are safe and well. Discovering, developing and delivering life-changing 
treatments for people with serious, challenging and under-addressed disorders is difficult enough on its 
own without the challenges and disruptions brought on by a global pandemic. I could not be more proud 
or grateful to be part of the biopharma industry, which came together with such speed and singular 
focus to develop therapeutics and vaccines for the novel SARS-Cov-2 virus. Like you, I cannot wait to 
safely spend time together with friends and family and interact in-person with my Neurocrine 
colleagues. 

Neurocrine has been in business for close to 30 years and there have been many ebbs and flows in our 
journey. We’ve learned that we need to be resilient and tenacious in order to successfully bring new 
medicines to patients. Our collective tenacity was on full display last year as we navigated the impact of 
the pandemic on our business. To our team at Neurocrine and our many partners: Thank you. 

 
 
 
 
 
 
 
 
I would like to review some of our key accomplishments in 2020 beginning with INGREZZA® 
(valbenazine).  Over the past four years, INGREZZA has helped tens of thousands of patients living with 
tardive dyskinesia (TD), and generated almost $1 billion in sales in 2020. While we are proud of the 
progress that we’ve made in educating the healthcare community to recognize, diagnose and treat 
tardive dyskinesia, we still have much more work to do. The vast majority of the over 500,000 patients 
in the U.S. with TD are undiagnosed. With the continued rise in antipsychotic prescription use and a 
burgeoning mental health crisis brought on by the pandemic, the addressable patient population may 
well increase.  

To address the benefits of the VMAT2 inhibitor class of drugs, the American Psychiatric Association 
recently updated their schizophrenia treatment guidelines to recommend first-line use of a VMAT2 
inhibitor, like INGREZZA, for the treatment of tardive dyskinesia. Looking ahead, we are well positioned 
to return to our normal growth trajectory as more patients, clinicians and their staff return to an in-
person environment. As the market leader in TD, INGREZZA is positioned to help even more patients and 
drive our long-term growth. 

Last fall, we launched our second commercial medicine, ONGENTYS® (opicapone) for the adjunctive 
treatment of Parkinson’s disease (PD).  As background, the gold standard treatment for PD is levodopa, 
which is always given with carbidopa. Carbidopa inhibits one of two enzymes that break down levodopa 
before it can be converted to dopamine in the brain. ONGENTYS inhibits the other enzyme, known as 
COMT, that breaks down levodopa. Therefore, by utilizing ONGENTYS earlier in the treatment paradigm, 
physicians can optimize levodopa’s impact. The early feedback from patients and physicians has been 
positive.  

Over the last several years, we have made great strides expanding our Research and Development 
pipeline with a variety of programs in epilepsy, psychiatry, and endocrinology.  Our most advanced 
asset, crinecerfont, is currently being evaluated in classic congenital adrenal hyperplasia (CAH), a rare 
and potentially fatal endocrine disorder with limited, sub-optimal treatment options.  Crinecerfont 
leverages our historical experience in corticotropin-releasing factor type 1 (CRF-1) antagonists, and we 
are currently enrolling adults and pediatric patients with classic CAH in two global registrational studies. 

Drug discovery and development, especially for neurology indications, is a risky endeavor. While we’ve 
been fortunate to have great success with a medicine like INGREZZA, we’ve also had our share of 
disappointing results from which we’ve learned new and valuable information to inform our future drug 
development efforts. While it is impossible to eliminate risk, we’ve strategically built our clinical pipeline 
to mitigate as much risk as we can. Our programs feature a variety of unique mechanisms of action to 
address serious medical needs across a variety of therapeutic areas. We have programs in registrational 
Phase III studies with established proof-of-concept molecules, such as valbenazine and crinecerfont.  We 
have programs that have the potential to address multiple unique indications, like valbenazine and our 
precision medicine epilepsy molecules.  We are also pursuing genetically validated targets in rare 
pediatric epilepsies. Finally, we have assets where we share in the financial costs and hopefully future 
profits with our psychiatry portfolio through our collaboration with Takeda Pharmaceuticals.  

Being in a sector that is important to human health, we were pleased, but not surprised, that the 
corporate sustainability report we posted last summer received high marks from our investors’ financial 
and stewardship teams and stakeholders more generally.  The Nominating/Corporate Governance 
Committee of Neurocrine’s Board of Directors oversees and reviews the progress of our environmental, 
social and governance (ESG) programs.  Our entire management team and Board of Directors are 100% 

 
 
 
 
 
 
committed to ensuring Neurocrine continues to do the right thing for our patients, our people, our 
communities, our planet, our shareholders and stakeholders. 

I would be remiss if I didn’t recognize Dr. Haig Bozigian who retired from Neurocrine as Chief 
Development Officer after almost a quarter century of dedication to our company. Haig embodies the 
Neurocrine core values of passion, integrity, collaboration, innovation and tenacity. Thank you Haig.  

We operate in a sector in which any company would feel fortunate to have one commercialized 
treatment and a pipeline with a handful of early stage hopefuls.  That is why I open and close this letter 
by saying:  Neurocrine Biosciences has four commercial, FDA-approved treatments in the United 
States and a robust pipeline with multiple mid-to-late-stage programs focused on neurological, 
endocrine, and psychiatric disorders.  

As I think about what is next for our company, I believe we have a meaningful opportunity to help many 
patients suffering from a variety of neurology, psychiatry, and endocrinology disorders.  With INGREZZA, 
a robust pipeline, and a strong financial position, our foundation is firmly in place to become the leading 
neuroscience focused company in the biopharmaceutical industry and to positively impact the lives of 
many more patients.  Achieving this ambitious goal will take time, disciplined execution, passion, and as 
I noted earlier, the tenacity to persist through the inevitable fits and starts of drug development.  I am 
confident that we have the team, resolve, values, and culture to do just that. 

Sincerely,  

Kevin C. Gorman, PH.D. 
Chief Executive Officer 

 
 
 
 
 
 
 
  
NEUROCRINE BIOSCIENCES, INC.
12780 El Camino Real
San Diego, CA 92130

Notice of Annual Meeting of Stockholders

To Be Held on May 19, 2021

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the 2021 Annual Meeting of Stockholders of Neurocrine Biosciences, Inc., a Delaware
corporation (the “Company”), will be held on May 19, 2021, at 10:30 a.m., local time, at the Company’s corporate headquarters
located at 12780 El Camino Real, San Diego, California 92130, for the following purposes as more fully described in the Proxy
Statement accompanying this Notice:

1.

2.

3.

4.

The election of the three nominees for Class I Director named herein to the Board of Directors to serve for a term of
three years;

An advisory vote on the compensation paid to the Company’s named executive officers;

The ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2021; and

To transact such other business as may properly come before the Annual Meeting of Stockholders or any continuation,
adjournment or postponement thereof.

Only stockholders of record at the close of business on March 23, 2021 are entitled to receive notice of and to vote at the

Annual Meeting of Stockholders.

All stockholders are normally invited to attend the Annual Meeting of Stockholders in person. However, based on the
COVID-19 pandemic, related government guidelines, and our current COVID-19 policies, we strongly urge our stockholders not to
attend the Annual Meeting in person this year and to instead submit proxy votes. Our Annual Meeting this year will be purely
functional in format to comply with the relevant legal requirements. There will be no presentations or exhibitions. No refreshments
will be provided, and any Board members or officers attending the meeting will not meet with stockholders individually. Your vote
is important. We hope you will vote as soon as possible. You may vote over the Internet, as well as by telephone or by mailing a
proxy or voting instruction form. Please review the instructions on each of your voting options described in these proxy materials.

By Order of the Board of Directors,

Darin Lippoldt
Chief Legal Officer and Corporate Secretary

San Diego, California
April 9, 2021

Important Notice Regarding the Availability of Proxy Materials for the Stockholders’
Meeting to be Held on May 19, 2021 at 10:30 a.m. Local Time at
12780 El Camino Real, San Diego, California 92130.

The proxy statement and annual report to stockholders are available at
www.proxyvote.com. Please have the control number on your proxy card available.

[THIS PAGE INTENTIONALLY LEFT BLANK]

This summary highlights information that is described in more detail elsewhere in this proxy statement. This summary does

not contain all the information you should consider before you vote, and you should read the entire proxy statement carefully
before voting.

PROXY SUMMARY

General Information

Annual Meeting of Stockholders

Meeting Date

May 19, 2021

Time

Place

10:30 a.m. Local Time

12780 El Camino Real, San Diego, California 92130

Record Date

March 23, 2021

How to Vote

Your vote is very important. Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as

possible. You may vote in the following ways:

Telephone: Call 1-800-690-6903 from any touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then
follow the instructions. Easy-to-follow voice prompts allow you to submit your proxy and confirm your instructions
have been properly recorded.

Internet: Visit www.proxyvote.com to transmit your voting instructions and for electronic delivery of information via
the Internet up until 11:59 P.M. Eastern Time the day before the meeting date. As with telephone voting, you can
confirm that your instructions have been properly recorded.

Mail: Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to
Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

Stockholders may also vote in person at the Annual Meeting; however, based on the evolving COVID-19 pandemic and
related government guidelines, we strongly urge our stockholders not to attend the Annual Meeting in person this year and to
instead submit proxy votes using one of the methods above.

Matters to be Voted on

Matter

Board of Directors
Recommendation

Page Reference for
More Information

Proposal One: Elect Class I Directors

FOR all nominees

Proposal Two: Advisory vote on executive
compensation

Proposal Three: Ratify Ernst & Young LLP as
independent registered public accounting firm

FOR

FOR

18

20

21

1

NEUROCRINE BIOSCIENCES, INC.

12780 El Camino Real
San Diego, California 92130

PROXY STATEMENT

This Proxy is solicited on behalf of Neurocrine Biosciences, Inc., a Delaware corporation (the “Company” or “Neurocrine

Biosciences”), for use at its 2021 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on May 19, 2021 beginning
at 10:30 a.m., local time, or at any continuations, postponements or adjournments thereof for the purposes set forth in this proxy
statement and the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at the Company’s
corporate headquarters, located at 12780 El Camino Real, San Diego, California 92130. The Company’s phone number is
(858) 617-7600.

Why did I receive these proxy materials?

ABOUT THE ANNUAL MEETING

The Company has sent you these proxy materials because the Board of Directors of the Company is soliciting your proxy to

vote at the Annual Meeting, including at any adjournments or postponements of the Annual Meeting.

We intend to mail these proxy materials on or about April 9, 2021 to all stockholders of record entitled to vote at the Annual

Meeting.

What is the purpose of the Annual Meeting?

At the Annual Meeting, stockholders will act upon the matters outlined in these proxy materials, including the election of the

three nominees for Class I Director named herein, an advisory vote on the compensation paid to the Company’s named executive
officers, and ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2021.

Who can attend the Annual Meeting?

All stockholders of record at the close of business on March 23, 2021 (the “Record Date”), or their duly appointed proxies,

may attend the Annual Meeting; however, based on the COVID-19 pandemic and related government guidelines, we strongly urge
our stockholders not to attend the Annual Meeting in person this year and to instead submit proxy votes. Our Annual Meeting this
year will be purely functional in format to comply with the relevant legal requirements. There will be no presentations or
exhibitions. No refreshments will be provided, and any Board members or officers attending the meeting will not meet with
stockholders individually. If you attend, please note that you may be asked to comply with social distancing guidelines, and present
valid picture identification, such as a driver’s license or passport. Cameras, recording devices and other electronic devices will not
be permitted at the Annual Meeting.

Please also note that if you hold your shares in “street name” (that is, through a broker or other nominee), you will need to

bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at
the Annual Meeting.

Who is entitled to vote at the Annual Meeting?

Stockholders of record at the close of business on the Record Date are entitled to receive notice of and to participate in the

Annual Meeting. At the close of business on the Record Date, 94,535,739 shares of the Company’s common stock, $0.001 par
value per share, were issued and outstanding. If you were a stockholder of record on that date, you will be entitled to vote all of
the shares that you held on that date at the Annual Meeting, or any continuations, postponements or adjournments of the Annual
Meeting.

2

Each outstanding share of the Company’s common stock will be entitled to one vote on each proposal considered at the

Annual Meeting.

What constitutes a quorum? What are broker non-votes? What are advisory votes?

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the aggregate voting power of the

common stock outstanding on the Record Date will constitute a quorum, permitting the Company to conduct its business at the
Annual Meeting. As of the Record Date, 94,535,739 shares of common stock, representing the same number of votes, were
outstanding. Thus, the presence of the holders of common stock representing at least 47,267,870 shares will be required to establish
a quorum. The presence of a quorum will be determined by the Inspector of Elections (the “Inspector”).

Proxies received but marked as abstentions, as well as “broker non-votes,” will be included in the calculation of the number

of shares considered to be present at the Annual Meeting. Broker non-votes occur when a holder of shares in “street name” does
not give instructions to the broker or nominee holding the shares as to how to vote on “non-routine” matters. Under the rules and
interpretations of the New York Stock Exchange (the “NYSE”), “non-routine” matters are matters that may substantively affect the
rights or privileges of stockholders, such as mergers, stockholder proposals and elections of directors, even if not contested. In
addition, as required by Section 957 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, advisory votes
on executive compensation are non-routine matters for which brokers do not have discretionary authority to vote shares held by
account holders. Only ratification of our independent registered public accounting firm under Proposal Three is considered a
routine matter.

The vote on Proposal Two is advisory. The approval or the disapproval of Proposal Two will not be binding on the Company

or the Board of Directors and will not create or imply any change to the fiduciary duties of the Board of Directors. However, the
Company and the Board of Directors will consider the results of the advisory vote on Proposal Two in making future decisions
about compensation of the Company’s named executive officers.

How do I vote my shares in person at the Annual Meeting?

You may vote your shares held in your name as the stockholder of record in person at the Annual Meeting; however, based

on the COVID-19 pandemic and related government guidelines, we strongly urge our stockholders not to attend the Annual
Meeting in person this year and to instead submit proxy votes as described below. Our Annual Meeting this year will be purely
functional in format to comply with the relevant legal requirements. There will be no presentations or exhibitions. No refreshments
will be provided, and any Board members or officers attending the meeting will not meet with stockholders individually. You may
vote your shares held beneficially in street name in person at the Annual Meeting only if you obtain a legal proxy from the broker,
bank, trustee, or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the Annual
Meeting, we recommend that you also submit your proxy or voting instructions as described below so that your vote will be
counted if you later decide not to attend the Annual Meeting.

How can I vote my shares without attending the Annual Meeting?

Whether you hold shares directly as the stockholder of record or beneficially in street name, you are encouraged to direct
how your shares are voted without attending the Annual Meeting. If you are a stockholder of record, you are encouraged to vote by
proxy. You can vote by proxy over the Internet, by mail or by telephone pursuant to instructions provided on the enclosed proxy
card. If you hold shares beneficially in street name, you may also vote by proxy over the Internet or you can also vote by telephone
or mail by following the voting instruction form provided to you by your broker, bank, trustee, or nominee. The deadline for voting
by telephone or electronically is 11:59 p.m., Eastern Time, on May 18, 2021.

Who will bear the cost of soliciting votes for the Annual Meeting?

To the extent such costs are incurred, the cost of solicitation of proxies will be borne by the Company. The Company will

reimburse expenses incurred by brokerage firms and other persons representing beneficial owners of shares in forwarding
solicitation material to beneficial owners. To assist in soliciting proxies (votes), the Company has retained the professional proxy
solicitation firm Alliance Advisors, LLC, at an approximate cost of $20,000. Proxies also may be solicited by certain of the
Company’s directors, officers and regular employees, without additional compensation, personally, by telephone or by other
appropriate means.

3

Can I change my vote after I return my proxy?

Yes. Even after you have submitted your proxy, you may change your vote at any time before the proxy is exercised by filing

with the Corporate Secretary of the Company either a notice of revocation or a duly executed proxy bearing a later date. Your
proxy will also be revoked if you attend the Annual Meeting and vote in person; however, we are strongly discouraging in person
attendance at the Annual Meeting this year as described above.

What does it mean if I receive more than one set of proxy materials?

If you receive more than one set of proxy materials, your common stock is registered in more than one name or are registered

in different accounts. Please complete a proxy for each separate set of proxy materials that you receive to ensure that all of
your shares are voted.

What are the Board of Directors’ recommendations?

Unless you give other instructions on your proxy, the persons named as proxy holders on the proxy will vote in accordance

with the recommendations of the Board of Directors. The Board of Directors’ recommendation is set forth together with the
description of each item in this proxy statement. In summary, the Board of Directors unanimously recommends a vote:

Š

Š

Š

for election of the three nominees for Class I Director named herein (see Proposal One);

for an advisory vote on the compensation paid to the Company’s named executive officers (see Proposal Two); and

for ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2021 (see Proposal Three).

With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the

Board of Directors or, if no recommendation is given, in their own discretion.

What vote is required to approve each item?

Election of Directors. The affirmative vote of a plurality of the votes cast at the Annual Meeting is required for the election
of directors. A properly executed proxy marked “WITHHOLD AUTHORITY” with respect to the election of one or more directors
will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether
there is a quorum.

Other Items. For each other item, the affirmative vote of the holders of a majority of the shares represented in person or by
proxy and entitled to vote on the item will be required for approval. A properly executed proxy marked “ABSTAIN” with respect
to any such matter will not be voted, although it will be counted for purposes of determining the number of shares represented in
person or by proxy at the Annual Meeting. Accordingly, an abstention will have the effect of a negative vote for each item. If you
hold your shares in “street name” through a broker or other nominee, your broker or nominee will not be permitted to exercise
voting discretion with respect to each of the matters to be acted upon, other than Proposal Three. Thus, if you do not give your
broker or nominee specific instructions, your shares will not be voted on and will not be counted for any other matter to be acted
upon, other than Proposal Three. Shares represented by such “broker non-votes” will, however, be counted in determining whether
there is a quorum.

Who counts the votes?

Votes cast by proxy or in person at the Annual Meeting will be tabulated by the Inspector.

How can I find out the results of the voting at the Annual Meeting?

Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a

current report on Form 8-K that we expect to file with the SEC within four business days after the Annual Meeting. If final voting
results are not available to us in time to file a Form 8-K within four business days after the meeting, we intend to file a Form 8-K to
publish preliminary results and, within four business days after the final results are known to us, file an amended Form 8-K to
publish the final results.

4

What proxy materials are available on the internet?

The proxy statement and annual report to stockholders are available under the “Investors” tab on our corporate website at

www.neurocrine.com, and at www.proxyvote.com. However, you can only vote your shares at www.proxyvote.com. Please have
the control number on your proxy card available.

5

Who are the principal stockholders, and how much stock does management own?

STOCK OWNERSHIP

The following table sets forth the beneficial ownership of the Company’s common stock as of March 15, 2021 by (i) each of

the executive officers named in the table under the heading “Summary Compensation Table,” (ii) each current director, (iii) all
current directors and executive officers as a group and (iv) all persons known to the Company to be the beneficial owners of more
than 5% of the Company’s common stock. The table is based upon information supplied by our executive officers, directors and
principal stockholders and a review of Schedules 13D and 13G, if any, filed with the SEC. A total of 94,533,573 shares of the
Company’s common stock were issued and outstanding as of March 15, 2021.

Name and Address of Beneficial Owner (1)

Number of
Shares of
Common
Stock
Acquirable
Within
60 Days (3)

Total Number
of Shares of
Common
Stock
Beneficially
Owned (4)

Number of
Shares of
Common Stock
Owned (2)

Percent
Ownership

Janus Henderson Group plc (5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,307,920

— 9,307,920

201 Bishopsgate EC2M 3AE, United Kingdom

FMR LLC (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,436,629

— 8,436,629

245 Summer Street, Boston, MA 02210

The Vanguard Group (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,337,265

— 8,337,265

100 Vanguard Blvd., Malvern, PA 19355

BlackRock, Inc. (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,997,795

— 6,997,795

55 East 52nd Street, New York, NY 10055

T. Rowe Price Associates, Inc. (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,271,730

— 6,271,730

100 E. Pratt Street, Baltimore, MD 21202

Kevin C. Gorman, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Matthew C. Abernethy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eric Benevich. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kyle W. Gano, Ph.D.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eiry W. Roberts, M.D.
William H. Rastetter, Ph.D.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gary A. Lyons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
George J. Morrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leslie V. Norwalk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard F. Pops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shalini Sharp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stephen A. Sherwin, M.D.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All current executive officers and directors as a group (17 persons) . . . .

452,972
14,869
21,236
104,984
18,886
24,750
223,697
—
—
29,512
—
27,055
1,242,021

842,780
105,367
250,978
353,899
110,677
159,517
128,017
98,017
13,850
128,017
6,250
128,017
2,956,012

1,295,752
120,236
272,214
458,883
129,563
184,267
351,714
98,017
13,850
157,529
6,250
155,072
4,198,033

9.8%

8.9%

8.8%

7.4%

6.6%

1.4%
*
*
*
*
*
*
*
*
*
*
*
4.3%

*
(1)
(2)

(3)

(4)

(5)

(6)

Represents beneficial ownership of less than one percent (1%) of the outstanding shares of the Company’s common stock as of March 15, 2021.
The address of each beneficial owner named is c/o Neurocrine Biosciences, Inc., 12780 El Camino Real, San Diego, CA 92130, unless otherwise indicated.
Represents shares of common stock owned, excluding shares of common stock subject to stock options that are listed under the heading “Number of Shares
of Common Stock Acquirable Within 60 Days,” by the named parties as of March 15, 2021.
Shares of common stock subject to stock options currently exercisable or exercisable within 60 days of March 15, 2021, regardless of exercise price, are
deemed to be outstanding for computing the percentage ownership of the person holding such options and the percentage ownership of any group of which
the holder is a member, but are not deemed outstanding for computing the percentage of any other person.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.
Except as indicated by footnote, and subject to community property laws where applicable, the Company believes that the persons named in the table have
sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.
Based on Amendment No. 3 to Schedule 13G filed by Janus Henderson Group plc (“Janus”) on February 11, 2021, reporting ownership as of
December 31, 2020. According to such filing, Janus beneficially owns 9,307,920 shares of common stock and sole voting power as to 0 shares of common
stock. These securities are owned by various institutional investors for which Janus has a controlling ownership interest. As a result of its role as an
investment adviser or sub-adviser to such institutional investors, for the purposes of the reporting requirements of the Exchange Act, Janus is deemed to be
a beneficial owner of such securities; however, Janus expressly disclaims that it is, in fact, the beneficial owner of such securities.
Based on Amendment No. 12 to Schedule 13G filed by FMR LLC (“FMR”) on February 8, 2021, reporting ownership as of December 31, 2020.
According to such filing, FMR beneficially owns 8,436,629 shares of common stock and has sole voting power as to 346,523 shares of common stock.
Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the common stock held by
FMR.

6

(7)

(8)

(9)

Based on Amendment No. 5 to Schedule 13G filed by The Vanguard Group, Inc. (“Vanguard Group”) on February 10, 2021, reporting ownership as of
December 31, 2020. According to such filing, Vanguard Group beneficially owns 8,337,265 shares of common stock and sole voting power as to 0 shares
of common stock.
Based on Amendment No. 8 to Schedule 13G filed by BlackRock, Inc. (“BlackRock”) on January 29, 2021, reporting ownership as of December 31, 2020.
According to such filing, BlackRock beneficially owns 6,997,795 shares of common stock and sole voting power as to 6,487,970 shares of common stock.
Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of shares of the common stock
held by BlackRock. No one person’s interest in the common stock held by BlackRock is more than five percent of the Company’s total outstanding
common stock.
Based on Amendment No. 1 to Schedule 13G filed by T. Rowe Price Associates, Inc. (“Price Associates”) on February 16, 2021, reporting ownership as of
December 31, 2020. According to such filing, Price Associates beneficially owns 6,271,730 shares of common stock and sole voting power as to 1,786,530
shares of common stock. These securities are owned by various individuals and institutional investors which Price Associates serves as an investment
adviser with power to direct investments and/or sole power to vote the securities. For the purposes of the reporting requirements of the Securities and
Exchange Act of 1934, as amended (the “Exchange Act”), Price Associates is deemed to be the beneficial owner of such securities; however, Price
Associates, expressly disclaims that it is, in fact, the beneficial owner of such securities.

7

General

BOARD OF DIRECTORS AND COMMITTEES

The Company’s bylaws, as amended, provide that the Board of Directors is comprised of eight directors. The Company’s

Certificate of Incorporation provides that the Board of Directors is divided into three classes. There are currently three directors in
Class I (William H. Rastetter, Ph.D., George J. Morrow and Leslie V. Norwalk), three directors in Class II (Richard F. Pops,
Shalini Sharp and Stephen A. Sherwin, M.D.), and two directors in Class III (Kevin C. Gorman, Ph.D. and Gary A. Lyons). With
the exception of Kevin C. Gorman, Ph.D., who is the Chief Executive Officer of the Company, all current members of the Board of
Directors meet the definition of “independent director” under the Nasdaq Stock Market qualification standards.

The directors in Class I hold office until the 2021 Annual Meeting of Stockholders, the directors in Class II hold office until
the 2022 Annual Meeting of Stockholders, and the directors in Class III hold office until the 2023 Annual Meeting of Stockholders
(or, in each case, until their earlier resignation, removal from office, or death). After each such election, the directors in each such
case will then serve in succeeding terms of three years and until a successor is duly elected and qualified. Officers of the Company
serve at the discretion of the Board of Directors. There are no family relationships among the Company’s directors and executive
officers.

The term of office for directors William H. Rastetter, Ph.D., George J. Morrow and Leslie V. Norwalk will expire at the 2021

Annual Meeting of Stockholders.

Director Biographies of Class I Directors Nominated for Reelection at the 2021 Annual Meeting of Stockholders

William H. Rastetter, Ph.D. has served on the Board of Directors since February 2010 and as Chairman of the Board of
Directors since May 2011. Currently, he serves as the Chairman of the Board of Directors for Fate Therapeutics, a publicly traded
company focused on cellular therapies, as well as for Daré Bioscience, Inc. (previously known as Cerulean Pharma Inc.), a publicly
traded company focused on women’s health care. Dr. Rastetter also serves on the Board of Directors for Regulus Therapeutics Inc.,
a publicly traded company focused on RNA based therapeutics, and Grail, Inc., a private company developing deep sequencing
approaches for disease diagnosis, with an initial focus on the early diagnosis of cancer. Dr. Rastetter serves as an advisor to
Illumina Ventures. Dr. Rastetter was a partner in the venture capital firm, Venrock, from 2006 through early 2013 and was
Executive Chairman of Biogen Idec, Inc. from 2003 to 2005. Earlier, he served as Chairman and Chief Executive Officer of IDEC
Pharmaceuticals Corporation until its merger with Biogen in 2003; he joined IDEC Corporation as its Chief Executive Officer at
the company’s founding in 1986. From 1984 to 1986, Dr. Rastetter was Director of Corporate Ventures at Genentech, where from
1982 to 1984 he held scientific positions. He held a series of faculty positions including Associate Professor at the Massachusetts
Institute of Technology (“MIT”) from 1975 to 1982. Dr. Rastetter has a Bachelor of Science degree in chemistry from MIT and
received Master of Art and doctorate degrees in chemistry from Harvard University.

The continued service of Dr. Rastetter on the Company’s Board of Directors is based on Dr. Rastetter’s scientific and
technical expertise combined with his business experience in leading rapidly growing companies in the life science industry. The
Company’s continued growth is dependent on scientific and technical advances, and the Board of Directors believes that
Dr. Rastetter offers both strategic and technical insight into the risks and opportunities associated with our business. In addition,
Dr. Rastetter’s board and executive leadership experience at other life science companies provides valuable strategic and
governance insight to the Board of Directors as a whole.

George J. Morrow has served on the Board of Directors since October 2015. Mr. Morrow served as Executive Vice

President, Global Commercial Operations at Amgen Inc., a global biotechnology company, from 2003 until his retirement in 2011.
He joined Amgen in 2001 as Executive Vice President, Worldwide Sales and Marketing. His responsibilities included oversight of
all commercial functions for Amgen’s broad spectrum of products in more than 50 countries worldwide, and the introduction of
multiple new products into global markets. From 1992 to 2001, Mr. Morrow held executive management and commercial positions
within several subsidiaries of Glaxo Wellcome, including Group Vice President for Commercial Operations (U.S.), Managing
Director (U.K.), and most recently as President and Chief Executive Officer of Glaxo Wellcome, Inc. (U.S.). Mr. Morrow currently
serves on the board of directors of Align Technology, Inc., a global medical device company. He has previously served on the
boards of Vical, Inc., Otonomy, Inc., Glaxo Wellcome, Inc., Human Genome Sciences, Inc., Safeway, Inc., National Commerce
Bank, the John Hopkins School of Public Health, and the Duke University Fuqua School of Business. Mr. Morrow holds a B.S. in
chemistry from Southampton College, Long Island University, an M.S. in biochemistry from Bryn Mawr College and an M.B.A.
from Duke University.

8

The continued service of Mr. Morrow on the Company’s Board of Directors is based on his extensive commercialization
experience at Amgen, his broad executive experience at GlaxoSmithKline Inc., and his years of experience in corporate governance
as a board member of several publicly traded companies. Mr. Morrow’s board experience, leadership experience and
commercialization expertise prove valuable strategic insights to the Board of Directors.

Leslie V. Norwalk has served on the Board of Directors since September 2019. Since 2007, Ms. Norwalk has served as
Strategic Counsel to healthcare companies at Epstein Becker Green, EBG Advisors and National Health Advisors. Ms. Norwalk is
an Operating Partner at Enhanced Equity Fund, L.P., a private equity firm, and also serves as an advisor to Warburg Pincus LLC,
and Peloton Equity, both private equity firms. She serves as a director of NuVasive, Inc., Modivcare (formerly Providence Service
Corporation), Magellan Health, Inc., and Arvinas, Inc., all publicly traded companies, as well as several privately-held healthcare
companies. Ms. Norwalk previously served on the Board of Directors of Endologix. Additionally, she serves as a healthcare,
regulatory and policy advisor to several private equity firms. Ms. Norwalk began her career in the public sector as The White
House Special Assistant to the Office of Presidential Personnel under the first Bush administration, following which, she practiced
law at the Washington, D.C. office of Epstein Becker Green, P.C. From 2001 to 2007 she served in several roles at the Centers for
Medicare & Medicaid Services (CMS) under the George W. Bush administration, including serving as Deputy Administrator, and
Counselor and Policy Advisor, before assuming the role of Acting Administrator. Ms. Norwalk holds a Juris Doctorate from the
George Mason University School of Law and a Bachelor of Arts degree in economics and international relations from Wellesley
College.

Ms. Norwalk may be considered overboarded under certain institutional investors’ voting policies. Nonetheless, the
Company believes Ms. Norwalk is able to devote sufficient time and attention to her duties and to fulfill her responsibilities. In
particular, other than occasional consulting work, Ms. Norwalk devotes all of her professional time to corporate board activities.
The continued service of Ms. Norwalk to the Company’s Board of Directors is based on her deep knowledge of, and experience
with, the healthcare industry and government regulations, as well as corporate governance and risk management. Such knowledge
and experience provides valuable guidance and insight to the Board of Directors.

Director Biographies of Class II and Class III Directors not Nominated for Reelection at the 2021 Annual Meeting of
Stockholders

Richard F. Pops has served on the Board of Directors since April 1998. Mr. Pops is the Chairman and Chief Executive

Officer of Alkermes, Inc. He joined Alkermes as Chief Executive Officer in February 1991. Under his leadership, Alkermes has
grown from a privately held research-based company with 25 employees to an international, publicly traded pharmaceutical
company with more than 1,200 employees. In addition to Alkermes, he currently serves on the Board of Directors of the
Biotechnology Industry Organization (BIO)and the Pharmaceutical Research and Manufacturers of America (PhRMA). Previously,
Mr. Pops served on the Board of Directors of Epizyme, Inc., a biotechnology company focused on epigenetics. He holds a B.A. in
economics from Stanford University.

The continued service of Mr. Pops to the Company’s Board of Directors is based on his leadership experience and track

record for growing companies, his strength in business strategy and his financial acumen and capital markets experience. In
addition, Mr. Pops is recognized for his service to the biopharmaceutical industry as a member of the Boards of the Biotechnology
Industry Organization and the Pharmaceutical Research and Manufacturers of America. His breadth and range of industry
experience from operations and strategy is a significant contribution to the Board of Directors.

Shalini Sharp has served on the Board of Directors since February 2020. She also serves on the Board of Directors of Mirati

Therapeutics, Sutro Biopharma and Precision Biosciences. Previously, Ms. Sharp served on the Board of Directors of Array
Biopharma, prior to its acquisition by Pfizer, as well as on the Board of Directors of Panacea Acquisition Corp., prior to its merger
with Nuvation Bio. Ms. Sharp has held the positions of Chief Financial Officer and Executive Vice President at Ultragenyx, a
biopharmaceutical company committed to bringing to patients novel products for the treatment of serious rare and ultra-rare
genetic diseases, and Chief Financial Officer at Agenus Inc., a clinical-stage immuno-oncology company focused on the discovery
and development of therapies that engage the body’s immune system to fight cancer. She served on the Board of Agenus for
several years after her departure. Ms. Sharp previously served in strategic planning and as chief of staff to the Chairman of the
Board of Directors at Elan Pharmaceuticals during the company’s restructuring. Ms. Sharp has also served as a management
consultant at McKinsey & Company and an investment banker at Goldman Sachs, specializing in healthcare at both companies.
She holds a B.A., magna cum laude, and an MBA from Harvard University.

The continued service of Ms. Sharp to the Company’s Board of Directors is based on her extensive experience as a chief

financial officer of a public company, her financial acumen, and her management and leadership skills.

9

Stephen A. Sherwin, M.D. has served on the Board of Directors since April 1999. Dr. Sherwin currently divides his time

between advisory work in the life science industry and patient care and teaching in his specialty of medical oncology. He is a
Clinical Professor of Medicine at the University of California, San Francisco, and a volunteer Attending Physician in Hematology-
Oncology at the Zuckerberg San Francisco General Hospital. Dr. Sherwin currently serves on the Board of Directors of Biogen. He
is a Venture Partner with Third Rock Ventures and a member of the Scientific Steering Committee of the Parker Institute for
Cancer Immunotherapy. Previously Dr. Sherwin was Chairman and Chief Executive Officer of Cell Genesys, a cancer
immunotherapy company, from 1990 until the company’s merger in 2009 with BioSante Pharmaceuticals (now ANI
Pharmaceuticals). He was also a Co-founder and Chairman of Abgenix, an antibody company which was acquired by Amgen in
2006, and co-founder and chairman of Ceregene, a gene therapy company which was acquired by Sangamo Biosciences in 2013.
From 1983 to 1990, Dr. Sherwin held various positions in clinical research at Genentech, most recently that of Vice President.
Prior to 1983, he was on the staff of the National Cancer Institute. In addition, Dr. Sherwin previously served on the board of
directors of Aduro Biotech, Neon Therapeutics, as well as the Biotechnology Industry Organization from 2001 to 2014 and as its
chairman from 2009 to 2011, and was a member of the President’s Council of Advisors in Science and Technology (PCAST)
Working Group on Drug Development from 2011 to 2013. Dr. Sherwin holds a B.A. in biology summa cum laude from Yale
University and an M.D. from Harvard Medical School, is board-certified in internal medicine and medical oncology, and is a
fellow of the American College of Physicians.

The continued service of Dr. Sherwin for election to the Company’s Board of Directors is based on his experience and

credentials in the biotechnology industry as the former Chief Executive Officer of Cell Genesys, Inc., the former chairman and
co-founder of Abgenix, Inc., the chairman and co-founder of Ceregene, Inc., and his positions at Genentech, Inc. and the National
Cancer Institute. Dr. Sherwin is also currently Chairman Emeritus of the Biotechnology Industry Organization. In addition to his
biotechnology credentials, Dr. Sherwin’s medical expertise in internal medicine and medical oncology provides a unique
contribution to the Board of Directors.

Kevin C. Gorman, Ph.D. has been employed with the Company since 1993. He was appointed President and Chief Executive

Officer in January 2008 after having served as Executive Vice President and Chief Operating Officer since September 2006 and
prior to that, as Executive Vice President and Chief Business Officer and Senior Vice President of Business Development. He
currently serves as Chief Executive Officer and has served on the Board of Directors since January 2008. Dr. Gorman also serves
as a director of Xencor, Inc. a clinical stage biopharmaceutical company. From 1990 until 1993, Dr. Gorman was a principal of
Avalon Medical Partners, L.P. where he was responsible for the early stage founding of the Company and several other
biotechnology companies such as Onyx Pharmaceuticals, Inc., Metra Biosystems, Inc., Idun Pharmaceuticals, Inc. and ARIAD
Pharmaceuticals, Inc. Dr. Gorman received his Ph.D. in immunology and M.B.A. in Finance from the University of California,
Los Angeles and did further post-doctoral training at The Rockefeller University.

The continued service of Dr. Gorman on the Company’s Board of Directors is based on the fact that as Chief Executive

Officer of the Company, Dr. Gorman has extensive knowledge of our commercial products and our product candidates, our
employees and the industry in which we operate. Dr. Gorman has also demonstrated exceptional leadership skills, sound business
judgment and a strong commitment to the Company.

Gary A. Lyons has served on the Board of Directors since joining Neurocrine Biosciences in February 1993. Mr. Lyons

served as the President and Chief Executive Officer of the Company from February 1993 through January 2008. Prior to joining
the Company, Mr. Lyons held a number of senior management positions at Genentech, Inc., including Vice President of Business
Development and Vice President of Sales. Mr. Lyons is currently the Chairman of the Board of Directors for each of Rigel
Pharmaceuticals, Inc., a biotechnology company focused on developing drugs for the treatment of inflammatory/autoimmune and
metabolic diseases, and Travere Therapeutics, an ultra-orphan disease commercial stage company. Mr. Lyons is a member of the
Board of Directors of Brickell Biotech, Inc., a biotechnology company focused on debilitating skin diseases, and Eledon
Pharmaceuticals, Inc. (formerly Novus Therapeutics), a biotechnology company focused on immunology therapeutics. Mr. Lyons
was previously a director of Neurogesx, Cytori Therapeutics, and Facet Biotech Corporation. Mr. Lyons holds a B.S. in marine
biology from the University of New Hampshire and an M.B.A. from Northwestern University’s J.L. Kellogg Graduate School of
Management.

The continued service of Mr. Lyons on the Company’s Board of Directors is based on Mr. Lyons’ extensive business

development and corporate governance experience and, as the Company’s former Chief Executive Officer, his in-depth
understanding of the Company’s product candidates, management and culture. With this history with the Company and
management, Mr. Lyons brings a unique perspective and point of view to the Company’s Board of Directors.

10

General

CORPORATE GOVERNANCE

We have long believed that good corporate governance is important to ensure that Neurocrine Biosciences is managed for
the long-term benefit of its stockholders. We periodically review our corporate governance policies and practices. The Board of
Directors has adopted Corporate Governance Guidelines which describe our corporate governance practices and address
corporate governance issues such as Board composition, responsibilities and director qualifications. These guidelines are
available at www.neurocrine.com.

Corporate Governance Best Practices

We are committed to maintaining strong corporate governance practices that promote the long-term interests of the Company

and our stockholders and help strengthen the oversight functions of our management and Board of Directors. Additional
information about our corporate governance policies and practices, including our committee charters, Corporate Governance
Guidelines, Code of Business Conduct and Ethics, Comprehensive Compliance Program, 2020 Environmental, Social, Governance
(ESG) Report, and Policy for Recoupment of Incentive Compensation, can be found on our website, www.neurocrine.com.
Additionally, for more information on our commitment to corporate social responsibility and stewardship, including environmental
sustainability, diversity and inclusion and other key initiatives, please see our ESG Report, which is posted on our website
referenced above under the “Corporate Sustainability” section of the website. We believe these efforts reflect the best interests of
our patients, our stockholders and the communities in which we operate and serve. The information posted on or accessible through
our website is not incorporated into this proxy statement.

We believe that our strong corporate governance practices empower our independent directors to exercise effective oversight

of our business generally and our management team specifically, including the performance of our Chief Executive Officer.

The following table highlights some of our key corporate governance practices:

Corporate Governance Best Practices

Director resignation policy for directors receiving
less than majority support

Stockholder ability to call special meetings

Director overboarding policy

Stockholder action by written consent

Diverse Board and policies emphasizing diversity in
all new director searches

No poison pill in force

Separate Chairman and CEO

Clawback policy

All directors attended at least 75% of Board and
relevant committee meetings

New director orientation and continuing director
education

Code of Business Conduct and Ethics

Executive sessions of independent directors held at
every regular Board meeting

Annual board and committee assessment

Active stockholder engagement

What is the Board’s leadership structure?

It is the Company’s policy to separate the roles of Chief Executive Officer and Chairman of the Board. This separation

recognizes the independent roles of the Board of Directors, Chairman of the Board and Chief Executive Officer. The Board of
Directors sets Company strategy and provides oversight and accountability for the Chief Executive Officer and Company
management. The Chairman of the Board presides over the Board of Directors and provides guidance to the Chief Executive
Officer. The Chief Executive Officer and the balance of the Board of Directors set Company goals with the Chief Executive
Officer providing leadership and day to day oversight in furtherance of those goals. The Company believes that separation of the
Board of Directors and Company leadership reinforces the independence of the Board of Directors in its oversight of the business
and affairs of the Company, and creates an environment that is more conducive to objective evaluation and oversight of
management’s performance, increasing management accountability and improving the ability of the Board of Directors to monitor
whether management’s actions are in the best interests of the Company and its stockholders.

11

Are the members of the Board independent?

The Board of Directors annually reviews the independence of each of the directors. With the exception of Kevin C.

Gorman, Ph.D., who is the Chief Executive Officer of Neurocrine Biosciences, all current members of the Board of Directors meet
the definition of “independent director” under the Nasdaq Stock Market qualification standards.

How often did the Board meet during fiscal 2020?

The Board of Directors held a total of nine meetings during 2020. For 2020, the Board of Directors had an Audit Committee,
a Compensation Committee, and a Nominating/Corporate Governance Committee Charters for each of these committees have been
established and approved by the Board of Directors and current copies of the charters for each of the committees have been posted
on the Company’s website at www.neurocrine.com. During 2020, no director attended fewer than 75% of the aggregate of the total
meetings of the Board of Directors and no director attended fewer than 75% of the total number of meetings held by any committee
of the Board of Directors on which such director served.

What are the various committees of the Board and which directors are on those committees?

The Company’s Audit Committee is comprised entirely of directors who meet the independence requirements set forth in

Nasdaq Stock Market Rule 5605(c)(2)(A). Information regarding the functions performed by the committee, its membership, and
the number of meetings held during the fiscal year is set forth in the “Report of the Audit Committee,” included in this proxy
statement. The members of the Audit Committee for 2020 were Richard F. Pops, Shalini Sharp and Stephen A. Sherwin, M.D. The
Board of Directors has determined that Mr. Pops, Ms. Sharp, and Dr. Sherwin are “audit committee financial experts” within the
meaning of item 407(d)(5) of SEC Regulation S-K. This committee met seven times during 2020.

The Company’s Compensation Committee consists of directors George J. Morrow, Richard F. Pops and Shalini Sharp. The

Compensation Committee reviews and recommends to the Board of Directors the compensation of executive officers and other
employees of the Company. Under its charter, the Compensation Committee may form, and delegate authority to, subcommittees
as appropriate. Each of the current members of the Compensation Committee is an “independent director” as defined by Nasdaq
Stock Market Rule 5605(a)(2). This committee met six times during 2020.

The Company’s Nominating/Corporate Governance Committee consists of directors Stephen A. Sherwin, M.D., George J.

Morrow and Leslie V. Norwalk. Dr. Sherwin, Mr. Morrow, and Ms. Norwalk are all “independent directors” as defined by Nasdaq
Stock Market Rule 5605(a)(2). The Nominating/Corporate Governance Committee is responsible for developing and implementing
policies and practices relating to corporate governance, including administration of the Company’s Code of Business Conduct and
Ethics (the “Code”), which applies to all of the Company’s officers, directors and employees, and is available on the Company’s
website at www.neurocrine.com. If we make any substantive amendments to the Code or grant any waiver from a provision of the
Code to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website or in a
current report on Form 8-K. The functions of this committee also include consideration of the composition of the Board of
Directors and recommendation of individuals for election as directors of the Company. The Nominating/Corporate Governance
Committee will consider nominees recommended by stockholders, provided such nominations are made pursuant to the
Company’s bylaws and applicable law. This committee met three times during 2020.

Compensation Committee interlocks and insider participation

During 2020, the Compensation Committee consisted of George J. Morrow, Richard F. Pops, and Shalini Sharp. No
interlocking relationship existed between any member of the Compensation Committee and any member of any other company’s
Board of Directors or compensation committee.

What is our director nomination process?

In selecting non-incumbent candidates and reviewing the qualifications of incumbent candidates for the Board of Directors,
the Nominating/Corporate Governance Committee considers the Company’s corporate governance principles, which include the
following:

(cid:129)

Directors should possess the highest ethics, integrity and values, and be committed to representing the long-term
interest of the stockholders. They also must have experience they can draw upon to help direct the business strategies
of the Company together with sound judgment. They must be actively engaged in the pursuit of information relevant to
the Company’s business and must constructively engage their fellow Board members and management in dialogue and
the decision-making process.

12

(cid:129)

(cid:129)

(cid:129)

Directors must be willing to devote sufficient time to carrying out their duties and responsibilities effectively, and
should be committed to serve on the Board of Directors for an extended period of time.

Directors should notify the Chairman of the Board and Chairman of the Nominating/Corporate Governance Committee
in the event of any significant change in their employment responsibilities or affiliations. Director nominees should
meet the Director Qualification requirements set forth in the Company’s Corporate Governance Guidelines.

In evaluating director nominees, the Nominating/Corporate Governance Committee considers the following factors:
personal and professional integrity, ethics and values including any potential conflicts of interest; experience in
corporate management and the biopharmaceutical industry, such as serving as an officer or former officer of a publicly
held company; gender and ethnic diversity; experience as a board member of another publicly held company; and
additionally, for nominees seeking re-election, meeting attendance, gender and ethnic diversity, and participation and
compliance with Company policies.

It is the Company’s policy to have a diversity of skills, professional experience, education, associations, achievements,

training, points of view and individual qualities and attributes represented on the Board of Directors. The Nominating/Corporate
Governance Committee considers the diversity of the Board of Directors, including diversity with respect to gender and ethnicity,
when evaluating candidates for election or re-election to the Board of Directors.

The Nominating/Corporate Governance Committee’s goal is to assemble a Board of Directors that brings to the Company a

variety of perspectives and skills derived from high quality business and professional experience.

In addition to the foregoing, the Nominating/Corporate Governance Committee Charter and Corporate Governance

Guidelines set forth minimum criteria for director nominees. The Nominating/Corporate Governance Committee may also consider
such other facts as it may deem are in the best interests of the Company and its stockholders. The Nominating/Corporate
Governance Committee does believe that several members of the Board of Directors meet the criteria for an “audit committee
financial expert” as defined by SEC rules. We believe that all of our directors should have a reputation for honesty, integrity and
highest ethical standards, and should demonstrate business acumen, an ability to exercise sound judgment and a commitment to
serve the Company.

Board Self-Assessment

The Nominating/Corporate Governance Committee ensures that each member of the Board, the Committees, and the Chair of
the Board are assessed annually aimed at enhancing effectiveness. Directors complete a number of different evaluations in order to
provide performance feedback and suggestions for improved effectiveness or contributions. The assessments are done by way of a
questionnaire conducted by our external corporate counsel, Cooley LLP. The assessments are treated on a confidential basis, with
the results tallied on an anonymous basis for review. The results of the evaluation are analyzed by Cooley LLP, our Chief Legal
Officer, the Nominating/Corporate Governance Committee, and the Board, who decide whether any changes are needed to the
Board’s processes, procedures, composition or Committee structure. The evaluation carried out in 2020 indicated that all
individuals and groups were effectively fulfilling their responsibilities.

Board Education

The Board recognizes the importance of ongoing director education. In order to facilitate the Board’s educational

development, the Board regularly meets with management and are given periodic presentations on our business and recent business
developments. When the Board meets in person, Members of the Board also attend dinners on the evening before regularly
scheduled Board meetings. Generally, at these dinners the Board meets with senior decision-makers within the Company or outside
experts in order to enhance the Board’s understanding of our business and affairs. In addition, on an annual basis an external expert
meets with the Nominating/Corporate Governance Committee to discuss best practices and new developments relating to corporate
governance and the operation of public company boards. The Company also provides funding for members of the Board of
Directors to attend outside director continuing education programs sponsored by educational and other institutions.

Identification and Evaluation of Nominees for Director

The Nominating/Corporate Governance Committee identifies nominees for director by first evaluating the current members
of the Board of Directors willing to continue in service. Current members with qualifications and skills that are consistent with the
Nominating/Corporate Governance Committee’s criteria for service and who are willing to continue are considered for

13

re-nomination, balancing the value of continuity of service by existing members of the Board of Directors with that of obtaining
members who would offer a new perspective. If any member of the Board of Directors does not wish to continue in service, or if
the Board of Directors decides not to re-nominate a member for re-election, the Nominating/Corporate Governance Committee
identifies the desired skills and experience of a new nominee in light of the criteria above. The Nominating/Corporate Governance
Committee generally polls the Board of Directors and members of management for their recommendations and may also seek input
from third-party search firms. The Nominating/Corporate Governance Committee may also seek input from industry experts or
analysts. The Nominating/Corporate Governance Committee reviews the qualifications, experience and background of the
candidates. Final candidates are then interviewed by the Company’s independent directors and executive management. In making
its determinations, the Nominating/Corporate Governance Committee evaluates each individual in the context of the Company’s
Board of Directors as a whole, with the objective of assembling a group that can best perpetuate the success of the Company and
represent stockholder interests through the exercise of sound judgment. After review and deliberation of all feedback and data, the
Nominating/Corporate Governance Committee makes its recommendation to the Board of Directors.

We have not received director candidate recommendations from the Company’s stockholders and do not have a formal policy

regarding consideration of such recommendations. However, any recommendations received from stockholders will be evaluated
in the same manner that potential nominees suggested by members of our Board of Directors, management or other parties are
evaluated. Accordingly, our Board of Directors believes a formal policy regarding consideration of such recommendations is
unnecessary.

What is our process for stockholder communications with the Board of Directors?

Stockholders of the Company wishing to communicate with the Company’s Board of Directors or an individual director may
send a written communication to the Board of Directors or such director c/o Neurocrine Biosciences, Inc., 12780 El Camino Real,
San Diego, CA 92130, Attn: Corporate Secretary. Each communication must set forth:

(cid:129)

(cid:129)

the name and address of the Company stockholder on whose behalf the communication is sent; and

the number of Company shares that are beneficially owned by such stockholder as of the date of the communication.

Each stockholder communication will be reviewed by the Company’s Corporate Secretary to determine whether it is
appropriate for presentation to the Board or such director. Examples of inappropriate communications include advertisements,
solicitations or hostile communications.

Communications determined by the Corporate Secretary to be appropriate for presentation to the Board or such director will

be submitted to the Board or such director on a periodic basis.

What is the Board’s role in risk oversight?

While the Board of Directors has ultimate oversight responsibility for the risk management process, it has delegated portions

of this responsibility to various committees. The Board of Directors and its committees oversee risk throughout the business with
focus on financial risk, legal/compliance risk, scientific/clinical development risk, and strategic risk. The Audit Committee focuses
on financial risk and internal controls. The Nominating/Corporate Governance Committee and Audit Committee each focus on
legal/compliance risk with the Nominating/Corporate Governance Committee taking the lead on the governance and management
process, ESG and sustainability risk, and healthcare and other compliance risks. The Audit Committee takes the lead on SEC
reporting and compliance. The Compensation Committee addresses compensation policies and practices as they relate to risk
management practices and risk-taking incentives. The participation of the full Board of Directors in setting the Company’s
business strategy incorporates assessment of scientific and strategic risks for the Company overall.

How do the Company’s compensation policies and practices relate to risk management practices and risk-taking incentives?

During 2020, the Compensation Committee, in conjunction with the Board of Directors, conducted an assessment of how the

Company’s compensation policies and practices relate to risk management practices and risk-taking incentives. As part of the
process, the Compensation Committee engaged the services of an external, independent compensation consulting firm to conduct
an independent risk assessment. Based on this assessment, the Compensation Committee concluded that the Company’s
compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.

What is our policy regarding Board member attendance at the Company’s Annual Meeting?

The Company does not have a formal policy regarding attendance by members of the Board of Directors at the Annual

Meeting. Director Dr. Gorman attended the 2020 Annual Meeting of Stockholders.

14

REPORT OF THE AUDIT COMMITTEE

The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or

incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent the Company specifically incorporates this Report by reference therein.

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management
has the primary responsibility for the Company’s financial statements and the reporting process, including the Company’s systems
of internal controls. In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed with management
the Company’s audited financial statements as of and for the year ended December 31, 2020, including a discussion of the quality,
not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in
the financial statements.

The Audit Committee also has reviewed and discussed the Company’s audited financial statements as of and for the year

ended December 31, 2020 with the Company’s independent registered public accounting firm, who are responsible for expressing
an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United
States, as well as their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such
other matters as are required to be discussed with the Audit Committee under the applicable requirements of the Public Company
Accounting Oversight Board (United States) (the “PCAOB”) and the Securities and Exchange Commission. The independent
registered public accounting firm also is responsible for performing an independent audit of the Company’s internal control over
financial reporting in accordance with the auditing standards of the PCAOB. In addition, the Audit Committee has discussed the
independent registered public accounting firm’s independence from management and the Company, including the matters in the
written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the
PCAOB and considered the compatibility of non-audit services with the auditors’ independence.

The Audit Committee discussed with the Company’s independent registered public accounting firm the overall scope and

plans for their audits. The Audit Committee meets with the independent registered public accounting firm, with and without
management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the
overall quality of the Company’s financial reporting.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors

that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31,
2020, for filing with the Securities and Exchange Commission. The Audit Committee and the Board of Directors are also seeking
stockholder ratification of the selection of the Company’s independent registered public accounting firm for the year ending
December 31, 2021.

Respectfully submitted by:
AUDIT COMMITTEE

Stephen A. Sherwin, M.D.
Richard F. Pops
Shalini Sharp

15

Audit and non-audit fees

The aggregate fees billed to the Company by Ernst & Young LLP, the Company’s independent registered public accounting

firm, for the indicated services for each of the last two fiscal years were as follows:

Audit fees (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit related fees (2) . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax fees (3)

$

1,073,760
—
500,176

$

1,053,634

—
155,101

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

1,573,936

$

1,208,735

2020

2019

(1)

(2)

(3)

Audit fees consist of fees for professional services performed by Ernst & Young LLP for the integrated audit of the Company’s annual financial statements
and internal control over financial reporting and review of financial statements included in the Company’s 10-Q filings, review of registration statements
on Form S-8, and services that are normally provided in connection with statutory and regulatory filings or engagements.
Audit related fees consist of fees for assurance and related services performed by Ernst & Young LLP that are reasonably related to the performance of the
audit or review of the Company’s financial statements.
Tax fees consist of fees for professional services performed by Ernst & Young LLP with respect to tax compliance, tax advice and tax planning. For 2020,
these fees included $123,285 for tax preparation services, $15,450 for services related to Section 382 studies for net operating loss utilization, $206,000 for
research and development tax credit study, $70,395 for state tax planning and $85,046 for on-call tax advisory services. For 2019, these fees included
$90,840 for tax preparation services, $15,450 for services related to Section 382 studies for net operating loss utilization and $48,811 for state tax planning.

The Audit Committee has considered whether the provision of non-audit services is compatible with maintaining the
independence of Ernst & Young LLP and has concluded that the provision of such services is compatible with maintaining the
independence of that firm. All of the services rendered by Ernst & Young LLP were pre-approved by the Audit Committee in
accordance with the Audit Committee pre-approval policy described below.

Audit Committee policy regarding pre-approval of audit and permissible non-audit services of our independent registered public
accounting firm

The Company’s Audit Committee has established a policy that all audit and permissible non-audit services provided by the

Company’s independent registered public accounting firm will be pre-approved by the Audit Committee. These services may
include audit services, audit related services, tax services and other services. The Audit Committee considers whether the provision
of each non-audit service is compatible with maintaining the independence of the Company’s registered public accounting firm.
Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The
Company’s independent registered public accounting firm and management are required to periodically (at least quarterly) report
to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in
accordance with this pre-approval, and the fees for the services performed to date.

16

COMPENSATION COMMITTEE REPORT

The following Report of the Committee does not constitute soliciting material and should not be deemed filed or incorporated
by reference into any other Company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent the Company specifically incorporates this Report by reference therein.

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis

required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation
Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy
statement.

Respectfully submitted by:
COMPENSATION COMMITTEE

George J. Morrow
Richard F. Pops
Shalini Sharp

17

PROPOSAL ONE: ELECTION OF DIRECTORS

The Company’s bylaws, as amended, provide that the Board of Directors is comprised of eight directors. The Company’s

Certificate of Incorporation provides that the Board of Directors is divided into three classes. There are currently three directors in
Class I (William H. Rastetter, Ph.D., George J. Morrow and Leslie V. Norwalk), three directors in Class II (Richard F. Pops,
Shalini Sharp and Stephen A. Sherwin, M.D.), and two directors in Class III (Kevin C. Gorman, Ph.D. and Gary A. Lyons). With
the exception of Kevin C. Gorman, Ph.D., who is the Chief Executive Officer of Neurocrine Biosciences, all current members of
the Board of Directors meet the definition of “independent director” under the Nasdaq Stock Market qualification standards.

The directors in Class I hold office until the 2021 Annual Meeting of Stockholders, the directors in Class II hold office until
the 2022 Annual Meeting of Stockholders and the directors in Class III hold office until the 2023 Annual Meeting of Stockholders
(or, in each case, until their earlier resignation, removal from office, or death). After each such election, the elected directors will
then serve in succeeding terms of three years and until a successor is duly elected and qualified. Officers of the Company serve at
the discretion of the Board of Directors. There are no family relationships among the Company’s directors and executive officers.

The term of office for directors William H. Rastetter, Ph.D., George J. Morrow and Leslie V. Norwalk will expire at the 2021

Annual Meeting of Stockholders.

Nominees for Election at the Annual Meeting

All of the nominees (William H. Rastetter, Ph.D., George J. Morrow and Leslie V. Norwalk) are currently Class I directors of

the Company. Information about the nominees is set forth below:

Name of Director

William H. Rastetter, Ph.D.

. . . . . . . . . . . . . . . . . . . . . . .

72 Chairman of the Board

George J. Morrow (2) (3) . . . . . . . . . . . . . . . . . . . . . . . . .

Leslie V. Norwalk (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69

55

Director

Director

Age

Position in the Company

Director
Since

2010

2015

2019

Who are the remaining Directors that are not up for election this year?

The Class II and III directors will remain in office after the 2021 Annual Meeting of Stockholders. The names and certain

other current information about the directors whose terms of office continue after the Annual Meeting are set forth below:

Age

Position in the Company

Director
Since

Name of Director

Richard F. Pops (1) (2) . . . . . . . . . . . . . . . .

Shalini Sharp (1) (2) . . . . . . . . . . . . . . . . . .

Stephen A. Sherwin, M.D. (1)(3) . . . . . . . .

58

46

72

Director

Director

Director

Kevin C. Gorman, Ph.D. . . . . . . . . . . . . . . .

63 Chief Executive Officer

and Director

Gary A. Lyons . . . . . . . . . . . . . . . . . . . . . . .

69

Director

1998

2020

1999

2008

1993

(1)
(2)
(3)

Member of the Audit Committee.
Member of the Compensation Committee.
Member of the Nominating/Corporate Governance Committee.

18

Vote Required

The nominees receiving the highest number of affirmative votes of the shares present in person or represented by proxy at the

2021 Annual Meeting of Stockholders and entitled to vote on the election of directors will be elected to the Board of Directors.

Votes withheld from any director are counted for purposes of determining the presence or absence of a quorum, but have no

other legal effect under Delaware law.

Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Company’s Class I nominees

named above. If any of the Company’s nominees is unable or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who is designated by the present Board of Directors to fill the vacancy. It is not expected
that any of the Company’s nominees will be unable or will decline to serve as a director. The Board of Directors unanimously
recommends that stockholders vote “FOR” the Class I nominees named above.

19

PROPOSAL TWO: ADVISORY VOTE ON
COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS

General

At the 2017 Annual Meeting of Stockholders, the Board of Directors, as a matter of good corporate governance,

recommended that the stockholders approve an advisory vote on Named Executive Officer compensation (“say-on-pay”) on an
annual basis. Approximately 94% of the stockholder votes cast at the 2017 Annual Meeting of Stockholders were for the
Company’s recommendation, and in response the Company holds an annual say-on-pay vote. This annual vote is not intended to
address any specific compensation item, but rather the overall compensation of the Company’s Named Executive Officers and the
philosophy, policies and practices described in this proxy statement.

Summary of the Company’s Executive Compensation Philosophy

The Compensation Committee of the Board of Directors (the “Committee”) bases its executive compensation decisions on a

number of objectives which include aligning management incentives with interests of stockholders, providing competitive
compensation, appropriately balancing compensation risk in the context of the Company’s business strategy and meeting evolving
compensation governance standards. The philosophy of the Committee in establishing the Company’s compensation policy for
executive officers as well as all other employees is to:

(cid:129)

(cid:129)

(cid:129)

(cid:129)

align compensation plans with both short-term and long-term goals and objectives of the Company and stockholder
interests;

attract and retain highly skilled individuals by offering compensation that compares favorably to other employers who
are competing for available employees;

incentivize employees through a mix of base salary, bonus amounts based on achievement of defined corporate and
personal goals and long-term equity awards to generate returns for stockholders; and

pay for performance by ensuring that an ever-increasing percentage of an individual’s compensation is performance-
based as they progress to higher levels within the Company.

As discussed below in the Compensation Discussion and Analysis, we believe we have adopted a compensation philosophy

that provides strong alignment between executive pay and performance based on strategic goals designed to provide both near-term
and long-term growth in stockholder value. The historical approval rates, on an advisory basis, for the Company’s executive
compensation program have been over 97% for each of the 2018, 2019 and 2020 Annual Meetings of Stockholders. The
Committee and our Board of Directors believe that this level of approval of our executive compensation program is indicative of
our stockholders’ strong support of our compensation philosophy and goals as well as the overall administration of executive
compensation by the Committee and the Board of Directors.

You are being asked to approve on an advisory basis, the compensation paid to the Company’s Named Executive Officers as

set forth in the Compensation Discussion and Analysis, Summary Compensation Table and related notes and narrative set forth
herein. This vote is not intended to address any specific compensation item, but rather the overall compensation of the Company’s
Named Executive Officers and the philosophy, policies and practices described in this proxy statement.

Vote Required

The say-on-pay vote is advisory and therefore not binding on the Company, the Committee or the Board of Directors.
However, we value the opinions of our stockholders and will review and will continue to consider the outcome of this advisory
vote when making future compensation decisions for our Named Executive Officers and will evaluate whether any actions are
necessary to address the stockholders’ concerns. Approval of this advisory vote requires the affirmative vote of the majority
of shares represented in person or by proxy and entitled to vote on the item. The Board of Directors unanimously recommends
voting “FOR” approval of the Company’s Named Executive Officers compensation.

20

PROPOSAL THREE: RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

General

The Audit Committee has selected Ernst & Young LLP to audit the financial statements of the Company for the current fiscal

year ending December 31, 2021. Ernst & Young LLP has audited the Company’s financial statements since 1992. Representatives
of Ernst & Young LLP are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they so
desire, and are expected to be available to respond to appropriate questions.

Stockholders are not required to ratify the selection of Ernst & Young LLP as the Company’s independent registered public

accounting firm. However, the Audit Committee is submitting the selection of Ernst & Young LLP to the stockholders for
ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will
reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee in their discretion may direct the
selection of a different independent registered public accounting firm at any time during the year if they determine that such a
change would be in the best interests of the Company and its stockholders.

Vote Required

The affirmative vote of the holders of a majority of the shares represented in person or by proxy at the Annual Meeting and

entitled to vote on the item will be required to approve and ratify the Audit Committee’s selection of Ernst & Young LLP. The
Board of Directors unanimously recommends voting “FOR” approval and ratification of such selection. In the event of a
negative vote on such ratification, the Audit Committee will reconsider its selection.

21

EXECUTIVE OFFICERS AND MANAGEMENT

The following table sets forth information regarding our executive officers and other management team members as of the

Record Date:

Name

Age

Position

. . . . . . . . . . . . . . . . . . . . . .
Kevin C. Gorman, Ph.D.
Matthew C. Abernethy . . . . . . . . . . . . . . . . . . . . . . . .
Eric Benevich . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David W. Boyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Haig P. Bozigian, Ph.D. . . . . . . . . . . . . . . . . . . . . . . .
Julie S. Cooke.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kyle W. Gano, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . .
Dimitri E. Grigoriadis, Ph.D. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Darin M. Lippoldt
Malcolm C. Lloyd-Smith . . . . . . . . . . . . . . . . . . . . . .
Eiry W. Roberts, M.D. . . . . . . . . . . . . . . . . . . . . . . . .

63 Chief Executive Officer and Director
41 Chief Financial Officer
55 Chief Commercial Officer
42 Chief Corporate Affairs Officer
63 Chief Development Officer
55 Chief Human Resources Officer
48 Chief Business Development and Strategy Officer
63 Chief Research Officer
55 Chief Legal Officer and Corporate Secretary
65 Chief Regulatory Officer
57 Chief Medical Officer

See above for biographical information concerning Kevin C. Gorman, Ph.D.

Matthew C. Abernethy was appointed Chief Financial Officer in November 2017 and is responsible for leading corporate
finance activities and commercial supply chain operations, as well as information technology and investor relations functions at
Neurocrine Biosciences. Mr. Abernethy has nearly 20 years of experience in the financial sector and investor relations with
expertise in the healthcare industry. He joined Neurocrine Biosciences from Zimmer Biomet, where he held various positions from
February 2009 to November 2017, including most recently, Vice President, Investor Relations and Treasurer and Vice President of
Finance for the Americas and Global Product Engines. He began his career with KPMG LLP and is a certified public accountant
(inactive). Mr. Abernethy earned his B.S. in Accounting and Business Administration from Grace College and an MBA from the
University of Chicago.

Eric Benevich was appointed Chief Commercial Officer in May 2015 and is responsible for all aspects of commercial
development, marketing and sales of the Neurocrine Biosciences product portfolio. Previously, Mr. Benevich was at Avanir
Pharmaceuticals, Inc., from 2005 to 2015, serving most recently as Vice President of Marketing where he was responsible for
NUEDEXTA ® and commercialization of their CNS pipeline. Mr. Benevich has nearly 30 years of experience in the
pharmaceutical industry and previously served in various positions of increasing responsibility at Peninsula Pharmaceuticals Inc.,
Amgen and AstraZeneca in the sales and marketing of drugs such as Enbrel® , Epogen® and Prilosec® . Mr. Benevich has a BBA in
International Business from Washington State University.

David W. Boyer was appointed Chief Corporate Affairs Officer in September 2019 and is responsible for patient advocacy

and engagement, corporate communications, government relations, and public policy at Neurocrine Biosciences. Mr. Boyer brings
nearly 20 years of experience in public affairs, specializing in the life sciences and biopharmaceutical sectors. He joins Neurocrine
Biosciences from nine years at BGR Group, where he served as a Principal and the Head of the Health & Lifesciences Practice,
leading the firm’s healthcare advocacy, policy and strategy development, and strategic consulting team. During his tenure at BGR
Group, Mr. Boyer led public policy, advocacy, and strategic communications initiatives for a wide range of healthcare clients. Prior
to joining BGR Group, Mr. Boyer served as Special Assistant to the President for Legislative Affairs under President George W.
Bush, Assistant Commissioner for Legislation at the U.S. Food and Drug Administration, and Special Assistant to the Secretary at
the U.S. Department of Health and Human Services. In addition to his public service, Mr. Boyer held senior advocacy positions at
the Biotechnology Innovation Organization (BIO) and the Pharmaceutical Research and Manufacturers of America (PhRMA).
Mr. Boyer holds a B.A. in Government from Georgetown University.

Haig P. Bozigian, Ph.D. was appointed Chief Development Officer in 2013 after having served as Senior Vice President of

Pharmaceutical and Preclinical Development. Dr. Bozigian is responsible for all preclinical development, chemistry manufacturing
and controls (CMC) and clinical pharmacology, and has led such functions since 2006. Dr. Bozigian joined Neurocrine Biosciences
in 1997. With extensive expertise in CNS related new product development, Dr. Bozigian has participated in research and
development for approximately 30 years. Prior to joining Neurocrine Biosciences, Dr. Bozigian served as Director of
Pharmaceutical Development at Procyte Corporation, Associate Director of Pharmacokinetics and Drug Metabolism at Sphinx
Pharmaceuticals Corporation and as a Clinical Pharmacokineticist at GlaxoSmithKline. Dr. Bozigian earned his B.S. in
Microbiology from the University of Massachusetts, his M.S. in Pharmacodynamics and Toxicology from the University of

22

Nebraska Medical Center, and earned his Ph.D. in Pharmaceutical Sciences from the University of Arizona Mr. Bozigian retired as
Chief Development Officer March 31, 2021.

Julie S. Cooke was appointed Chief Human Resources Officer in September 2017. She joined Neurocrine Biosciences from
the Sanford Burnham Prebys Medical Research Institute where she served as Senior Vice President for Human Resources and was
a member of the executive management team. Previously, Ms. Cooke held multiple positions at Life Technologies, including being
the human resource partner to the Chief Operating Officer, Division Presidents and Global Function Leads. Prior to Life
Technologies, she ran human resources and was a member of the executive management team at SGX Pharmaceuticals. Ms. Cooke
began her career at PepsiCo., The Pepsi Bottling Group, and Gateway, where she held positions of increasing responsibility in
human resources. She holds a Bachelor of Arts in Economics from Colorado College.

Kyle W. Gano, Ph.D. was appointed Chief Business Development Officer in 2011, and Chief Business Development and
Strategy Officer in 2020, and is responsible for all business and corporate development activities, including the management of
ongoing collaborations with AbbVie, Mitsubishi Tanabe Pharma, BIAL, Takeda ,Voyager Therapeutics, Xenon Pharmaceuticals
and Idorsia Pharmaceuticals Ltd. From 2001 to 2011, Dr. Gano held several positions of increasing responsibility at Neurocrine
Biosciences spanning marketing analytics to business development. Dr. Gano received his B.S. in Chemistry from the University
of Oregon, B.S. in Biochemistry from the University of Washington, and his Ph.D. in Organic Chemistry and M.B.A in Finance
from the University of California, Los Angeles.

Dimitri E. Grigoriadis, Ph.D. was appointed Chief Research Officer in 2013. Dr. Grigoriadis oversees all research functions,

including drug discovery, biology and chemistry, and has led such functions since 2006. Dr. Grigoriadis joined Neurocrine
Biosciences in 1993, established the pharmacology and drug screening groups and was most recently a Neurocrine Biosciences
Fellow and Vice President of Discovery Biology. Prior to joining Neurocrine Biosciences, he was a Senior Scientist in the
Neuroscience group at the DuPont Pharmaceutical Company from 1990 to 1993. Dr. Grigoriadis received his B.Sc. from the
University of Guelph in Ontario, Canada, and his M.Sc. and Ph.D. in Pharmacology from the University of Toronto, Ontario,
Canada. He conducted his postdoctoral research at the National Institute on Drug Abuse from 1987 to 1990.

Darin M. Lippoldt was appointed Chief Legal Officer and Corporate Secretary in October 2014 and has oversight of all
corporate legal, intellectual property, and corporate compliance matters. Prior to joining Neurocrine Biosciences, Mr. Lippoldt
served as Executive Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary of Volcano Corporation,
a company he joined in 2010. Prior to Volcano, Mr. Lippoldt served as Associate General Counsel at Amylin Pharmaceuticals, Inc.
He previously practiced corporate and securities law with the law firms of Fulbright & Jaworski LLP and Matthews and
Branscomb, P.C. Mr. Lippoldt received a B.B.A. in Finance, an M.A. in International Relations and a J.D. from St. Mary’s
University.

Malcolm C. Lloyd-Smith was appointed Chief Regulatory Officer in September 2014 and is responsible for regulatory affairs
and quality assurance. Prior to joining Neurocrine Biosciences, Mr. Lloyd-Smith served at Cadence Pharmaceuticals, Inc. as Senior
Vice President, Regulatory Affairs, Quality and Clinical from August 2012 to September 2014, and previously as Senior Vice
President, Regulatory Affairs and Quality Assurance from August 2008. Mr. Lloyd-Smith served as Vice President and Head of
Global Regulatory Affairs for Elan Pharmaceuticals, Inc. from September 2003 to August 2008, after having served in the United
Kingdom as its Vice President, International Regulatory Affairs from March 2002 to August 2003. Previously, Mr. Lloyd-Smith
served in various positions of increasing responsibility with DuPont Pharmaceuticals in Germany, Switzerland, USA and UK.
Mr. Lloyd-Smith holds a B.Sc. in Pharmacology from the University of Leeds and a M.Sc. in Pharmacological Biochemistry from
Hatfield Polytechnic.

Eiry W. Roberts, M.D. was appointed Chief Medical Officer in January 2018 and is responsible for all clinical development
and medical affairs activities at Neurocrine Biosciences. Dr. Roberts has over 25 years of research and development experience in
the pharmaceutical industry across all phases of drug development from research through commercialization in multiple
therapeutic areas, including neuroscience, inflammation, oncology and metabolic diseases. She joined Neurocrine Biosciences
from Eli Lilly and Company where she had worked since May 1991. During her tenure at Eli Lily and Company Dr. Roberts held
various positions of increasing responsibility, including Vice President, Clinical Pharmacology/Managing Director of Chorus a
position she held from October 2014 until December 2017 and Vice President of R&D, BioMedicines Business Unit. At Eli Lilly
Dr. Roberts was the Chair of the Medical Review Committee, where she was responsible for review and approval of all the
integrated clinical plans for molecules in the Lilly portfolio. Dr. Roberts was accountable for early clinical development programs
across all therapeutic areas within Lilly, as well as registration for new chemical entities and biproducts in Phase III development.
During her time at Lilly, Dr. Roberts established a new therapeutic area, which resulted in the development of five potential novel
medicines from Phase I through to approval, with two of them successfully receiving regulatory approval. Dr. Roberts also has

23

extensive leadership and business development experience, including the management of strategic alliances, business partnerships
and venture capital collaborations. Dr. Roberts is a physician who trained in pharmacology and medicine in the UK, qualifying
from the University of London in 1987. Her post-graduate clinical training was in clinical pharmacology and cardiology at St.
Bartholomew’s Hospital and the Royal London Hospital.

24

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes Neurocrine Biosciences’ executive officer compensation program for

2020 and certain elements of our 2021 program. It provides qualitative information on the factors relevant to these decisions and
the manner in which compensation is awarded to the following individuals who are our Named Executive Officers (“NEOs”) for
2020:

Kevin C. Gorman, Ph.D., Chief Executive Officer;

(cid:129)
(cid:129) Matthew C. Abernethy, Chief Financial Officer;
Eric Benevich, Chief Commercial Officer;
(cid:129)
Kyle W. Gano, Ph.D., Chief Business Development and Strategy Officer; and
(cid:129)
Eiry W. Roberts, M.D., Chief Medical Officer
(cid:129)

Executive Summary

Business Overview

We are a neuroscience-focused, biopharmaceutical company dedicated to discovering, developing and delivering life-
changing treatments for people with serious, challenging and under-addressed neurological, endocrine and psychiatric disorders.
We specialize in targeting and interrupting disease-causing mechanisms involving the interconnected pathways of the nervous and
endocrine systems. Our business strategy includes commercializing our product portfolio, continuing to advance and extend our
product pipeline, seeking to identify and validate new medicines on novel targets for internal development or collaboration and
selectively acquiring rights to programs at all stages of development and commercial products to take advantage of our drug
development and commercial capabilities.

We have marketed INGREZZA® (valbenazine) in the U.S. since May 2017 as the first FDA-approved drug for the treatment

of tardive dyskinesia, and ONGENTYS® (opicapone) in the U.S. since September 2020 as an adjunct therapy to levodopa/
carbidopa in patients with Parkinson’s disease experiencing motor fluctuations. INGREZZA net product sales represented the
significant majority of our total net product sales for 2020 and all of our net product sales for 2019 and 2018.

In addition to our marketed products:

Š We receive royalties at tiered percentage rates on any net sales of ORILISSA and ORIAHNN, from our collaboration
partner, AbbVie. AbbVie received approval for ORILISSA from the FDA in July 2018 and Health Canada in October
2018 and received approval for ORIAHNN from the FDA in May 2020.

Š We have the following product candidates in our late-stage clinical pipeline: (1) crinecerfont for the treatment of

Congenital Adrenal Hyperplasia, or CAH, (2) valbenazine for the treatment of chorea in Huntington’s Disease, or HD, and
(3) valbenazine for the treatment of Tardive Dyskinesia in Japan and other East Asian countries.

Š We have the following product candidates in our early- and mid-stage clinical pipeline: (1) NBI-827104 for treatment of
epileptic encephalopathy with continuous spike and wave during sleep, (2) NBI-921352 for the treatment of SCN8A
developmental and epileptic encephalopathy, (3) NBI-1065844 for the treatment of negative symptoms of schizophrenia,
(4) NBI-1065845 for treatment-resistant depression, (5) NBI-1065846 for the treatment of anhedonia in depression, and
(6) in collaboration with our partner, AbbVie, elagolix for the treatment of PCOS in women.

2020 Corporate Performance Highlights

The global COVID-19 pandemic has dramatically changed the ways in which we live and interact with one another. While
we adapt to this new shared reality, our mission remains unchanged: to discover and develop life-changing treatments for people
with serious, challenging and under-addressed disorders.

The global COVID-19 pandemic impacted our business in 2020 and continues to do so. As further described below, despite
this impact we did not modify our 2020 Corporate Goals. In early March 2020, we implemented a “Work from Home Policy” for
employees not involved in business-critical activities and for employees involved in business-critical activities, we implemented
safety measures designed to comply with federal, state and local guidelines. Due to the impact of COVID-19, we initially paused
enrollment of new patients in several of our clinical trials. Beginning in the third quarter of 2020, we began enrolling patients in
our HD and CAH studies. Additionally, most hospitals, community mental health facilities, and other healthcare facilities have
implemented policies that limit access of our sales representatives, medical affairs personnel, and patients to such facilities.

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Despite the impact of COVID-19 on our business, we delivered strong performance in 2020, including the following:

Š

INGREZZA net product sales for 2020 increased $240.2 million, or 31.9%, to $993.1 million.

Š We received FDA approval in April 2020 and launched ONGENTYS in the U.S. in September 2020. ONGENTYS is an

adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson’s disease patients.

Š AbbVie launched ORIAHNN in the U.S. in June 2020 as the first FDA-approved non-surgical, oral medication option for
the management of heavy menstrual bleeding associated with uterine fibroids in pre-menopausal women in May 2020.

Š Completed strategic partnerships with Idorsia Pharmaceuticals Ltd, or Idorsia, and Takeda Pharmaceutical Company

Limited, or Takeda, to significantly expand our clinical pipeline.

Š We decreased our total debt outstanding by $136.2 million to $381.3 million after repurchasing approximately 26% of our

outstanding convertible notes in December 2020.

Pay for Performance/At-Risk Pay

Our executive officer compensation program is designed to reward achievement of the specific strategic goals that we believe

will advance our business strategy and create long-term value for our stockholders. Consistent with our goal of attracting,
motivating and retaining a high-caliber executive team, our executive officer compensation program is designed to pay for
performance. We utilize compensation elements that meaningfully align our NEOs’ interests with those of our stockholders to
create long-term value. As such, a significant portion of our CEO’s and other executive officers’ compensation is “at-risk,”
performance-based compensation, in the form of long-term equity awards that have performance-based vesting criteria or only
have value to the executive officer if the Company’s stock price increases, and annual cash incentives that are only earned if we
achieve multiple corporate metrics.

With respect to long-term equity awards, the Compensation Committee of our Board of Directors (the “Committee”)
annually considers the appropriate mix of equity awards. The Committee believes that combining such performance- based vesting
equity awards with time-based vesting equity awards complements the performance- based vesting equity awards and facilitates a
focus on the totality of the Company’s ongoing and future activities as potential contributors to stock price appreciation.

The graphics below illustrate the elements of our CEO’s compensation mix for 2020 and the aggregate compensation mix for

2020 for the other named executive officers as a group. The percentages in the chart below reflect the actual cash incentives paid
and the grant-date value of equity awards, in each case as reported in our 2020 Summary Compensation Table.

CEO 2020 Compensation Mix

All Other NEOs 2020 Compensation Mix

Annual Cash
Incentive

S h ort-Term 10%

4% 6%

0 %

Lon g-T e r m   9

51%
Options

77%
At-Risk

Salary

17%
RSUs

22%
PRSUs

Annual Cash
Incentive

S h ort-Term 11%
3% 8%

9 %

Lon g-T e r m   8

Salary

48%
Options

25%
RSUs

16%
PRSUs

76%
At-Risk

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Our Compensation Practices

Below are key elements of our compensation program, as well as problematic pay practices that we avoid:

WHAT WE DO

WHAT WE DON’T DO

✘ Provide guaranteed bonuses or base salary increases
✘ Allow for the repricing of stock options without

stockholder approval

✘ Pay dividends or dividend equivalents on unearned

shares

✘ Permit hedging or other forms of speculative
transactions by employees or directors
✘ Permit pledging by employees or directors
✘ Provide single-trigger change in control benefits
✘ Include gross-ups in new executive employment

agreements or change-in-control arrangements
✘ Provide excessive perquisites to our executive officers
✘ Provide retirement or pension benefits to our executive
officers that are not available to employees generally

✓ Heavily weight our executive officer compensation
toward “at risk,” performance-based compensation

✓ Balance short-term and long-term incentive

compensation

✓ Use multi-year vesting for all executive officer equity

awards

✓ Grant performance-based equity awards annually in the

form of PRSUs

✓ Have an incentive compensation recoupment or clawback
policy for performance-based cash and equity incentives
✓ Structure our executive officer compensation program to

minimize inappropriate risk-taking and encourage
appropriate risk-taking

✓ Cap annual cash incentives at a maximum payout amount
✓ Select peer companies that we compete with for

executive officer talent, have a similar business and are
of similar size as us, and review their pay practices

✓ Solicit advice from the Committee’s independent

compensation consultant

✓ Have meaningful stock ownership guidelines for

executive officers

✓ Hold annual say-on-pay advisory vote

Role of the Compensation Committee

As discussed in greater detail below, the Committee takes into consideration a peer group, survey data and advice from an
independent compensation consultant when setting the compensation philosophy and compensation structure for the Company. The
Committee’s complete roles and responsibilities are set forth in a written charter, which was adopted by the Board of Directors and
is available at www.neurocrine.com. Some of the significant roles and responsibilities of the Committee include:

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reviewing and, if necessary, revising the compensation philosophy of the Company;
reviewing and approving corporate goals and objectives relating to the compensation of the Company’s employees,
including executive officers, and evaluating the performance of the Company, and its executive officers, in light of
these corporate goals and objectives;
reviewing and approving compensation for all executive officers, including perquisite benefits, if any;
reviewing and approving all employment and severance agreements for executive officers;
reviewing and approving all promotions to executive officer positions and the hiring of all new executive officers;
reviewing director compensation by taking into consideration peer group data and advice from an independent
compensation consultant, and making recommendations to the Board of Directors;
reviewing and approving guidelines for salaries, merit salary increases, cash incentive payments, stock-based grants
and performance-based stock grants for all non-executive officer employees of the Company;
reviewing and approving equity grants to non-employees of the Company, if any;
reviewing and approving equity and incentive plans, including amendments or modifications to such equity and
incentive plans;
administering the Company’s equity and incentive plans and employee pension and benefit plans;
reviewing and taking into consideration stockholder feedback regarding compensation matters, including our annual
say-on-pay vote;

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retaining independent compensation consultants and advisors when appropriate to advise the Committee on
compensation policies and plans;
complying with requirements established by the SEC, assessing the risks arising from the Company’s compensation
policies and taking any actions required as a result thereof;
reviewing executive officer and director compliance with our Stock Ownership Guidelines; and
preparing and approving the Compensation Discussion and Analysis to be included as part of the Company’s annual
proxy statement.

Committee Actions in Connection with Say-on-Pay Vote

Our Committee is committed to ensuring that our executive officer compensation program is effective and aligned with our

stockholders’ interests and concerns. Accordingly, a critical component of our Committee’s process has been to continue:

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reviewing emerging compensation “best practices” in the U.S., with a focus toward companies of similar size, market
capitalization and revenues; and
soliciting advice from our Committee’s independent compensation consultant.

In 2020, we sought a say-on-pay advisory vote from our stockholders regarding our executive officer compensation program.

Each year, the Committee considers the results of the advisory vote as it completes its annual review of each pay element and the
compensation provided to our NEOs and other executive officers.

2020 Say-on-Pay Voting Results

Given the significant level of stockholder support, the Committee concluded that:
✓ our executive officer compensation program continues to align executive officer pay

with stockholder interests;

✓ our executive officer compensation program provides competitive pay that encourages
retention and effectively incentivizes performance of talented NEOs and executive
officers;

✓ no significant changes to our programs are necessary; and
✓ the Committee will continue to consider the outcome of our say-on-pay votes and our
stockholders’ views when making future compensation decisions for the NEOs and
executive officers.

97%

In 2020, we received 97% of votes
cast in support of our 2020
executive compensation program,
and in the last five years, we
received over 98% (on average) of
votes cast in support of our
executive compensation programs.

During 2020 we continued our stockholder engagement efforts in order to solicit feedback on a variety of topics including

environmental, social, governance (ESG) and executive compensation practices. We contacted stockholders representing over 68%
of outstanding stock and spoke with all stockholders that wanted to provide us with feedback. Overall, stockholders have expressed
strong support for our ESG and executive compensation practices. We are pleased with our say-on-pay advisory vote results and
stockholder feedback, and we will continue to engage with our stockholders to ensure alignment between our executive officer
compensation program and our stockholders’ interests.

Compensation Philosophy

We believe that in order to create value for our stockholders, it is critical to attract, motivate and retain key executive officer
talent by providing competitive compensation packages. Accordingly, we design our executive officer compensation programs to:

ATTRACT, DEVELOP &
RETAIN

executive officers with the skills and
expertise to execute our business plans
within the highly competitive life sciences
industry

MOTIVATE & REWARD

executives fairly over time for actions
consistent with creating long-term
stockholder value

MAXIMIZE
stockholder value via an appropriate blend
of short-term and long-term incentives

Our compensation philosophy for executive officers provides that cash compensation should be structured such that at least

one-third of each executive officer’s total cash compensation, consisting of base salary and target cash incentives, is at risk and

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dependent upon the Company’s achievement of specific corporate metrics that drive stockholder value. Starting in 2020, 50% of
our Chief Executive Officer’s target total cash compensation is at risk under our annual cash incentive plan. Non-cash long-term
equity compensation for executive officers is generally a combination of performance-based and time-based vesting, and is
designed to motivate executive officers to increase long-term stockholder value as well as reward and retain key employees.

Overall Compensation Determination Process

The implementation of the compensation philosophy is carried out under the supervision of the Committee. The Committee

uses the services of an independent compensation consultant who is retained by, and reports directly to, the Committee.
Management, under guidelines and procedures approved by the Committee, determines the compensation of our non-executive
officer employees.

In the early part of each year, the Committee deliberates and makes decisions regarding the base salary, target cash incentives

and long-term equity award components of compensation to be awarded to our executive officers, including our Chief Executive
Officer, for the new fiscal year, as well as performance-based compensation payouts for the prior fiscal year. In setting
compensation for our other NEOs, the Committee solicits the input of our Chief Executive Officer, who recommends to the
Committee the base salary, target cash incentives and long-term equity award components of compensation to be awarded to our
NEOs for the new fiscal year, as well as performance-based compensation payouts for the prior fiscal year. The Committee
remains solely responsible for making the final decisions on compensation for all of our NEOs. Our NEOs, including our Chief
Executive Officer, are not present during discussions of their respective compensation packages nor do they participate in
approving any portion of their own or other NEO compensation packages.

The Committee considers a variety of factors, as described below, which may vary from year to year, to set the compensation

of our NEOs at levels that the Committee considers to be competitive and appropriate for each NEO, using the Committee’s
professional experience and judgment:

✓ Market data from the independent compensation consultant
✓ Chief Executive Officer’s recommendations (other than for himself), based on direct knowledge of NEO performance and

his extensive industry experience

✓ Independent compensation consultant recommendations
✓ Internal pay equity among individuals and positions
✓ Criticality and scope of job function
✓ Retention risk
✓ Company performance
✓ Individual performance
✓ Total targeted and historical compensation
✓ Any other factors the Committee determines appropriate

In addition, during the first quarter of the year, Company-wide performance goals for the then current year are finalized by
the Committee and the Board of Directors, and progress toward these goals is reviewed at meetings throughout the year. Later in
the year, the Committee reviews the Company’s compensation philosophy, policies and procedures. Committee meetings in the
fourth quarter of the year generally focus on Company goal achievement, selection of the peer group for the following year and
executive officer performance.

Compensation Consultant

The Committee uses the services of an independent compensation consultant who is retained by, and reports directly to, the
Committee to provide the Committee with an additional external perspective with respect to its evaluation of relevant market and
industry practices. The Committee elected to continue with Radford, which is part of the Rewards Solutions practice at Aon plc, as
a third-party compensation consultant to assist the Committee in establishing 2020 and 2021 overall compensation levels. Radford
conducted analyses and provided advice on, among other things, the appropriate peer group, executive officer compensation and
compensation trends in the life sciences industry.

In weighing its recommendations for executive officer compensation for the fiscal year 2020, the Committee directed
Radford to advise the Committee on both best practices and peer practices when designing and modifying our compensation
program for executive officers in order to achieve our objectives. As part of its duties, Radford provided the Committee with the
following services with respect to 2020 compensation decisions:

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carried out a comprehensive review of our peer group for use in making 2020 executive officer compensation
decisions;

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provided compensation data for the peer group and relevant executive officer pay survey data and an analysis of the
compensation of the Company’s executive officers as compared to this market data;
provided a competitive assessment of, and comparison to, incentive design and executive officer pay program structure
based on peer group data;
conducted a comprehensive pay for performance assessment;
provided recommendations regarding the annual cash incentive and long-term equity incentive program design for
2020;
assisted the Committee with the design of 2020 pay programs consistent with the Company’s business strategy and pay
philosophy;
provided background information and data for 2020 adjustments to the Company’s executive officer compensation
program consistent with good governance practices and the Company’s objectives; and
prepared an analysis of the Board of Directors’ 2020 compensation program.

The Committee annually assesses whether the work of Radford as a compensation consultant has raised any conflict of

interest, taking into consideration the following factors: (i) the provision of other services, if any, to the Company by Radford;
(ii) the amount of fees the Company paid to Radford as a percentage of the firm’s total revenue; (iii) Radford’s policies and
procedures that are designed to prevent conflicts of interest; (iv) any business or personal relationship of Radford or the individual
compensation advisors employed by the firm with an executive officer of the Company; (v) any business or personal relationship
of the individual compensation advisors with any member of the Committee; and (vi) any stock of the Company owned by Radford
or the individual compensation advisors employed by the firm. The Committee has determined, based on its analysis of the above
factors, that the work of Radford and the individual compensation advisors employed by Radford as compensation consultants to
the Company have not created any conflict of interest.

Competitive Assessment of Compensation—Peer Group and Market Data

2020 Peer Group. In October 2019, when developing a proposed list of our peer group companies to be used in connection
with making compensation decisions for 2020, Radford selected primarily recently commercial or commercial biopharmaceutical
companies with revenue generally between $200 million and $2.0 billion, market capitalization between $3 billion to $25 billion
and employee headcount up to 2,000, reflecting our then-current revenue, market capitalization and headcount.

Based on these criteria, for 2020 Radford recommended, and our Committee approved, the following peer group:

ACADIA Pharmaceuticals, Inc.
Alnylam Pharmaceuticals, Inc.
bluebird bio, Inc.
Ionis Pharmaceuticals, Inc.
Sage Therapeutics, Inc.
Ultragenyx Pharmaceutical Inc.

Alexion Pharmaceuticals, Inc.
BeiGene, Ltd.
Exelixis, Inc.
Jazz Pharmaceuticals plc
Sarepta Therapeutics, Inc.
United Therapeutics Corporation

Alkermes plc
BioMarin Pharmaceuticals, Inc.
Incyte Corporation
Nektar Therapeutics
Seattle Genetics, Inc.

The 2020 peer group reflects the following changes from our 2019 peer group, all of which were recommended by Radford

and approved by our Committee: (i) the removal of the following companies: Agios Pharmaceuticals, Inc. and Intercept
Pharmaceuticals, Inc., which no longer met the criteria above; and (ii) the addition of ACADIA Pharmaceuticals, Inc., which met
the criteria above.

In determining executive officer compensation for 2020, the Committee reviewed data from this group of peer companies. At

the time of approval of our 2020 peer group, our Company was approximately in the 69th percentile of the peer group for market
capitalization and in the 47th percentile of the peer group for revenue.

2020 Market Data. In early 2020, Radford completed an assessment of executive officer compensation based on the 2020
peer group to inform the Committee’s determinations of executive officer compensation for 2020. The data for this assessment was
compiled from multiple sources, including: (i) the 2020 peer group companies’ publicly disclosed information, or public peer data;
and (ii) data from public biotechnology and pharmaceutical companies in the 2019 Radford Global Life Sciences Survey that had
market values between $3 billion and $25 billion, or the general survey data. The components of this data were based on the
availability of sufficient comparative data for an executive officer’s position. The general survey data and the public peer data,
collectively referred to in this proxy statement together as market data, were reviewed by the Committee, with the assistance of
Radford, and used as one reference point, in addition to other factors, in setting our executive officers’ compensation.

30

Use of 2020 Market Data. The Committee generally reviews target total direct compensation, comprising both target cash

compensation and equity compensation, against the market data described above primarily to ensure that our executive officer
compensation program as a whole is positioned competitively to attract and retain the highest caliber executive officers and that the
total direct compensation opportunity for the executive officer group is aligned with our corporate objectives and strategic needs.
The Committee does not have a specific target compensation level for the NEOs; rather, the Committee reviews a range of market
data reference points (generally at the 25th, 50th and 75th percentiles of the market data) with respect to target total direct
compensation, target total cash compensation (including both base salary and the target annual cash incentive) and equity
compensation (valued based on an approximation of grant date fair value). In making compensation determinations, the Committee
considers the market data, along with the other factors described above under “Overall Compensation Determination Process.”

2021 Peer Group. In September 2020, Radford reviewed our compensation philosophy and peer group and recommended

changes to our 2020 peer group company list to reflect our continued revenue growth, market capitalization, organizational
complexity and stage of our commercial development. Radford proposed a list of peer group companies to be used in connection
with making compensation decisions for 2021, which consists primarily of recently commercial biopharmaceutical companies or
late-stage high valuation pre-commercial companies with revenue generally between $200 million and $2.5 billion, market
capitalization between $3.5 billion and $30 billion and employee headcount up to 3,000, reflecting our then-current revenue,
market capitalization and headcount.

Based on these criteria, for 2021 Radford recommended, and our Committee approved, the following peer group:

ACADIA Pharmaceuticals, Inc.
Alnylam Pharmaceuticals, Inc.
bluebird bio, Inc.
Incyte Corporation
Nektar Therapeutics
Ultragenyx Pharmaceutical Inc.

Alexion Pharmaceuticals, Inc.
BeiGene, Ltd.
Exelixis, Inc.
Ionis Pharmaceuticals, Inc.
Sarepta Therapeutics, Inc.
United Therapeutics Corporation

Alkermes plc
BioMarin Pharmaceuticals, Inc.
Horizon Therapeutics plc
Jazz Pharmaceuticals plc
Seattle Genetics, Inc.

The 2021 peer group reflects the following changes from our 2020 peer group, all of which were recommended by Radford

and approved by our Committee: (i) the removal of Sage Therapeutics, Inc., which no longer met the criteria above; and (ii) the
addition of Horizon Therapeutics plc, which met the criteria above.

Components of Executive Compensation

The Committee considers each executive officer’s performance, contribution to Company goals, responsibilities, experience,
qualifications, and where in the competitive range the executive officer’s compensation compares to the Company’s identified peer
group when determining the appropriate compensation for each executive officer. The Committee considers each component of
compensation independently and each component in the context of each executive officer’s total compensation. Compensation for
our NEOs currently consists of three key elements that are designed to reward performance in a simple and straightforward
manner: base salaries, annual performance-based cash incentives and long-term equity awards, which generally include restricted
stock units, or RSUs, and stock options, which both vest based on continued service over time, and performance-based restricted
stock units, or PRSUs, which vest upon achievement of key corporate metrics that we believe will create stockholder value. The
purpose and key characteristics of each of these elements are summarized below.

Compensation Element

Base Salary

Purpose of This Element

Key Characteristics

Designed to compensate
competitively at levels necessary
to attract and retain qualified
executive officers in the life
sciences industry; generally based
on the scope of each executive
officer’s responsibilities, as well
as his/her qualifications, breadth
of experience, performance record
and depth of applicable functional
expertise; established and adjusted
to be appropriate as compared to

Fixed cash compensation where
year-to-year adjustments to each
executive officer’s base salary are
based upon sustained superior
performance, changes in the
general level of base salaries of
persons in comparable positions
within our industry, and any
average merit salary increase for
such year for all employees of the
Company established by the
Committee, as well as other

31

factors the Committee judges to be
pertinent during an assessment
period.

In making base salary decisions,
the Committee exercises its
judgment to determine the
appropriate weight to be given to
each of these factors. Although
adjustments may also be made
during the year for special
circumstances, no mid-year
adjustments have been made in the
past five years.

Annual cash award opportunity
based on corporate performance
compared to pre-established
corporate goals with
pre-established target and
maximum payout opportunities for
each executive officer.

The cash incentive program,
including corporate goals and
target payouts, are reviewed and
approved by the Committee
annually and may include
individual performance targets for
each executive officer. The
corporate goals are prepared in an
interactive process between
management and the Committee
based on the Company’s business
plan and budget for the year. Cash
incentive payments are linked to
the attainment of overall corporate
goals and the individual
performance of each executive
officer, or other factors the
Committee determines
appropriate.

RSUs generally vest on an annual
basis, ratably over four years
subject to executive officer’s
continued service; the ultimate
value realized varies with our
common stock price.

the applicable market data,
enabling the Company to attract,
motivate, reward and retain highly
skilled executive officers; gives
executive officers a degree of
certainty in light of having a
majority of their compensation at
risk.

Motivates executive officers to
achieve our short-term strategic
plan and milestones that are
designed to drive long-term
growth and performance while
providing flexibility to respond to
opportunities and changing market
conditions.

Annual Cash Incentives

Long-Term Equity
Incentives (RSUs)

Motivates executive officers to
achieve our business objectives by
tying compensation to the
performance of our common stock
over the long term; creates an
ownership culture; motivates our
executive officers to remain with
the Company by mitigating swings
in incentive values during periods
when market volatility impacts our
stock price; directly motivates an
executive officer to maximize
long-term stockholder value and
serve as an effective tool for
incentivizing and retaining those

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Long-Term Equity
Incentives (Stock Options)

executive officers who are most
responsible for influencing
stockholder value.

Motivates executive officers to
achieve our business objectives by
tying incentives to the
appreciation of our common stock
over the long-term and creates an
ownership culture.

Long-Term Equity
Incentives (PRSUs)

Other Compensation

Creates a strong link to the
Company’s long-term
performance, creates an ownership
culture and closely aligns the
interests of our executive officers
with those of our stockholders
because the value that the grants
delivered is directly dependent on
our performance goal attainment.

Provides benefits that promote
employee health and welfare,
which assists in attracting and
retaining our executive officers;
certain additional benefits reflect
market standards and are
reasonable and necessary to attract
and/or retain each of our executive
officers and allow the executive
officers to realize the full benefit
of the other elements of
compensation we provide.

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Stock options with an exercise
price equal to the fair market value
on the date of grant generally
vesting monthly over four years
subject to executive officer’s
continued service; the ultimate
realizable value, if any, depends
on the appreciation of our
common stock price from the date
of grant. The Committee views
stock options as performance-
based compensation, as stock
options provide a return to our
executive officers only if the
market price of our common
shares appreciates over the stock
option term.

PRSUs only vest upon
achievement of objectively
measurable performance goals tied
to our business strategy that focus
executive officers on achieving
these long-term Company
performance goals and increasing
stockholder value.

Executive officers are eligible to
participate in the Company’s
employee benefit plans on the
same terms as all other full-time
employees. These plans include
medical, dental and life insurance
and eligibility to participate in the
Company’s employee stock
purchase plan. Additional benefits
include disability insurance
premiums, an annual physical
examination and financial
planning services.
The terms of the Company’s
401(k) Savings Plan (the “401(k)
Plan”) provide for executive
officer and broad-based employee
participation on the same general
terms. Under the 401(k) Plan, all
Company employees are eligible
to receive basic matching
contributions from the Company
that vest annually over three years
from date of hire.

Severance and Change in Control
Benefits

Serves our retention objectives by
helping our executive officers
maintain continued focus and
dedication to their responsibilities
to maximize stockholder value,
including in the event of a
transaction that could result in a
change in control of the Company.

Provides protection in the event of
a termination of employment
under specified circumstances,
including following a change in
control of the Company as
described below under “Potential
Payments Upon Termination or
Change-in-Control.”

Compensation components for
executive officers in the event of a
termination by the Company
without cause or termination by
the executive officer due to
constructive termination within six
months after the consummation of
a change in control include
payments for annual base salary, a
cash compensation payment, cash
compensation for the value of all
outstanding stock awards, limited
Company-paid health insurance
benefits, and any accrued vacation
and any accrued benefits under
any plans of the Company in
which the executive officer is a
participant. Eligibility for these
benefits requires a signed release
agreement by the executive
officer.

Certain individuals whose offer
letters were first entered into or
amended in or before 2007 are
entitled to tax gross-ups in the
event of certain levels of payments
they may receive upon a change in
control. We have not entered into
any new change in control
gross-ups for executive officers
since 2007, nor does the Company
intend to enter into any new
agreements containing such
gross-ups. Accordingly,
Dr. Gorman’s employment
agreement is the only one of our
NEOs whose agreement does
provide for such tax gross-ups.

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2020 and Early 2021 Named Executive Officer Compensation Decisions

2020 Base Salary Decisions

In February 2020, our Committee reviewed and determined the 2020 base salaries for each of the NEOs as set forth in the

table below, effective January 1, 2020. In making these 2020 decisions, the Committee considered the Company’s performance in
2019, market data for each individual NEO’s position, as well as the individual’s historical salary levels, our then-current budget
for employee salary adjustments, anticipated role and responsibilities for the coming year, along with the other factors described
under “Overall Compensation Determination Process” set forth above. Specifically, the Committee determined that the increases
reflected in the table below were appropriate due to (i) the Company’s performance in 2019, (ii) the adjustments made to our peer
group for 2020, which resulted in shifts in median salaries for similarly situated executives, (iii) retention of our NEOs and (iv) our
NEOs’ experience, job criticality and performance. Although the Committee does not have a specific target compensation level for
each NEO, the NEOs’ salaries are generally within the 25th to 50th percentiles of the market data. Each of the changes in base salary
from 2019 to 2020 were intended to bring those NEOs into at least the 25th percentile of the market data.

Named Executive Officer

Kevin C. Gorman, Ph.D.

Matthew C. Abernethy

Eric Benevich

Kyle W. Gano, Ph.D.

Eiry W. Roberts, M.D.

2020 Annual Cash Incentives

2020
Base Salary

$775,000

$545,200

$499,900

$487,700

$575,900

%
Change
from 2019 Base
Salary

6.9%

10.0%

7.0%

10.0%

7.0%

In February 2020, the Committee approved the Company’s executive officer cash incentive target percentages and

performance goals for 2020. The table below sets forth the target percentages for our Chief Executive Officer and other NEOs for
2020. After considering market data for each NEO’s position, no changes were made to the target percentages of our NEOs who
were employed with us in 2019, except with respect to our Chief Executive Officer, whose target percentage was increased from
80% to 100% to align more closely with the market data and increase the percentage of target total cash compensation that is at
risk. The target percentage is paid as a percentage of such executive officer’s base salary. For example, if 100% of the Company’s
corporate goals for 2020 are achieved, this would yield our Chief Executive Officer a cash incentive award equal to 100% of his
2020 base salary.

Executive Officer

Chief Executive Officer

All Other Executive Officers

Target
Percentage
of
Base
Salary

100%

50%

35

In February 2020, the Committee approved the corporate goals described below. Our objective corporate goals are directly

aligned with our specific strategic goals, including advancing our development programs, our research function, our clinical
activities, our commercialization activities and certain corporate and financial goals, which we believe will create long-term value
for stockholders. The Board of Directors and the Committee did not assign specific relative weightings to the goals for 2020.
Overall maximum bonus payout for executive officers was capped at 120% of target. As the course of the COVID-19 pandemic
worsened over the first half of 2020, the Committee did not modify the corporate goals, even as the impact of the pandemic
negatively impacted INGREZZA revenue and the launch of ONGENTYS, and prevented clinical trial enrollment for several
months. In February 2021 the Committee evaluated the accomplishments and performance of the Company and conservatively
determined our 2020 corporate goal achievement at 70%. In arriving at this determination, the Committee took into account the
Company’s resiliency and adaptability in changing the way in which we worked while still progressing toward our goals. In
addition, the Committee recognized our efforts to keep our employees, their families, our patients, customers, and clinical trial
participants safe.

Corporate Goal

Target Achievements

Maximize medical and economic value of INGREZZA® and

Achieved

ONGENTYS®

Overall Goal
Achievement

Partial
Achievement

(cid:129) Meet sales forecast for INGREZZA®
(cid:129)

Launch ONGENTYS® on time, on budget and achieve
sales forecast

(cid:129) Maximize research and clinical value from our

ongoing partnerships

Execute significant business development transactions

Advance and expand clinical pipeline

(cid:129)

(cid:129)

(cid:129)

Gain ONGENTYS® FDA approval
Advance CAH programs in adults and adolescents

Advance two additional compound into clinical trials

Stay on budget for non-GAAP operating expense

Not Achieved

Met

Exceeded (Idorsia and
Takeda)

Achieved

Not Achieved

Not Achieved

Achieved

Exceeded

Partial
Achievement

Achieved

70%

In February 2021, after making these determinations regarding the level of corporate performance achieved against the
pre-established performance goals, the Committee reviewed and approved corporate cash incentives as set forth in the table below.
The Committee may, in its sole discretion, eliminate any individual cash incentive, or reduce or increase the amount of
compensation payable with respect to any individual cash incentive.

For 2020, the Committee determined that each NEO’s cash incentive amount should be 70% of his target amount to reflect
our corporate achievement percentage, except with respect to Mr. Benevich, Dr. Gano and Dr. Roberts for whom the Committee
exercised its discretion to increase the amount of their cash incentive amounts because of their significant individual performance
contributing to achievement of our corporate goals, while navigating the extraordinary circumstances resulting from the COVID-19
pandemic.

36

Specifically, the Committee recognized (1) Mr. Benevich for his contributions to meeting our INGREZZA sales forecast,
launching ONGENTYS® and transitioning our sales force to a virtual selling module in response to the pandemic, (2) Dr. Gano for
leading the efforts to complete partnerships with Idorsia and Takeda, which significantly increased our early-/mid-stage clinical
pipeline and (3) Dr. Roberts for quickly reorganizing the clinical infrastructure and reengaging clinic sites after the pandemic
temporarily halted ongoing clinical trials.

Named Executive Officer

Kevin C. Gorman, Ph.D.

Matthew C. Abernethy

Eric Benevich

Kyle W. Gano, Ph.D.

Eiry W. Roberts, M.D.

2020 Target Annual Cash
Incentive

2020 Actual Annual Cash Incentive Paid

% of Base
Salary

$

% of Target Annual Cash
Incentive

100 % $

775,000

50 % $

272,600

50 % $

249,950

50 % $

243,850

50 % $

287,950

70 %

70 %

80 %

85 %

75 %

$

542,500

190,820

199,960

207,273

215,963

$

$

$

$

$

2021 Base Salary and Annual Cash Incentive Decisions

In February 2021, after considering the same factors described under “2020 Base Salary Decisions” and “Overall

Compensation Determination Process” set forth above, our Committee reviewed and determined the 2021 base salaries and target
bonus percentages for each of the NEOs as set forth in the table below. The target bonus percentages for our NEOs remained the
same.

Named Executive Officer

Kevin C. Gorman, Ph.D.
Matthew C. Abernethy
Eric Benevich
Kyle W. Gano, Ph.D.
Eiry W. Roberts, M.D.

2020 Long-Term Equity Awards

2021
Base Salary

$
$
$
$
$

825,000
588,800
534,900
517,000
604,700

2021 Target
Percentage of
Base Salary

100
50
50
50
50

%
%
%
%
%

2020 Equity Award Mix. In February 2020, our Committee granted long-term equity awards to our NEOs in the form of stock

options, RSUs and PRSUs. The Committee generally targeted allocating the aggregate value of each NEO’s long-term equity
awards 50% to stock options, 25% to RSUs and 25% to PRSUs.

Size of 2020 Equity Awards. In determining the size of the total equity compensation opportunity in 2020, the Committee:

(cid:129)

(cid:129)

(cid:129)

aimed to have the aggregate target award value result in target total direct compensation at a level that is competitive in
the marketplaces in which we compete;
focused a larger portion of total direct compensation in the form of long-term performance equity awards which only
vest upon achievement of the specific, objective criteria described below, which if achieved, the Committee believes
will drive long-term differentiated value relative to our peers and maximize long-term stockholder value; and
considered the recommendations of Dr. Gorman for the other NEOs.

2020 Equity Award Vesting Criteria. The Committee determined that the February 2020 equity grants vest as follows: (i) the

stock options vest in equal monthly installments over a four-year period; (ii) the RSUs vest in equal annual installments over a
four-year period; and (iii) the PRSUs vest based on objectively measurable performance goals that focus executive officers on
achieving longer-term Company performance goals that are key to our business strategy and increasing stockholder value. The
Committee determined that these three types of equity awards provided the appropriate balance of long-term and performance-
based incentives for our executive officers.

Specifically, the PRSUs vest on the date, or dates, that the Committee determines achievement of two underlying
performance goals, each of which must occur before December 31, 2022. Such goals relate to specific metrics related to (i) the

37

commercialization of INGREZZA and (ii) the advancement and enhancement of our product candidate pipeline, each within the
three-year performance period commencing on January 1, 2020 and ending on December 31, 2022. The actual number of units
subject to the PRSUs will be determined based on the level of achievement of such goals, with minimum, target, upside and
maximum levels specified.

2021 Long-Term Equity Awards

2021 Equity Award Mix. In February 2021, the Committee granted long-term equity awards to our NEOs in the form of stock
options, RSUs and PRSUs after determining that these three types of equity awards continue to provide the appropriate balance of
long-term and performance-based incentives for our executive officers. The Committee altered the mix of equity awards in 2021 to
decrease the amount of RSUs and increase the amount of PRSUs to place more compensation on performance-based incentives to
further align our NEOs’ financial interests with those of our stockholders. The Committee generally targeted allocating the
aggregate value of each NEO’s long-term equity awards to approximately 50% to stock options, 15% to RSUs and 35% to PRSUs,
primarily based on each NEO’s expected impact on the PRSUs.

2021 Equity Award Vesting Criteria. The Committee determined that the February 2021 stock option and RSU grants will be

subject to the same general vesting schedules as the February 2020 stock option and RSU grants as described above. The PRSUs
will vest on the date, or dates, that the Committee determines achievement of two underlying performance goals, each of which
must occur before March 31, 2023. Such goals relate to specific metrics related to the advancement of certain clinical programs
which we believe will drive stockholder value within the 27-month performance period commencing on January 1, 2021 and
ending on March 31, 2023. The actual number of units subject to the PRSUs will be determined based on the level of achievement
of such goals, with minimum, target and maximum levels specified.

2018 PRSU Award Payouts

In 2018, the Company granted executives PRSUs that were tied to the following metrics: (1) 30% of each grant would vest in

connection with the FDA approval of ONGENTYS, (2) 35% of each grant would vest in connection with the Company reaching
$1.5 billion in cumulative net revenue between the dates of January 1, 2018 and December 31, 2020, and (3) the remaining 35% of
each grant would vest in connection with the Company reaching $2.0 billion in cumulative net revenue between the dates of
January 1, 2018 and December 31, 2020. The Committee felt that achievement of these goals would substantially increase
stockholder value, given that the Company had achieved approximately $162 million in total revenue in the prior year, 2017. The
2018 PRSUs vested in full during 2020.

Retirement Benefits

The Company’s matching contribution to the 401(k) Plan for 2020 was 100% of eligible participant contributions, subject to

applicable federal limits. Our NEOs are eligible for these benefits on the same basis as our other employees. The Company made
no additional discretionary contributions to the 401(k) Plan in 2020.

Equity Ownership Guidelines

Since 2014, we have maintained equity ownership guidelines for our executive officers. The Committee amended these
guidelines in November 2018 to increase the guideline for our Chief Executive Officer from three to six times his base salary. The
equity ownership guidelines are designed to further align the interests of the executive officers with those of our stockholders by
ensuring that our executive officers have a meaningful financial stake in the Company’s long-term success. The equity ownership
guidelines establish a minimum equity ownership level by position, with such values determined based on the value of our
common stock owned by such persons as of certain measurement dates. All shares directly or beneficially owned by the executive
officer, including the net exercisable value of outstanding vested stock options (where the market price of our common stock
exceeds the strike price of such option) are included in determining the value of equity owned under our equity ownership
guidelines. The equity ownership requirements are as follows:

Chief Executive Officer

6 times base salary

All other executive officers

1 times base salary

38

New executive officers are granted a five-year period to reach the equity ownership requirements set forth in the guidelines

and are expected to make annual progress toward the equity ownership requirements during this five-year period. When an
executive officer does not meet the equity ownership requirements set forth in the guidelines, he/she is restricted from selling any
held shares until such requirements are met. Additionally, should an executive officer who does not meet the equity ownership
requirements choose to exercise a stock option or vest in any RSUs, he or she is required to retain all shares acquired through those
transactions, aside from any shares necessary to fulfill such transaction related tax obligations, until full compliance with the equity
ownership guidelines is attained.

Annual compliance with the equity ownership guidelines is assessed during the first quarter of each year. As of March 15,

2021, each of our executive officers is in compliance with the equity ownership guidelines.

Equity Trading Policies and Procedures

The Company has policies and procedures in place that prohibit direct or indirect participation by employees and directors of

the Company in transactions involving trading activities in Company common stock which by their aggressive or speculative
nature may give rise to an appearance of impropriety. Such prohibited activities would include the purchase of put or call options,
or the writing of such options as well as short sales, hedging transactions such as “cashless” collars, forward sales, equity swaps
and other related arrangement which may indirectly involve short-sale and any other transactions designed for profit from short-
term movement in the Company’s stock price. In addition, no officer, director or employee of the Company may margin, or make
any offer to margin, any Company common stock, including without limitation, borrowing against such stock, at any time.

To the Company’s knowledge, there were no transactions involving hedging, pledging or margining Company common stock

during 2020, nor were there any such transactions as of the Record Date.

The Company also requires directors and executive officers to complete all equity related open-market purchase and sale
transactions via a 10b5-1 plan. The 10b5-1 plans typically cover, among other transactions, direct sales and purchases of Company
stock, as well as same-day-sales related to option exercises and sales of stock for tax payments upon the vesting of RSUs. All
10b5-1 plans are required to have a waiting period from the election date to the date of the first transaction. Additionally, Company
policy restricts the executive officers from amending a 10b5-1 trading plan.

Compensation Recoupment Policy

In February 2017, we adopted a clawback policy, even though the SEC has not yet issued final rules implementing the Dodd-

Frank Wall Street Reform and Consumer Protection Act requirement. Our policy currently provides that, in the event that (i) we
are required to prepare an accounting restatement for any fiscal quarter or year due to our material noncompliance with any
financial reporting requirement and (ii) it is determined that misconduct contributed to the noncompliance that resulted in the
obligation to restate our financial statements, we may take action to recover from any officer whose misconduct contributed to the
noncompliance which resulted in the obligation to restate our financial statements, the incentive compensation, including cash and
equity, that was paid or vested to such officer during the twelve-month period preceding the restatement obligation. We will also
comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and will modify our policy, if
necessary, once the SEC adopts final regulations on the subject.

Tax Considerations

Internal Revenue Code Section 162(m)

Under Section 162(m) of the Internal Revenue Code (“Section 162(m)”), compensation paid to each of the Company’s

“covered employees” that exceeds $1 million per taxable year is generally non-deductible unless the compensation qualifies for
certain grandfathered exceptions (including the “performance-based compensation” exception) for certain compensation paid
pursuant to a written binding contract in effect on November 2, 2017 and not materially modified on or after such date.

Although the Committee will continue to consider tax implications as one factor in determining executive officer

compensation, the Committee also looks at other factors in making its decisions and retains the flexibility to provide compensation
for the Company’s NEOs in a manner consistent with the goals of the Company’s executive officer compensation program and the
best interests of the Company and its stockholders, which may include providing for compensation that is not deductible by the
Company due to the deduction limit under Section 162(m). The Committee also retains the flexibility to modify compensation that
was initially intended to be exempt from the deduction limit under Section 162(m) if it determines that such modifications are
consistent with the Company’s business needs.

39

Internal Revenue Code Section 409A

Section 409A governs deferred compensation arrangements. The Committee structures our deferred compensation programs

with the assistance of our external counsel to be exempt from, or compliant with, Section 409A.

Accounting Considerations

The Company accounts for equity compensation paid to our employees under the FASB ASC Topic 718, which requires us
to estimate and record an expense over the service period of the equity award. Our cash compensation is recorded as an expense at
the time the obligation is incurred. The accounting impact of our compensation programs are one of many factors that the
Committee considers in determining the structure and size of our executive officer compensation programs.

Risk Analysis of Our Compensation Program

Our Committee has reviewed our compensation policies as generally applicable to our employees and believes that our
policies do not encourage excessive or inappropriate risk taking and that the level of risk that they do encourage is not reasonably
likely to have a material adverse effect on the Company. As part of its assessment, the Committee considered, among other factors,
the allocation of compensation among base salary and short- and long-term compensation, our approach to establishing Company-
wide and individual financial, operational and other performance targets, our bonus structure of payouts at multiple levels of
performance (including maximum payout caps and payments for performance below target levels) and the nature of our key
performance metrics. We believe these practices encourage our employees to focus on sustained, long-term Company growth,
which we believe will ultimately contribute to the creation of stockholder value.

40

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Summary Compensation Table The following table sets forth the compensation paid by the Company for the fiscal years

ended December 31, 2018, 2019 and 2020 to the NEOs named below.

Summary Compensation Table

Name and Principal Position (1)

Kevin C. Gorman, Ph.D.

. . .

Chief Executive Officer

Year

Salary
($)(2)

Bonus
($)(2)

Option
Awards
($)(3)

Stock
Awards
($)(4)

All
Other
Compensation
($)(5)

Total ($)

2018 $ 675,000 $ 425,250 $ 4,486,852 $ 2,998,832 $
2019 $ 725,000 $ 667,000 $ 6,000,525 $ 2,000,071 $
2020 $ 775,000 $ 542,500 $ 7,124,633 $ 5,375,188 $

8,632,979
47,045 $
58,230 $
9,450,826
63,311 $ 13,880,632

Matthew C. Abernethy . . . . .
Chief Financial Officer

— $ 1,996,506 $
2018 $ 420,000 $ 199,500 $
2019 $ 495,600 $ 284,970 $ 3,750,345 $ 1,250,035 $
2020 $ 545,200 $ 190,820 $ 2,999,869 $ 2,500,266 $

Eric Benevich . . . . . . . . . . . .
Chief Commercial Officer

2018 $ 432,600 $ 205,485 $ 1,496,335 $ 1,499,417 $
2019 $ 467,200 $ 280,320 $ 3,750,345 $ 1,250,035 $
2020 $ 499,900 $ 199,960 $ 2,999,869 $ 3,000,257 $

Kyle W. Gano, Ph.D. . . . . . .
Chief Development and
Strategy Officer

2018 $ 403,100 $ 191,473 $ 1,309,024 $ 2,656,575 $
2019 $ 443,400 $ 266,040 $ 3,000,285 $ 1,000,076 $
2020 $ 487,700 $ 207,273 $ 3,749,799 $ 2,750,210 $

69,741 $
42,170 $
45,021 $

38,768 $
45,547 $
48,974 $

8,069 $
16,171 $
16,751 $

Eiry W. Roberts, M.D. . . . . .
Chief Medical Officer

2018 $ 490,700 $ 220,800 $ 2,863,700 $ 4,053,869 $
2019 $ 538,200 $ 309,465 $ 3,000,285 $ 1,000,076 $
2020 $ 575,900 $ 215,963 $ 2,624,855 $ 2,375,242 $

671,554 $
51,889 $
56,073 $

2,685,747
5,823,120
6,281,176

3,672,605
5,793,447
6,748,960

4,568,241
4,725,972
7,211,733

8,300,623
4,899,915
5,848,033

(1)
(2)

(3)

(4)

(5)

The titles and capacities set forth in the table above are as of December 31, 2020.
Salary and bonus figures represent amounts earned during each respective fiscal year, regardless of whether part or all of such amounts were paid in
subsequent fiscal year(s). Bonuses are awarded pursuant to a bonus program.
The amounts shown are the full grant date fair value in accordance with Accounting Standards Codification 718-10, Compensation—Stock Compensation
(ASC 718). The assumptions used to calculate the grant date fair value of stock awards are set forth under Note 8 of the Notes to the Consolidated Financial
Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 5, 2021. The
grant date fair values of option awards for 2018, 2019 and 2020 (other than Dr. Robert’s 2018 new hire award) are based on per share Black-Scholes values
of $43.06, $45.00 and $48.90, respectively. Dr. Robert’s new hire option awards are based on per share Black-Scholes value of $40.91.
Stock awards consist of RSUs and PRSUs and may be subject to deferred delivery arrangements. The amounts shown are the full grant date fair value in
accordance with Accounting Standards Codification 718-10, Compensation—Stock Compensation (ASC 718). The assumptions used to calculate the grant
date fair value of stock awards are set forth under Note 8 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2020 filed with the SEC on February 5, 2021. The fair values of RSUs granted in 2018, 2019 and 2020 are
based on the Company’s closing market price per share on the grant date, which was $81.49 for all 2018 grants (other than Dr. Roberts’ new hire grant, for
which it was $77.81), which was $81.05 for all 2019 grants and which was $102.90 for all 2020 grants.
Includes all other compensation as described in the table below.

41

All Other Compensation Table

Name

Kevin C. Gorman, Ph.D. . . . . . . . . . . . . . . . . . .

Matthew C. Abernethy . . . . . . . . . . . . . . . . . . .

Eric Benevich. . . . . . . . . . . . . . . . . . . . . . . . . . .

Kyle W. Gano, Ph.D.

. . . . . . . . . . . . . . . . . . . .

Eiry W. Roberts, M.D.

. . . . . . . . . . . . . . . . . . .

401(k)
Employer
Match

Insurance
Premiums
(1)

Year

Inducement
Payments

Relocation
Expense

Total
Other

2018 $
8,250 $ 38,795 $
2019 $ 16,800 $ 41,430 $
2020 $ 17,100 $ 46,211 $

2018 $
8,250 $ 27,817 $
2019 $ 16,800 $ 25,370 $
2020 $ 17,100 $ 27,921 $

2018 $
8,250 $ 30,518 $
2019 $ 16,800 $ 28,747 $
2020 $ 16,800 $ 32,174 $

5,375 $
2018 $
2019 $ 13,302 $
2020 $ 14,631 $

2,694 $
2,869 $
2,120 $

— $
— $
— $

— $
— $
— $

— $
— $
— $

— $
— $
— $

— $
— $
— $

33,674 $
— $
— $

— $
— $
— $

— $
— $
— $

2018 $
2019 $ 16,800 $ 35,089 $
2020 $ 17,100 $ 38,973 $

8,250 $ 35,522 $ 225,000 $ 402,782 $
— $
— $

— $
— $

47,045
58,230
63,311

69,741
42,170
45,021

38,768
45,547
48,974

8,069
16,171
16,751

671,554
51,889
56,073

(1)

The amounts in this column represent the costs for medical insurance for Company-wide plans, as well as disability insurance premiums and related tax
gross-up amounts.

Grants of Plan-Based Awards During the Fiscal Year Ended December 31, 2020

The following table sets forth certain information regarding plan based awards granted by the Company during the year

ended December 31, 2020 to the NEOs below:

Estimated Future Payouts Under PRSU Awards (1)

Name

Kevin C. Gorman, Ph.D.

. . . . .

Matthew C. Abernethy. . . . . . .

Eric Benevich. . . . . . . . . . . . . .

Kyle W. Gano, Ph.D. . . . . . . . .

Eiry W. Roberts, M.D. . . . . . . .

Grant
Date

2/6/2020
2/6/2020
2/6/2020

2/6/2020
2/6/2020
2/6/2020

2/6/2020
2/6/2020
2/6/2020

2/6/2020
2/6/2020
2/6/2020

2/6/2020
2/6/2020
2/6/2020

Minimum (#) Target (#) Upside (#) Maximum (#)

20,458

29,156

39,359

47,620

10,691

14,579

22,838

27,212

13,121

19,438

27,697

32,071

10,691

14,579

22,838

27,212

10,691

14,579

22,838

27,212

All Other
Stock Awards:
Number of
Shares of
Stock or Units
(#)(2)

All Other
Option Awards:
Number of
Securities
Underlying
Options (#)(2)

Exercise
Price of
Option
Awards
($/Sh)(2)

Grant Date
Fair
Value (3)

23,081

9,719

9,719

12,148

8,504

$
$
145,698 $

— $ 2,375,035
— $ 3,000,153
102.90 $ 7,124,633

$
$
61,347 $

— $ 1,000,086
— $ 1,500,180
102.90 $ 2,999,869

$
$
61,347 $

— $ 1,000,086
— $ 2,000,171
102.90 $ 2,999,869

$
$
76,683 $

— $ 1,250,030
— $ 1,500,180
102.90 $ 3,749,799

$
$
53,678 $

— $
875,062
— $ 1,500,180
102.90 $ 2,624,855

(1)

(2)

(3)

Represents the number of shares that may be earned under the PRSUs granted to NEOs in 2020 under the Company’s 2011 Plan. The PRSUs vest upon
achievement of two underlying performance goals, each of which must occur before December 31, 2022. Such goals relate to specific metrics related to
(i) the commercialization of INGREZZA and (ii) the advancement and enhancement of our product candidate pipeline, each within the three-year
performance period commencing on January 1, 2020 and ending on December 31, 2022. The actual number of units subject to the PRSUs will be determined
based on level of achievement of such goals, with minimum, target, upside and maximum levels specified.
All options, RSUs and PRSUs were granted and approved on the same date with option awards having an exercise price equal to the closing market price of
the Company’s common stock on the date of grant. All option awards are time-based awards, which vest monthly, on a pro-rata basis, over four years and
have an option term of ten years. These restricted stock units vest annually, on a pro-rata basis, over a four-year period.
Reflects the grant date per share Black-Scholes value of $48.90 for option awards and the grant date per share value of $102.90 for RSUs, each granted on
February 6, 2020 which was calculated in accordance with ASC 718.

42

Agreements with Named Executive Officers

Kevin C. Gorman, Ph.D. has an employment contract that provides that: (i) Dr. Gorman will serve as the Company’s

Executive Vice President and Chief Operating Officer commencing on August 1, 2007 at an initial annual salary of $400,000,
subject to annual adjustment by the Board of Directors (subsequent to entering into the employment contract, Dr. Gorman became
Chief Executive Officer and his annual base salary for 2020 is $775,000); (ii) the agreement terminates upon death, disability,
termination by the Company with or without cause, constructive termination or voluntary resignation; (iii) Dr. Gorman is eligible
for a discretionary annual bonus as determined by the Board of Directors, based upon achieving certain performance criteria; and
(iv) each year starting in 2007 and continuing for the term of the agreement, Dr. Gorman will be eligible to receive equity awards
with the number of shares, vesting terms, and exercise price as shall be determined by the Board of Directors.

Matthew C. Abernethy has an employment contract that provides that: (i) Mr. Abernethy will be entitled to receive an initial

base salary of $420,000 per year, which was his base salary for 2018, subject to future adjustments (Mr. Abernethy’s annual base
salary for 2020 is $545,200); (ii) the agreement terminates upon death, disability, termination by the Company with or without
cause, constructive termination or voluntary resignation; (iii) Mr. Abernethy is eligible for a discretionary annual bonus as
determined by the Board of Directors, based upon achieving certain performance criteria; (iv) Mr. Abernethy is eligible to receive
equity awards with the number of shares, vesting terms, and exercise price as shall be determined by the Board of Directors.;
(v) Mr. Abernethy received a one-time cash inducement advance in the amount of $180,000, which was deemed earned in 2020 as
Mr. Abernethy completed two full years of employment with the Company; and (vi) Mr. Abernethy received relocation benefits,
including a one-time cash relocation advance in the amount of $140,000.

Eric Benevich has an employment contract that provides that: (i) Mr. Benevich will serve as the Company’s Chief
Commercial Officer commencing on May 26, 2015 at an initial annual salary of $365,000, subject to annual adjustment by the
Board of Directors (Mr. Benevich’s annual base salary for 2020 is $499,900); (ii) the agreement terminates upon death, disability,
termination by the Company with or without cause, constructive termination or voluntary resignation; (iii) Mr. Benevich is eligible
for a discretionary annual bonus as determined by the Board of Directors, based upon achieving certain performance criteria; and
(iv) Mr. Benevich is eligible to receive stock option awards with the equity awards with the number of shares, vesting terms, and
exercise price as shall be determined by the Board of Directors.

Kyle W. Gano, Ph.D. has an employment contract that provides that: (i) Dr. Gano will serve as the Company’s Chief

Business Development Officer commencing on November 12, 2014 at an initial annual salary of $310,000, subject to annual
adjustment by the Board of Directors (Dr. Gano’s annual base salary for 2020 is $487,700); (ii) the agreement terminates upon
death, disability, termination by the Company with or without cause, constructive termination or voluntary resignation;
(iii) Dr. Gano is eligible for a discretionary annual bonus as determined by the Board of Directors, based upon achieving certain
performance criteria; and (iv) Dr. Gano is eligible to receive stock option awards with the equity awards with the number of shares,
vesting terms, and exercise price as shall be determined by the Board of Directors.

Eiry W. Roberts, M.D. has an employment contract that provides that: (i) Dr. Roberts will serve as the Company’s Chief
Medical Officer commencing on January 8, 2018 at an initial annual salary of $520,000, subject to annual adjustment by the Board
of Directors (Dr. Roberts’ annual base salary for 2020 is $575,900); (ii) the agreement terminates upon death, disability,
termination by the Company with or without cause, constructive termination or voluntary resignation; (iii) Dr. Roberts is eligible
for a discretionary annual bonus as determined by the Board of Directors, based upon achieving certain performance criteria;
(iv) Dr. Roberts is eligible to receive stock option awards with the equity awards with the number of shares, vesting terms, and
exercise price as shall be determined by the Board of Directors; (v) Dr. Roberts received a one-time cash inducement advance in
the amount of $225,000, which was deemed earned in early 2021 when Dr. Roberts completed two full years of employment with
the Company; and (vi) Dr. Roberts received relocation benefits, including a one-time cash relocation advance in the amount of
$220,000.

43

Outstanding Equity Awards at Fiscal Year-End. The following table sets forth the outstanding equity awards held by the NEOs at
December 31, 2020.

Option Awards

Stock Awards

Award
Grant and
Commencement
of Vesting Date

Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable

Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)

Option
Exercise
Price
($)

Option
Expiration
Date

Number
of
Shares
or Units
of
Stock
That
Have
Not
Vested
(#)

Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($)

1/12/2012
1/10/2013
1/16/2014
2/3/2015
2/5/2016
2/6/2017
2/5/2018
2/7/2019
2/6/2020

12/1/2017
2/7/2019
2/6/2020

6/1/2015
2/5/2016
2/6/2017
2/5/2018
2/7/2019
2/6/2020

1/12/2012
1/16/2014
2/3/2015
2/5/2016
2/6/2017
2/5/2018
2/7/2019
2/6/2020

1/8/2018
2/7/2019
2/6/2020

143,449
164,801
167,858
146,105
109,100
198,755
73,808
61,116
30,354

30,002
38,198
12,781

60,000
20,605
73,598
24,615
38,198
12,781

28,266
75,000
65,000
36,400
57,499
21,533
30,558
15,976

46,042
30,558
11,183

—
—
—
—
—
8,645
30,392
72,229
115,344

14,998
45,143
48,566

—
—
3,202
10,135
45,143
48,566

—
—
—
—
2,501
8,867
36,115
60,707

18,958
36,115
42,495

— $
— $
— $
— $
— $
— $
— $
— $
— $

— $
— $
— $

— $
— $
— $
— $
— $
— $

— $
— $
— $
— $
— $
— $
— $
— $

— $
— $
— $

8.66
8.65
19.59
32.99
35.99
43.24
81.49
81.05
102.90

73.60
81.05
102.90

41.78
35.99
43.24
81.49
81.05
102.90

8.66
19.59
32.99
35.99
43.24
81.49
81.05
102.90

77.81
81.05
102.90

1/12/2022 (2)
1/10/2023 (2)
1/16/2024 (2)
2/3/2025 (2)
2/5/2026 (2)
2/6/2027 (2)
2/5/2028 (2)
2/7/2029 (2)
2/6/2030 (2)

—
—
—
—
—
—
—
—
—
—
790,763
8,250 (3)
9,200 (3)
881,820
18,508 (3) 1,773,992
52,237 (4) 2,212,314

12/1/2027 (1)
2/7/2029 (2)
2/6/2030 (2)

3,125 (3)

299,531
11,568 (3) 1,108,793
931,566
24,298 (4)

6/1/2025 (1)
2/5/2026 (2)
2/6/2027 (2)
2/5/2028 (2)
2/7/2029 (2)
2/6/2030 (2)

1/12/2022 (2)
1/16/2024 (2)
2/3/2025 (2)
2/5/2026 (2)
2/6/2027 (2)
2/5/2028 (2)
2/7/2029 (2)
2/6/2030 (2)

—
—
254,003
2,650 (3)
3,076 (3)
294,835
11,568 (3) 1,108,793
931,566
29,157 (4)

—
—
—
—
—
—
—
—
182,115
1,900 (3)
975,370
10,176 (3)
9,255 (3)
887,092
26,727 (4) 1,164,386

1/8/2028 (1)
2/7/2029 (2)
2/6/2030 (2)

10,000 (3)
9,255 (3)
23,083 (4)

958,500
887,092
815,108

Name

Kevin C. Gorman, Ph.D. . . .

Matthew C. Abernethy . . . .

Eric Benevich. . . . . . . . . . . .

Kyle W. Gano, Ph.D.

. . . . .

Eiry W. Roberts, M.D . . . . .

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)

—
—
—
—
—
—
—
—
2,794,603

—
—
1,397,397

—
—
—
—
1,863,132

—
—
—
—
—
—
—
1,397,397

—
—
1,397,397

(1) Vests monthly over four years, subject to an initial one-year “cliff.”
(2) Vests monthly over four years.
(3) Vests annually over four years.
(4)

Consists of 29,156 PRSUs for Dr. Gorman, 19,438 for Mr. Benevich, 14,579 PRSUs for Mr. Abernethy, Dr. Gano and Dr. Roberts. Represents the number of
shares that may be earned under the PRSUs granted to NEOs in 2020 under the Company’s 2011 Plan. The PRSUs vest upon achievement of two underlying
performance goals, each of which must occur before December 31, 2022. Such goals relate to specific metrics related to (i) the commercialization of
INGREZZA and (ii) the advancement and enhancement of our product candidate pipeline, each within the three-year performance period commencing on
January 1, 2020 and ending on December 31, 2022. The actual number of units subject to the PRSUs will be determined based on the level of achievement of
such goals, with minimum, target, upside and maximum levels specified. Additionally, Dr. Gorman has 23,081 restricted stock unit (RSU) awards, Dr. Gano
has 12,148 RSUs, Dr. Roberts has 8,504 RSUs and both Mr. Abernethy and Mr. Benevich have 9,719 RSUs. These RSUs are time-based and vest annually,
on a pro-rata basis over four years.

44

Option Exercises and Stock Vested During the Year. The following table sets forth the options exercised and stock awards that
vested during fiscal 2020 along with their respective values at December 31, 2020 for the NEOs:

Option Exercises and Stock Vested Table

Option Awards (1)

Stock Awards (2)

Number of
Shares
Acquired on
Exercise (#)

Value
Realized on
Exercise ($) (3)

Number of
Shares
Acquired on
Vesting (#)

Value
Realized on
Vesting ($) (4)

Name

Kevin C. Gorman, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Matthew C. Abernethy . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eric Benevich. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kyle W. Gano, Ph.D.
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eiry W. Roberts, M.D.

— $
15,000 $
20,595 $
— $
5,000 $

—
549,134
1,246,757
—
260,950

43,169 $
19,230 $
22,467 $
24,246 $
20,334 $

4,430,741
1,948,667
2,305,377
2,486,184
2,128,605

(1)
(2)
(3)

(4)

Information relates to stock option exercises during 2020.
Information relates to RSUs and PRSUs that vested during 2020.
Calculated by multiplying the number of shares acquired upon exercise of stock options by the difference between the exercise price and the market price of
the Company’s common stock at the time of exercise.
Calculated by multiplying the number of shares acquired upon vesting of RSUs by the average price of shares sold for purposes of satisfying federal and
state income tax liabilities.

Potential Payments Upon Termination or Change-in-Control. The following tables set forth the potential severance benefits
payable to the NEOs in the event of a termination prior to or following a change in control, assuming such event occurred on
December 31, 2020:

Potential Payment Upon Termination Table*

Name

Salary (1)

Bonus (2)

Accrued
Compensation (3)

Stock
Awards (4)

Medical (5)

Total

Kevin C. Gorman, Ph.D.
. . . . . . . . . $ 968,750 $ 968,750 $
Matthew C. Abernethy . . . . . . . . . . . $ 545,200 $ 272,600 $
Eric Benevich.
. . . . . . . . . . . . . . . . . $ 499,900 $ 249,950 $
Kyle W. Gano, Ph.D. . . . . . . . . . . . . $ 487,700 $ 243,850 $
Eiry W. Roberts, M.D. . . . . . . . . . . . $ 575,900 $ 287,950 $

93,150 $ 5,469,263 $
65,530 $ 1,544,012 $
58,162 $ 1,605,398 $
58,618 $ 1,744,009 $
52,674 $ 1,541,126 $

57,765 $ 7,557,678
27,924 $ 2,455,266
32,184 $ 2,445,594
2,124 $ 2,536,301
38,976 $ 2,496,626

*
(1)
(2)
(3)
(4)

(5)

Reflects a termination without cause or due to a constructive termination, or deemed termination, prior to a change in control.
Based on salary as of December 31, 2020.
Based on bonus targets established by the Board of Directors for 2020.
Accrued compensation is comprised of vacation pay earned and unpaid as of December 31, 2020.
The amounts in this column represent the intrinsic value of ‘in-the money’ unvested options and RSUs as of December 31, 2019 that would vest in
accordance with the executive officers’ employment agreements. Values were derived using the closing price of the Company’s common stock on
December 31, 2020 of $95.85.
Medical is comprised primarily of health insurance premiums for the period specified in each executive officer’s employment contract.

45

Potential Payment Upon Change-in-Control Table*

Name

Severance (1)

Bonus (2)

Accrued
Compensation (3)

Stock
Awards (4)

Medical (5)

Total

Kevin C. Gorman, Ph.D.
Matthew C. Abernethy . . . . . . $
. . . . . . . . . . . . $
Eric Benevich.
Kyle W. Gano, Ph.D..
. . . . . . $
Eiry W. Roberts, M.D. . . . . . . $

. . . . $ 1,550,000 $ 1,550,000 $
408,900 $
374,925 $
365,775 $
431,925 $

817,800 $
749,850 $
731,550 $
863,850 $

93,150 $ 10,413,723 $
3,831,405 $
65,530 $
5,434,441 $
58,162 $
5,399,770 $
58,618 $
4,934,602 $
52,674 $

92,424 $ 13,699,297
5,165,521
41,886 $
6,665,654
48,276 $
6,558,899
3,186 $
6,341,515
58,464 $

*
(1)
(2)
(3)
(4)

(5)

*
(1)
(2)
(3)
(4)

(5)

Reflects benefits to be provided upon a termination without cause, or due to a constructive termination, within a specified time following a change-in-control.
Based on salary as of December 31, 2020.
Based on bonus targets established by the Board of Directors for 2020.
Accrued compensation is comprised of vacation pay earned and unpaid as of December 31, 2020.
The amounts in this column represent the intrinsic value of ‘in-the money’ unvested options and RSUs as of December 31, 2020 that would vest in
accordance with the executive officers’ employment agreements. Values were derived using the closing price of the Company’s common stock on
December 31, 2020 of $95.85.
Medical is comprised primarily of health insurance premiums for the period specified in each executive officer’s employment contract.

Potential Payment Upon Termination by Disability Table*

Name

Salary (1)

Bonus (2)

Accrued
Compensation (3)

Stock
Awards (4)

Medical (5)

Total

Kevin C. Gorman, Ph.D.
. . . . . . . . . $ 968,750 $ 968,750 $
Matthew C. Abernethy . . . . . . . . . . . $ 545,200 $ 272,600 $
. . . . . . . . . . . . . . . . . $ 499,900 $ 249,950 $
Eric Benevich.
Kyle W. Gano, Ph.D. . . . . . . . . . . . . $ 487,700 $ 243,850 $
Eiry W. Roberts, M.D. . . . . . . . . . . . $ 575,900 $ 287,950 $

93,150 $ 5,469,263 $
65,530 $ 1,544,012 $
58,162 $ 1,605,398 $
58,618 $ 1,744,009 $
52,674 $ 1,541,126 $

57,765 $ 7,557,678
27,924 $ 2,455,266
32,184 $ 2,445,594
2,124 $ 2,536,301
38,976 $ 2,496,626

Reflects a termination due to disability.
Based on salary as of December 31, 2020.
Based on bonus targets established by the Board of Directors for 2020.
Accrued compensation is comprised of vacation pay earned and unpaid as of December 31, 2020.
The amounts in this column represent the intrinsic value of ‘in-the money’ unvested options and RSUs as of December 31, 2020 that would vest in
accordance with the executive officers’ employment agreements. Values were derived using the closing price of the Company’s common stock on
December 31, 2020 of $95.85.
Medical is comprised primarily of health insurance premiums for the period specified in each executive officer’s employment contract.

Potential Payment Upon Termination by Death Table*

Name

Bonus (1)

Accrued
Compensation (2)

Stock
Awards (3)

Total

Kevin C. Gorman, Ph.D.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 775,000 $
Matthew C. Abernethy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 272,600 $
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 249,950 $
Eric Benevich.
Kyle W. Gano, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 243,850 $
Eiry W. Roberts, M.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 287,950 $

93,150 $ 5,469,263 $ 6,337,413
65,530 $ 1,544,012 $ 1,882,142
58,162 $ 1,605,398 $ 1,913,510
58,618 $ 1,744,009 $ 2,046,477
52,674 $ 1,541,126 $ 1,881,750

*
(1)
(2)
(3)

Reflects a termination due to death.
Based on bonus targets established by the Board of Directors for 2020.
Accrued compensation is comprised of vacation pay earned and unpaid as of December 31, 2020.
The amounts in this column represent the intrinsic value of ‘in-the money’ unvested options and RSUs as of December 31, 2020 that would vest in
accordance with the executive officers’ employment agreements. Values were derived using the closing price of the Company’s common stock on
December 31, 2020 of $95.85.

The following is a description of the arrangements under which the NEOs may be entitled to potential payments upon a
termination without cause or resignation due to a constructive termination (including following a change-in-control) or upon
disability or death. Resignation due to constructive termination may include an executive’s resignation following one or more of
the following material adverse changes in the nature of such executive’s employment, as specified in the agreement, which is not
cured following notification:

(cid:129)

(cid:129)

a significant reduction in the executive or the executive supervisor’s duties or responsibilities,

a material reduction in base salary,

46

(cid:129) material relocation, or

(cid:129) material breach of the executive’s employment agreement.

Dr. Gorman is entitled to 1.25 times the amount of his annual base salary and target annual bonus to be paid equally over

15 months, an acceleration of unvested shares that would have vested over the 15 continuous months after the date of termination,
and payment of COBRA benefits to continue then-current coverage for a period of 15 months following termination in the event
that the Company terminates his employment without cause, or he resigns due to a constructive termination. In the event of such
termination within six months after the consummation of a change in control, Dr. Gorman is entitled to 2 times the amount of his
annual base salary and annual target bonus to be paid in one lump sum, a cash amount equal to the value of all unvested stock
awards and all vested and outstanding stock awards, and payment of COBRA benefits to continue then-current coverage for a
period of 24 months following termination. In addition, the Company has agreed to reimburse Dr. Gorman for the increase in
federal and state income taxes payable by him by reason of the benefits provided in connection with such a termination in
connection with a change in control if the total payment exceeds 2.99 times his base amount by more than 15%. In the event of
termination due to disability, Dr. Gorman is entitled to 15 months of base salary paid semi-monthly over 15 months, a lump sum
amount equal to his target annual bonus multiplied by a fraction the numerator of which is the number of full months of
employment by Dr. Gorman in the fiscal year and the denominator of which is 12, an acceleration of unvested shares that would
have vested over the 15 continuous months after the date of termination, and payment of COBRA benefits to continue then-current
coverage for a period of 15 months following termination. In the event of a termination due to Dr. Gorman’s death, his
beneficiaries or estate, would be entitled to an acceleration of unvested shares that would have vested over the 15 continuous
months after the date of termination, a lump sum amount equal to his target annual bonus multiplied by a fraction the numerator of
which is the number of full months of employment by Dr. Gorman in the fiscal year and the denominator of which is 12 and any
accrued and unpaid compensation on the date of termination.

Mr. Abernethy is entitled to 1.0 times the amount of his annual base salary and target annual bonus to be paid equally over
12 months, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination,
and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination in the event
that the Company terminates his employment without cause, or he resigns due to a constructive termination. In the event of such
termination within six months after the consummation of a change in control, Mr. Abernethy is entitled to 1.5 times the amount of
his annual base salary and annual target bonus to be paid in one lump sum, a cash amount equal to the value of all unvested stock
awards and all vested and outstanding stock awards, and payment of COBRA benefits to continue then-current coverage for a
period of 18 months following termination; provided, however, in the event such payment to Mr. Abernethy after a change in
control is subject to a “best-after-tax” provision. The best-after-tax provision provides that if the change in control payment due to
Mr. Abernethy would be subject to the excise tax provisions of Section 280G of the Internal Revenue Code, the Company may
reduce the change in control payments to Mr. Abernethy if, after all applicable taxes, the final payments would be larger than if the
change in control payments were not reduced and therefor subject to an excise tax. In the event of termination due to disability,
Mr. Abernethy is entitled to 12 months of base salary paid semi-monthly over 12 months, a lump sum amount equal to his target
annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Mr. Abernethy in the
fiscal year and the denominator of which is 12, an acceleration of unvested shares that would have vested over the 12 continuous
months after the date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 12 months
following termination. In the event of a termination due to Mr. Abernethy’s death, his beneficiaries or estate, would be entitled to
an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, a lump sum
amount equal to his target annual bonus multiplied by a fraction the numerator of which is the number of full months of
employment by Mr. Abernethy in the fiscal year and the denominator of which is 12 and any accrued and unpaid compensation on
the date of termination.

Mr. Benevich is entitled to 1.0 times the amount of his annual base salary and target annual bonus to be paid equally over

12 months, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination,
and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination in the event
that the Company terminates his employment without cause, or he resigns due to a constructive termination. In the event of such
termination within six months after the consummation of a change in control, Mr. Benevich is entitled to 1.5 times the amount of
his annual base salary and annual target bonus to be paid in one lump sum, a cash amount equal to the value of all unvested stock
awards and all vested and outstanding stock awards, and payment of COBRA benefits to continue then-current coverage for a
period of 18 months following termination; provided, however, in the event such payment to Mr. Benevich after a change in
control is subject to a “best-after-tax” provision. The best-after-tax provision provides that if the change in control payment due to
Mr. Benevich would be subject to the excise tax provisions of Section 280G of the Internal Revenue Code, the Company may
reduce the change in control payments to Mr. Benevich if, after all applicable taxes, the final payments would be larger than if the

47

change in control payments were not reduced and therefor subject to an excise tax. In the event of termination due to disability,
Mr. Benevich is entitled to 12 months of base salary paid semi-monthly over 12 months, a lump sum amount equal to his target
annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Mr. Benevich in the
fiscal year and the denominator of which is 12, an acceleration of unvested shares that would have vested over the 12 continuous
months after the date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 12 months
following termination. In the event of a termination due to Mr. Benevich’s death, his beneficiaries or estate, would be entitled to an
acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, a lump sum
amount equal to his target annual bonus multiplied by a fraction the numerator of which is the number of full months of
employment by Mr. Benevich in the fiscal year and the denominator of which is 12 and any accrued and unpaid compensation on
the date of termination.

Dr. Gano is entitled to 1.0 times the amount of his annual base salary and target annual bonus to be paid equally over
12 months, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination,
and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination in the event
that the Company terminates his employment without cause, or he resigns due to a constructive termination. In the event of such
termination within six months after the consummation of a change in control, Dr. Gano is entitled to 1.5 times the amount of his
annual base salary and annual target bonus to be paid in one lump sum, a cash amount equal to the value of all unvested stock
awards and all vested and outstanding stock awards, and payment of COBRA benefits to continue then-current coverage for a
period of 18 months following termination; provided, however, in the event such payment to Dr. Gano after a change in control is
subject to a “best-after-tax” provision. The best-after-tax provision provides that if the change in control payment due to Dr. Gano
would be subject to the excise tax provisions of Section 280G of the Internal Revenue Code, the Company may reduce the change
in control payments to Dr. Gano if, after all applicable taxes, the final payments would be larger than if the change in control
payments were not reduced and therefor subject to an excise tax. In the event of termination due to disability, Dr. Gano is entitled
to 12 months of base salary paid semi-monthly over 12 months, a lump sum amount equal to his target annual bonus multiplied by
a fraction the numerator of which is the number of full months of employment by Dr. Gano in the fiscal year and the denominator
of which is 12, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of
termination, and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination.
In the event of a termination due to Dr. Gano’s death, his beneficiaries or estate, would be entitled to an acceleration of
unvested shares that would have vested over the 12 continuous months after the date of termination, a lump sum amount equal to
his target annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Dr. Gano
in the fiscal year and the denominator of which is 12 and any accrued and unpaid compensation on the date of termination.

Dr. Roberts is entitled to 1.0 times the amount of her annual base salary and target annual bonus to be paid equally over
12 months, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination,
and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination in the event
that the Company terminates her employment without cause, or she resigns due to a constructive termination. In the event of such
termination within six months after the consummation of a change in control, Dr. Roberts is entitled to 1.5 times the amount of her
annual base salary and annual target bonus to be paid in one lump sum, a cash amount equal to the value of all unvested stock
awards and all vested and outstanding stock awards, and payment of COBRA benefits to continue then-current coverage for a
period of 18 months following termination; provided, however, in the event such payment to Dr. Roberts after a change in control
is subject to a “best-after-tax” provision. The best-after-tax provision provides that if the change in control payment due to
Dr. Roberts would be subject to the excise tax provisions of Section 280G of the Internal Revenue Code, the Company may reduce
the change in control payments to Dr. Roberts if, after all applicable taxes, the final payments would be larger than if the change in
control payments were not reduced and therefor subject to an excise tax. In the event of termination due to disability, Dr. Roberts is
entitled to 12 months of base salary paid semi-monthly over 12 months, a lump sum amount equal to her target annual bonus
multiplied by a fraction the numerator of which is the number of full months of employment by Dr. Roberts in the fiscal year and
the denominator of which is 12, an acceleration of unvested shares that would have vested over the 12 continuous months after the
date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 12 months following
termination. In the event of a termination due to Dr. Roberts’s death, her beneficiaries or estate, would be entitled to an
acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, a lump sum
amount equal to her target annual bonus multiplied by a fraction the numerator of which is the number of full months of
employment by Dr. Roberts in the fiscal year and the denominator of which is 12 and any accrued and unpaid compensation on the
date of termination.

48

CEO PAY RATIO

Under SEC rules, we are required to calculate and disclose the annual total compensation of our median employee, as well as

the ratio of the annual total compensation of our median employee as compared to the annual total compensation of our CEO,
Kevin C. Gorman, Ph.D. (“CEO Pay Ratio”). To identify our median employee, we used the following methodology:

(cid:129)

(cid:129)

(cid:129)

To determine our total population of employees, we included all full-time and part-time as of December 31, 2020.

To identify our median employee from our employee population, we calculated the aggregate amount of each
employee’s fiscal 2020 base salary (using a reasonable estimate of the hours worked and overtime actually paid during
fiscal 2020 for hourly employees and actual salary paid for our remaining employees) and bonuses attributable to fiscal
2020 performance and the grant date fair value of equity awards granted in fiscal 2020 using the same methodology we
use for estimating the value of the equity awards granted to our named executive officers and reported in our Summary
Compensation Table.

In making this determination, we annualized the base salary and target bonus compensation of employees who were
employed by us for less than the entire fiscal year.

For fiscal 2020, the median of the annual total compensation of our employees (other than our CEO) was $241,848 and the

annual total compensation of our CEO, as reported in the Summary Compensation Table included in this Proxy Statement, was
$13,880,632. Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total
compensation of all employees was approximately 57 to 1.

The CEO Pay Ratio above represents our reasonable estimate calculated in a manner consistent with SEC rules and
applicable guidance. SEC rules and guidance provide significant flexibility in how companies identify the median employee, and
each company may use a different methodology and make different assumptions particular to that company. As a result, and as
explained by the SEC when it adopted these rules, in considering the pay ratio disclosure, stockholders should keep in mind that
the rule was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same
industry, but rather to allow stockholders to better understand and assess each particular company’s compensation practices and
pay ratio disclosures. Neither the Compensation Committee nor our management used our CEO Pay Ratio measure in making
compensation decisions.

In addition to the information above, in order to reflect our employee compensation practices, we have also calculated the

annual base salary of our median employee while taking only annual base salary into account, as well as the ratio of the base salary
of our CEO as compared to the annual base salary of such median employee. In calculating the annual base salary of our median
employee, we used the applicable methodology listed above. For fiscal 2020, the median of the annual base salary of our
employees (other than our CEO) was $144,179, and the annual base salary of our CEO, as reported in the Summary Compensation
Table included in this Proxy Statement, was $775,000. Based on this information, the ratio of the annual base salary of our CEO to
the median of the annual base salary of all employees (other than the CEO) was approximately 5 to 1. Neither the Compensation
Committee nor our management used this ratio to make compensation decisions.

49

Non-Employee Director Compensation Philosophy

DIRECTORS COMPENSATION SUMMARY

Our non-employee director compensation philosophy is based on the following guiding principles:

(cid:129)

(cid:129)

Aligning the long-term interests of stockholders and directors; and

Compensating directors appropriately and adequately for their time, effort and experience.

The elements of director compensation consist of annual cash retainers and equity awards, as well as customary and usual

expense reimbursement in attending Board or Committee meetings. In an effort to align the long-term interests of our stockholders
and non-employee directors, the mix of cash and equity compensation has historically been, and is currently, weighted more
heavily to equity. The equity compensation has historically taken the form of stock options, which we believe motivates the
non-employee directors to help us achieve our business objectives by tying incentives to the appreciation of our common stock
over the long term.

The Board and the Company’s stockholders have approved certain annual limits on compensation to be paid to the

Company’s non-employee directors. The aggregate value of all compensation granted or paid, as applicable, to any individual for
service as a non-employee director will not exceed $1,250,000 in total value during any year, measured from our annual meeting of
stockholders for a particular year and ending on the date of our annual meeting of stockholders for the subsequent year. In addition,
the aggregate value of the initial option grant or other similar stock awards granted under our 2011 Equity Incentive Plan, as
amended (the “2011 Plan”) or otherwise to any individual for service as a non-employee director upon or in connection with his or
her initial election or appointment to the Board will not exceed $2,000,000 in total value. These limits are further described in our
2011 Plan. Under our 2011 Plan, the Board has the authority to make exceptions to these limits in extraordinary circumstances, in
its discretion, provided that any non-employee director who is granted or paid such additional compensation may not participate in
the decision to grant or pay such additional compensation. No exceptions were made in 2019. Our 2020 Equity Incentive Plan
includes similar limits and does not provide the Board the authority to make exceptions to these limits.

Our Compensation Committee regularly assesses, on at least an annual basis, our non-employee director compensation
program in consultation with its independent compensation consultant, who provides analysis and input on prevailing market
practices, and recommends any changes to the program to our Board, who ultimately approves non-employee director
compensation. On at least an annual basis, qualified experts in the field of non-employee director compensation also deliver a
presentation to the Compensation Committee about recent developments and best practices related to non-employee director
compensation.

The 2020 compensation for the Company’s non-employee directors was recommended by the Compensation Committee to
the Board following the review of a report from Radford, its independent compensation consultant during 2020, which contained
an analysis of prevailing market practices regarding levels and types of non-employee director compensation, including the
non-employee director compensation practices of our peer group, which is described in the “Compensation Discussion and
Analysis” section of this proxy statement, and a comparative assessment of our non-employee director compensation to such peers
and market practices. In 2020, the Compensation Committee also received a presentation from Radford about recent developments
and best practices related to non-employee directors to inform its analysis of, and recommendations regarding, non-employee
director compensation. In 2019, the 2020 the Board approved changing from a number of shares approach to a dollar value
approach in determining the number of shares subject to the annual option granted to each non-employee director at the 2020
Annual Meeting of Stockholders and the initial option granted to each non-employee director upon his or her initial election or
appointment to the Board.

In formulating its recommendations to the Board for 2020, the Compensation Committee did not engage in benchmarking or
targeting compensation to a specific level of the peer group data provided by Radford, but rather used the peer data as a reference
point in making non-employee director compensation recommendations. The Compensation Committee determined that the equity
awards granted to non-employee directors should consist of stock options rather than time-vesting RSU grants. It is the
Compensation Committee’s view that stock options are inherently performance oriented and align the interests of the
non-employee directors with those of our stockholders, as the non-employee director realizes no value from stock options unless
and until the Company’s stock price increases. Ultimately, the Board set 2020 non-employee director compensation in the forms
and amounts it determined to be appropriate using its professional experience and judgment, after careful review of the Radford
analysis and the Compensation Committee’s recommendations. Our director compensation for fiscal 2020 is described below.

50

Non-Employee Director Compensation for Fiscal 2020

For 2020, directors who are not employees of the Company earned a $55,000 annual cash retainer. The Company provided
the Chair of the Board, William H. Rastetter, an additional $30,000, making his total annual cash retainer $87,500. In addition to
the cash compensation set forth above, the Chair of the Audit Committee earned an additional $25,000 annual cash retainer, the
Chair of the Compensation Committee earned an additional $20,000 annual cash retainer, and the Chair of the Nominating/
Corporate Governance Committee earned an additional $10,000 annual cash retainer. Each other director who was a member of the
Audit Committee, the Compensation Committee, the Nominating/Corporate Governance Committee earned an additional annual
cash retainer of $12,000, $12,000, and $5,000 , respectively, for each Committee on which she or he served.

Additionally, for 2020, each non-employee director received a grant of a nonstatutory stock option to purchase 6,018 shares

of the Company’s common stock, representing an approximate value of $400,000 on the date of the 2020 Annual Meeting of
Stockholders. The options granted to non-employee directors have exercise prices equal to the closing price of the Company’s
common stock on the date of the grant, are subject to a ten-year term and vest monthly over the one-year period following the date
of grant. Non-employee directors are reimbursed for expenses incurred in connection with performing their duties as directors of
the Company.

Upon her appointment to the board in February 2020, Shalini Sharp received a grant of a nonstatutory stock option to
purchase 15,000 shares of the Company’s common stock. Such option had an exercise price equal to the closing price of the
Company’s common stock on the date of grant, a ten-year maximum term and vests monthly over the three-year period following
the date of grant.

The following table sets forth the compensation earned for the fiscal year ended December 31, 2020 by the directors of the

Company named below:

Name

Director Compensation Table

Fees Earned
or Paid in
Cash (1)

Option
Awards (2)

Total

Kevin C. Gorman, Ph.D. (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
William H. Rastetter, Ph.D. (4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gary A. Lyons (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
George J. Morrow (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Leslie V. Norwalk (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Richard F. Pops (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Shalini Sharp (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Stephen A. Sherwin, M.D. (10)

— $
88,271 $
58,271 $
75,734 $
63,628 $
85,750 $
45,569 $
87,867 $

— $
400,030 $
400,030 $
400,030 $
400,030 $
400,030 $
822,459 $
400,030 $

—
488,301
458,301
475,764
463,658
485,780
868,027
487,897

(1)

(2)

(3)

(4)
(5)
(6)
(7)
(8)
(9)

Amounts in this column reflect compensation earned in 2020. During 2019, the Company transitioned from paying Board and Committee fees annually in
May to quarterly in arrears, and therefore, the amount of cash paid to the Directors in 2020 is less than the amounts earned.
The amounts shown represent the full grant date fair value of option awards granted in 2020 as determined pursuant to ASC 718. The assumptions used to
calculate the value of such awards are set forth under Note 8 of the Notes to the Consolidated Financial Statements included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2020. The grant date fair values of all option awards are based on a per share Black-Scholes value of
$66.47 (other than Ms. Sharp’s grant, for which it was $54.83).
During 2020, Dr. Gorman was an employee of the Company, and as such, did not receive any compensation for service on the Board of Directors. As of
December 31, 2020, Dr. Gorman had outstanding options to purchase 1,321,956 shares of common stock, and 88,195 outstanding RSUs and PRSUs.
As of December 31, 2020, Dr. Rastetter had outstanding options to purchase 160,018 shares of common stock.
As of December 31, 2020, Mr. Lyons had outstanding options to purchase 128,518 shares of common stock.
As of December 31, 2020, Mr. Morrow had outstanding options to purchase 98,518 shares of common stock.
As of December 31, 2020, Ms. Norwalk had outstanding options to purchase 21,018 shares of common stock.
As of December 31, 2020, Mr. Pops had outstanding options to purchase 128,518 shares of common stock.
Ms. Sharp was appointed to the board in February 2020. As of December 31, 2020, Ms. Sharp had outstanding options to acquire 15,000 shares of common
stock.

(10) As of December 31, 2020, Dr. Sherwin had outstanding options to purchase 128,518 shares of common stock.

51

Equity Ownership Guidelines

The Board of Directors has adopted equity ownership guidelines for our non-employee directors, which are designed to
further align the interests of the non-employee directors with those of our stockholders by ensuring that our non-employee directors
have a significant financial stake in the Company’s long-term success. The equity ownership guidelines establish a minimum
equity ownership equal to three times the cash retainer paid to the non-employee director, with such values determined based on
the value of our common stock owned by such persons as of certain measurement dates. All shares directly or beneficially owned
by the non-employee director, including the net exercisable value of outstanding vested stock options (where the market price of
our common stock exceeds the strike price of such option) are included in determining the value of equity owned under our equity
ownership guidelines. New non-employee directors are granted a five-year period to reach the equity ownership requirements set
forth in the guidelines and are expected to make annual progress toward the equity ownership requirements during this five-year
period. When a non-employee director does not meet the equity ownership requirements set forth in the guidelines, he/she is
restricted from selling any held shares until such requirements are met. Additionally, should non-employee director who does not
meet the equity ownership requirements choose to exercise a stock option or vest in any RSUs, he or she is required to retain all
shares acquired through those transactions, aside from any shares necessary to fulfill such transaction related tax obligations, until
full compliance with the equity ownership guidelines is attained.

Annual compliance with the equity ownership guidelines is assessed during the first quarter of each year. As of March 1,

2021, each of our non-employee directors is in compliance with the equity ownership guidelines.

Additional Information

Executive officers of the Company serve at the discretion of the Board of Directors. There are no family relationships among

any of the directors, executive officers or key employees of the Company. None of our directors or executive officers has been
involved in any of the legal proceedings specified in Item 401(f) of Regulation S-K in the past 10 years.

Review, Approval or Ratification of Related Person Transactions

RELATED PERSON TRANSACTIONS

In accordance with the Company’s Audit Committee Charter, the Company’s Audit Committee is responsible for reviewing
and approving the terms and conditions of all related person transactions. In connection with its review, approval or ratification of
related person transactions, the Company’s Audit Committee takes into account all relevant available facts and circumstances in
determining whether such transaction is in the best interests of the Company and its stockholders. Any transaction that would
disqualify a director from meeting the “independent director” standard as defined under the Nasdaq Stock Market rules requires
review by the Company’s Audit Committee prior to entering into such transaction. For all other related person transactions, the
Company reviews all agreements and payments for related person transactions and based on this review, a report is made to the
Company’s Audit Committee quarterly disclosing all related person transactions during that quarter, if any. All related person
transactions shall be disclosed in the Company’s applicable filings with the SEC as required under SEC rules.

Related Person Transactions During Fiscal 2020

The Company made charitable contributions to SD2 in 2020. SD2 is a San Diego-based non-profit corporation formed during

the summer of 2020 to help bridge the diversity gap in STEM careers through programming, mentorship, and scholarship. Our
Board Chair, Bill Rastetter, is Chair of SD2. Julie Cooke, our Chief Human Resources Officer, serves as a Member of the Board of
Directors of SD2 and Darin Lippoldt, our Chief Legal Officer, serves as the Corporate Secretary of SD2. However, none of them (or
any of their immediate family members or members of their household) are employed by SD2 or receive fees for their service.

There were no other related person transactions during fiscal 2020.

OTHER MATTERS

As of the date of this proxy statement, the Company knows of no other matters to be submitted to the stockholders at the
Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the
proxy to vote the shares they represent as the Board of Directors may recommend.

52

ADDITIONAL INFORMATION

“Householding” of Proxy Materials. The SEC has adopted rules that permit companies and intermediaries such as brokers

to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by
delivering a single set of proxy materials addressed to those stockholders. This process, which is commonly referred to as
“householding,” potentially provides extra convenience for stockholders and cost savings for companies. The Company, as well as
certain brokers, household proxy materials, unless contrary instructions have been received from the affected stockholders. Once
you have received notice from your broker or us that they or we will be householding materials to your address, householding will
continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in
householding and would prefer to receive a separate set of proxy materials, please notify your broker if your shares are held in a
brokerage account or us if you hold registered shares. If you hold registered shares, you may direct your written request to the
Company’s Corporate Secretary at 12780 El Camino Real, San Diego, California 92130 or contact the Company’s Corporate
Secretary at 858-617-7600.

Advance Notice Procedures. To be considered for inclusion in next year’s proxy materials, a stockholder must submit his,
her or its proposal in writing by December 10, 2021 which is the date that is 120 days prior to the first anniversary of the mailing
date of this proxy statement, to the Company’s Corporate Secretary at 12780 El Camino Real, San Diego, California 92130. Any
proposal must comply with the requirements as to form and substance established by the SEC for such proposal to be included in
our proxy statement. Stockholders are also advised to review our bylaws, which contain additional requirements about advance
notice of stockholder proposals and director nominations.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement and other materials we are sending you or that are available on our website in connection with the

Annual Meeting contain “forward-looking statements” as defined under federal securities laws. Many of these statements can be
identified by the use of terminology such as “believes,” “expects,” “intends,” “anticipates,” “plans,” “may,” “will,” “projects,”
“continues,” “estimates,” “potential,” “opportunity” or the negative versions of these terms and other similar expressions. These
forward-looking statements may be found in the sections of this proxy statement titled “Proxy Overview,” “Compensation
Discussion and Analysis,” and other sections of this proxy statement. These forward-looking statements are based on our current
expectations and assumptions, and are subject to risks and uncertainties that could cause our actual results or experience and the
timing of events to differ significantly from the forward-looking statements. Factors that could cause or contribute to these
differences include those discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed
with the SEC on February 5, 2021 under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and elsewhere in the Annual Report. You should carefully consider that information before voting.

You should not place undue reliance on these statements, which speak only as of the date that they were made. These
cautionary statements should be considered in connection with any written or oral forward-looking statements that we may make in
the future. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect later
events or circumstances or to reflect the occurrence of unanticipated events.

53

[THIS PAGE INTENTIONALLY LEFT BLANK]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K 

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

For the fiscal year ended December 31, 2020 

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

For the transition period from __________to__________

Commission file number 0-22705 
NEUROCRINE BIOSCIENCES, INC. 

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

12780 El Camino Real, San Diego, California

(Address of principal executive offices)

33-0525145
(I.R.S. Employer
Identification No.)

92130

(Zip Code)

(858) 617-7600 
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.001 par value
(Title of each class)

NBIX
(Trading Symbol)

Nasdaq Global Select Market
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:
None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☑    No  ☐ 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ☐     No  ☑ 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such 
filing requirements for the past 90 days. Yes  ☑     No  ☐ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of 
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such 
files). Yes  ☑     No  ☐ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an 
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth 
company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑   Accelerated filer ☐   Non-accelerated filer ☐   Smaller reporting company ☐   Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any 
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐ 
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal 
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that 
prepared or issued its audit report. Yes  ☑    No  ☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  ☐     No  ☑ 
The aggregate market value of registrant’s common stock held by non-affiliates of the registrant, computed by reference to the closing price as of the 
last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2020, was approximately $11,231,617,436.

As of January 29, 2021, 93,943,645 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement relating to the registrant’s annual meeting of stockholders to be filed pursuant to Regulation 14A 
within 120 days following the end of the registrant’s fiscal year ended December 31, 2020 are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

PART I

Business

Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.

Properties

Item 3.

Item 4.

Legal Proceedings

Mine Safety Disclosures

PART II

Item 5.

Item 6.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of 
Equity Securities

Selected Financial Data

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information

PART III

Item 10. Directors, Executive Officers and Corporate Governance
Item 11.

Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder 
Matters

Certain Relationships and Related Transactions, and Director Independence

Principal Accounting Fees and Services

Item 12.

Item 13.

Item 14.

PART IV

Item 15.

Exhibits, Financial Statement Schedules

Page

3

15

31

31

32

32

33

34

35

41

42

67

67

70

71

71

71

71

71

72

INGREZZA® and ONGENTYS® are registered trademarks of Neurocrine Biosciences, Inc. Any other brand names 
or trademarks appearing in this Annual Report that are not the property of Neurocrine Biosciences, Inc. are the 
property of their respective holders.

2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART I

Forward-Looking Statements

This Annual Report on Form 10-K and the information incorporated herein by reference contain forward-looking 
statements that involve a number of risks and uncertainties. Although our forward-looking statements reflect the 
good faith judgment of our management, these statements can only be based on facts and factors currently known by 
us. Consequently, these forward-looking statements are inherently subject to risks and uncertainties, and actual 
results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.

Forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” 
“hopes,” “may,” “will,” “plan,” “intends,” “estimates,” “could,” “should,” “would,” “continue,” “seeks,” “pro 
forma,” or “anticipates,” or other similar words (including their use in the negative), or by discussions of future 
matters such as the development of new products, technology enhancements, possible changes in legislation and 
other statements that are not historical. These statements include but are not limited to statements under the captions 
“Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and 
“Business,” as well as other sections in this report. You should be aware that the occurrence of any of the events 
discussed under the heading in Part I titled “Item 1A. Risk Factors” and elsewhere in this report could substantially 
harm our business, results of operations and financial condition and that if any of these events occurs, the trading 
price of our common stock could decline and you could lose all or a part of the value of your shares of our common 
stock.

The cautionary statements made in this report are intended to be applicable to all related forward-looking statements 
wherever they may appear in this report. We urge you not to place undue reliance on these forward-looking 
statements, which speak only as of the date of this report. Except as required by law, we assume no obligation to 
update our forward-looking statements, even if new information becomes available in the future.

3

Item 1. Business

Overview

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

Product Pipeline

Exclusive and Partnered Commercial Products

The following table summarizes our exclusive and partnered commercial products and is followed by detailed 
descriptions of each product:

INGREZZA (valbenazine)

We launched INGREZZA in the U.S. in May 2017, after receiving FDA approval for INGREZZA as the first FDA-
approved drug for the treatment of tardive dyskinesia in April 2017. INGREZZA provides a once-daily dosing 
treatment option for tardive dyskinesia and has two dosing options (40 mg and 80 mg capsules), with 40 mg taken 
for the first seven days of treatment and an option to take 40 mg or 80 mg thereafter, depending on the patient’s 
dosing needs.

In February 2021, Mitsubishi Tanabe Pharmaceutical Company, or MTPC, reported positive top-line results from 
the J-KINECT Phase III study, designed to evaluate the efficacy and safety of valbenazine in tardive dyskinesia. 
Detailed results from this trial will be presented at a future medical conference. With positive data in hand, a 
marketing authorization with the Ministry of Health and Welfare is planned for 2021 in Japan. In addition, MTPC 
submitted filings for marketing authorizations in South Korea, Thailand, Singapore, Indonesia, and Malaysia in 
2020.

Tardive dyskinesia is defined by hyperkinetic involuntary movements which arise after months or years of treatment 
with dopamine receptor blocking agents, such as antipsychotics used for treating schizophrenia, bipolar disorder and 
depression, and certain treatments for nausea, vomiting and gastric emptying in patients with gastroparesis. While 
the prevalence rates of tardive dyskinesia can vary greatly in accordance with the population being studied, it is 
estimated that over 500 thousand individuals are affected by tardive dyskinesia in the U.S. alone (Kantar Health).

4

INGREZZA net product sales totaled $993.1 million, $752.9 million and $409.6 million for 2020, 2019 and 2018, 
respectively, and represented the significant majority of our total net product sales for 2020 and all of our net 
product sales for 2019 and 2018.

ONGENTYS (opicapone)

We launched ONGENTYS in the U.S. in September 2020, after receiving FDA approval for ONGENTYS as an 
adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients in April 2020. 
We acquired the U.S. and Canada rights to ONGENTYS from BIAL – Portela & Ca, S.A., or BIAL, in the first 
quarter of 2017. 

ONGENTYS is a novel, once-daily, peripherally acting, highly selective Catechol-O-methyltransferase, or COMT, 
inhibitor utilized as an adjunct therapy to levodopa/carbidopa in patients with Parkinson’s disease experiencing 
motor fluctuations. COMT inhibitors are utilized to prolong the duration of effect of levodopa, the primary treatment 
option for Parkinson’s disease patients, during periods of the day where the effects of levodopa wear off and motor 
symptoms worsen, also referred to as “off-time.” Parkinson’s disease is a chronic and progressive movement 
disorder that affects approximately 1 million individuals in the U.S. alone.

ORILISSA (elagolix)

AbbVie Inc., or AbbVie, launched ORILISSA in the U.S. and Canada in August and November 2018, respectively, 
after receiving FDA and Health Canada approval for ORILISSA for the management of moderate to severe 
endometriosis pain in women in July and October 2018, respectively. Discovered and developed through Phase II 
clinical studies by us, we out-licensed the global rights to elagolix to AbbVie in 2010. 

The World Endometriosis Research Foundation estimates that there are over 170 million women worldwide who 
suffer from endometriosis, including approximately 7.5 million women in the U.S. alone.

ORIAHNN (elagolix, estradiol, and norethindrone acetate; elagolix)

AbbVie launched ORIAHNN in the U.S. in June 2020, after receiving FDA approval for ORIAHNN as the first 
FDA-approved non-surgical, oral medication option for the management of heavy menstrual bleeding associated 
with uterine fibroids in pre-menopausal women in May 2020. We out-licensed the global rights to elagolix to 
AbbVie in 2010.

Uterine fibroids are benign hormonally responsive tumors that form in the wall of the uterus with a prevalence rate 
of at least 25% (American College of Obstetricians and Gynecologists) and are a leading indication for hysterectomy 
in the U.S., with approximately 250,000 hysterectomies performed each year related to uterine fibroids (Whiteman 
et al AJOG 2008, 198, e1).

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Clinical Development Pipeline

The following table summarizes our clinical development pipeline and is followed by detailed descriptions of each
program:

Neurology

valbenazine – VMAT2 Inhibitor

VMAT2 is a protein concentrated in the human brain that is essential for the transmission of nerve impulses between
neurons. VMAT2 is primarily responsible for packaging and transporting monoamines (dopamine, norepinephrine,
serotonin and histamine) in neurons. Specifically, dopamine enables neurotransmission among nerve cells that are
involved in voluntary and involuntary motor control. Disease states such as tardive dyskinesia, Tourette syndrome,
Huntington’s chorea, schizophrenia, and tardive dystonia are characterized in part by a hyperdopaminergic state in
the brain, and modulation of neuronal dopamine levels may provide symptomatic benefits for patients with these
conditions, among others.

We are currently conducting the KINECT-HD study, a Phase III, randomized, placebo-controlled, double-blind,
multi-center Phase III clinical study to evaluate the efficacy, safety and tolerability of valbenazine for the treatment
of chorea in 120 patients with Huntington’s disease, or HD, with Phase III top-line data expected in the fourth
quarter of 2021.

HD is a hereditary progressive neurodegenerative disorder, in which neurons within the brain break down, resulting
in motor, cognitive and psychiatric symptoms. Symptoms generally appear between the ages of 30 to 50 and worsen
over a 10 to 25-year period. Many patients with HD experience chorea, a troublesome involuntary movement
disorder, in which patients develop abnormal, abrupt or irregular movements. Chorea can affect various body parts,
and interfere with speech, swallowing, posture and gait. HD is estimated to affect approximately 30,000 adults in the
U.S., with more than 200,000 at risk of inheriting the disease (NORD).

NBI-921352 (XEN901) – Nav1.6 Sodium Channel Inhibitor

NBI-921352 is a potent, highly selective Nav1.6 sodium channel inhibitor being developed to treat pediatric patients
with SCN8A-DEE and other potential indications, including adult focal epilepsy.

The safety, tolerability and pharmacokinetics of NBI-921352 have been evaluated in a randomized, double-blind,
placebo-controlled Phase I study using a powder-in-capsule formulation of NBI-921352 in healthy adult subjects.

6

Xenon has developed a pediatric-specific, granule formulation of NBI-921352, and completed juvenile toxicology 
studies to support pediatric development activities.

In October 2020, the FDA requested additional non-clinical data to support the IND we submitted in August 2020 in 
support of a Phase II clinical study for NBI-921352 in patients with SCN8A-DEE. Based on feedback received in 
January 2021, we plan to initiate a Phase II clinical study in adolescent patients (aged 12 years and older) with 
SCN8A-DEE in the third quarter of 2021, and the study protocol will be amended to include younger pediatric 
patients (aged 2-11 years) with SCN8A-DEE as soon as the FDA has reviewed and approved additional non-clinical 
information. We are also advancing clinical plans to initiate a Phase II clinical study of NBI-921352 for the 
treatment of adult focal epilepsy in 2021. In addition, in October 2020, we announced the FDA granted us Rare 
Pediatric Disease Designation for NBI-921352 for the treatment of SCN8A-DEE.

SCN8A-DEE is a rare, extremely severe, single-gene epilepsy caused by mutations in the SCN8A gene that activates 
Nav1.6, the most highly expressed sodium channel in the excitatory pathways of the central nervous system, or 
CNS. Children born with SCN8A-DEE typically start experiencing seizures between birth and 18 months of age, 
and most have multiple seizures per day. Other symptoms include learning difficulties, muscle spasms, low or high 
muscle tone, poor coordination, developmental delay, and features similar to autism. An estimated 10% of people 
with SCN8A are reported to have experienced sudden unexpected death in epilepsy. The prevalence of SCN8A-DEE 
is estimated to be 1% of all developmental and epileptic encephalopathies (Larsen et al, Neurology 2015, 84, 480). 
As SCN8A mutations were discovered only recently (i.e., in 2012), the number of SCN8A-DEE cases is expected to 
increase as awareness of and access to genetic surveillance increases. SCN8A-DEE is generally refractory to anti-
epilepsy treatments.

We are developing NBI-921352 with Xenon Pharmaceuticals Inc., or Xenon, as part of a strategic collaboration 
announced in December 2019.

NBI-827104 (ACT-709478) – T-type Calcium Channel Blocker

We acquired the global rights to NBI-827104 from Idorsia Pharmaceuticals Ltd., or Idorsia, in May 2020. 
NBI-827104 is a potent, selective, orally active and brain penetrating T-type calcium channel blocker, being 
developed for the treatment of a rare pediatric epilepsy and other potential indications, including essential tremor.

In November 2020, we initiated a Phase II clinical study for NBI-827104 in a rare pediatric epileptic encephalopathy 
known as Continuous Spike and Wave During Sleep, or CSWS. CSWS typically impacts children initially between 
the ages of two and four years old and manifests itself via a variety of seizure types, including atypical absence 
seizures, generalized tonic-clonic seizures and focal seizures that usually occur during sleep. In addition, children 
with CSWS often present with cognitive, behavioral and developmental regression or delay. Due to the 
differentiated mechanism of action of this molecule, when compared to non-selective calcium channel inhibitors, 
treatment with NBI-827104 could lead to an enhanced benefit risk profile for patients with this rare pediatric form of 
epilepsy. In parallel we are advancing clinical plans to initiate a Proof of Concept clinical study of NBI-827104 for 
the treatment of essential tremor in 2021.

Endocrinology

crinecerfont (NBI-74788) – CRF1 Antagonist

Crinecerfont is a potent, selective, orally active, corticotropin-releasing factor1, or CRF1, receptor antagonist as 
demonstrated in a range of in vitro and in vivo assays. CRF1, is a hypothalamic hormone released directly into the 
hypophyseal portal vasculature which acts on the CRF1 receptor, a G protein-coupled receptor, or GPCR, in the 
anterior pituitary to stimulate the release of adrenocorticotropin hormone, or ACTH. The primary role of ACTH is 
the stimulation of the synthesis and release of adrenal steroids, including cortisol. Cortisol from the adrenals have a 
negative feedback role at the level of the hypothalamus that decreases CRF1 release as well as at the level of the 
pituitary to inhibit the release of ACTH. This tight control loop is known as the hypothalamic-pituitary-adrenal axis. 
Blockade of CRF1 receptors at the pituitary has been shown to decrease the release of ACTH, which in turn 
decreases the production of adrenal steroids including androgens, and potentially the symptoms associated with 
classic CAH. Lower ACTH levels would also reduce the amount of exogenous corticosteroid necessary for classic 
CAH patients to thrive avoiding the side-effects currently associated with excessive steroid therapy. 

7

Classic CAH is a group of autosomal recessive genetic disorders that affects approximately 30 thousand people in 
the U.S. and approximately 50 thousand people in the EU, and results in an enzyme deficiency altering the 
production of adrenal steroids. Because of this deficiency, the adrenal glands have little to no cortisol biosynthesis 
resulting in a potentially life-threatening condition. If left untreated, classic CAH can result in salt wasting, 
dehydration, and eventually death. Even with cortisol replacement, persistent elevation of ACTH from the pituitary 
gland results in excessive androgen levels leading to virilization of females including precocious puberty, menstrual 
irregularity, short stature, hirsutism, acne and fertility problems.

Corticosteroids are the current standard of care for classic CAH and are used chronically to both correct the 
endogenous cortisol deficiency and to reduce the excessive ACTH levels and androgen excess. However, the dose 
and duration of steroid use required to suppress ACTH is well above the normal physiological level of cortisol; 
resulting in metabolic syndrome, bone loss, growth impairment, and Cushing’s syndrome as common and serious 
side effects. We have been granted orphan drug designation for crinecerfont in the treatment of classic CAH in the 
U.S. and the EU.

In June 2020, positive data from a completed Phase II, open-label, pharmacokinetic/pharmacodynamic clinical study 
of crinecerfont in adult patients with classic CAH, which assessed key pharmacodynamic biomarkers including 
ACTH, 17-hydroxyprogesterone (17-OHP), androgen and cortisol levels collected the morning following bedtime 
dosing on Day 1 and Day 14, demonstrated meaningful reductions in elevated ACTH and 17-hydroxyprogesterone 
(17-OHP) levels (by 54% to 75%) at all doses studied, together with a dose-related decrease in androstenedione (A4) 
levels, ranging from 21% to 64%. At the highest dose of crinecerfont (100 mg twice daily), 75% of patients showed 
a response of at least 50% reduction from baseline for each of the three hormone markers at day 14. Treatment with 
crinecerfont was well tolerated with a favorable safety profile with no related serious adverse events reported. 
Adverse events reported in two or more participants included headache, upper respiratory tract infection, fatigue, 
contusion, insomnia and nausea.

In July 2020, we initiated the CAHtalyst study, a global registrational Phase III, randomized, double-blind, placebo-
controlled clinical study to evaluate the safety and efficacy of crinecerfont in 165 adult patients with classic CAH, 
followed by an open-label treatment period. 

In July 2019, we initiated a Phase IIa proof-of-concept, pharmacokinetic/pharmacodynamic clinical study to 
evaluate the safety and tolerability of crinecerfont in pediatric patients with classic CAH. We plan to initiate a single 
global registrational Phase III clinical study for crinecerfont in pediatric patients with CAH in 2021.

elagolix – GnRH Antagonist

The gonadotropin-releasing hormone, or GnRH, is the endogenous peptide that binds to the GnRH receptor and 
stimulates the secretion of the pituitary hormones that are responsible for sex steroid production and normal 
reproductive function. Researchers have found that chronic administration of GnRH agonists, after initial 
stimulation, reversibly shuts down this transmitter pathway and is clinically useful in treating hormone-dependent 
diseases such as Polycystic Ovary Syndrome, or PCOS.

AbbVie initiated a Phase II clinical study of elagolix in patients with PCOS in mid-2019. The study is designed to 
evaluate whether there is a potential impact on disordered hormonal dynamics in women with PCOS. We out-
licensed the global rights to elagolix to AbbVie in 2010.

PCOS is one of the most common hormonal disorders among women of reproductive age, affecting approximately 
3.5 million women in the U.S. PCOS occurs when the ovaries or adrenal glands produce more male hormones 
(androgens) than normal. Women with PCOS experience irregular menstrual periods, infertility, pelvic pain, weight 
gain, acne and excess hair growth on the face, chest, stomach and thighs. There is no cure for PCOS, and treatment 
options are limited. If left untreated, PCOS can lead to certain cancers, diabetes and coronary artery disease. 

8

Psychiatry

We acquired the global rights to develop and commercialize NBI-1065844 (TAK-831), NBI-1065845 (TAK-653) 
and NBI-1065846 (TAK-041) from Takeda Pharmaceutical Company Limited, or Takeda, in June 2020.

NBI-1065844 (TAK-831) – DAAO Inhibitor

NBI-1065844 is a potential first-in-class D-Amino Acid Oxidase, or DAAO, inhibitor that has completed multiple 
Phase I clinical studies and is currently in on-going Phase II clinical studies, including the Phase II INTERACT 
proof-of-concept clinical study in negative symptoms of schizophrenia, with Phase II top-line data expected in the 
first quarter of 2021.

According to the World Health Organization, or WHO, 20 million people across the globe are affected by 
schizophrenia. In the U.S., the prevalence of schizophrenia is estimated to be approximately 0.6% of the population. 
The negative symptoms associated with schizophrenia describe a lessening or absence of behaviors and functions 
related to motivation and interest, or verbal and emotional expression. There are currently no approved treatment 
options in the U.S. for patients with predominant negative symptoms of schizophrenia.

NBI-1065844 is currently designated as a royalty-bearing product for Takeda. Takeda retains a one-time opt-in right 
for a 50:50 profit share arrangement upon achievement of a certain development event.

NBI-1065845 (TAK-653) – AMPA Potentiator

NBI-1065845 is a potential first-in-class Alpha-Amino-3-Hydroxy-5-Methyl-4-Isoxazole Propionic Acid, or AMPA, 
potentiator with the potential to be developed for treatment-resistant depression. NBI-1065845 has completed 
multiple Phase I clinical studies. We plan to initiate a Phase II clinical study of NBI-1065845 in treatment-resistant 
depression in 2021.

According to the WHO, major depressive disorder, or MDD, is one of the leading causes of disability. While there 
are a number of marketed treatments for MDD, approximately 1/3 of patients do not benefit from them. There is a 
significant need to develop new therapies with improved, faster onset of efficacy that are well tolerated. 

NBI-1065845 is currently designated as a 50:50 profit share product with Takeda. Takeda retains a one-time opt-out 
right to convert the designation to a royalty-bearing product dependent on a certain development event.

NBI-1065846 (TAK-041) – G Protein-Coupled Receptor 139 Agonist

NBI-1065846 is a potential first-in-class G Protein-Coupled Receptor 139, or GPR139, agonist with the potential to 
be developed for the treatment of anhedonia in depression. NBI-1065846 has completed multiple Phase I clinical 
studies. We plan to initiate a Phase II clinical study of NBI-1065846 in anhedonia in 2021.

Anhedonia is a psychological condition characterized by the inability to experience pleasure. In patients with 
depression, anhedonia often does not improve with current treatments and predicts lack of functional improvement. 

NBI-1065846 is currently designated as a 50:50 profit share product with Takeda. Takeda retains a one-time opt-out 
right to convert the designation to a royalty-bearing product dependent on a certain development event.

Research Programs

We invest in research and development in order to address diseases and disorders of the central nervous and 
endocrine systems, which include therapeutic categories ranging from hypothalamic-pituitary-adrenal disorders to 
stress-related disorders and neurological/neuropsychiatric diseases. CNS and endocrinology drug therapies are 
among the largest therapeutic categories, accounting for over $110 billion in drug sales in the U.S. alone according 
to IQVIA (2018).

9

Business Strategy

Our mission is to improve the lives of patients living with serious and under-addressed neurological, neuro-
endocrinology and psychiatry related diseases and disorders. The following are the key elements of our business 
strategy:

Commercializing Our Product Portfolio. In April 2017, we received approval from the FDA for INGREZZA for the 
treatment of tardive dyskinesia. In April 2020, we received FDA approval for ONGENTYS as an adjunctive therapy 
to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients. We market INGREZZA and 
ONGENTYS in the U.S. The commercial launch of INGREZZA occurred in May 2017 and ONGENTYS occurred 
in September 2020. We have built a specialty sales force in the U.S. of approximately 250 experienced sales 
professionals. This specialty sales force focuses on promotion to physicians, primarily psychiatrists and neurologists. 
Our commercial team is comprised of experienced professionals in marketing, access and reimbursement, managed 
markets, market research, commercial operations, and sales force planning and management. In addition, our 
commercial infrastructure includes capabilities in manufacturing, medical affairs, quality control and compliance. 
We intend to retain commercial rights to certain products, including INGREZZA, that we can effectively and 
efficiently develop, secure regulatory approval and commercialize, which includes products with a concentrated 
prescriber base and well-defined patient population that can be accessed with an efficient patient and prescriber 
outreach program.

Advancing Life-Changing Discoveries in Neurology, Neuro-Endocrinology and Psychiatry. We believe that by 
continuing to advance and extend our product pipeline, we can mitigate some of the clinical development risks 
associated with drug development. We currently have multiple programs in various stages of research and 
development, including symptomatic disease modifying and curative treatments. We take a portfolio approach to 
managing our pipeline that balances the size of the market opportunities with clear and defined clinical and 
regulatory paths to approval. By doing so, we focus our internal development resources on innovative therapies with 
improved probabilities of technical and commercial success.

Discovering Novel Medicines to Address Unmet Patient Needs. We seek to identify and validate new medicines on 
novel targets for internal development or collaboration. We believe the creativity and productivity of our discovery 
research group will continue to be a critical component for our ongoing success.

Acquiring Rights to Commercial Products, Drug Development Candidates and Technologies. We plan to continue to 
selectively acquire rights to programs at all stages of development and commercial products to take advantage of our 
drug development and commercial capabilities.

Corporate Collaborations and Strategic Alliances

One of our business strategies is to utilize strategic alliances to enhance our development and commercialization 
capabilities. The following is a summary of our significant collaborations/alliances:

Takeda. In June 2020, we entered into an exclusive license agreement with Takeda, which became effective in July 
2020, to develop and commercialize certain compounds in Takeda’s early to mid-stage psychiatry pipeline. 
Specifically, Takeda granted us an exclusive license to the following seven assets: (i) NBI-1065844 (TAK-831) for 
schizophrenia, (ii) NBI-1065845 (TAK-653) for treatment-resistant depression, (iii) NBI-1065846 (TAK-041) for 
anhedonia (which together with the NBI-1065845 are referred to as the Phase II Ready Assets), and (iv) four non-
clinical stage assets, or the Non-Clinical Assets.

NBI-1065844 is deemed a royalty-bearing product under the license agreement pursuant to which we will be 
responsible for all costs and expenses associated with the development, manufacture, and commercialization of such 
asset, subject to certain exceptions, and Takeda will be eligible to receive development and commercial milestones 
and royalties with respect to such asset, or a Royalty-Bearing Product, and Takeda will retain the right to opt-in to a 
profit sharing arrangement pursuant to which we and Takeda will equally share in the operating profits and losses 
related to such asset, subject to certain exceptions, in lieu of receiving milestones and royalties, or a Profit-Share 
Product. Subject to specified conditions, Takeda may elect to exercise such opt-in right for NBI-1065844 before we 
initiate a Phase III clinical trial. Each of the Phase II Ready Assets is deemed a Profit-Share Product and Takeda will 
retain the right to opt-out of the profit-sharing arrangement for such asset pursuant to which such asset would 
become a Royalty-Bearing Product. Takeda may elect to exercise such opt-out rights with respect to a Phase II 

10

Ready Asset immediately following the completion of the second Phase II clinical trial for such Phase II Ready 
Asset. In addition, under certain circumstances related to the development and commercialization activities to be 
performed by us, Takeda may elect to opt-out of the profit-sharing arrangement for a Profit-Share Product before the 
initiation of a Phase III clinical trial for such product.

Each of the Non-Clinical Assets will be Royalty-Bearing Products pursuant to which we will be responsible for all 
costs and expenses associated with the development, manufacture, and commercialization of such assets, subject to 
certain exceptions.

Unless earlier terminated, the license agreement will continue on a licensed product-by-licensed product and 
country-by-country basis until the date on which, (i) for any Royalty-Bearing Product, the royalty term has expired 
in such country; and (ii) for any Profit-Share Product, for so long as we continue to develop, manufacture, or 
commercialize such licensed product. We may terminate the license agreement for convenience in its entirety or in 
one or more (but not all) of the United States, Japan, the European Union, and the United Kingdom, or the Major 
Markets, on 6 months’ written notice to Takeda (i) with respect to all licensed products prior to the first commercial 
sale of the first licensed product for which first commercial sale occurs, or (ii) with respect to all licensed products 
in one or more given target classes, as defined in the agreement, prior to the first commercial sale of the first 
licensed product in such target class(es) for which first commercial sale occurs. We may terminate the license 
agreement for convenience in its entirety or in one or more (but not all) of the Major Markets on 12 months’ written 
notice to Takeda (i) with respect to all licensed products following the first commercial sale of the first licensed 
product for which first commercial sale occurs, or (ii) with respect to all licensed products in one or more given 
target classes following the first commercial sale of the first licensed product in such target class(es) for which first 
commercial sale. Takeda may terminate the license agreement, subject to specified conditions, (i) if we challenge the 
validity or enforceability of certain Takeda intellectual property rights or (ii) on a target class-by-target class basis, 
in the event that we do not conduct any material development or commercialization activities with respect to any 
licensed product within such target class for a specified continuous period. Subject to a cure period, either party may 
terminate the license agreement in the event of any material breach, solely with respect to the target class of a 
licensed product to which such material breach relates, or in its entirety in the event of any material breach that 
relates to all licensed products.

Idorsia. We acquired the global rights to NBI-827104 from Idorsia in May 2020. NBI-827104 is a potent, selective, 
orally active and brain penetrating T-type calcium channel blocker, being developed for the treatment of a rare 
pediatric epilepsy and other potential indications, including essential tremor. The agreement also included a research 
collaboration to discover and identify additional novel T-type calcium channel blockers as development candidates. 
Under the terms of the agreement, we are responsible for all manufacturing, development and commercialization 
costs of any collaboration product. We may terminate the collaboration and licensing agreement, in its entirety or 
with respect to a particular compound or development candidate, by providing 90 days’ written notice to Idorsia. 
Further, in the event a party commits a material breach and fails to cure such material breach within 90 days after 
receiving written notice thereof, the non-breaching party may terminate the agreement in its entirety immediately 
upon written notice to the breaching party.

Xenon. In December 2019, we entered into a license and collaboration agreement with Xenon to identify, research, 
and develop sodium channel inhibitors, including clinical candidate NBI-921352 and three preclinical candidates, 
which compounds we will have the exclusive right to further develop and commercialize under the terms and 
conditions set forth in the agreement.

We will be solely responsible, at our sole cost and expense, for all development and manufacturing of the 
compounds and any pharmaceutical product that contains a compound, subject to Xenon’s right to elect to co-fund 
the development of one product in a major indication and thus receive a mid-single digit percentage increase in 
royalties owed on the net sales of such product in the U.S. If Xenon exercises such option, the parties will share 
equally all reasonable and documented costs and expenses incurred in connection with the development of such 
product in the applicable indication, except costs and expenses that are solely related to the development of such 
product for regulatory approval outside the U.S.

Unless earlier terminated, the term of the license and collaboration agreement will continue on a product-by-product 
and country-by-country basis until the expiration of the royalty term for such product in such country. Upon the 
expiration of the royalty term for a particular product and country, the exclusive license granted by Xenon to us with 

11

respect to such product and country will become fully paid, royalty free, perpetual, and irrevocable. We may 
terminate the license and collaboration agreement by providing at least 90 days’ written notice, provided that such 
unilateral termination will not be effective for certain products until we have used commercially reasonable efforts 
to complete certain specified clinical studies. Either party may terminate the agreement in the event of a material 
breach in whole or in part, subject to specified conditions.

Voyager. We entered into a collaboration and license agreement with Voyager, a clinical-stage gene therapy 
company, which became effective in March 2019. The agreement is focused on the development and 
commercialization of four programs using Voyager’s proprietary gene therapy platform. The four programs consist 
of the following: NBIb-1817 for Parkinson’s disease, the Friedreich’s ataxia program and two undisclosed programs.

Pursuant to development plans agreed to by us and Voyager, unless Voyager exercises its co-development and co-
commercialization rights as provided for in the agreement, we will be responsible for all development costs. Further, 
upon the occurrence of a specified event for each program, we will assume responsibility for the development, 
manufacturing, and commercialization activities of such program.

On February 2, 2021, we notified Voyager of our termination of the NBIb-1817 for Parkinson’s disease program. 
The effective date of this termination will be August 2, 2021. The termination does not apply to any other 
development program other than NBIb-1817 for Parkinson’s disease, and our collaboration and license agreement 
with Voyager will otherwise continue in effect. With respect to the other programs, we may terminate the 
collaboration and license agreement with Voyager upon 180 days written notice to Voyager prior to the first 
commercial sale of any collaboration product or upon 1 year after the date of notice if such notice is provided after 
the first commercial sale of any collaboration product. Unless terminated earlier, the agreement will continue in 
effect until the expiration of the last to expire royalty term with respect to any collaboration product or the last 
expiration or termination of any exercised co-development and co-commercialization rights by Voyager as provided 
for in the agreement.

BIAL. We acquired the U.S. and Canada rights to ONGENTYS from BIAL in the first quarter of 2017. We 
launched ONGENTYS in the U.S. in September 2020, after receiving FDA approval for ONGENTYS as an 
adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients in April 2020.

Under the terms of the agreement, we are responsible for the commercialization of ONGENTYS in the U.S. and 
Canada. Further, we rely on BIAL for the commercial supply of ONGENTYS. Upon our written request prior to the 
estimated expiration of the term of a licensed product, the parties shall negotiate a good faith continuation of BIAL’s 
supply of such licensed product after the term. After the term, and if BIAL is not supplying a certain licensed 
product, we shall pay BIAL a trademark royalty based on the net sales of such licensed product.

Upon commercialization of ONGENTYS, we determined certain annual sales forecasts. In the event we fail to meet 
the minimum sales requirements for a particular year, we would be obligated to pay BIAL an amount equal to the 
difference between the actual net sales and minimum sales requirements for such year.

Unless earlier terminated, the agreement will continue on a licensed product-by-product and country-by-country 
basis until a generic product in respect of such licensed product under the agreement is sold in a country and sales of 
such generic product are greater than a specified percentage of total sales of such licensed product in such country.

Either party may terminate the agreement if the other party materially breaches the agreement and does not cure the 
breach within a specified notice period, or upon the other party’s insolvency. BIAL may terminate the agreement if 
we fail to use commercially reasonable efforts to submit a new drug application, or NDA, for a licensed product by a 
specified date, in the event we fail to meet the minimum sales requirements for any two years, or under certain 
circumstances involving a change of control of Neurocrine Biosciences. Under certain circumstances where BIAL 
elects to terminate the agreement in connection with a change of control of Neurocrine Biosciences, BIAL would be 
obligated to pay us a termination fee. We may terminate the agreement at any time for any reason upon nine months’ 
written notice to BIAL.

MTPC. In March 2015, we entered into a collaboration and license agreement with MTPC for the development and 
commercialization of INGREZZA for movement disorders in Japan and other select Asian markets. Under the terms 
of the agreement, MTPC is responsible for all development, marketing and commercialization costs in Japan and 
other select Asian markets, with the exception of a single Huntington’s chorea study to be performed by us. We will 

12

be entitled to a percentage of sales of INGREZZA in Japan and other select Asian markets for the longer of ten years 
or the life of the related patent rights. MTPC may terminate the agreement at its discretion upon 180 days’ written 
notice to us. In such event, all INGREZZA product rights for Japan and other select Asian markets would revert to 
us.

AbbVie. In June 2010, we entered into an exclusive worldwide collaboration with AbbVie to develop and 
commercialize elagolix and all next-generation GnRH antagonists, or collectively the GnRH Compounds, for 
women’s and men’s health.

AbbVie received approval of ORILISSA for the management of moderate to severe endometriosis pain in women 
from the FDA in July 2018 and Health Canada in October 2018. In May 2020, AbbVie received approval from the 
FDA for ORIAHNN for the management of heavy menstrual bleeding associated with uterine fibroids in pre-
menopausal women.

Under the terms of the agreement, AbbVie is responsible for all third-party development, marketing, and 
commercialization costs. We are entitled to a percentage of worldwide sales of GnRH Compounds for the longer of 
ten years or the life of the related patent rights. AbbVie may terminate the collaboration at its discretion upon 180 
days’ written notice to us.

Intellectual Property

We actively seek to protect our products and product candidates and related inventions and improvements that we 
consider important to our business. We own a portfolio of U.S and non-U.S. patents and patent applications and 
have licensed rights to a number of U.S. and non-U.S. patents and patent applications. Our owned and licensed 
patents and patent applications cover or relate to our products and product candidates, including certain 
formulations, used to treat particular conditions and methods of administration, drug delivery technologies and 
delivery profiles and methods of manufacturing.

We own or have licensed rights to the following U.S. patents relating to INGREZZA and our other products and 
product candidates in our pipeline (in addition to non-U.S. patents and certain patents covering our early-stage 
product candidates):

•

•

•

•

•

INGREZZA, our highly selective VMAT2 inhibitor for the treatment of tardive dyskinesia, is covered by 
eight issued U.S. patents that are listed in the FDA’s Orange Book and are set to expire between 2027 and 
2037. There is also a potential patent term extension of up to an additional two years for U.S. Patent No. 
8,039,627, which is currently set to expire in 2029 and is the earliest patent covering valbenazine, the active 
pharmaceutical ingredient contained in INGREZZA. In Japan and certain other East Asian markets, we are 
actively pursuing most of the patents corresponding to those listed in the FDA’s Orange Book entry for 
INGREZZA.

ONGENTYS, a highly selective COMT inhibitor for Parkinson’s disease, is covered by nine issued U.S. 
patents that are listed in the FDA’s Orange Book and set to expire between 2026 to 2035 (not including a 
potential patent term extension of up to an additional four years for one of these patents).

ORILISSA, our small molecule GnRH antagonist for the treatment of endometriosis pain, is covered by 
eight issued U.S. patents that are listed in the FDA’s Orange Book and are set to expire between 2021 to 
2036 (not including a potential patent term extension of up to an additional five years for one of the patents 
currently set to expire either in 2021 or 2024). 

ORIAHNN, containing our small molecule GnRH antagonist for the treatment of menstrual bleeding 
associated with uterine fibroids, is covered by six issued U.S. patents that are listed in the FDA’s Orange 
Book and are set to expire between 2021 to 2024 (not including a potential patent term extension of up to 
an additional five years for one of the patents).

Valbenazine, our highly selective VMAT2 inhibitor under further clinical development for the treatment of 
chorea in Huntington’s disease, is covered by at least six of the issued U.S. patents that are listed in the 
FDA’s Orange Book entry for INGREZZA and are set to expire between 2027 and 2036 . There is also a 
potential patent term extension of up to an additional two years for U.S. Patent No. 8,039,627, which is 
currently set to expire in 2029. 

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•

•

•

•

•

•

•

Crinecerfont, our CRF1 antagonist for the treatment of CAH, is covered by U.S. Patent No. 10,905,690, 
which expires in 2035 (not including a potential patent term extension of up to an additional five years).

NBI-1065844, a DAAO inhibitor for the treatment of negative symptoms of schizophrenia, is covered by 
U.S. Patent No. 9,290,456, among others, which expires in 2032 (not including a potential patent term 
extension of up to an additional five years).

NBI-827104, an inhibitor of T-type calcium channels for the treatment of CSWS epilepsy, is covered by 
U.S. Patent No. US 9,932,314, among others, which expires in 2035 (not including a potential patent term 
extension of up to an additional five years).

NBI-921352, an inhibitor of the Nav1.6 voltage-gated sodium channel for the treatment of SCN8A-DEE 
epilepsy, is covered by U.S. Patent No. US 10,246,453, among others, which expires in 2037 (not including 
a potential patent term extension of up to an additional five years).

Elagolix, our small molecule GnRH antagonist under further development for the treatment of polycystic 
ovary syndrome, is covered by six of the issued U.S. patents that are listed in the FDA’s Orange Book entry 
for ORILISSA and are set to expire between 2021 to 2024 (not including a potential patent term extension 
of up to an additional five years for one of the patents).

NBI-1065845, a positive allosteric modulator of AMPA for the treatment of treatment-resistant depression 
is covered by U.S. Patent No. 8,778,934, among others, which expires in 2031 (not including a potential 
patent term extension of up to an additional five years).

NBI-1065846, a GPR139 agonist for the treatment of anhedonia in depression, is covered by U.S. Patent 
No. 9,556,130, among others, which expires in 2035 (not including a potential patent term extension of up 
to an additional five years).

In addition to the potential patent term extensions referenced above, the products and product candidates in our 
pipeline may be subject to additional terms of exclusivity that we might obtain by future patent issuances.

Separately, the U.S., the European Union, or EU, and Japan all provide data and marketing exclusivity for new 
medicinal compounds. If this protection is available, no competitor may use the original applicant’s data as the basis 
of a generic marketing application during the period of data and marketing exclusivity, which is measured from the 
date of marketing approval by the FDA or corresponding foreign regulatory authority. This period of exclusivity is 
generally five years in the U.S., six years in Japan and ten years in the EU, except that for biologics, this period of 
exclusivity in the U.S. is twelve years under the Biologics Price Competition and Innovation Act. In addition, if 
granted orphan drug designation, certain of our product candidates, including crinecerfont, may also be eligible for 
market exclusivity in the U.S. and EU for seven years and ten years, respectively.

Manufacturing and Supply

We currently rely on, and intend to continue to rely on, third-party manufacturers for the production of INGREZZA 
and our product candidates. Raw materials, active pharmaceutical ingredients, or API, and other supplies required 
for the production of INGREZZA and our product candidates are procured from various third-party manufacturers 
and suppliers in quantities adequate to meet our needs. Continuing adequate supply of such raw materials and API is 
assured through our long-term commercial supply and manufacturing agreements with multiple manufacturers and 
our continued focus on the expansion and diversification of our third-party manufacturing relationships. In addition, 
under the terms of our agreement with BIAL, we rely on BIAL and its suppliers to supply all drug product for the 
commercialization of ONGENTYS.

We believe our outsource manufacturing strategy enables us to direct our financial resources to the maximization of 
our opportunities with INGREZZA and ONGENTYS, investment in our internal R&D programs and expansion of 
our clinical pipeline through business development opportunities.

Our third-party manufacturers, suppliers and service providers may be subject to routine current Good 
Manufacturing Practice, or cGMP, inspections by the FDA or comparable agencies in other jurisdictions. We depend 
on our third-party partners for continued compliance with cGMP requirements and applicable foreign standards.

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Marketing, Sales and Distribution

Our sales force in the U.S. consists of approximately 250 experienced sales professionals focused on educating 
health care professionals, including psychiatrists and neurologists, who treat patients with tardive dyskinesia and 
Parkinson’s disease.

For INGREZZA, our customers in the U.S. consist of a limited network of specialty pharmacy providers that deliver 
INGREZZA to patients by mail and a specialty distributor that distributes INGREZZA primarily to closed-door 
pharmacies and government facilities. For ONGENTYS, our customers in the U.S. consist primarily of wholesale 
distributors. We rely on third-party service providers to perform a variety of functions related to the packaging, 
storage and distribution of INGREZZA and ONGENTYS.

Government Regulation

Our business activities are subject to extensive regulation by the U.S. and other countries. Regulation by government 
authorities in the U.S. and foreign countries is a significant factor in the development, manufacture, distribution, 
tracking, marketing and sale of our proposed products and in our ongoing research and product development 
activities. All of our products in development will require regulatory approval by government agencies prior to 
commercialization. The process of obtaining these approvals and the subsequent compliance with appropriate 
federal and state statutes and regulations require the expenditure of substantial time and financial resources.

In addition, federal and state healthcare laws restrict business practices in the pharmaceutical industry. These laws 
include, without limitation, federal and state fraud and abuse laws, false claims laws, data privacy and security laws, 
as well as transparency laws regarding payments or other items of value provided to healthcare providers. We have a 
comprehensive compliance program designed to ensure our business practices remain compliant.

The federal Anti-Kickback Statute makes it illegal for any person or entity to knowingly and willfully, directly or 
indirectly, solicit, receive, offer, or pay any remuneration that is intended to induce the referral of business, 
including the purchase, order, lease of any good, facility, item or service for which payment may be made under a 
federal healthcare program, such as Medicare or Medicaid.

Federal civil and criminal false claims laws and the federal civil monetary penalties law, which prohibit among other 
things, any person or entity from knowingly presenting, or causing to be presented, for payment to, or approval by, 
federal programs, including Medicare and Medicaid, claims for items or services, including drugs, that are false or 
fraudulent or not provided as claimed and knowingly making, or causing to be made, a false record or to avoid or 
decrease an obligation to pay money to the federal government.

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal 
statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to 
defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, 
concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in 
connection with the delivery of or payment for healthcare benefits, items or services.

In addition, we may be subject to HIPPA, as amended by the Health Information Technology for Economic and 
Clinical Health Act of 2009, or HITECH, and their privacy and security regulations, which impose certain 
obligations, including the adoption of administrative, physical and technical safeguards to protect individually 
identifiable health information on covered entities subject to HIPPA (i.e., health plans, healthcare clearinghouses 
and certain healthcare providers) and their business associates that perform certain services for or on their behalf 
involving the use or disclosure of individually identifiable health information as we as their covered subcontractors.

The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and 
medical supplies to report annually to the Centers for Medicare and Medicaid Services, or CMS, information related 
to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, 
podiatrists and chiropractors) and teaching hospitals, and applicable entities to report ownership and investment 
interests held by the physicians and their immediate family members. Beginning in 2022, such obligations will 
include payments and other transfers of value provided in the previous year to certain other healthcare professionals, 
including physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified 
nurse anesthetists, and certified nurse-midwives.

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Also, many states have similar healthcare statutes or regulations that may be broader in scope and may apply 
regardless of payor. Additionally, to the extent that our product is sold in a foreign country, we may be subject to 
similar foreign laws.

Failure to comply with these laws, where applicable, can result in significant penalties, including the imposition of 
significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, imprisonment, 
possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, and additional 
reporting requirements and regulatory oversight, any of which could adversely affect our ability to operate our 
business and our results of operations.

Development and Marketing Approval for Products

Preclinical studies generally are conducted in laboratory animals to evaluate the potential safety and efficacy of a 
product. Drug developers submit the results of preclinical studies to the FDA as a part of an investigational new 
drug, or IND, application before clinical trials can begin in humans. Typically, clinical evaluation involves a time 
consuming and costly three-phase process.

Phase I Clinical trials are conducted with a small number of subjects to determine the early safety profile, 

maximum tolerated dose and pharmacokinetic properties of the product in human volunteers and for 
certain products, such as gene therapies, in patients with the target disease.

Phase II Clinical trials are conducted with groups of patients afflicted with a specific disease in order to determine 

preliminary efficacy, optimal dosages and expanded evidence of safety.

Phase III Larger, multi-center, comparative clinical trials are conducted with patients afflicted with a specific 

disease in order to determine safety and efficacy as primary support for regulatory approval by the FDA 
to market a product candidate for a specific disease.

The FDA closely monitors the progress of each of the three phases of clinical trials that are conducted in the U.S. 
and may, at its discretion, re-evaluate, alter, suspend or terminate the testing based upon the data accumulated to that 
point and the FDA’s assessment of the risk/benefit ratio to the patient. Institutional Review Boards, Institutional 
Ethics Committees, and Data Safety Monitoring Boards also closely monitor the conduct of our trials and may also 
place holds on our clinical trials or recommend that we voluntarily do so. Clinical trials conducted in foreign 
countries are also subject to oversight by regulatory authorities in those countries.

Once Phase III trials are completed, drug developers submit the results of preclinical studies and clinical trials to the 
FDA in the form of an NDA or a biologics license application, or BLA, for approval to commence commercial sales. 
In most cases, the submission of an NDA or BLA is subject to a substantial application user fee. Under the 
Prescription Drug User Fee Act, or PDUFA, the FDA has a goal of ten months from the date of filing of a standard 
NDA for a new molecular entity to review and act on the submission. The FDA generally has a six-month review 
goal of priority NDAs.

In addition, under the Pediatric Research Equity Act of 2003 as amended and reauthorized, certain applications or 
supplements to an application must contain data that are adequate to assess the safety and effectiveness of the drug 
for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for 
each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at 
the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the 
product for use in adults or full or partial waivers from the pediatric data requirements.

The FDA also may require submission of a risk evaluation and mitigation strategy to ensure that the benefits of the 
drug outweigh its risks. The risk evaluation and mitigation strategy could include medication guides, physician 
communication plans, assessment plans, and/or additional elements to assure safe use, such as restricted distribution 
methods, patient registries, or other risk minimization tools.

The FDA conducts a preliminary review of all NDAs and BLAs within the first 60 days after submission, before 
accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The 
FDA may request additional information rather than accept an application for filing. Once the submission is 
accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA or BLA to determine, 
among other things, whether the drug is safe and effective for its intended use and whether the facility in which it is 

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manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, 
quality and purity.

The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of 
independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a 
recommendation as to whether the application should be approved and under what conditions. The FDA is not 
bound by the recommendations of an advisory committee, but it considers such recommendations carefully when 
making decisions.

Before approving an NDA or BLA, the FDA typically will inspect the facility or facilities where the product is 
manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and 
facilities are in compliance with current Good Manufacturing Practice requirements and adequate to assure 
consistent production of the product within required specifications. Additionally, before approving an NDA or BLA, 
the FDA may inspect one or more clinical trial sites to assure compliance with Good Clinical Practice requirements.

After evaluating the NDA or BLA and all related information, including the advisory committee recommendation, if 
any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an 
approval letter, or, in some cases, a complete response letter. A complete response letter generally contains a 
statement of specific conditions that must be met in order to secure final approval of the application and may require 
additional clinical or preclinical testing in order for FDA to reconsider the application. Even with submission of this 
additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for 
approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an 
approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing 
information for specific indications.

Even if the FDA approves a product, it may limit the approved indications for use of the product, require that 
contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, 
including Phase IV clinical trials, be conducted to further assess a drug’s safety after approval, require testing and 
surveillance programs to monitor the product after commercialization, or impose other conditions, including 
distribution and use restrictions or other risk management mechanisms under a risk evaluation and mitigation 
strategy, which can materially affect the potential market and profitability of the product. The FDA may prevent or 
limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After 
approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, 
and additional labeling claims, are subject to further testing requirements and FDA review and approval.

We will also have to complete an approval process similar to that in the U.S. in order to commercialize our product 
candidates in each foreign country. The approval procedure and the time required for approval vary from country to 
country and may involve additional testing. Foreign approvals may not be granted on a timely basis, or at all. In 
addition, regulatory approval of prices is required in most countries other than the U.S. The resulting prices may not 
be sufficient to generate an acceptable return to us or our corporate collaborators.

In the EU, there are currently two potential tracks for seeking marketing approval for a product not authorized in any 
EU member state: a decentralized procedure and a centralized procedure. In the decentralized procedure, identical 
applications for marketing authorization are submitted simultaneously to the national regulatory agencies. 
Regulatory review is led by one member state (the reference-member state), and its assessment—based on safety, 
quality and efficacy—is reviewed and approved (assuming there are no concerns that the product poses a serious 
risk to public health) by the other member states from which the applicant is seeking approval (the concerned-
member states). The decentralized procedure leads to a series of single national approvals in all relevant countries. In 
the centralized procedure, which is required of all products derived from biotechnology, a company submits a single 
marketing authorization application to the European Medicines Agency, or EMA, which conducts an evaluation of 
the dossier, drawing upon its scientific resources across Europe. If the drug product is proven to fulfill the 
requirements for quality, safety and efficacy, the EMA’s Committee for Medicinal Products of Human Use, or 
CHMP, adopts a positive opinion, which is transmitted to the European Commission for final decision on grant of 
the marketing authorization. While the EC generally follows the CHMP’s opinion, it is not bound to do so. 
Subsequent commercialization is enabled by country-by-country reimbursement approval.

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Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or 
condition, which is a disease or condition that affects fewer than 200,000 individuals in the U.S., or if it affects more 
than 200,000, there is no reasonable expectation that sales of the drug in the U.S. will be sufficient to offset the costs 
of developing and making the drug available in the U.S. Orphan drug designation must be requested before 
submitting an NDA or BLA. Orphan drug designation does not convey any advantage in or shorten the duration of 
the regulatory review and approval process.

If the FDA approves a sponsor’s marketing application for a designated orphan drug for use in the rare disease or 
condition for which it was designated, the sponsor is eligible for a seven-year period of marketing exclusivity, 
during which the FDA may not approve another sponsor’s marketing application for a drug with the same active 
moiety and intended for the same use or indication as the approved orphan drug, except in limited circumstances, 
such as if a subsequent sponsor demonstrates its product is clinically superior. During a sponsor’s orphan drug 
exclusivity period, competitors, however, may receive approval for drugs with different active moieties for the same 
indication as the approved orphan drug, or for drugs with the same active moiety as the approved orphan drug, but 
for different indications. Orphan drug exclusivity could block the approval of one of our products for seven years if 
a competitor obtains approval for a drug with the same active moiety intended for the same indication before we do, 
unless we are able to demonstrate that grounds for withdrawal of the orphan drug exclusivity exist, or that our 
product is clinically superior. Further, if a designated orphan drug receives marketing approval for an indication 
broader than the rare disease or condition for which it received orphan drug designation, it may not be entitled to 
exclusivity.

Legislation similar to the Orphan Drug Act has been enacted in other countries outside of the United States, 
including the EU. The orphan legislation in the EU is available for therapies addressing conditions that affect five or 
fewer out of 10,000 persons, are life‑threatening or chronically debilitating conditions and for which no satisfactory 
treatment is authorized. The market exclusivity period is for ten years, although that period can be reduced to six 
years if, at the end of the fifth year, available evidence establishes that the product does not justify maintenance of 
market exclusivity.

Post-Approval Requirements

Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by 
the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product 
sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After 
approval, most changes to the approved product, such as adding new indications or other labeling claims are subject 
to prior FDA review and approval. There also are continuing, annual program user fee requirements for any 
marketed products, as well as new application fees for supplemental applications with clinical data.

The FDA may impose a number of post-approval requirements as a condition of approval of an NDA or BLA. For 
example, the FDA may require post-marketing testing, including Phase IV clinical trials, and surveillance to further 
assess and monitor the product’s safety and effectiveness after commercialization.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs 
are required to register their establishments with the FDA and state agencies and are subject to periodic 
unannounced inspections by the FDA and these state agencies for compliance with current Good Manufacturing 
Practices, or cGMP, requirements. Changes to the manufacturing process are strictly regulated and often require 
prior FDA approval before being implemented. FDA regulations also require investigation and correction of any 
deviations from cGMP requirements and impose reporting and documentation requirements upon the sponsor and 
any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to 
expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and 
standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously 
unknown problems with a product, including adverse events of unanticipated severity or frequency, or with 
manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to 
the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess 

18

new safety risks; or imposition of distribution or other restrictions under a risk evaluation and mitigation strategy 
program. Other potential consequences include, among other things:

•

•

•

•

•

restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the 
market or product recalls;

fines, warning letters or holds on post-approval clinical trials;

refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or 
revocation of product approvals;

product seizure or detention, or refusal to permit the import or export of products; or

injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. 
Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved 
label. However, companies may share truthful and not misleading information that is otherwise consistent with a 
product’s FDA approved labeling. The FDA and other agencies actively enforce the laws and regulations prohibiting 
the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be 
subject to significant liability. Physicians may prescribe legally available products for uses that are not described in 
the product’s labeling and that differ from those tested by us and approved by the FDA. The FDA does not regulate 
behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s 
communications on the subject of off-label use of their products.

Additional Regulation for Gene Therapy Products

In addition to the regulations discussed above, there are a number of standards that apply to gene therapy. FDA has 
issued various guidance documents regarding gene therapies, which outline factors that FDA will consider at each of 
the stages of development and relate to, among other things: the proper preclinical assessment of gene therapies; the 
chemistry, manufacturing and controls information that should be included in an IND application; the proper design 
of tests to measure product potency in support of an IND or BLA; and measures to observe delayed adverse effects 
in subjects who have been exposed to investigational gene therapies when the risk of such effects is high. For 
instance, FDA usually recommends that sponsors observe all surviving subjects who receive treatment using gene 
therapies that are based on adeno-associated virus vectors in clinical trials for potential gene therapy-related delayed 
adverse events for a minimum five-year period, followed by 10 years of annual queries, either in person or by 
questionnaire. FDA does not require the long-term tracking to be complete prior to its review of the BLA.

In addition to FDA oversight and oversight by institutional review boards, gene therapy clinical trials are also 
subject to review and oversight by an institutional biosafety committee, or IBC, a local institutional committee that 
reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC 
assesses the safety of the research and identifies any potential risk to public health or the environment.

Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we 
obtain regulatory approval. In the U.S. and markets in other countries, sales of any products for which we receive 
regulatory approval will depend, in part, on the extent to which third-party payors provide coverage and establish 
adequate reimbursement levels for such drug products.

In the U.S., third-party payors include federal and state healthcare programs, government authorities, private 
managed care providers, private health insurers and other organizations. No uniform policy for coverage and 
reimbursement exists in the United States, and coverage and reimbursement can differ significantly from payor to 
payor. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own 
reimbursement rates, but also have their own methods and approval process apart from Medicare determinations. As 
a result, the coverage determination process is often a time-consuming and costly process that will require us to 
provide scientific and clinical support for the use of our drug products to each payor separately, with no assurance 
that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

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Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-
effectiveness of medical drug products and medical services, in addition to questioning their safety and efficacy. 
Such payors may limit coverage to specific drug products on an approved list, also known as a formulary, which 
might not include all of the FDA-approved drugs for a particular indication. We may need to conduct expensive 
pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in 
addition to the costs required to obtain the FDA approvals. Nonetheless, our products or product candidates, 
including INGREZZA, may not be considered medically necessary or cost-effective.

Moreover, the process for determining whether a third-party payor will provide coverage for a drug product may be 
separate from the process for setting the price of a drug product or for establishing the reimbursement rate that such 
a payor will pay for the drug product. A payor’s decision to provide coverage for a drug product does not imply that 
an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug 
product does not assure that other payors will also provide coverage for the drug product. Adequate third-party 
payor reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate 
return on our investment in product development.

The marketability of any product or product candidates for which we or our collaborators receive regulatory 
approval for commercial sale may suffer if third-party payors fail to provide coverage and adequate reimbursement. 
In addition, emphasis on managed care in the U.S. has increased and we expect will continue to increase the pressure 
on pharmaceutical pricing. Coverage policies and third-party payor reimbursement rates may change at any time. 
Even if favorable coverage and reimbursement status is attained for one or more products for which we receive 
regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Healthcare Reform

The U.S. and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory 
proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. 
Among policy makers and payors in the U.S. and elsewhere, there is significant interest in promoting changes in 
healthcare systems with the stated goals of containing healthcare costs, improving quality or expanding access. In 
the U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected 
by major legislative initiatives.

By way of example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care 
and Education Reconciliation Act of 2010, 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 fraud 
and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees 
on the health industry and impose additional health policy reforms.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result 
in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that 
we receive for any approved product. Any reduction in reimbursement from Medicare or other government-funded 
programs may result in a similar reduction in payments from private third-party payor.

There remain legal and political challenges to certain aspects of the ACA. Since January 2017, the Trump 
administration signed several executive orders and other directives designed to delay, circumvent, or loosen certain 
requirements mandated by the ACA. Concurrently, Congress considered legislation that would repeal or repeal and 
replace all or part of the ACA. Legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, includes a 
provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA 
on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly 
referred to as the “individual mandate”. In addition, the 2020 federal spending package permanently eliminated, 
effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and 
medical device tax and, effective January 1, 2021, also eliminated the health insurer tax. On December 14, 2018, a 
Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual 
mandate” was repealed by Congress as part of the Tax Cuts and Jobs Act. Additionally, on December 18, 2019, the 
U.S. Court of Appeals for the 5th Circuit ruled that the individual mandate was unconstitutional and remanded the 
case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. The 

20

U.S. Supreme Court is currently reviewing this case, although it is unclear when a decision will be made. It is also 
unclear how such litigation will impact the ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include, 
among others, aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the 
Budget Control Act of 2011, which began in 2013 and will remain in effect through 2030, except for a temporary 
suspension from May 1, 2020 through May 31, 2021 due to the COVID-19 pandemic, unless additional 
Congressional action is taken.

Also, there has been heightened governmental scrutiny recently over pharmaceutical pricing practices in light of the 
rising cost of prescription drugs and biologics. Such scrutiny has resulted in several Congressional hearings and 
proposed and enacted federal and state legislation designed to, among other things, bring more transparency to 
product pricing, review the relationship between pricing and manufacturer patient programs, and reform government 
program reimbursement methodologies for products. Both the U.S. House of Representatives and the Senate Finance 
Committee passed legislation in 2019 to reform pharmaceutical pricing in a variety of meaningful ways, and we 
expect legislative efforts to reform drug pricing to continue in 2021.

At the federal level, the Trump administration’s budget proposal for fiscal year 2021 included a $135 billion 
allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket 
drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, 
the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would, among 
other things, cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical 
price increases. Additionally, the Trump administration previously released a “Blueprint” to lower drug prices and 
reduce out-of-pocket costs of drugs. On July 24, 2020 and September 13, 2020, the Trump administration announced 
several executive orders related to drug pricing that sought to implement several of the administration’s proposals. 
As a result, the FDA released a final rule on September 24, 2020, effective November 30, 2020, providing guidance 
for states to build and submit importation plans for drugs from Canada. This rule is undergoing legal challenge.

Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions 
from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit 
managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions 
reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit 
managers and manufacturers. This rule has been stayed until 2023 while pending litigation is heard in the courts.

On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation 
executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest 
price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the United 
States District Court in Northern California issued a nationwide preliminary injunction against implementation of 
the interim final rule. Two additional lawsuits in other jurisdictions are challenging the legality of this rule. 

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control 
pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, 
restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, 
designed to encourage importation from other countries and bulk purchasing. Further, it is possible that additional 
governmental action is taken in response to the COVID-19 pandemic.

Competition

The biotechnology and pharmaceutical industries are subject to rapid and intense technological change. We face, and 
will continue to face, competition in the development and marketing of our products and product candidates from 
academic institutions, government agencies, research institutions and biotechnology and pharmaceutical companies. 
Many of our competitors have significantly greater financial resources and expertise in research and development, 
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approval and marketing than we 
do.

Competition may also arise from, among other things, new drug development technologies, new or improved 
treatment options for preventing or reducing the incidence of disease in diseases our products treat and new small 

21

molecule or other classes of therapeutic agents. Such developments by competitors could reduce or eliminate the use 
of our products or may limit the utility and application of ongoing clinical trials for our product candidates.

Additional information about the competition that our marketed products face is set forth below.

Tardive Dyskinesia. INGREZZA competes with AUSTEDO (deutetrabenazine), which was approved by the FDA 
for the treatment of tardive dyskinesia in adults in August 2017 and is marketed by Teva Pharmaceutical Industries, 
and several clinical development-stage programs targeting tardive dyskinesia and related movement disorders. 
Additionally, there are a number of commercially available medicines used to treat tardive dyskinesia off-label, such 
as Xenazine® (tetrabenazine) and generic equivalents, and various antipsychotic medications (e.g., clozapine), 
anticholinergics, benzodiazepines (off-label), and botulinum toxin.

Parkinson’s Disease. ONGENTYS competes with two other FDA-approved COMT inhibitors and their generic 
equivalents. Additionally, there are a number of alternative adjunctive treatment options (FDA-approved and in 
clinical development) for Parkinson’s patients which compete with ONGENTYS, including various L-dopa 
preparations, dopamine agonists, MAO-B inhibitors and others. In terms of potential future competition, there are 
several programs in late-stage clinical development.

Endometriosis and Uterine Fibroids. ORILISSA and ORIAHNN each compete with several FDA-approved 
products for the treatment of endometriosis, uterine fibroids, infertility, and central precocious puberty. Additionally, 
there is also competition from surgical intervention, including hysterectomies and ablations. Separate from these 
options, there are many programs in clinical development which serve as potential future competition. Lastly, there 
are numerous medicines used to treat the symptoms of disease (vs. endometriosis or uterine fibroids directly) which 
may also serve as competition: oral contraceptives, NSAIDs and other pain medications including opioids.

Congenital Adrenal Hyperplasia. For CAH, high doses of corticosteroids are the current standard of care to both 
correct the endogenous cortisol deficiency as well as reduce the excessive ACTH levels. In the U.S. alone, there are 
more than two dozen companies manufacturing steroid-based products. In addition, there are several clinical 
development-stage programs targeting CAH and several companies developing medicinal treatments for CAH.

Epilepsy. Our investigational treatments for potential use in epilepsy may in the future compete with numerous 
approved anti-seizure medications, or ASMs, and development-stage programs being pursued by several other 
companies. Commonly used ASMs, among others, include phenytoin, levetiracetam, brivaracetam, cenobamate, 
carbamazepine, clobazam, lamotrigine, valproate, oxcarbazepine, topiramate, lacosamide, perampanel and 
cannabidiol. There are currently no FDA-approved treatments specifically indicated for the early infantile epileptic 
encephalopathies SCN8A-DEE and EE-CSWS; however, a number of different ASMs are currently used in these 
patient populations. 

Schizophrenia. The investigational treatment NBI-1065844 for the negative symptoms of schizophrenia may in the 
future compete with off-label antipsychotic and antidepressant medicines, including cariprazine, clozapine, 
fluoxetine, citalopram, sertraline, and amisulpride. In addition, there are several development-stage programs being 
pursued by other companies, including pimavanserin, roluperidone, RO6889450 and sodium benzoate. Currently, 
there are no-FDA approved treatments specifically indicated for the negative symptoms of schizophrenia.

Other. Our investigational treatments for potential use in endocrinology, neurology, and psychiatry, as well as our 
investigational gene therapies, may in the future compete with numerous approved products and development-stage 
programs being pursued by several other companies.

Human Capital

Our Employees. We have grown to a team of over 845 employees as of December 31, 2020, all of whom were 
employed in the U.S. Our highly qualified and experienced team which includes scientists, physicians and 
professionals across sales, marketing, manufacturing, regulatory, finance and other important functions are critical to 
our success. We also leverage temporary workers to provide flexibility for our business needs. During 2020, we 
added 191 new employees to our team. 

We expect to continue to add additional employees in 2021 with a focus on expanding our expertise and bandwidth 
in clinical and preclinical research and development. We continually evaluate our business needs and opportunities 

22

and balance in house expertise and capacity with external expertise and capacity. Currently, we rely on third-party 
contract manufacturers. 

Our Culture. The success of our human capital management investments is evidenced by our low employee 
turnover, a number which is regularly reviewed by our Board of Directors as part of their oversight of our human 
capital strategy. In recognition of our efforts, in 2020, we were named to the Fortune Best Small and Medium 
Workplaces 2020 list ranking Number 8 across the country. We were also named a Great Place to Work Certified 
company and were recognized on Great Place to Work’s Best Workplace for Parents 2020 list.

Employee Engagement, Talent Development & Benefits. We believe that our future success largely depends upon 
our continued ability to attract and retain highly skilled employees. We provide our employees with competitive 
salaries and bonuses, opportunities for equity ownership, development programs that enable continued learning and 
growth and a robust employment package that promotes well-being across all aspects of their lives, including health 
care, retirement planning and paid time off. As part of our promotion and retention efforts, we also invest in ongoing 
leadership development through programs as well as offer tuition reimbursement. In addition, we regularly conduct 
an employee survey to gauge employee engagement and identify areas of focus.

Diversity & Inclusion. Much of our success is rooted in the diversity of our teams and our commitment to inclusion. 
We value diversity at all levels and continue to focus on extending our diversity and inclusion initiatives across our 
entire workforce. We believe that our business benefits from the different perspectives a diverse workforce brings, 
and we pride ourselves on having a strong, inclusive and positive culture based on our shared mission and values.

Corporate Information

We were originally incorporated in California in January 1992 and reincorporated in Delaware in May 1996. Our 
principal executive offices are located at 12780 El Camino Real, San Diego, California 92130. Our telephone 
number is (858) 617-7600.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and 
amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as 
amended, are available free of charge on our website at www.neurocrine.com, as soon as reasonably practicable after 
such reports are available on the Securities and Exchange Commission, or SEC, website at www.sec.gov. 
Additionally, copies of our Annual Report will be made available, free of charge, upon written request. Information 
found on, or accessible through, our website is not a part of, and is not incorporated into, this Annual Report on 
Form 10-K.

Item 1A. Risk Factors

The following information sets forth risk factors that could cause our actual results to differ materially from those 
contained in forward-looking statements we have made in this Annual Report on Form 10-K and those we may 
make from time to time. If any of the following risks actually occur, our business, operating results, prospects or 
financial condition could be harmed. Additional risks not presently known to us, or that we currently deem 
immaterial, may also affect our business operations.

Summary Risk Factors

We face risks and uncertainties related to our business, many of which are beyond our control. In particular, risks 
associated with our business include:

• We may not be able to successfully commercialize INGREZZA, ONGENTYS, or any of our product 

candidates if they are approved in the future.

•

•

If physicians and patients do not continue to accept INGREZZA or do not accept ONGENTYS, or our sales 
and marketing efforts are not effective, we may not generate sufficient revenue.

Governmental and third-party payors may impose sales and pharmaceutical pricing controls on our 
products or limit coverage and/or reimbursement for our products that could limit our product revenues and 
delay sustained profitability.

23

•

•

•

Our business could be adversely affected by the effects of health pandemics or epidemics, including the 
COVID-19 pandemic, in regions where we or third parties on which we rely have significant sales and 
marketing efforts or manufacturing facilities, concentrations of clinical trial sites or other business 
operations, or materially affect our operations, and at our clinical trial sites, as well as the business or 
operations of our manufacturers, CROs or other third parties with whom we conduct business.

Because the development of our product candidates is subject to a substantial degree of technological 
uncertainty, we may not succeed in developing any of our product candidates.

Our clinical studies may be delayed for safety or other reasons, or fail to demonstrate the safety and 
efficacy of our product candidates, which could prevent or significantly delay their regulatory approval. For 
example, the FDA has placed a clinical hold on the RESTORE-1 study, a Phase II, randomized, placebo-
surgery controlled, double-blind, multi-center clinical study of NBIb-1817 in Parkinson’s disease patients, 
following our submission of an IND safety report related to the observation of MRI abnormalities in some 
study participants. The clinical implications of this observation are currently unknown and are being 
evaluated. On February 2, 2021, we notified Voyager of our termination of the NBIb-1817 for Parkinson’s 
disease program. The effective date of the termination will be August 2, 2021.

• We depend on our current collaborators for the development and commercialization of several of our 
products and product candidates and may need to enter into future collaborations to develop and 
commercialize certain of our product candidates.

•

Use of our approved products or those of our collaborators could be associated with side effects or adverse 
events.

• We face intense competition, and if we are unable to compete effectively, the demand for our products may 

be reduced.

• We currently have no manufacturing capabilities. If third-party manufacturers of INGREZZA, 

ONGENTYS or any of our product candidates fail to devote sufficient time and resources to our concerns, 
or if their performance is substandard, our clinical trials and product introductions may be delayed, and our 
costs may rise.

• We currently depend on a limited number of third-party suppliers. The loss of these suppliers, or delays or 
problems in the supply of INGREZZA or ONGENTYS, could materially and adversely affect our ability to 
successfully commercialize INGREZZA or ONGENTYS.

•

If we are unable to retain and recruit qualified scientists or if any of our key senior executives discontinues 
his or her employment with us, it may delay our development efforts or impact our commercialization of 
INGREZZA, ONGENTYS or any product candidate approved by the FDA.

• We license some of our core technologies and drug candidates from third parties. If we default on any of 

our obligations under those licenses, or violate the terms of these licenses, we could lose our rights to those 
technologies and drug candidates or be forced to pay damages.

•

Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks 
that could adversely affect our business, financial condition and results of operations.

• We have a history of losses and expect to increase our expenses for the foreseeable future, and we may not 

be able to sustain profitability.

• We have recently increased the size of our organization and will need to continue to increase the size of our 
organization. We may encounter difficulties with managing our growth, which could adversely affect our 
results of operations.

•

•

•

Our customers are concentrated and therefore the loss of a significant customer may harm our business.

If we cannot raise additional funding, we may be unable to complete development of our product 
candidates or establish commercial and manufacturing capabilities in the future.

Health care reform measures and other recent legislative initiatives could adversely affect our business.

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•

If we are unable to protect our intellectual property, our competitors could develop and market products 
based on our discoveries, which may reduce demand for our products.

Risks Related to Our Company

We may not be able to continue to successfully commercialize INGREZZA, ONGENTYS, or any of our product 
candidates if they are approved in the future.

Our ability to produce INGREZZA revenues consistent with expectations ultimately depends on our ability to 
successfully commercialize INGREZZA and secure adequate third-party reimbursement. Our experience in 
marketing and selling pharmaceutical products began with INGREZZA’s approval in 2017, when we hired our sales 
force and established our distribution and reimbursement capabilities, all of which are necessary to successfully 
commercialize our current and future products. We have continued to invest in our commercial infrastructure and 
distribution capabilities in the past four years, including our sales force expansion in late 2018. While our team 
members and consultants have experience marketing and selling pharmaceutical products, we may face difficulties 
related to managing the rapid growth of our personnel and infrastructure, and there can be no guarantee that we will 
be able to maintain the personnel, systems, arrangements and capabilities necessary to continue to successfully 
commercialize INGREZZA, or to successfully commercialize ONGENTYS or any product candidate approved by 
the FDA in the future. 

In addition, our business has been and may continue to be adversely affected by the effects of health pandemics or 
epidemics, including the ongoing COVID-19 pandemic. Most hospitals, community mental health facilities, and 
other healthcare facilities have implemented policies that limit access of our sales representatives, medical affairs 
personnel, and patients to such facilities. Due to these closures and our work from home decisions, our field force is 
currently functioning utilizing digital and telephonic engagement tools and tactics, which may be less effective than 
our ordinary sales and marketing and medical education programs. The ultimate impact of the COVID-19 pandemic, 
including any lasting effects on the way we conduct our business, is highly uncertain and subject to change. If we 
fail to maintain successful marketing, sales and reimbursement capabilities, our product revenues may suffer.

If physicians and patients do not continue to accept INGREZZA or do not accept ONGENTYS or our sales and 
marketing efforts are not effective, we may not generate sufficient revenue.

The commercial success of INGREZZA or ONGENTYS will depend upon the acceptance of those products as safe 
and effective by the medical community and patients.

The market acceptance of INGREZZA or ONGENTYS could be affected by a number of factors, including:

•

•

•

•

•

•

•

the timing of receipt of marketing approvals for indications;

the safety and efficacy of the products;

the pricing of our products;

the availability of healthcare payor coverage and adequate reimbursement for the products;

public perception regarding any products we may develop;

the success of existing competitor products addressing our target markets or the emergence of equivalent or 
superior products; and

the cost-effectiveness of the products.

If the medical community and patients do not continue to accept our products as being safe, effective, superior and/
or cost-effective, we may not generate sufficient revenue.

Governmental and third-party payors may impose sales and pharmaceutical pricing controls on our products or 
limit coverage and/or reimbursement for our products that could limit our product revenues and delay sustained 
profitability.

Our ability to continue to commercialize INGREZZA successfully or to commercialize ONGENTYS, will depend in 
part on the extent to which coverage and adequate reimbursement for these products and related treatments will be 
available. The continuing efforts of government and third-party payors to contain or reduce the costs of health care 

25

and the price of prescription drugs through various means may reduce our potential revenues. These payors’ efforts 
could decrease the price that we receive for any products we may develop and sell in the future.

Assuming we obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates 
may not be adequate or may require co-payments that patients find unacceptably high. Patients who are prescribed 
medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party 
payors to reimburse all or part of the costs associated with their prescription drugs. Patients are unlikely to use our 
products unless coverage is provided and reimbursement is adequate to cover all or a significant portion of the cost 
of our products. Coverage decisions may depend upon clinical and economic standards that disfavor new drug 
products when more established or lower cost therapeutic alternatives are already available or subsequently become 
available regardless of whether they are approved by the FDA for that particular use.

Government authorities and other third-party payors are developing increasingly sophisticated methods of 
controlling healthcare costs, such as by limiting coverage and the amount of reimbursement for particular 
medications. Further, no uniform policy requirement for coverage and reimbursement for drug products exists 
among third-party payors in the U.S. Therefore, coverage and reimbursement for drug products can differ 
significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and 
costly process that will require us to provide scientific and clinical support for the use of our products to each payor 
separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in 
the first instance. In addition, communications from government officials regarding health care costs and 
pharmaceutical pricing could have a negative impact on our stock price, even if such communications do not 
ultimately impact coverage or reimbursement decisions for our products.

There may also be significant delays in obtaining coverage and reimbursement for newly approved drugs, and 
coverage may be more limited than the purposes for which the drug is approved by the FDA or comparable foreign 
regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid 
for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. 
Even if favorable coverage and reimbursement status is attained for one or more products for which we receive 
regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. In 
addition, gene therapy treatments, which we are developing pursuant to our collaboration and license agreement 
with Voyager, face additional uncertainty related to pricing and reimbursement. As an example, there are a limited 
number of gene therapy products currently approved for coverage and reimbursement by the Centers for Medicare & 
Medicaid Services, or CMS.

If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not 
successfully commercialize INGREZZA, ONGENTYS or any other product candidate for which we obtain 
marketing approval. Our inability to promptly obtain coverage and profitable reimbursement rates from both 
government-funded and private payors for any approved products that we develop could have a material adverse 
effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial 
condition.

Our business could be adversely affected by the effects of health pandemics or epidemics, including the 
COVID-19 pandemic, in regions where we or third parties on which we rely have significant sales and marketing 
efforts or manufacturing facilities, concentrations of clinical trial sites or other business operations, or materially 
affect our operations, and at our clinical trial sites, as well as the business or operations of our manufacturers, 
CROs or other third parties with whom we conduct business.

Our business could be adversely affected by the effects of health pandemics or epidemics in regions where we have 
concentrations of clinical trial sites or other business operations, and could cause significant disruption in the 
operations of third-party manufacturers and CROs upon whom we rely. As a result of the ongoing COVID-19 
pandemic, we may experience disruptions that could severely impact our supply chain, ongoing and future clinical 
trials and commercialization of INGREZZA and ONGENTYS. For example, the COVID-19 pandemic has resulted 
in increased travel restrictions and the shutdown or delay of business activities in various regions, including San 
Diego, California, where our headquarters are located. In response to state and local restrictions, we implemented 
work-from-home policies for all employees except certain key essential members involved in business-critical 
activities. The effects of the stay at home order and our work-from-home policies may negatively impact 
productivity, disrupt our business and delay our clinical programs and timelines, the magnitude of which will 

26

depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our 
business in the ordinary course. In addition, we may face several challenges or disruptions upon a return back to the 
workplace if and when the COVID-19 pandemic subsides, including re-integration challenges by our employees and 
distractions to management related to such transition. These and similar, and perhaps more severe, disruptions in our 
operations due to the COVID-19 pandemic could negatively impact our business, operating results and financial 
condition.

Quarantines, stay at home orders and other state and local restrictions, or the perception that such orders, shutdowns 
or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious 
diseases, could impact personnel at third-party manufacturing facilities in the United States and other countries, or 
the availability or cost of materials, which would disrupt our supply chain.

In addition, clinical site initiation and patient enrollment may be delayed due to concerns for patient safety and 
prioritization of healthcare resources toward the COVID-19 pandemic. Some patients may not be able to comply 
with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Similarly, our 
ability to recruit and retain patients, principal investigators and site staff (who as healthcare providers may have 
heightened exposure to COVID-19) may be hindered, which would adversely impact our clinical trial operations. 
For example, due to the impact of the COVID-19 pandemic, we initially paused enrollment of new patients in 
several of our clinical trials. Since then, we have begun enrolling patients again in the Phase III study of valbenazine 
for chorea in HD and the Phase IIa pediatric study of crinecerfont in CAH. However, increases in COVID-19 cases 
or hospitalizations in the future could cause us to again limit or suspend our patient enrollment and screening 
activities.

The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While 
the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or 
predict, the pandemic is currently resulting in disruption of global financial markets. This disruption, if sustained or 
recurrent, could make it more difficult for us to access capital, which could in the future negatively affect our 
liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially 
affect our business and the value of our common stock.

The global COVID-19 pandemic continues to rapidly evolve. The ultimate impact of the COVID-19 pandemic or a 
similar health pandemic or epidemic is highly uncertain and subject to change. We do not yet know the full extent of 
potential delays or impacts on our business, our clinical trials, healthcare systems or the global economy as a whole. 
These effects could have a material impact on our operations.

Because the development of our product candidates is subject to a substantial degree of technological 
uncertainty, we may not succeed in developing any of our product candidates.

All of our product candidates are currently in research or clinical development with the exceptions of INGREZZA, 
which has been approved by the FDA for tardive dyskinesia, ONGENTYS, which has been approved by the FDA 
for Parkinson’s disease, ORILISSA (partnered with AbbVie), which has been approved by the FDA for the 
management of moderate to severe endometriosis pain in women, and ORIAHNN (partnered with AbbVie), which 
has been approved by the FDA for the management of heavy menstrual bleeding associated with uterine fibroids in 
pre-menopausal women. Only a small number of research and development programs ultimately result in 
commercially successful drugs. In addition, to date the FDA has granted regulatory approval for only a very limited 
number of gene therapy products and the clinical development of a gene therapy product may result in unforeseen 
adverse events. For example, the FDA has placed a clinical hold on the RESTORE-1 study, a Phase II, randomized, 
placebo-surgery controlled, double-blind, multi-center clinical study of NBIb-1817 in Parkinson’s disease patients, 
following our submission of an IND safety report related to the observation of MRI abnormalities in some study 
participants. The clinical implications of this observation are currently unknown and are being evaluated. On 
February 2, 2021, we notified Voyager of our termination of the NBIb-1817 for Parkinson’s disease program. The 
effective date of the termination will be August 2, 2021. 

Potential products that appear to be promising at early stages of development may not reach the market for a number 
of reasons. These reasons include the possibilities that the potential products may:

•

be found ineffective or cause harmful side effects during preclinical studies or clinical trials;

27

•

•

•

•

fail to receive necessary regulatory approvals on a timely basis or at all;

be precluded from commercialization by proprietary rights of third parties;

be difficult to manufacture on a large scale; or

be uneconomical to commercialize or fail to achieve market acceptance.

If any of our product candidates encounters any of these potential problems, we may never successfully market that 
product candidate.

Our clinical trials may be delayed or fail to demonstrate the safety and efficacy of our product candidates, which 
could prevent or significantly delay their regulatory approval.

Before obtaining regulatory approval for the sale of any of our potential products, we must subject these product 
candidates to extensive preclinical and clinical testing to demonstrate their safety and efficacy for humans. Clinical 
trials are expensive, time-consuming and may take years to complete and the outcomes are uncertain.

In connection with the clinical trials of our product candidates, we face the risks that:

•

•

•

•

•

•

•

•

•

•

•

•

the FDA or similar foreign regulatory authority may not allow an IND application or foreign equivalent 
filings required to initiate human clinical studies for our drug candidates or the FDA may require additional 
preclinical studies as a condition of the initiation of Phase I clinical studies, or additional clinical studies for 
progression from Phase I to Phase II, or Phase II to Phase III, or for NDA approval;

the product candidate may not prove to be effective or as effective as other competing product candidates;

we may discover that a product candidate may cause harmful side effects or results of required toxicology 
or other studies may not be acceptable to the FDA;

the results may not replicate the results of earlier, smaller trials;

the FDA or similar foreign regulatory authorities may require use of new or experimental endpoints that 
may prove insensitive to treatment effects;

we or the FDA or similar foreign regulatory authorities may suspend the trials;

the results may not be statistically significant;

patient recruitment and enrollment may be slower or more difficult than expected;

the FDA may not accept the data from any trial or trial site outside of the US;

patients may drop out of the trials;

unforeseen disruptions or delays may occur, caused by man-made or natural disasters or public health 
pandemics or epidemics or other business interruptions, including, for example, the COVID-19 pandemic; 
and

regulatory requirements may change.

These risks and uncertainties impact all of our clinical programs and any of the clinical, regulatory or operational 
events described above could change our planned clinical and regulatory activities. For example, due to the impact 
of the COVID-19 pandemic, we paused enrollment of new patients in several of our clinical trials, and increases in 
COVID-19 cases or hospitalizations in the future could cause us to further limit or suspend our patient enrollment 
and screening activities. Additionally, any of these events described above could result in suspension of a program 
and/or obviate any filings for necessary regulatory approvals.

In addition, late-stage clinical trials are often conducted with patients having the most advanced stages of disease. 
During the course of treatment, these patients can die or suffer other adverse medical effects for reasons that may not 
be related to the pharmaceutical agent being tested but which can nevertheless adversely affect clinical trial results. 
Any failure or substantial delay in completing clinical trials for our product candidates may severely harm our 
business.

28

Even if the clinical trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory 
authorities will interpret the results as we do, and more trials could be required before we submit our product 
candidates for approval. To the extent that the results of the trials are not satisfactory to the FDA or foreign 
regulatory authorities for support of a marketing application, approval of our product candidates may be 
significantly delayed, or we may be required to expend significant additional resources, which may not be available 
to us, to conduct additional trials in support of potential approval of our product candidates.

We depend on our current collaborators for the development and commercialization of several of our products 
and product candidates and may need to enter into future collaborations to develop and commercialize certain of 
our product candidates.

We depend on our current collaborators for the development and commercialization of several of our products and 
product candidates and may need to enter into future collaborations to develop and commercialize certain of our 
product candidates. For example, we collaborate with AbbVie for the manufacture and commercialization of two of 
our commercial products, ORILISSA and ORIAHNN, and for the continued development of elagolix. We 
collaborate with MTPC for the development and commercialization of INGREZZA for movement disorders in Japan 
and other select Asian markets. We also rely on BIAL for the commercial supply of ONGENTYS. In addition, we 
collaborate with Xenon for the development of NBI-921352, Idorsia for the development of NBI-827104 and 
Takeda for the development of NBI-1065844.

Our current and future collaborations and licenses could subject us to a number of risks, including:

•

•

•

•

•

•

•

•

•

•

•

•

we may be required to undertake the expenditure of substantial operational, financial and management 
resources; 

we may be required to assume substantial actual or contingent liabilities; 

we may not be able to control the amount and timing of resources that our strategic collaborators devote to 
the development or commercialization of our products or product candidates; 

we may not be able to influence our strategic collaborator’s decisions regarding the development and 
collaboration of our partnered product and product candidates, and as a result, our collaboration partners 
may not pursue or prioritize the development and commercialization of those partnered products and 
product candidates in a manner that is in our best interest;

strategic collaborators may select indications or design clinical trials in a way that may be less successful 
than if we were doing so; 

strategic collaborators may not conduct collaborative activities in a timely manner, provide insufficient 
funding, terminate a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or 
require a new version of a product candidate for clinical testing; 

strategic collaborators may not pursue further development and commercialization of products resulting 
from the strategic collaboration arrangement or may elect to discontinue research and development 
programs; 

disagreements or disputes may arise between us and our strategic collaborators that result in delays or in 
costly litigation or arbitration that diverts management’s attention and consumes resources; 

strategic collaborators may experience financial difficulties; 

strategic collaborators may not properly maintain, enforce or defend our intellectual property rights or may 
use our proprietary information in a manner that could jeopardize or invalidate our proprietary information 
or expose us to potential litigation; 

strategic collaborators could 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; and

strategic collaborators could develop, either alone or with others, products or product candidates that may 
compete with ours. 

29

If any of these issues arise, it may delay and/or negatively impact the development and commercialization of drug 
candidates and, ultimately, our generation of product revenues.

We may not be able to successfully commercialize ONGENTYS.

In April 2020, we received FDA approval for ONGENTYS as an adjunctive therapy to levodopa/DOPA 
decarboxylase inhibitors in adult Parkinson’s disease patients, and in September 2020, we launched the commercial 
sale of ONGENTYS with our existing INGREZZA infrastructure. The successful commercialization of 
ONGENTYS is subject to many risks, and there are numerous examples of unsuccessful product launches and 
failures, including by pharmaceutical companies with more experience and resources than us. If we are unable to 
effectively train our employees and equip them with effective materials, including medical and sales literature to 
help them inform and educate health care practitioners about the benefits of ONGENTYS and its proper 
administration, our commercialization of ONGENTYS may not be successful. Even if we are successful in 
effectively training and equipping our sales force, there are many factors that could cause the commercialization of 
ONGENTYS to be unsuccessful, including a number of factors that are outside our control. Health care practitioners 
may not prescribe ONGENTYS and patients may be unwilling to use ONGENTYS if insurance coverage is not 
provided or reimbursement is inadequate. In addition, our ability to train our employees and effectively 
communicate with potential prescribers could be adversely affected by the effects of health pandemics or epidemics, 
including the ongoing COVID-19 pandemic.

Use of our approved products or those of our collaborators could be associated with side effects or adverse events.

As with most pharmaceutical products, use of our approved products or those of our collaborators could be 
associated with side effects or adverse events which can vary in severity (from minor adverse reactions to death) and 
frequency (infrequent or prevalent). Side effects or adverse events associated with the use of our products or those of 
our collaborators may be observed at any time, including after a product is commercialized, and reports of any such 
side effects or adverse events may negatively impact demand for our or our collaborators’ products or affect our or 
our collaborators’ ability to maintain regulatory approval for such products. Side effects or other safety issues 
associated with the use of our approved products or those of our collaborators could require us or our collaborators 
to modify or halt commercialization of these products or expose us to product liability lawsuits which will harm our 
business. We or our collaborators may be required by regulatory agencies to conduct additional studies regarding the 
safety and efficacy of our products which we have not planned or anticipated. Furthermore, there can be no 
assurance that we or our collaborators will resolve any issues related to any product related adverse events to the 
satisfaction of the FDA or any regulatory agency in a timely manner or ever, which could harm our business, 
prospects and financial condition.

Gene therapy treatments, which we are developing pursuant to our collaboration and license agreement with 
Voyager, may be perceived as unsafe or may result in unforeseen adverse events. Negative public opinion and 
increased regulatory scrutiny of gene therapy may adversely affect our ability to initiate or continue clinical 
development or obtain regulatory approvals for gene therapy product candidates or the commercialization of gene 
therapy products.

Gene therapy remains a novel technology, with few gene therapy products approved to date in the US. Public 
perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance 
of the public or the medical community. Even if we are able to successfully complete clinical development of a gene 
therapy product and obtain commercial approval, the success of our collaboration with Voyager will depend upon 
physicians who specialize in the treatment of genetic diseases targeted by gene therapy product candidates, 
prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments 
with which they are familiar and for which greater clinical data may be available. More restrictive government 
regulations, negative public opinion related to gene therapy products, or safety issues identified in our clinical trials 
may delay or impair the development and commercialization of our gene therapy product candidates or demand for 
any gene therapy products we develop.

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The limited precedent for gene therapy approvals makes it difficult to determine how long it will take or how 
much it will cost to obtain regulatory approvals for the product candidates we are developing through our 
collaboration with Voyager.

The FDA has limited experience in the review and approval of gene therapy products. The limited precedent for 
gene therapy approvals makes it difficult to determine how long it will take or how much it will cost to obtain 
regulatory approvals for the product candidates we are developing through our collaboration with Voyager.

Regulatory requirements governing gene therapy products have changed frequently and may continue to change in 
the future. As a result, the regulatory review process may take longer or cost more than we anticipate, including 
requirements for additional preclinical studies or clinical trials, and delay or prevent approval and commercialization 
of our gene therapy product candidates we are developing through our collaboration with Voyager. While the FDA 
has issued draft guidance for the development of gene therapies and proposed rules that would streamline certain 
requirements to which gene therapies are currently subject, it remains to be seen as to whether such initiatives will 
ultimately increase the speed of drug development in gene therapies such as the product candidates we are 
developing through our collaboration with Voyager.

Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential 
product to market could decrease our ability to generate sufficient product revenue, and our business, financial 
condition, results of operations and prospects would be harmed. If our gene therapy products are approved but fail to 
achieve market acceptance among physicians, patients, hospitals, third-party payors or others in the medical 
community, we will not be able to generate significant revenue.

We face intense competition, and if we are unable to compete effectively, the demand for our products may be 
reduced.

The biotechnology and pharmaceutical industries are subject to rapid and intense technological change. We face, and 
will continue to face, competition in the development and marketing of our products and product candidates from 
academic institutions, government agencies, research institutions and biotechnology and pharmaceutical companies.

Competition may also arise from, among other things:

•

other drug development technologies;

• methods of preventing or reducing the incidence of disease, including vaccines; and

•

new small molecule or other classes of therapeutic agents.

Developments by others may render our product candidates or technologies obsolete or noncompetitive.

We are commercializing and performing research on or developing products for the treatment of several disorders 
including endometriosis, tardive dyskinesia, uterine fibroids, essential tremor, classic congenital adrenal hyperplasia, 
pain, Parkinson’s disease, Friedreich’s ataxia, and other neurological and endocrine-related diseases and disorders, 
and there are a number of competitors to our products and product candidates. If one or more of our competitors’ 
products or programs are successful, the market for our products may be reduced or eliminated.

• With respect to INGREZZA for tardive dyskinesia, we compete with Teva Pharmaceutical Industries, 
which received FDA approval for AUSTEDO to treat tardive dyskinesia in August 2017, and several 
clinical development-stage programs targeting tardive dyskinesia and related movement disorders. 
Additionally, there are a number of commercially available medicines used to treat tardive dyskinesia off-
label, such as Xenazine (tetrabenazine) and generic equivalents, and various antipsychotic medications 
(e.g., clozapine), anticholinergics, benzodiazepines (off-label), and botulinum toxin.

•

In endometriosis, ORILISSA and ORIAHNN each compete with several FDA-approved products for the 
treatment of endometriosis, uterine fibroids, infertility, and central precocious puberty. Additionally, there 
is also competition from surgical intervention, including hysterectomies and ablations. Separate from these 
options, there are many programs in clinical development which serve as potential future competition. 
Lastly, there are numerous medicines used to treat the symptoms of disease (vs. endometriosis or uterine 
fibroids directly) which may also serve as competition: oral contraceptives, NSAIDs and other pain 
medications including opioids.

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• With respect to ONGENTYS for Parkinson’s disease, there are currently two other FDA-approved COMT 

inhibitors. ONGENTYS competes directly with these two drugs and their generic equivalents. Additionally, 
there are a number of alternative adjunctive treatment options (FDA-approved and in clinical development) 
for Parkinson’s patients which compete with ONGENTYS, including various L-dopa preparations, 
dopamine agonists, MAO-B inhibitors and others. In terms of potential future competition, there are several 
programs in late-stage clinical development.

•

•

•

•

As for CAH, high doses of corticosteroids are the current standard of care to both correct the endogenous 
cortisol deficiency as well as reduce the excessive ACTH levels. In the U.S. alone, there are more than two 
dozen companies manufacturing steroid-based products. Additionally, there are several clinical 
development-stage programs targeting CAH and several companies developing medicinal treatments for 
CAH.

Our investigational treatments for potential use in epilepsy may in the future compete with numerous 
approved anti-seizure medications, or ASMs, and development-stage programs being pursued by several 
other companies. Commonly used ASMs, among others, include phenytoin, levetiracetam, brivaracetam, 
cenobamate, carbamazepine, clobazam, lamotrigine, valproate, oxcarbazepine, topiramate, lacosamide, 
perampanel and cannabidiol. There are currently no FDA-approved treatments specifically indicated for the 
early infantile epileptic encephalopathies SCN8A-DEE and EE-CSWS; however, a number of different 
ASMs are currently used in these patient populations.

The investigational treatment NBI-1065844 for the negative symptoms of schizophrenia may in the future 
compete with off-label antipsychotic and antidepressant medicines, including ciraprazine, clozapine, 
fluoxetine, citalopram, sertraline, and amisulpride. In addition, there are several development-stage 
programs being pursued by other companies, including pimavanserin, roluperidone, RO6889450 and 
sodium benzoate. Currently, there are no-FDA approved treatments specifically indicated for the negative 
symptoms of schizophrenia.

Our investigational treatments for potential use in endocrinology, neurology, and psychiatry, as well as our 
investigational gene therapies, may in the future compete with numerous approved products and 
development-stage programs being pursued by several other companies.

Compared to us, many of our competitors and potential competitors have substantially greater:

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capital resources;

research and development resources, including personnel and technology;

regulatory experience;

preclinical study and clinical testing experience;

• manufacturing, marketing and distribution experience; and

•

production facilities.

Moreover, increased competition in certain disorders or therapies may make it more difficult for us to recruit or 
enroll patients in our clinical trials for similar disorders or therapies.

We currently have no manufacturing capabilities. If third-party manufacturers of INGREZZA, ONGENTYS or 
any of our product candidates fail to devote sufficient time and resources to our concerns, or if their performance 
is substandard, our clinical trials and product introductions may be delayed, and our costs may rise.

We have in the past utilized, and intend to continue to utilize, third-party manufacturers to produce the drug 
compounds we use in our clinical trials and for the commercialization of our products. We have limited experience 
in manufacturing products for commercial purposes and do not currently have any manufacturing facilities. 
Establishing internal commercial manufacturing capabilities would require significant time and resources, and we 
may not be able to timely or successfully establish such capabilities. Consequently, we depend on, and will continue 
to depend on, several contract manufacturers for all production of products for development and commercial 
purposes, including INGREZZA and ONGENTYS. If we are unable to obtain or retain third-party manufacturers, 
we will not be able to develop or commercialize our products, including INGREZZA and ONGENTYS. The 

32

manufacture of our products for clinical trials and commercial purposes is subject to specific FDA regulations, 
including current Good Manufacturing Practice regulations. Our third-party manufacturers, including BIAL and its 
suppliers, might not comply with FDA regulations relating to manufacturing our products for clinical trials and 
commercial purposes or other regulatory requirements now or in the future. In addition, the manufacture of gene 
therapy products, which will be necessary under our collaboration and license agreement with Voyager, is 
technically complex and necessitates substantial expertise and capital investment. Our reliance on contract 
manufacturers also exposes us to the following risks:

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•

•

•

contract manufacturers may encounter difficulties in achieving volume production, quality control or 
quality assurance, and also may experience shortages in qualified personnel. As a result, our contract 
manufacturers might not be able to meet our clinical schedules or adequately manufacture our products in 
commercial quantities when required;

switching manufacturers may be difficult because the number of potential manufacturers is limited. It may 
be difficult or impossible for us to find a replacement manufacturer quickly on acceptable terms, or at all;

our contract manufacturers may not perform as agreed or may not remain in the contract manufacturing 
business for the time required to successfully produce, store or distribute our products; and

drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the U.S. Drug 
Enforcement Administration, and other agencies to ensure strict compliance with cGMP and other 
government regulations and corresponding foreign standards. We do not have control over third-party 
manufacturers’ compliance with these regulations and standards.

Our current dependence upon third parties for the manufacture of our products may reduce our profit margin, if any, 
on the sale of INGREZZA, ONGENTYS, or our future products and our ability to develop and deliver products on a 
timely and competitive basis.

We currently depend on a limited number of third-party suppliers. The loss of these suppliers, or delays or 
problems in the supply of INGREZZA or ONGENTYS, could materially and adversely affect our ability to 
successfully commercialize INGREZZA or ONGENTYS.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the 
development of process controls required to consistently produce the active pharmaceutical ingredients, or API, and 
the finished product in sufficient quantities while meeting detailed product specifications on a repeated basis. 
Manufacturers of pharmaceutical products may encounter difficulties in production, such as difficulties with 
production costs and yields, process controls, quality control and quality assurance, including testing of stability, 
impurities and impurity levels and other product specifications by validated test methods, compliance with strictly 
enforced U.S., state, and non-U.S. regulations, and disruptions caused by man-made or natural disasters or public 
health pandemics or epidemics or other business interruptions, including, for example, the COVID-19 pandemic. We 
depend on a limited number of suppliers for the production of INGREZZA and its API. If our third-party suppliers 
for INGREZZA encounter these or any other manufacturing, quality or compliance difficulties, we may be unable to 
meet commercial demand for INGREZZA, which could materially and adversely affect our ability to successfully 
commercialize INGREZZA. In addition, under the terms of our agreement with BIAL, although we are responsible 
for the management of all ONGENTYS commercialization activities, we rely on BIAL and its suppliers to supply all 
drug product for the commercialization of ONGENTYS. BIAL relies on third-party contract manufacturers to 
produce ONGENTYS. These contract manufacturers may encounter difficulties in achieving volume production, 
quality control, or quality assurance. As a result, these contract manufacturers may not be able to adequately produce 
ONGENTYS in commercial quantities when required, which may impact our ability to deliver ONGENTYS on a 
timely basis.

In addition, if our suppliers fail or refuse to supply us with INGREZZA or its API for any reason, it would take a 
significant amount of time and expense to qualify a new supplier. The FDA and similar international regulatory 
bodies must approve manufacturers of the active and inactive pharmaceutical ingredients and certain packaging 
materials used in pharmaceutical products. The loss of a supplier could require us to obtain regulatory clearance and 
to incur validation and other costs associated with the transfer of the API or product manufacturing processes. If 
there are delays in qualifying new suppliers or facilities or a new supplier is unable to meet FDA or a similar 
international regulatory body’s requirements for approval, there could be a shortage of INGREZZA, which could 

33

materially and adversely affect our ability to successfully commercialize INGREZZA. If BIAL is unable or refuses 
to supply us with ONGENTYS drug product for any reason, or does not meet FDA or international regulators’ 
requirements for approval, we have limited opportunity to qualify a new supplier. This could materially and 
adversely affect our ability to successfully commercialize ONGENTYS.

The independent clinical investigators and contract research organizations that we rely upon to conduct our 
clinical trials may not be diligent, careful or timely, and may make mistakes, in the conduct of our trials.

We depend on independent clinical investigators and contract research organizations, or CROs, to conduct our 
clinical trials under their agreements with us. The investigators are not our employees, and we cannot control the 
amount or timing of resources that they devote to our programs. If our independent investigators fail to devote 
sufficient time and resources to our drug development programs, or if their performance is substandard, or not in 
compliance with Good Clinical Practices, it may delay or prevent the approval of our FDA applications and our 
introduction of new drugs. The CROs we contract with for execution of our clinical trials play a significant role in 
the conduct of the trials and the subsequent collection and analysis of data. Failure of the CROs to meet their 
obligations could adversely affect clinical development of our products. Moreover, these independent investigators 
and CROs may also have relationships with other commercial entities, some of which may compete with us. If 
independent investigators and CROs assist our competitors at our expense, it could harm our competitive position.

We do not and will not have access to all information regarding the products and product candidates we licensed 
to AbbVie.

We do not and will not have access to all information regarding elagolix, including potentially material information 
about commercialization plans, medical information strategies, clinical trial design and execution, safety reports 
from clinical trials, safety reports, regulatory affairs, process development, manufacturing and other areas known by 
AbbVie. In addition, we have confidentiality obligations under our agreement with AbbVie. Thus, our ability to 
keep our shareholders informed about the status of elagolix will be limited by the degree to which AbbVie keeps us 
informed and allows us to disclose such information to the public. If AbbVie fails to keep us informed about 
commercialization efforts related to elagolix, or the status of the clinical development or regulatory approval 
pathway of other product candidates licensed to it, we may make operational and/or investment decisions that we 
would not have made had we been fully informed, which may materially and adversely affect our business and 
operations.

We are subject to ongoing obligations and continued regulatory review for INGREZZA. Additionally, our other 
product candidates, if approved, could be subject to labeling and other post-marketing requirements and 
restrictions.

Regulatory approvals for any of our product candidates may be subject to limitations on the approved indicated uses 
for which the product may be marketed or to the conditions of approval, or contain requirements for potentially 
costly post-marketing testing, including Phase IV clinical trials, and surveillance to monitor the safety and efficacy 
of the product candidate. For example, with respect to the FDA’s approval of INGREZZA for tardive dyskinesia in 
April 2017, we are subject to certain post-marketing requirements and commitments. In addition, with respect to 
INGREZZA, and any product candidate that the FDA or a comparable foreign regulatory authority approves, the 
manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion 
and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These 
requirements include submissions of safety and other post-marketing information and reports, registration, as well as 
continued compliance with current Good Manufacturing Practices for any clinical trials that we conduct post-
approval. Failure to comply with these ongoing regulatory requirements, or later discovery of previously unknown 
problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party 
manufacturers or manufacturing processes, may result in, among other things:

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•

•

restrictions on the marketing or manufacturing of the product, changes in the product’s label, withdrawal of 
the product from the market, or voluntary or mandatory product recalls;

fines, warning letters or holds on clinical trials;

refusal by the FDA to approve pending applications or supplements to approved applications filed by us, or 
suspension or revocation of product license approvals;

34

•

•

product seizure or detention, or refusal to permit the import or export of products; and

product injunctions or the imposition of civil or criminal penalties.

The occurrence of any of these events may adversely affect our business, prospects and ability to achieve or sustain 
profitability on a sustained basis.

If we are unable to retain and recruit qualified scientists or if any of our key senior executives discontinues his or 
her employment with us, it may delay our development efforts or impact our commercialization of INGREZZA, 
ONGENTYS or any product candidate approved by the FDA.

We are highly dependent on the principal members of our management and scientific staff. The loss of any of these 
people could impede the achievement of our objectives, including the successful commercialization of INGREZZA, 
ONGENTYS or any product candidate approved by the FDA. Furthermore, recruiting and retaining qualified 
scientific personnel to perform research and development work in the future, along with personnel with experience 
marketing and selling pharmaceutical products, is critical to our success. We may be unable to attract and retain 
personnel on acceptable terms given the competition among biotechnology, pharmaceutical and health care 
companies, universities and non-profit research institutions for experienced scientists and individuals with 
experience marketing and selling pharmaceutical products. We may face particular retention challenges in light of 
the recent rapid growth in our personnel and infrastructure and the perceived impact of those changes upon our 
corporate culture. In addition, we rely on a significant number of consultants to assist us in formulating our research 
and development strategy and our commercialization strategy. Our consultants may have commitments to, or 
advisory or consulting agreements with, other entities that may limit their availability to us.

If the market opportunities for our products and product candidates are smaller than we believe they are, our 
revenues may be adversely affected, and our business may suffer.

Certain of the diseases that INGREZZA, ONGENTYS and our other product candidates are being developed to 
address are in underserved and underdiagnosed populations. Our projections of both the number of people who have 
these diseases, as well as the subset of people with these diseases who will seek treatment utilizing our products or 
product candidates, may not be accurate. If our estimates of the prevalence or number of patients potentially on 
therapy prove to be inaccurate, the market opportunities for INGREZZA, ONGENTYS and our other product 
candidates may be smaller than we believe they are, our prospects for generating expected revenue may be adversely 
affected and our business may suffer.

We license some of our core technologies and drug candidates from third parties. If we default on any of our 
obligations under those licenses, or violate the terms of these licenses, we could lose our rights to those 
technologies and drug candidates or be forced to pay damages.

We are dependent on licenses from third parties for some of our key technologies. These licenses typically subject 
us to various commercialization, reporting and other obligations. If we fail to comply with these obligations, we 
could lose important rights. If we were to default on our obligations under any of our licenses, we could lose some 
or all of our rights to develop, market and sell products covered by these licenses. For example, BIAL may terminate 
our license agreement, pursuant to which we have rights to commercialize ONGENTYS, if we fail to use 
commercially reasonable efforts to comply with specified obligations under the license agreement, or if we 
otherwise breach the license agreement. In addition, several of our collaboration and license agreements allow our 
licensors to terminate such agreements if we challenge the validity or enforceability of certain intellectual property 
rights or if we commit a material breach in whole or in part of the agreement and do not cure such breach within the 
agreed upon cure period. In addition, if we were to violate any of the terms of our licenses, we could become subject 
to damages. Likewise, if we were to lose our rights under a license to use proprietary research tools, it could 
adversely affect our existing collaborations or adversely affect our ability to form new collaborations. We also face 
the risk that our licensors could, for a number of reasons, lose patent protection or lose their rights to the 
technologies we have licensed, thereby impairing or extinguishing our rights under our licenses with them.

Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that 
could adversely affect our business, financial condition and results of operations.

In May 2017, we sold $517.5 million aggregate principal amount of 2.25% convertible senior notes due May 15, 
2024, or the 2024 Notes. In November 2020, we entered into separate, privately negotiated transactions with certain 

35

holders of the 2024 Notes to repurchase $136.2 million aggregate principal amount of the 2024 Notes for an 
aggregate repurchase price of $186.9 million in cash. At December 31, 2020, $381.3 million aggregate principal 
amount of the 2024 Notes remained outstanding. We may also incur additional indebtedness to meet future 
financing needs. Our indebtedness could have significant negative consequences for our security holders and our 
business, results of operations and financial condition by, among other things:

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•

•

•

•

•

increasing our vulnerability to adverse economic and industry conditions;

limiting our ability to obtain additional financing;

requiring the dedication of a substantial portion of our cash flow from operations to service our 
indebtedness, which will reduce the amount of cash available for other purposes;

limiting our flexibility to plan for, or react to, changes in our business;

diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon 
conversion of the 2024 Notes; and

placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have 
better access to capital.

Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash 
reserves, to pay amounts due under the 2024 Notes and any additional indebtedness that we may incur. In addition, 
our cash needs may increase in the future. In addition, any future indebtedness that we may incur may contain 
financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments 
under our other indebtedness. If we fail to comply with these covenants or to make payments under our indebtedness 
when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other 
indebtedness becoming immediately payable in full.

We have a history of losses and expect to increase our expenses for the foreseeable future, and we may not be 
able to sustain profitability.

Since our inception, we have incurred significant net losses and negative cash flow from operations. At December 
31, 2020, we had an accumulated deficit of $0.7 billion as a result of historical operating losses.

We received FDA approval for INGREZZA for tardive dyskinesia in April 2017 and for ONGENTYS for 
Parkinson’s disease in April 2020. Our partner AbbVie received FDA approval for ORILISSA for endometriosis in 
July 2018 and for ORIAHNN for uterine fibroids in May 2020. However, we have not yet obtained regulatory 
approvals for any other product candidates. Even if we continue to succeed in commercializing INGREZZA, or if 
we successfully commercialize ONGENTYS or are successful in developing and commercializing any of our other 
product candidates, we may not be able to sustain profitability. We also expect to continue to incur significant 
operating and capital expenditures as we:

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•

•

•

•

commercialize INGREZZA for tardive dyskinesia;

commercialize ONGENTYS for Parkinson’s disease;

seek regulatory approvals for our product candidates;

develop, formulate, manufacture and commercialize our product candidates;

in-license or acquire new product development opportunities;

implement additional internal systems and infrastructure; and

hire additional clinical, scientific, sales and marketing personnel.

We expect to increase our expenses and other investments in the coming years as we fund our operations, in-
licensing or acquisition opportunities, and capital expenditures. While we were profitable for the year ended 
December 31, 2020, our future operating results and profitability may fluctuate from period to period due to the 
factors described above, and we will need to generate significant revenues to achieve and maintain profitability and 
positive cash flow on a sustained basis. We may not be able to generate these revenues, and we may never achieve 

36

profitability on a sustained basis in the future. Our failure to maintain or increase profitability on a sustained basis 
could negatively impact the market price of our common stock.

We have recently increased the size of our organization and will need to continue to increase the size of our 
organization. We may encounter difficulties with managing our growth, which could adversely affect our results 
of operations.

At December 31, 2020, we had approximately 845 full-time employees. Although we have substantially increased 
the size of our organization, we may need to add additional qualified personnel and resources, especially now that 
we have a commercial sales force. Our current infrastructure may be inadequate to support our development and 
commercialization efforts and expected growth. Future growth will impose significant added responsibilities on 
members of management, including the need to identify, recruit, maintain and integrate additional employees, and 
may take time away from running other aspects of our business, including development and commercialization of 
our product candidates.

Our future financial performance and our ability to commercialize INGREZZA, ONGENTYS and any other product 
candidates that receive regulatory approval will depend, in part, on our ability to manage any future growth 
effectively. In particular, as we commercialize INGREZZA and ONGENTYS, we will need to support the training 
and ongoing activities of our sales force and will likely need to continue to expand the size of our employee base for 
managerial, operational, financial and other resources. To that end, we must be able to successfully:

• manage our development efforts effectively;

•

•

integrate additional management, administrative and manufacturing personnel;

further develop our marketing and sales organization; and

• maintain sufficient administrative, accounting and management information systems and controls.

We may not be able to accomplish these tasks or successfully manage our operations and, accordingly, may not 
achieve our research, development, and commercialization goals. Our failure to accomplish any of these goals could 
harm our financial results and prospects.

We may be subject to claims that we or our employees have wrongfully used or disclosed alleged trade secrets of 
their former employers.

As is commonplace in the biotechnology industry, we employ individuals who were previously employed at other 
biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims 
against us are currently pending, we may be subject to claims that these employees or we have inadvertently or 
otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may 
be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation 
could result in substantial costs and be a distraction to management.

Because our operating results may vary significantly in future periods, our stock price may decline.

Our quarterly revenues, expenses and operating results have fluctuated in the past and are likely to fluctuate 
significantly in the future. Our financial results are unpredictable and may fluctuate, for among other reasons, due to 
seasonality and timing of customer purchases and commercial sales of INGREZZA, impact of the commercial 
launch of ONGENTYS and ORIAHNN, royalties from out-licensed products, the impact of Medicare Part D 
coverage, our achievement of product development objectives and milestones, clinical trial enrollment and expenses, 
research and development expenses and the timing and nature of contract manufacturing, contract research 
payments, fluctuations in our effective tax rate, and disruptions caused by man-made or natural disasters or public 
health pandemics or epidemics or other business interruptions, including, for example, the COVID-19 pandemic. A 
high portion of our costs are predetermined on an annual basis, due in part to our significant research and 
development costs. Thus, small declines in revenue could disproportionately affect financial results in a quarter. 
While we were profitable for the year ended December 31, 2020, our future operating results and profitability may 
fluctuate from period to period, and even if we become profitable on a quarterly or annual basis, we may not be able 
to sustain or increase our profitability. Moreover, as our company and our market capitalization have grown, our 
financial performance has become increasingly subject to quarterly and annual comparisons with the expectations of 

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securities analysts or investors. The failure of our financial results to meet these expectations, either in a single 
quarterly or annual period over a sustained period time, could cause our stock price to decline.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse 
effect on our business, cash flows, financial condition or results of operations.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, 
which could adversely affect our business and financial condition. Further, existing tax laws, statutes, rules, 
regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, 
legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, or the Tax Act, enacted many significant 
changes to the US tax laws. Future guidance from the Internal Revenue Service and other tax authorities with 
respect to the Tax Act may affect us, and certain aspects of the Tax Act repealed or modified in future legislation. 
For example, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, modified certain 
provisions of the Tax Act. In addition, it is uncertain if and to what extent various states will conform to the Tax Act 
or any newly enacted federal tax legislation. Changes in corporate tax rates, the realization of net deferred tax assets 
relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Act or 
future reform legislation could have a material impact on the value of our deferred tax assets, could result in 
significant one-time charges, and could increase our future US tax expense.

Our ability to use net operating loss carryforwards and certain other tax attributes may be limited.

Our net operating loss, or NOL, carryforwards generated in tax years ending on or prior to December 31, 2017, are 
only permitted to be carried forward for 20 years under applicable US tax law. Under the Tax Cut and Jobs Act, as 
modified by the CARES Act, our federal NOLs generated in tax years beginning after December 31, 2017, may be 
carried forward indefinitely, but the deductibility of such federal NOLs in tax years beginning after December 31, 
2020, is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to the Tax 
Cut and Jobs Act or the CARES Act. In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, 
as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is 
generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the 
corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-
change income or taxes may be limited. We do not believe we have experienced any previous ownership changes, 
but the determination is complex and there can be no assurance we are correct. Furthermore, we may experience 
ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be 
outside of our control.

As a result, our pre-2018 NOL carryforwards may expire prior to being used and our NOL carryforwards generated 
in tax years beginning after December 31, 2020, will be subject to a percentage limitation and, if we undergo an 
ownership change (or if we previously underwent such an ownership change), our ability to use all of our pre-
change NOLs and other pre-change tax attributes (such as research tax credits) to offset our post-change income or 
taxes may be limited. Similar provisions of state tax law may also apply to limit our use of accumulated state tax 
attributes. In addition, at the state level, there may be periods during which the use of NOLs is suspended or 
otherwise limited, which could accelerate or permanently increase state taxes owed. For example, California passed 
legislation imposing limits on the usability of California state NOLs and certain tax credits in tax years beginning 
after 2019 and before 2023. As a result, we may be unable to use all or a material portion of our NOLs and other tax 
attributes, which could adversely affect our future cash flows.

Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued 
amounts.

Our effective tax rate is derived from a combination of applicable tax rates in the various places that we operate. In 
preparing our financial statements, we estimate the amount of tax that will become payable in each of such places. 
Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including 
changes in the mix of our profitability from state to state, the results of examinations and audits of our tax filings, 
our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income taxes 
and changes in tax laws. Any of these factors could cause us to experience an effective tax rate significantly 
different from previous periods or our current expectations and may result in tax obligations in excess of amounts 
accrued in our financial statements.

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In addition, on December 31, 2020, we determined, based on our facts and circumstances, that it was more likely 
than not that a substantial portion of our deferred tax assets would be realized and, as a result, substantially all of our 
valuation allowance against our deferred tax assets was released. Therefore, beginning in 2021, we expect to 
commence recording income tax expense at an estimated tax rate that will likely approximate statutory tax rates, 
which would result in a significant reduction in our net income and net income per share.

The price of our common stock is volatile.

The market prices for securities of biotechnology and pharmaceutical companies historically have been highly 
volatile, and the market for these securities has from time to time experienced significant price and volume 
fluctuations that are unrelated to the operating performance of particular companies. The COVID-19 pandemic, for 
example, has negatively affected the stock market and investor sentiment and has resulted in significant volatility. 
Furthermore, especially as we and our market capitalization have grown, the price of our common stock has been 
increasingly affected by quarterly and annual comparisons with the valuations and recommendations of the analysts 
who cover our business. If our results do not meet these analysts’ forecasts, the expectations of our investors or the 
financial guidance we provide to investors in any period, which is based on assumptions that may be incorrect or 
that may change from quarter to quarter, the market price of our common stock could decline. Over the course of the 
last twelve months, the price of our common stock has ranged from approximately $72 per share to approximately 
$136 per share. The market price of our common stock may fluctuate in response to many factors, including:

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sales of INGREZZA and ORILISSA;

impact of the commercial launch of ONGENTYS and ORIAHNN;

the status and cost of our post-marketing commitments for INGREZZA and ONGENTYS;

the results of our clinical trials;

reports of safety issues related to INGREZZA, ONGENTYS, ORILISSA, or ORIAHNN;

developments concerning new and existing collaboration agreements;

announcements of technological innovations or new therapeutic products by us or others;

general economic and market conditions, including economic and market conditions affecting the 
biotechnology industry;

developments in patent or other proprietary rights;

developments related to the FDA;

future sales of our common stock by us or our stockholders;

comments by securities analysts;

additions or departures of key personnel;

fluctuations in our operating results;

potential litigation matters;

government regulation;

government and third-party payor coverage and reimbursement;

failure of any of our product candidates, if approved, to achieve commercial success;

disruptions caused by man-made or natural disasters or public health pandemics or epidemics or other 
business interruptions, including, for example, the COVID-19 pandemic; and

public concern as to the safety of our drugs.

Our customers are concentrated and therefore the loss of a significant customer may harm our business.

We have entered into agreements for the distribution of INGREZZA with a limited number of specialty pharmacy 
providers and a specialty distributor, and all of our product sales are to these customers. Two of these customers 

39

represented approximately 86% of our product revenue for the year ended December 31, 2020 and a significant 
majority of our accounts receivable balance at December 31, 2020. If any of these significant customers becomes 
subject to bankruptcy, is unable to pay us for our products or is acquired by a company that wants to terminate the 
relationship with us, or if we otherwise lose any of these significant customers, our revenue, results of operations 
and cash flows would be adversely affected. Even if we replace the loss of a significant customer, we cannot predict 
with certainty that such transition would not result in a decline in our revenue, results of operations and cash flows.

If we cannot raise additional funding, we may be unable to complete development of our product candidates or 
establish commercial and manufacturing capabilities in the future.

We may require additional funding to continue our research and development programs, to conduct preclinical 
studies and clinical trials, for operating expenses, to pursue regulatory approvals for our product candidates, for the 
costs involved in filing and prosecuting patent applications and enforcing or defending patent claims, if any, and the 
cost of product in-licensing and any possible acquisitions. In addition, we may require additional funding to 
establish manufacturing and marketing capabilities in the future. We believe that our existing capital resources, 
together with investment income, and future payments due under our strategic alliances, will be sufficient to satisfy 
our current and projected funding requirements for at least the next twelve months. However, these resources might 
be insufficient to conduct research and development programs, the cost of product in-taking and possible 
acquisitions, fully commercialize products and operate the company to the full extent currently planned. If we 
cannot obtain adequate funds, we may be required to curtail significantly our commercial plans or one or more of 
our research and development programs or obtain funds through additional arrangements with corporate 
collaborators or others that may require us to relinquish rights to some of our technologies or product candidates.

Our future capital requirements will depend on many factors, including:

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

debt service obligations on the 2024 Notes;

continued scientific progress in our R&D and clinical development programs;

the magnitude and complexity of our research and development programs;

progress with preclinical testing and clinical trials;

the time and costs involved in obtaining regulatory approvals;

the costs involved in filing and pursuing patent applications, enforcing patent claims, or engaging in 
interference proceedings or other patent litigation;

competing technological and market developments;

the establishment of additional strategic alliances;

developments related to any future litigation;

the cost of commercialization activities and arrangements, including manufacturing of our product 
candidates; and

the cost of product in-licensing and any possible acquisitions.

We intend to seek additional funding through strategic alliances and may seek additional funding through public or 
private sales of our securities, including equity securities. In addition, during the second quarter of 2017, we issued 
the 2024 Notes and we have previously financed capital purchases and may continue to pursue opportunities to 
obtain additional debt financing in the future. In November 2020, we entered into separate, privately negotiated 
transactions with certain holders of the 2024 Notes to repurchase $136.2 million aggregate principal amount of the 
2024 Notes for an aggregate repurchase price of $186.9 million in cash. At December 31, 2020, $381.3 million 
aggregate principal amount of the 2024 Notes remained outstanding. Additional equity or debt financing might not 
be available on reasonable terms, if at all. In addition, disruptions due to the COVID-19 pandemic could make it 
more difficult for us to access capital. Any additional equity financings will be dilutive to our stockholders and any 
additional debt financings may involve operating covenants that restrict our business.

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Compliance with changing regulation of corporate governance and public disclosure may result in additional 
expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the 
Dodd-Frank Wall Street Reform and Consumer Protection Act, new SEC regulations and Nasdaq rules, are creating 
uncertainty for companies such as ours. These laws, regulations and standards are subject to varying interpretations 
in some cases due to their lack of specificity, and as a result, their application in practice may evolve over time as 
new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty 
regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance 
practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a 
result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to 
continue to result in, increased selling, general and administrative expenses and management time related to 
compliance activities. If we fail to comply with these laws, regulations and standards, our reputation may be harmed, 
and we might be subject to sanctions or investigation by regulatory authorities, such as the SEC. Any such action 
could adversely affect our financial results and the market price of our common stock.

Increasing use of social media could give rise to liability and result in harm to our business.

Our employees are increasingly utilizing social media tools and our website as a means of communication. Despite 
our efforts to monitor social media communications, there is risk that the unauthorized use of social media by our 
employees to communicate about our products or business, or any inadvertent disclosure of material, nonpublic 
information through these means, may result in violations of applicable laws and regulations, which may give rise to 
liability and result in harm to our business. In addition, there is also risk of inappropriate disclosure of sensitive 
information, which could result in significant legal and financial exposure and reputational damages that could 
potentially have a material adverse impact on our business, financial condition and results of operations. 
Furthermore, negative posts or comments about us or our products on social media could seriously damage our 
reputation, brand image and goodwill.

Risks Related to Our Industry

Health care reform measures and other recent legislative initiatives could adversely affect our business.

The business and financial condition of pharmaceutical and biotechnology companies are affected by the efforts of 
governmental and third-party payors to contain or reduce the costs of health care and to lower drug prices. In the 
U.S., comprehensive health care reform legislation was enacted by the Federal government and we expect that there 
will continue to be a number of federal and state proposals to implement government control over the pricing of 
prescription pharmaceuticals. In addition, increasing emphasis on reducing the cost of health care in the U.S. will 
continue to put pressure on the rate of adoption and pricing of prescription pharmaceuticals. Moreover, in some 
foreign jurisdictions, pricing of prescription pharmaceuticals is already subject to government control. Additionally, 
other federal and state legislation impose obligations on manufacturers of pharmaceutical products, among others, 
related to product tracking and tracing. Among the requirements of this new legislation, manufacturers are required 
to provide certain information regarding the drug product provided to individuals and entities to which product 
ownership is transferred, label drug product with a product identifier, and keep certain records regarding distribution 
of the drug product. Further, under this new legislation, manufacturers will have drug product investigation, 
quarantine, disposition, notification and purchaser license verification responsibilities related to counterfeit, diverted, 
stolen, and intentionally adulterated products, as well as products that are the subject of fraudulent transactions or 
which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health 
consequences or death.

Additionally, in March 2010, Patient Protection and Affordable Care Act, as amended by the Health Care and 
Education Reconciliation Act of 2010, or collectively the ACA, was signed into law, which was intended to broaden 
access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud 
and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees 

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on the health industry and impose additional health policy reforms. Among the provisions of the ACA of importance 
to our potential drug candidates are:

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an annual, nondeductible fee on any entity that manufactures, or imports, specified branded prescription 
drugs and biologic agents, apportioned among these entities according to their market share in certain 
government healthcare programs;

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate 
Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, 
respectively;

a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are 
calculated for drugs that are inhaled, infused, instilled, implanted or injected;

extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are 
enrolled in Medicaid managed care organizations;

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer 
Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, 
thereby potentially increasing a manufacturer’s Medicaid rebate liability;

a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 
70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during 
their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be covered under 
Medicare Part D;

expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing 
program; and

a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct 
comparative clinical effectiveness research, along with funding for such research.

There remain legal and political challenges to certain aspects of the ACA. Since January 2017, several executive 
orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the ACA 
have been put into place. Concurrently, Congress has considered legislation that would repeal or repeal and replace 
all or part of the ACA. Legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act includes a provision 
that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain 
individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as 
the “individual mandate”. In addition, the 2020 federal spending package permanently eliminated, effective January 
1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device 
tax and, effective January 1, 2021, also eliminated the health insurer tax. On December 14, 2018, a U.S. District 
Court Judge in Texas ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was 
repealed by Congress as part of the Tax Cuts and Jobs Act. Additionally, on December 18, 2019, the U.S. Court of 
Appeals for the 5th Circuit ruled that the individual mandate was unconstitutional and remanded the case back to the 
District Court to determine whether the remaining provisions of the ACA are invalid as well. On March 2, 2020, the 
United States Supreme Court is currently reviewing this case, although it is unclear when a decision will be made. It 
is also unclear how such litigation will impact the ACA and our business.

Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include 
aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control 
Act of 2011, which began in 2013 and, due to subsequent legislative amendments to the statute, including the 
Bipartisan Budget Act of 2018, will remain in effect through 2030, except for a temporary suspension from May 1, 
2020 through May 31, 2021 due to the COVID-19 pandemic, unless additional Congressional action is taken. The 
American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several 
providers, including hospitals and cancer treatment centers, increased the statute of limitations period for the 
government to recover overpayments to providers from three to five years.

Additional changes that may affect our business include the expansion of new programs such as Medicare payment 
for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015, which 

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ended the use of the statutory formula, also referred to as the Sustainable Growth Rate, for clinician payment and 
established a quality payment incentive program, also referred to as the Quality Payment Program. This program 
provides clinicians with two ways to participate, including through the Advanced Alternative Payment Models, or 
APMs, and the Merit-based Incentive Payment System, or MIPS. In November 2019, CMS issued a final rule 
finalizing the changes to the Quality Payment Program. At this time, it remains unclear how the introduction of the 
Quality Payment Program will impact overall physician reimbursement.

Also, there has been heightened governmental scrutiny recently over pharmaceutical pricing practices in light of the 
rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent Congressional inquiries 
and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to 
product pricing, review the relationship between pricing and manufacturer patient programs, and reform government 
program reimbursement methodologies for products. At the federal level, the Trump administration’s budget 
proposal for the 2021 fiscal year includes a $135 billion allowance to support legislative proposals seeking to reduce 
drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-
cost generic and biosimilar drugs. On March 10, 2020, the Trump administration sent “principles” for drug pricing 
to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket 
pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and 
place limits on pharmaceutical price increases. Further, the Trump administration released a “Blueprint” to lower 
drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer 
competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to 
lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. On July 
24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to 
prescription drug pricing that attempt to implement several of the administration’s proposals. As a result, the FDA 
released a final rule on September 24, 2020, effective November 30, 2020, providing guidance for states to build and 
submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health 
and Human Services, or HHS, finalized a regulation removing safe harbor protection for price reductions from 
pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, 
unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at 
the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and 
manufacturers. On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most 
Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered 
drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On December 
28, 2020, the U.S. District Court in Northern California issued a nationwide preliminary injunction against 
implementation of the interim final rule. It is unclear whether the Biden administration will work to reverse these 
measures or pursue similar policy initiatives. At the state level, legislatures have increasingly passed legislation and 
implemented regulations designed to control pharmaceutical and biological product pricing, including price or 
patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure 
and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk 
purchasing.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result 
in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that 
we receive for any approved product. In particular, it is possible that additional governmental action is taken in 
response to the COVID-19 pandemic. Any reduction in reimbursement from Medicare or other government-funded 
programs may result in a similar reduction in payments from private payors. The implementation of cost 
containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain 
sustained profitability or commercialize our drugs.

We are currently unable to predict what additional legislation or regulation, if any, relating to the health care 
industry may be enacted in the future or what effect recently enacted federal legislation or any such additional 
legislation or regulation would have on our business. The pendency or approval of such proposals or reforms could 
result in a decrease in our stock price or limit our ability to raise capital or to enter into collaboration agreements for 
the further development and commercialization of our programs and products.

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Any relationships with healthcare professionals, principal investigators, consultants, customers (actual and 
potential) and third-party payors in connection with our current and future business activities are and will 
continue to be subject, directly or indirectly, to federal and state healthcare laws. If we are unable to comply, or 
have not fully complied, with such laws, we could face penalties, contractual damages, reputational harm, 
diminished profits and future earnings and curtailment or restructuring of our operations.

Our business operations and activities may be directly, or indirectly, subject to various federal and state healthcare 
laws, including without limitation, fraud and abuse laws, false claims laws, data privacy and security laws, as well as 
transparency laws regarding payments or other items of value provided to healthcare providers. These laws may 
restrict or prohibit a wide range of business activities, including, but not limited to, research, manufacturing, 
distribution, pricing, discounting, marketing and promotion, sales commission, customer incentive programs and 
other business arrangements. These laws may impact, among other things, our current activities with principal 
investigators and research subjects, as well as current and future sales, marketing, patient co-payment assistance and 
education programs.

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the federal Anti-Kickback Statute which prohibits, among other things, persons and entities from 
knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in 
cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, 
order or recommendation of, any good or service, for which payment may be made under a federal 
healthcare program such as Medicare and Medicaid;

the federal civil and criminal false claims laws, including the federal civil False Claims Act, and civil 
monetary penalties laws, which impose criminal and civil penalties against individuals or entities for, 
among other things, knowingly presenting, or causing to be presented, to the federal government, claims for 
payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation 
to pay money to the federal government;

HIPAA, which imposes criminal and civil liability for, among other things, executing a scheme to defraud 
any healthcare benefit program or making false statements relating to healthcare matters;

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and its 
implementing regulations, which also imposes obligations, including mandatory contractual terms, on 
covered entities, including certain healthcare providers, health plans, and healthcare clearinghouses, as well 
as their business associates and their covered subcontractors, with respect to safeguarding the privacy, 
security and transmission of individually identifiable health information;

the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, 
biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s 
Health Insurance Program, with specific exceptions, to report annually to CMS information related to 
payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, 
podiatrists, and chiropractors) and teaching hospitals, and applicable manufacturers and applicable group 
purchasing organizations to report annually to CMS ownership and investment interests held by physicians 
and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to 
report such information regarding its relationships with physician assistants, nurse practitioners, clinical 
nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse 
midwives during the previous year; and

analogous state, local, and foreign laws and regulations, such as state anti-kickback and false claims laws, 
which may apply to sales or marketing arrangements and claims involving healthcare items or services 
reimbursed by non-governmental third party payors, including private insurers; state laws that require 
pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines 
and the relevant compliance guidance promulgated by the federal government; state laws that require drug 
manufacturers to report information related to payments and other transfers of value to physicians and other 
healthcare providers or marketing expenditures or drug pricing; state laws that require disclosure of price 
increases above certain identified thresholds as well as of new commercial launches in the state; state and 
local laws that require the registration of pharmaceutical sales representatives; state and local “drug take 

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back” laws and regulations; and state and foreign laws governing the privacy and security of health 
information in some circumstances, many of which differ from each other in significant ways and often are 
not preempted by HIPAA, thus complicating compliance efforts.

Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve 
substantial costs. While our interactions with healthcare professionals, including our speaker programs and other 
arrangements, such as our contributions to patient assistance programs, have been structured to comply with these 
laws and related guidance, it is possible that governmental and enforcement authorities will conclude that our 
business practices may not comply with current or future statutes, regulations or case law interpreting applicable 
fraud and abuse or other healthcare laws. If our operations or activities are found to be in violation of any of the laws 
described above or any other governmental regulations that apply to us, we may be subject to, without limitation, 
significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion 
from participation in Medicare, Medicaid and other federal healthcare programs, additional reporting requirements 
and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of 
non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings and 
curtailment or restructuring of our operations, any of which could adversely affect our ability to operate.

In addition, any sales of our product once commercialized outside the U.S. will also likely subject us to foreign 
equivalents of the healthcare laws mentioned above, among other foreign laws.

We could face liability if a regulatory authority determines that we are promoting INGREZZA, ONGENTYS or 
any of our product candidates that receives regulatory approval, for “off-label” uses.

A company may not promote “off-label” uses for its drug products. An off-label use is the use of a product for an 
indication that is not described in the product’s FDA-approved label in the U.S. or for uses in other jurisdictions that 
differ from those approved by the applicable regulatory agencies. Physicians, on the other hand, may prescribe 
products for off-label uses. Although the FDA and other regulatory agencies do not regulate a physician’s choice of 
drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications 
from companies or their sales force with respect to off-label uses of products for which marketing clearance has not 
been issued. However, companies may share truthful and not misleading information that is otherwise consistent 
with a product’s FDA approved labeling. A company that is found to have promoted off-label use of its product may 
be subject to significant liability, including civil and criminal sanctions. We intend to comply with the requirements 
and restrictions of the FDA and other regulatory agencies with respect to our promotion of our products, including 
INGREZZA and ONGENTYS, but we cannot be sure that the FDA or other regulatory agencies will agree that we 
have not violated their restrictions. As a result, we may be subject to criminal and civil liability. In addition, our 
management’s attention could be diverted to handle any such alleged violations. If the FDA or any other 
governmental agency initiates an enforcement action against us, or if we are the subject of a qui tam suit brought by 
a private plaintiff on behalf of the government, and it is determined that we violated prohibitions relating to the 
promotion of products for unapproved uses, we could be subject to substantial civil or criminal fines or damage 
awards and other sanctions such as consent decrees and corporate integrity agreements pursuant to which our 
activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and 
regulations. Any such fines, awards or other sanctions would have an adverse effect on our revenue, business, 
financial prospects, and reputation.

If we are unable to protect our intellectual property, our competitors could develop and market products based on 
our discoveries, which may reduce demand for our products.

Our success will depend on our ability to, among other things:

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obtain patent protection for our products;

preserve our trade secrets;

prevent third parties from infringing upon our proprietary rights; and

operate without infringing upon the proprietary rights of others, both in the U.S. and internationally.

Because of the substantial length of time and expense associated with bringing new products through the 
development and regulatory approval processes in order to reach the marketplace, the pharmaceutical industry places 

45

considerable importance on obtaining patent and trade secret protection for new technologies, products and 
processes. Accordingly, we intend to seek patent protection for our proprietary technology and compounds. 
However, we face the risk that we may not obtain any of these patents and that the breadth of claims we obtain, if 
any, may not provide adequate protection of our proprietary technology or compounds.

We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological 
innovation to develop and maintain our competitive position, which we seek to protect, in part, through 
confidentiality agreements with our commercial collaborators, employees and consultants. We also have invention 
or patent assignment agreements with our employees and some, but not all, of our commercial collaborators and 
consultants. However, if our employees, commercial collaborators or consultants breach these agreements, we may 
not have adequate remedies for any such breach, and our trade secrets may otherwise become known or 
independently discovered by our competitors.

In addition, although we own a number of patents, the issuance of a patent is not conclusive as to its validity or 
enforceability, and third parties may challenge the validity or enforceability of our patents. We cannot assure you 
how much protection, if any, will be given to our patents if we attempt to enforce them and they are challenged in 
court or in other proceedings. It is possible that a competitor may successfully challenge our patents or that 
challenges will result in limitations of their coverage. Moreover, competitors may infringe our patents or 
successfully avoid them through design innovation. To prevent infringement or unauthorized use, we may need to 
file infringement claims, which are expensive and time-consuming. In addition, in an infringement proceeding a 
court may decide that a patent of ours is not valid or is unenforceable or may refuse to stop the other party from 
using the technology at issue on the grounds that our patents do not cover its technology. Interference proceedings 
declared by the U.S. Patent and Trademark Office may be necessary to determine the priority of inventions with 
respect to our patent applications or those of our licensors. Litigation or interference proceedings may fail and, even 
if successful, may result in substantial costs and be a distraction to management. We cannot assure you that we will 
be able to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not 
protect such rights as fully as in the U.S.

If we fail to obtain or maintain orphan drug designation or other regulatory exclusivity for some of our product 
candidates, our competitive position would be harmed.

A product candidate that receives orphan drug designation can benefit from a streamlined regulatory process as well 
as potential commercial benefits following approval. Currently, this designation provides market exclusivity in the 
U.S. and the EU for seven years and ten years, respectively, if a product is the first such product approved for such 
orphan indication. This market exclusivity does not, however, pertain to indications other than those for which the 
drug was specifically designated in the approval, nor does it prevent other types of drugs from receiving orphan 
designations or approvals in these same indications. Further, even after an orphan drug is approved, the FDA can 
subsequently approve the same drug for the same condition if the FDA concludes that the new drug is clinically 
superior to the orphan product or a market shortage occurs.

In the EU, orphan exclusivity may be reduced to six years if the drug no longer satisfies the original designation 
criteria or can be lost altogether if the marketing authorization holder consents to a second orphan drug application 
or cannot supply enough drug, or when a second applicant demonstrates its drug is “clinically superior” to the 
original orphan drug. We may not be successful obtaining orphan drug designations for any indications and, even if 
we succeed, such orphan drug designations may fail to result in or maintain orphan drug exclusivity upon approval, 
which would harm our competitive position.

The technologies we use in our research as well as the drug targets we select may infringe the patents or violate 
the proprietary rights of third parties.

We cannot assure you that third parties will not assert patent or other intellectual property infringement claims 
against us or our collaborators with respect to technologies used in potential products. If a patent infringement suit 
were brought against us or our collaborators, we or our collaborators could be forced to stop or delay developing, 
manufacturing or selling potential products that are claimed to infringe a third party’s intellectual property unless 
that party grants us or our collaborators rights to use its intellectual property. In such cases, we could be required to 
obtain licenses to patents or proprietary rights of others in order to continue to commercialize our products. 
However, we may not be able to obtain any licenses required under any patents or proprietary rights of third parties 

46

on acceptable terms, or at all. Even if our collaborators or we were able to obtain rights to the third party’s 
intellectual property, these rights may be non-exclusive, thereby giving our competitors access to the same 
intellectual property. Ultimately, we may be unable to commercialize some of our potential products or may have to 
cease some of our business operations as a result of patent infringement claims, which could severely harm our 
business.

Our employees, independent contractors, principal investigators, consultants, commercial partners and vendors 
may engage in misconduct or other improper activities, including non-compliance with regulatory standards and 
requirements.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees and independent 
contractors, such as principal investigators, consultants, commercial partners and vendors, or by employees of our 
commercial partners could include failures to comply with FDA regulations, to provide accurate information to the 
FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcare 
fraud and abuse laws, to report financial information or data accurately, to maintain the confidentiality of our trade 
secrets or the trade secrets of our commercial partners, or to disclose unauthorized activities to us. In particular, 
sales, marketing and other business arrangements in the healthcare industry are subject to extensive laws intended to 
prevent fraud, kickbacks, self-dealing and other abusive practices. Employee and independent contractor misconduct 
could also involve the improper use of individually identifiable information, including, without limitation, 
information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to 
our reputation. Any action against our employees, independent contractors, principal investigators, consultants, 
commercial partners or vendors for violations of these laws could result in significant civil, criminal, and 
administrative penalties, fines, and imprisonment.

We face potential product liability exposure far in excess of our insurance coverage.

The use of any of our potential products in clinical trials, and the sale of any approved products, including 
INGREZZA and ONGENTYS, may expose us to liability claims. These claims might be made directly by 
consumers, health care providers, pharmaceutical companies or others selling our products. We have product 
liability insurance coverage for our clinical trials in the amount of $45.0 million per occurrence and $45.0 million in 
the aggregate. In addition, we have product liability insurance related to the sale of INGREZZA and ONGENTYS in 
the amount of $45.0 million per occurrence and $45.0 million in the aggregate. However, our insurance may not 
reimburse us or may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance 
coverage is becoming increasingly expensive, and we may not be able to maintain insurance coverage at a 
reasonable cost or in sufficient amounts to protect us against losses due to liability from any current or future clinical 
trials or approved products. A successful product liability claim, or series of claims, brought against us would 
decrease our cash reserves and could cause our stock price to fall. Furthermore, regardless of the eventual outcome 
of a product liability claim, any product liability claim against us may decrease demand for our approved products, 
including INGREZZA and ONGENTYS, damage our reputation, result in regulatory investigations that could 
require costly recalls or product modifications, cause clinical trial participants to withdrawal, result in costs to 
defend the related litigation, decrease our revenue, and divert management’s attention from managing our business.

Our activities involve hazardous materials, and we may be liable for any resulting contamination or injuries.

Our research activities involve the controlled use of hazardous materials. We cannot eliminate the risk of accidental 
contamination or injury from these materials. If an accident occurs, a court may hold us liable for any resulting 
damages, which may harm our results of operations and cause us to use a substantial portion of our cash reserves, 
which would force us to seek additional financing.

Cyber security breaches and other disruptions could compromise our information, including the theft of our 
intellectual property, and could expose us to liability, which would cause our business and reputation to suffer.

We are increasingly dependent on information technology systems and infrastructure, including mobile 
technologies, to operate our business. In the ordinary course of our business, we collect and store confidential and 
sensitive electronic information on our networks and in our data centers. This information includes, among other 
things, our intellectual property and proprietary information, the confidential information of our collaborators and 
licensees, and the personally identifiable information of our employees. It is important to our operations and 
business strategy that this electronic information remains secure and is perceived to be secure. The size and 

47

complexity of our information technology systems, and those of third-party vendors with whom we contract, and the 
volume of data we retain, make such systems potentially vulnerable to breakdown, malicious intrusion, security 
breaches and other cyber-attacks. Additionally, natural disasters, public health pandemics or epidemics (including, 
for example, the COVID-19 pandemic), terrorism, war and telecommunication and electrical failures may result in 
damage to or the interruption or impairment of key business processes, or the loss or corruption of confidential 
information, including intellectual property, proprietary business information and personal information. Information 
security risks have significantly increased in recent years in part due to the proliferation of new technologies and the 
increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including 
foreign private parties and state actors. A security breach or privacy violation that leads to disclosure or modification 
of or prevents access to personally identifiable information or other protected information could harm our reputation, 
compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to 
mandatory corrective action, require us to verify the correctness of database contents and otherwise subject us to 
liability under laws and regulations that protect personal data, resulting in increased costs or loss of revenue. 
Similarly, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in 
our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Additionally, 
theft of our intellectual property or proprietary business information could require substantial expenditures to 
remedy. If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial 
measures, our operations could be disrupted, and we may suffer loss of reputation, financial loss and other 
regulatory penalties because of lost or misappropriated information. In addition, these breaches and other 
inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the 
type described above. Moreover, the prevalent use of mobile devices that access confidential information increases 
the risk of data security breaches, which could lead to the loss of confidential information, trade secrets or other 
intellectual property. As cyber threats continue to evolve, we may be required to expend significant additional 
resources to continue to modify or enhance our protective measures or to investigate and remediate any information 
security vulnerabilities. While we have implemented security measures to protect our data security and information 
technology systems, such measures may not prevent such events. Significant disruptions of our information 
technology systems or breaches of data security could have a material adverse effect on our business, financial 
condition and results of operations.

Compliance with evolving U.S. and global privacy and data security requirements could result in additional costs 
and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such 
requirements could have a material adverse effect on our business, financial condition or results of operations.

The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of information 
worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. For example, the EU’s 
General Data Protection Regulation, or GDPR, imposes strict obligations on the processing of personal data, 
including personal health data, and the free movement of such data. The GDPR applies to any company established 
in the EU as well as any company outside the EU that processes personal data in connection with the offering of 
goods or services to individuals in the EU or the monitoring of their behavior. The GDPR enhances data protection 
obligations for processors and controllers of personal data, including, for example, obligations relating to: 
processing health and other sensitive data; obtaining consent of individuals; providing notice to individuals 
regarding data processing activities; responding to data subject requests; taking certain measures when engaging 
third-party processors; notifying data subjects and regulators of data breaches; implementing safeguards to protect 
the security and confidentiality of personal data; and transferring personal data to countries outside the EU, 
including the U.S. The GDPR imposes substantial fines for breaches of data protection requirements, which can be 
up to four percent of global revenue or 20 million euros, whichever is greater, and it also confers a private right of 
action on data subjects for breaches of data protection requirements. The GDPR and other changes in laws or 
regulations associated with the enhanced protection of certain types of sensitive data, such as EU regulations 
governing clinical trial data and other healthcare data, could require us to change our business practices or lead to 
government enforcement actions, private litigation or significant penalties against us and could have a material 
adverse effect on our business, financial condition or results of operations.

Additionally, the California Consumer Privacy Act, or CCPA, which went into effect in 2020, created new 
individual privacy rights for California consumers (as that word is broadly defined in the law) and places increased 
privacy and security obligations on entities handling personal data of consumers or households. For example, the 

48

CCPA requires covered companies to provide additional disclosures to California consumers, and provides such 
consumers with new rights, such as the ability to opt out of certain disclosures of personal information. The CCPA 
provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to 
increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Some observers 
have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., 
which could increase our potential liability and adversely affect our business.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We lease our corporate headquarters, which are located in San Diego, California, and consist of 141 thousand square 
feet of laboratory and office space located at 12780 El Camino Real, 88 thousand square feet of office space located 
at 12790 El Camino Real, 46 thousand square feet of laboratory space located at 10420 Wateridge Circle, and 45 
thousand square feet of office space located at 12777 High Bluff Drive.

We believe that our property and equipment are generally well maintained, in good operating condition, and suitable 
for the conduct of our business.

Item 3. Legal Proceedings

From time to time in the normal course of business, we may be subject to various legal matters such as threatened or 
pending claims or proceedings. We are not currently a party to any material legal proceedings or claims, nor are we 
aware of any pending or threatened litigation or claims that could have a material adverse effect on our business, 
operating results, cash flows or financial condition should such litigation or claim be resolved unfavorably.

Item 4. Mine Safety Disclosures

None.

49

PART II

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

Our common stock is traded on the Nasdaq Global Select Market under the symbol “NBIX”.

At January 29, 2021, there were approximately 47 stockholders of record of our common stock. We have not paid 
any cash dividends on our common stock since inception and do not anticipate paying cash dividends in the 
foreseeable future.

Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this 
Annual Report on Form 10-K.

Recent Sales of Unregistered Securities and Issuer Purchases of Equity Securities

There were no unregistered sales of our equity securities during 2020. In addition, we did not repurchase any of our 
equity securities during 2020.

Stock Performance Graph and Cumulative Total Return*

The graph below shows the cumulative total stockholder return assuming the investment of $100 on December 31, 
2015 (and the reinvestment of dividends thereafter) in each of (i) Neurocrine Biosciences, Inc.’s common stock, 
(ii) the Nasdaq Composite Index and (iii) the Nasdaq Biotechnology Index. The comparisons in the graph below are 
based upon historical data and are not indicative of, or intended to forecast, future performance of our common stock 
or Indexes.

* The material in this section is not “soliciting material”, is not deemed “filed” with the Securities and Exchange 
Commission, or SEC, and is not to be incorporated by reference into any of our SEC filings whether made before or 
after the date hereof and irrespective of any general incorporation language in any such SEC filing except to the 
extent we specifically incorporate this section by reference.

50

Neurocrine Biosciences, Inc.Nasdaq CompositeNasdaq Biotechnology12/201512/201612/201712/201812/201912/2020$50$100$150$200$250$300Item 6. Selected Financial Data

The following selected financial data have been derived from our audited financial statements. The information set 
forth below is not necessarily indicative of our results of future operations and should be read in conjunction with 
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial 
statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K.

— 
94.3 
— 
68.1 
162.4 
(147.4) 

— 
— 
— 
6.3 
6.3 
(141.1) 
— 
(141.1) 
(1.63) 
(1.63) 

(in millions, except per share data)
Consolidated Statements of Operations Data
Revenues:

Product sales, net
Collaboration revenue

Total revenues
Operating expenses:

Cost of sales
Research and development
Acquired in-process research and development
Selling, general and administrative

Total operating expenses
Operating income (loss)
Other (expense) income:

2020

2019

2018

2017

2016

$ 

994.1  $ 
51.8 
  1,045.9 

752.9  $ 
35.2 
788.1 

409.6  $ 
41.6 
451.2 

116.6  $ 
45.0 
161.6 

— 
15.0 
15.0 

10.1 
275.0 
164.5 
433.3 
882.9 
163.0 

7.4 
200.0 
154.3 
354.1 
715.8 
72.3 

4.9 
155.8 
4.8 
248.9 
414.4 
36.8 

1.3 
91.8 
30.0 
169.9 
293.0 
(131.4) 

Interest expense
Unrealized loss on restricted equity securities
Loss on extinguishment of convertible senior notes
Investment income and other, net

Total other (expense) income, net
Income (loss) before (benefit from) provision for income taxes
(Benefit from) provision for income taxes
Net income (loss)
Net income (loss) per share, basic
Net income (loss) per share, diluted
Weighted average common shares outstanding:

(32.8) 
(17.7) 
(18.4) 
12.6 
(56.3) 
106.7 
(300.6) 
407.3  $ 
4.38  $ 
4.16  $ 

(32.0) 
(13.0) 
— 
19.2 
(25.8) 
46.5 
9.5 
37.0  $ 
0.40  $ 
0.39  $ 

(30.5) 
— 
— 
15.5 
(15.0) 
21.8 
0.7 
21.1  $ 
0.23  $ 
0.22  $ 

(19.5) 
— 
— 
8.3 
(11.2) 
(142.5) 
— 
(142.5)  $ 
(1.62)  $ 
(1.62)  $ 

$ 
$ 
$ 

Basic
Diluted

93.1 
97.8 

91.6 
95.7 

90.2 
95.4 

88.1 
88.1 

86.7 
86.7 

970.2  $ 
$  1,028.1  $ 
265.7  $ 
829.7  $ 
$ 
$  1,734.7  $  1,306.0  $ 
$ 
408.8  $ 
$ 
$  1,126.2  $ 

350.8 
280.0 
365.1 
317.9  $ 
— 
(725.4)  $ (1,132.7)  $ (1,177.8)  $ (1,198.9)  $ (1,056.3) 
314.9 

763.3  $ 
500.5  $ 
817.6  $ 
369.6  $ 

866.9  $ 
649.5  $ 
993.2  $ 
388.5  $ 

372.1  $ 

480.8  $ 

636.9  $ 

Consolidated Balance Sheets Data
Cash, cash equivalents and debt securities available-for-sale
Working capital 
Total assets
Convertible senior notes
Accumulated deficit
Total stockholders’ equity

51

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of 
Operations 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations section 
contains forward-looking statements pertaining to, among other things, the commercialization of our product and 
product candidates, the expected continuation of our collaborative agreements, the receipt of research and 
development payments thereunder, the future achievement of various milestones in product development and the 
receipt of payments related thereto, the potential receipt of royalty payments, preclinical testing and clinical trials of 
potential products, the period of time that our existing capital resources will meet our funding requirements, and 
our financial results of operations. Our actual results could differ materially from those anticipated in these 
forward-looking statements as a result of various risks and uncertainties, including those set forth in this Annual 
Report on Form 10-K under the heading “Item 1A. Risk Factors.” See “Forward-Looking Statements” in Part I of 
this Annual Report on Form 10-K.

Overview

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

We launched INGREZZA® (valbenazine) in the U.S. with our specialty sales force in May 2017, after receiving 
FDA approval for INGREZZA as the first FDA-approved drug for the treatment of tardive dyskinesia in April 2017. 
In September 2020, we launched ONGENTYS® (opicapone) in the U.S. leveraging our existing INGREZZA 
commercial infrastructure after receiving FDA approval for ONGENTYS for Parkinson's disease in April 2020. 
INGREZZA net product sales represent the significant majority of our total net product sales.

Our partner AbbVie Inc., or AbbVie, launched ORILISSA® (elagolix) in the U.S. and Canada in August and 
November 2018, respectively, after receiving FDA and Health Canada approval for ORILISSA for endometriosis in 
July and October 2018, respectively. In June 2020, AbbVie launched ORIAHNNTM (elagolix, estradiol, and 
norethindrone acetate; elagolix) in the U.S. after receiving FDA approval for ORIAHNN for uterine fibroids in May 
2020. We receive royalties at tiered percentage rates on any net sales of ORILISSA and ORIAHNN.

In addition, we have a rapidly expanding pipeline of potential treatments and gene therapies for diseases such as 
Huntington’s disease, or HD, Parkinson’s disease, epilepsy, congenital adrenal hyperplasia, or CAH, schizophrenia 
and depression. Refer to Part I, Item 1, “Business” for more information about our exclusive and partnered 
commercial products, clinical development pipeline and research programs.

Highlights:

•

INGREZZA net product sales for 2020 increased $240.2 million, or 31.9%, to $993.1 million, primarily 
reflecting strong refill and persistency rates for existing INGREZZA patients.

• We launched ONGENTYS in the U.S. in September 2020, after receiving FDA approval for ONGENTYS 
as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients 
in April 2020. 

•

•

AbbVie launched ORIAHNN in the U.S. in June 2020, after receiving FDA approval for ORIAHNN as the 
first FDA-approved non-surgical, oral medication option for the management of heavy menstrual bleeding 
associated with uterine fibroids in pre-menopausal women in May 2020. We recognized a $30.0 million 
event-based milestone as revenue in the second quarter of 2020. 

Completed strategic partnerships with Idorsia Pharmaceuticals Ltd, or Idorsia, and Takeda Pharmaceutical 
Company Limited, or Takeda, to expand clinical pipeline for epilepsy and psychiatry disorders. Recognized 

52

in-process research and development, or IPR&D, expense for 2020 of $164.5 million, related to upfront 
payments.

•

•

Total debt outstanding decreased by $136.2 million to $381.3 million after repurchase of approximately 
26% of our debt outstanding in December 2020. The total aggregate repurchase price of $186.9 million was 
paid in cash and resulted in an $18.4 million loss.

At December 31, 2020, in part because we achieved three years of cumulative pretax income, management 
determined that there is sufficient positive evidence to conclude that it is more likely than not that deferred 
tax assets of $319.4 million are realizable. We therefore reduced the valuation allowance accordingly.

Pipeline Highlights:

•

•

•

•

Crinecerfont (NBI-74788): In July 2020, we initiated the CAHtalyst study, a global registrational Phase III, 
randomized, double-blind, placebo-controlled clinical study to evaluate the safety and efficacy of 
crinecerfont in 165 adult patients with classic CAH, followed by an open-label treatment period.

NBI-827104 (ACT-709478): In November 2020, we initiated a Phase II clinical study for NBI-827104 in a 
rare pediatric epileptic encephalopathy known as Continuous Spike and Wave During Sleep.

INGREZZA: In February 2021, Mitsubishi Tanabe Pharmaceutical Company, or MTPC, reported positive 
top-line results from the J-KINECT Phase III study, designed to evaluate the efficacy and safety of 
valbenazine in tardive dyskinesia. Detailed results from this trial will be presented at a future medical 
conference. With positive data in hand, a marketing authorization with the Ministry of Health and Welfare 
is planned for 2021 in Japan. In addition, MTPC submitted filings for marketing authorizations in South 
Korea, Thailand, Singapore, Indonesia, and Malaysia in 2020.

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

COVID-19

The global COVID-19 pandemic has dramatically changed the ways in which we live and interact with one another. 
While we adapt to this new shared reality, our mission remains unchanged: to discover and develop life-changing 
treatments for people with serious, challenging and under-addressed disorders.

While we are unable to reliably estimate the duration or extent of any potential business disruption or financial 
impact during this time, including any impacts on INGREZZA product sales or R&D expense, we remain committed 
to (1) prioritizing the safety, health and well-being of patients, their caregivers, healthcare providers and our 
employees; (2) ensuring patients with tardive dyskinesia are well supported and have continued uninterrupted access 
to INGREZZA, for which we currently do not expect any supply disruption; and (3) advancing ongoing clinical 
studies. As part of this commitment, we implemented a “Work from Home Policy” in early March 2020 for 
employees not involved in business-critical activities. For employees involved in business-critical activities, we 
implemented safety measures designed to comply with federal, state and local guidelines.

Due to the impact of COVID-19, we initially paused enrollment of new patients in several of our clinical trials. 
Beginning in the third quarter of 2020, we began enrolling patients in our HD and CAH studies. To date, we have 
not experienced any interruption of our supply of drug products needed to support our ongoing clinical studies, but 
we expect that completion and data readouts for several of our ongoing and planned studies will be delayed.

We continue to believe that existing funds, cash generated from operations, and existing sources of and access to 
financing are adequate to satisfy our needs for working capital, capital expenditures, debt service requirements and 
other business development initiatives that we plan to strategically pursue. However, should the COVID-19 
pandemic and any associated recession or depression continue for a prolonged period, our results of operations, 
financial condition, liquidity and cash flows could be materially impacted by lower revenues and profitability and a 
lower likelihood of effectively and efficiently developing new medicines.

53

Results of Operations

Revenues

The following table presents revenues by category.

(in millions)
INGREZZA product sales, net
ONGENTYS product sales, net
Collaboration revenues
Total revenues

Year Ended December 31,

2020

2019

2018

$ 

$ 

993.1  $ 
1.0 
51.8 
1,045.9  $ 

752.9  $ 
— 
35.2 
788.1  $ 

409.6 
— 
41.6 
451.2 

Product Sales, net. Net product sales were $994.1 million for 2020, $752.9 million for 2019 and $409.6 million for 
2018.

Collaboration Revenues. Collaboration revenues reflect the achievement of certain event-based milestones, royalties 
earned at tiered percentage rates on any net sales of ORILISSA and ORIAHNN and license fees earned under our 
collaboration agreements with AbbVie and MTPC.

In the second quarter of 2020, we recognized a $30.0 million event-based milestone as revenue upon FDA-approval 
of AbbVie’s ORIAHNN for uterine fibroids. In the third quarter of 2019, we recognized a $20.0 million event-based 
milestone as revenue upon the FDA’s acceptance of AbbVie’s new drug application, or NDA, submission of 
elagolix for uterine fibroids. In the third quarter of 2018, we recognized a $40.0 million event-based milestone as 
revenue upon FDA-approval of AbbVie’s ORILISSA for the treatment of moderate to severe pain associated with 
endometriosis.

For ORILISSA and ORIAHNN, we recognized royalty revenue of $19.2 million for 2020, $14.3 million for 2019 
and $1.6 million for 2018. 

Operating Expenses

Cost of Sales. Cost of sales was $10.1 million for 2020, $7.4 million for 2019 and $4.9 million for 2018, primarily 
reflecting a higher annual volume of INGREZZA product sales since commercial launch in April 2017.

Research and Development. We support our drug discovery and development efforts through the commitment of 
significant resources to discovery, R&D programs and business development opportunities.

Costs are reflected in the applicable development stage based upon the program status when incurred. Therefore, the 
same program could be reflected in different development stages in the same reporting period. For several of our 
programs, the R&D activities are part of our collaborative and other relationships.

Late stage consists of costs incurred related to product candidates in Phase II registrational studies and onwards. 
Early stage consists of costs incurred related to product candidates in post-investigational new drug application, or 
IND, through Phase II non-registrational studies. Research and discovery consists of pre-IND costs. Milestone 
expenses reflect payments made in connection with our collaborative and other relationships. Payroll and benefits 
consists of costs incurred for salaries and wages, payroll taxes, benefits and share-based compensation associated 
with employees involved in ongoing R&D activities. Share-based compensation may fluctuate from period to period 
based on factors that are not within our control, such as our stock price on the dates share-based grants are issued. 
Facilities and other consists of indirect costs incurred in support of overall R&D activities and non-specific 
programs, including activities that benefit multiple programs, such as management costs, as well as depreciation, 
information technology and facility-based expenses. These costs are not allocated to a specific program or stage.

54

 
 
 
 
 
 
 
The following table presents R&D expense by category:

(in millions)
Late stage

Early stage

Research and discovery

Milestone payments

Payroll and benefits

Facilities and other

Total R&D expense

Year Ended December 31,

2020

2019

2018

$ 

55.1  $ 

43.7  $ 

30.2 

43.3 

20.0 

95.4 

31.0 

25.3 

24.6 

10.0 

71.3 

25.1 

14.2 

41.7 

17.0 

10.0 

62.0 

10.9 

$ 

275.0  $ 

200.0  $ 

155.8 

R&D expense was $275.0 million for 2020, $200.0 million for 2019 and $155.8 million for 2018. The increase in 
R&D expense was primarily the result of increased investment to support advancing our expanded clinical portfolio 
and increased personnel expenses on higher headcount.

Acquired In-Process Research and Development. IPR&D expense was $164.5 million for 2020, $154.3 million for 
2019 and $4.8 million for 2018. For 2020, we recorded IPR&D expense of $46.0 million and $118.5 million in 
connection with the payments of the upfront fees pursuant to our collaborations with Idorsia and Takeda, 
respectively. For 2019, we recorded IPR&D expense of $118.1 million and $36.2 million in connection with the 
payments of the upfront fees pursuant to our collaborations with Voyager and Xenon Pharmaceuticals, Inc., or 
Xenon. For 2018, we recorded IPR&D expense of $4.8 million in connection with payment of the upfront fee to 
Jnana to obtain access to Jnana’s proprietary drug discovery platform.

Selling, General and Administrative. Selling, general and administrative, or SG&A, expense was $433.3 million for 
2020, $354.1 million for 2019 and $248.9 million for 2018. The increase in SG&A expense from 2019 to 2020 was 
primarily due to increased personnel expenses on higher headcount and continued investment in INGREZZA 
marketing. The increase in SG&A expense from 2018 to 2019 was primarily due to the sales force expansion 
completed in the third quarter of 2018, the national launch of a patient-focused disease state awareness campaign, 
Talk About TD, and an increase in the Branded Pharmaceutical Drug Fee expense.

Other Expense

Other expense, net, was $56.3 million for 2020, $25.8 million for 2019 and $15.0 million for 2018. Periodic 
fluctuations in other expense, net, primarily reflect unrealized losses recognized to adjust our equity investments in 
Voyager and Xenon Pharmaceuticals Inc. to fair value. For 2020, other expense, net, also reflects an $18.4 million 
loss on debt extinguishment recognized for the partial repurchase of the 2024 Notes in November 2020.

(Benefit from) Provision for Income Taxes

Our benefit from income taxes was $300.6 million for 2020, compared to a provision for income taxes of $9.5 
million for 2019 and $0.7 million for 2018. The benefit from income taxes for 2020 included a $296.3 million 
benefit related to the release of substantially all of our valuation allowance against our deferred tax assets on 
December 31, 2020. The decision to release the valuation allowance was made after we determined that it was more 
likely than not the deferred tax assets, including net operating losses and tax credits, would be realized, and was 
based on the evaluation and weighting of both positive and negative evidence, such as our achievement of a 
cumulative three-year income position at December 31, 2020, as well as our consideration of forecasts of future 
operating results and utilization of net operating losses and tax credits prior to their expiration. The provision for 
income taxes for 2019 and 2018 reflected estimated current state income taxes for both periods. At December 31, 
2019 and 2018, we had full valuation allowances against our net deferred tax assets as realization was uncertain. Our 
tax expense for 2020, 2019 and 2018 varied from the statutory tax rate primarily due to changes in our valuation 
allowances, net of other permanent book/tax differences, tax credits generated and impacts of changes in tax laws.

Net Income

Net income was $407.3 million, or $4.16 diluted earnings per share, for 2020, $37.0 million, or $0.39 diluted 
earnings per share, for 2019 and $21.1 million, or $0.22 diluted earnings per share, for 2018. The change from 2019 

55

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
to 2020 was primarily the result of increased INGREZZA net product sales and a non-cash tax benefit of $296.3 
million related to the release of substantially all of our valuation allowance against our deferred tax assets on 
December 31, 2020, offset by $164.5 million of IPR&D in connection with our collaborations with Idorsia and 
Takeda, ongoing support for the commercial launch of INGREZZA for tardive dyskinesia and progression of our 
clinical pipeline. The change from 2018 to 2019 was primarily the result of increased INGREZZA net product sales, 
offset by $154.3 million of IPR&D in connection with our collaborations with Voyager and Xenon, ongoing support 
for the commercial launch of INGREZZA for tardive dyskinesia and progression of our clinical pipeline.

Liquidity and Capital Resources

Cash, cash equivalents and debt securities available-for-sale totaled $1.0 billion and $970.2 million at December 31, 
2020 and 2019, respectively.

Net cash provided by operating activities was $228.5 million for 2020, $147.0 million for 2019 and $101.4 million 
for 2018. The increase in positive cash flow from 2019 to 2020 was primarily due to increased INGREZZA net 
product sales partially offset by incremental INGREZZA investment and progression of our clinical pipeline. The 
increase in positive cash flow from 2018 to 2019 was primarily due to increased INGREZZA net product sales, 
partially offset by incremental INGREZZA investment and upfront payments of $154.3 million in connection with 
our collaborations with Voyager and Xenon.

Net cash provided by investing activities was $4.1 million for 2020, compared with net cash used in investing 
activities of $211.1 million for 2019 and $242.9 million for 2018. Periodic fluctuations in cash flows from investing 
activities primarily reflect timing differences in purchases, sales and maturities of debt securities available-for-sale 
and changes in our portfolio-mix. Net cash used in investing activities for 2019 also reflects equity investments of 
$54.7 million in Voyager and $14.2 million in Xenon.

Net cash used in financing activities was $157.8 million for 2020, primarily reflecting our repurchase of 
$136.2 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of $186.9 million in 
cash in November 2020, compared to net cash provided by financing activities of $32.4 million for 2019 and $29.5 
million in 2018. For 2019 and 2018, periodic fluctuations in cash flows from financing activities reflect proceeds 
from issuances of our common stock.

Shelf Registration Statement. In February 2017, we filed an automatic shelf registration statement which 
immediately became effective by rule of the Securities and Exchange Commission, or SEC. We sold no securities 
under this shelf registration statement in 2020, 2019 or 2018.

Convertible Senior Notes. In May 2017, we completed a private placement of $517.5 million in aggregate principal 
amount of 2.25% convertible senior notes scheduled to mature on May 15, 2024, unless earlier converted, redeemed, 
or repurchased. We may not redeem the 2024 Notes prior to May 15, 2021. On or after this date, at our election, we 
may redeem all, or any portion, of the 2024 Notes under certain circumstances. The 2024 Notes do not contain any 
financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness 
or the issuance or repurchase of securities by us. There are customary events of default with respect to the 2024 
Notes, including that upon certain events of default, 100% of the principal and accrued and unpaid interest on the 
2024 Notes will automatically become due and payable. Amounts for the 2024 Notes and related interest in the table 
above assume that the 2024 Notes will be held until maturity. In November 2020, we entered into separate, privately 
negotiated transactions with certain holders of the 2024 Notes to repurchase $136.2 million aggregate principal 
amount of the 2024 Notes for an aggregate repurchase price of $186.9 million in cash. At December 31, 2020, 
$381.3 million aggregate principal amount of the 2024 Notes remained outstanding.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon financial statements 
that we have prepared in accordance with accounting principles generally accepted in the United States of America, 
or GAAP. The preparation of these financial statements requires management to make estimates and judgments that 
affect the reported amounts of assets, liabilities and expenses, and related disclosures. On an on-going basis, we 
evaluate these estimates, including those related to revenue recognition and share-based compensation. Estimates are 
based on historical experience, information received from third parties and on various other assumptions that are 
believed to be reasonable under the circumstances, the results of which form the basis for making judgments about 

56

the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ 
from these estimates under different assumptions or conditions. Historically, revisions to our estimates have not 
resulted in a material change to the financial statements. The items in our financial statements requiring significant 
estimates and judgments are as follows:

Product Sales, Net. Revenues from product sales are recorded net of reserves established for applicable discounts 
and allowances that are offered within contracts with our customers, payors and other third parties. The transaction 
price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to 
constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the 
amount of the cumulative revenue recognized will not occur in a future period. Actual amounts may ultimately differ 
from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the 
period of adjustment.

Government Rebates. We are obligated to pay rebates for mandated discounts under the Medicaid Drug Rebate 
Program. The liability for such rebates consists of invoices received for claims from prior quarters that remain 
unpaid, or for which an invoice has not been received, and estimated rebates for the current applicable reporting 
period, which are primarily based on actual historical rebates, estimated payor mix, state and federal regulations and 
related contractual terms. Estimated rebates are recorded as a reduction of revenue in the period the related sale is 
recognized. To date, actual government rebates have not differed materially from our estimates.

Share-Based Compensation. For purposes of calculating share-based compensation, we estimate the fair value of 
share-based compensation awards using a Black-Scholes option-pricing model. The determination of the fair value 
of share-based compensation awards utilizing the Black-Scholes model is affected by our stock price and a number 
of assumptions, including but not limited to expected stock price volatility over the term of the awards and the 
expected term of stock options. Our stock options have characteristics significantly different from those of traded 
options, and changes in the assumptions can materially affect the fair value estimates. For example, an increase in 
the underlying stock price results in a significant increase in the Black-Scholes option-pricing. The fair value of 
performance-based restricted stock units, or PRSUs, is estimated based on the closing sale price of our common 
stock on the date of grant. Expense recognition for PRSUs commences when attainment of the associated 
performance-based criteria is determined to be probable.

If factors change and we employ different assumptions, share-based compensation expense may differ significantly 
from what we have recorded in the past. If there is a difference between the assumptions used in determining share-
based compensation expense and the actual factors which become known over time, we may change the input 
factors used in determining share-based compensation expense for future grants. These changes, if any, may 
materially impact our results of operations in the period such changes are made. For actual forfeitures, we recognize 
the adjustment to compensation expense in the period the forfeitures occur.

Income Taxes. Our income tax benefit (provision) is computed under the asset and liability method. Significant 
estimates are required in determining our income tax benefit (provision). Some of these estimates are based on 
interpretations of existing tax laws or regulations. We recognize deferred tax assets and liabilities for the expected 
future tax consequences of events that have been included in the financial statements or tax returns. Under this 
method, deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of 
assets and liabilities and their respective financial reporting amounts (temporary differences) at enacted tax rates in 
effect for the years in which the differences are expected to reverse. A valuation allowance is established for 
deferred tax assets for which it is more likely than not that some portion or all of the deferred tax assets, including 
net operating losses and tax credits, will not be realized. We periodically re-assess the need for a valuation 
allowance against our deferred tax assets based on various factors including our historical earnings experience by 
taxing jurisdiction, and forecasts of future operating results and utilization of net operating losses and tax credits 
prior to their expiration. Significant judgment is required in making this assessment and, to the extent that a reversal 
of any portion of our valuation allowance against our deferred tax assets is deemed appropriate, a tax benefit will be 
recognized against our income tax provision in the period of such reversal. Prior to 2020, we recorded a valuation 
allowance that fully offset our deferred tax assets. On December 31, 2020, based on our evaluation of various 
factors, such as our achievement of a cumulative three-year income position as of December 31, 2020, as well as our 
consideration of forecasts of future operating results and utilization of net operating losses and tax credits prior to 
their expiration, we released substantially all of our valuation allowance against our deferred tax assets and recorded 

57

a corresponding income tax benefit. We continue to maintain a valuation allowance against our California state 
deferred tax assets.

Additional Information

Refer to Note 1 to the consolidated financial statements for information on accounting pronouncements that have 
impacted or are expected to materially impact our consolidated financial condition, results of operations, or cash 
flows.

Factors That May Affect Future Financial Condition and Liquidity

The funding necessary to execute our business strategies is subject to numerous uncertainties, which may adversely 
affect our liquidity and capital resources. Marketing of approved pharmaceuticals and completion of clinical trials 
may take several years or more, but the length of time generally varies substantially according to the type, 
complexity, novelty and intended use of a product candidate. It is also important to note that if a clinical candidate is 
identified, the further development of that candidate can be halted or abandoned at any time due to a number of 
factors. These factors include, but are not limited to, funding constraints, safety or a change in market demand.

The nature and efforts required to develop our product candidates into commercially viable products include 
research to identify a clinical candidate, preclinical development, clinical testing, FDA approval and 
commercialization. In the pharmaceutical industry, total R&D spend for a drug candidate that successfully 
completes all stages of R&D and is commercialized may exceed $2 billion. Further, it can take in excess of ten years 
to complete all stages of R&D for a drug candidate.

We test our potential product candidates in numerous preclinical studies to identify disease indications for which our 
product candidates may show efficacy. We may conduct multiple clinical trials to cover a variety of indications for 
each product candidate. As we obtain results from trials, we may elect to discontinue clinical trials for certain 
product candidates or for certain indications in order to focus our resources on more promising product candidates or 
indications. The duration and the cost of clinical trials may vary significantly over the life of a project as a result of 
differences arising during the clinical trial protocol, including, among others, the following:

•

•

•

•

we or the FDA or similar foreign regulatory authorities may suspend the trials;

we may discover that a product candidate may cause harmful side effects;

patient recruitment and enrollment may be slower or more difficult than expected; and

patients may drop out of the trials.

For each of our programs, we periodically assess the scientific progress and merits of the programs to determine if 
continued R&D is economically viable. Certain of our programs have been terminated due to the lack of scientific 
progress and lack of prospects for ultimate commercialization. Because of the uncertainties associated with R&D of 
these programs, we may not be successful in achieving commercialization. As such, the ultimate timeline and costs 
to commercialize a product cannot be accurately estimated.

Our in-license, research and clinical development agreements are generally cancellable with written notice within 
180 days or less. We may be required to pay up to $8.5 billion in milestone payments, plus sales royalties, in the 
event that all scientific research, development and commercialization milestones under these agreements are 
achieved.

Other than INGREZZA, which has been FDA-approved for the treatment of tardive dyskinesia; ONGENTYS, which 
has been FDA-approved as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson’s 
disease patients; ORILISSA (partnered with AbbVie), which has been FDA-approved for the management of 
moderate to severe endometriosis pain in women; and ORIAHNN (partnered with AbbVie), which has been FDA-
approved for the management of heavy menstrual bleeding associated with uterine fibroids in pre-menopausal 
women, our product candidates have not yet achieved FDA regulatory approval, which is required before we can 
market them as therapeutic products in the U.S. In order to proceed to subsequent clinical trial stages and to 
ultimately achieve regulatory approval, the FDA must conclude that our clinical data establish safety and efficacy. 
We must satisfy the requirements of similar regulatory authorities in foreign countries in order to market products in 
those countries. The results from preclinical testing and early clinical trials may not be predictive of results in later 

58

clinical trials. It is possible for a candidate to show promising results in clinical trials, but subsequently fail to 
establish sufficient safety and efficacy data necessary to obtain regulatory approvals.

As a result of the uncertainties discussed above, among others, the duration and completion costs of our R&D 
projects, clinical trials, and post-marketing studies are difficult to estimate and are subject to considerable variation. 
Our inability to complete our R&D projects in a timely manner or our failure to enter into collaborative agreements, 
when appropriate, could significantly increase our capital requirements and could adversely impact our liquidity. 
These uncertainties could force us to seek additional, external sources of financing from time to time in order to 
continue with our business strategy. Our inability to raise additional capital, or to do so on terms reasonably 
acceptable to us, would jeopardize the future success of our business.

We currently have limited experience in marketing and selling pharmaceutical products. If we fail to maintain 
successful marketing, sales, and reimbursement capabilities, or fail to enter into successful arrangements with third 
parties, our product revenues may suffer. We also may be required to make further substantial expenditures if 
unforeseen difficulties arise in other areas of our business. In particular, our future capital requirements will depend 
on many factors, including:

•

•

•

•

•

•

•

•

•

•

•

•

•

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

debt service obligations on the 2024 Notes;

continued scientific progress in our R&D and clinical development programs;

the magnitude and complexity of our research and development programs;

progress with preclinical testing and clinical trials;

the time and costs involved in obtaining regulatory approvals;

the costs involved in filing and pursuing patent applications, enforcing patent claims, or engaging in 
interference proceedings or other patent litigation;

competing technological and market developments;

the establishment of additional strategic alliances;

developments related to any future litigation;

the impact of the COVID-19 pandemic on our business;

the cost of commercialization activities and arrangements, including manufacturing of our product 
candidates; and

the cost of product in-licensing and any possible acquisitions.

We believe that our existing capital resources, funds generated by anticipated INGREZZA net product sales and 
investment income will be sufficient to satisfy our current and projected funding requirements for at least the next 
twelve months. However, we cannot guarantee that our existing capital resources and anticipated revenues will be 
sufficient to conduct and complete all of our research and development programs or commercialization activities as 
planned.

The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While 
the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or 
predict, the pandemic is currently resulting in disruption of global financial markets. This disruption, if sustained or 
recurrent, could make it more difficult for us to access capital, which could in the future negatively affect our 
liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially 
affect our business and the value of our common stock.

We may require additional funding to continue our research and product development programs, to conduct 
preclinical studies and clinical trials, for operating expenses, to pursue regulatory approvals for our product 
candidates, for the costs involved in filing and prosecuting patent applications and enforcing or defending patent 
claims, if any, the cost of product in-licensing and any possible acquisitions, and we may require additional funding 
to establish manufacturing and marketing capabilities in the future. We may seek to access the public or private 

59

equity markets whenever conditions are favorable. For example, we have an effective shelf registration statement on 
file with the SEC which allows us to issue an unlimited number of shares of our securities from time to time. In 
addition, we issued $517.5 million of convertible debt in May 2017 and we have previously financed capital 
purchases and may continue to pursue opportunities to obtain additional debt financing in the future. In November 
2020, we entered into separate, privately negotiated transactions with certain holders of the 2024 Notes to 
repurchase $136.2 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of 
$186.9 million in cash. At December 31, 2020, $381.3 million aggregate principal amount of the 2024 Notes 
remained outstanding. We may also seek additional funding through strategic alliances or other financing 
mechanisms. We cannot assure you that adequate funding will be available on terms acceptable to us, if at all. In 
addition, COVID-19 pandemic is currently resulting in disruption of global financial markets. This disruption, if 
sustained or recurrent, could make it more difficult for us to access capital, which could in the future negatively 
affect our liquidity. Any additional equity financings will be dilutive to our stockholders and any additional debt 
may involve operating covenants that may restrict our business. If adequate funds are not available through these 
means, we may be required to curtail significantly one or more of our research or development programs or obtain 
funds through arrangements with collaborators or others. This may require us to relinquish rights to certain of our 
technologies, products or product candidates. To the extent that we are unable to obtain third-party funding for such 
expenses, we expect that increased expenses will result in increased cash flow losses from operations. We cannot 
assure you that we will successfully develop our products under development or that our approved products will 
generate revenues sufficient to enable us to earn a profit.

Contractual Obligations

The following table presents our contractual obligations at December 31, 2020.

(in millions)
2024 Notes and related interest (1)
Operating leases (2)
Total contractual obligations

Total

2021

2022

2023

2024

2025 and
Thereafter

$ 

$ 

411.5  $ 
159.6 
571.1  $ 

8.7  $ 
12.3 
21.0  $ 

8.6  $ 
14.9 
23.5  $ 

8.6  $ 
15.5 
24.1  $ 

385.6  $ 
16.0 
401.6  $ 

— 
100.9 
100.9 

(1) In May 2017, we completed a private placement of $517.5 million in aggregate principal amount of 2.25% convertible senior 
notes scheduled to mature on May 15, 2024, unless earlier converted, redeemed, or repurchased. We may not redeem the 2024 
Notes prior to May 15, 2021. On or after this date, at our election, we may redeem all, or any portion, of the 2024 Notes under 
certain circumstances. The 2024 Notes do not contain any financial or operating covenants or any restrictions on the payment of 
dividends, the issuance of other indebtedness or the issuance or repurchase of securities by us. There are customary events of 
default with respect to the 2024 Notes, including that upon certain events of default, 100% of the principal and accrued and 
unpaid interest on the 2024 Notes will automatically become due and payable. Amounts for the 2024 Notes and related interest in 
the table above assume that the 2024 Notes will be held until maturity. In November 2020, we entered into separate, privately 
negotiated transactions with certain holders of the 2024 Notes to repurchase $136.2 million aggregate principal amount of the 
2024 Notes for an aggregate repurchase price of $186.9 million in cash. At December 31, 2020, $381.3 million aggregate 
principal amount of the 2024 Notes remained outstanding.

(2) We lease our corporate headquarters, which consist of laboratory and office space located San Diego, California, under 
various operating lease agreements. In addition to minimum rental commitments, these operating leases may require us to pay 
additional amounts for taxes, insurance, maintenance and other operating expenses. The non-cancelable lease terms for these 
operating leases expire at various dates between 2025 and 2031 and do not include renewal options. Amounts for operating 
leases presented in the table above reflect future minimum rental commitments under non-cancelable operating leases as of 
December 31 for each of the periods presented.

60

 
 
 
 
 
 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are exposed to interest rate risk on our short-term investments. The primary objective of our investment 
activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To 
achieve this objective, we invest in highly liquid and high-quality government and other debt securities. To 
minimize our exposure due to adverse shifts in interest rates, we invest in short-term securities and ensure that the 
maximum average maturity of our investments does not exceed twelve months. If a 1% change in interest rates were 
to have occurred on December 31, 2020, this change would not have had a material effect on the fair value of our 
investment portfolio as of that date. Due to the short holding period of our investments, we have concluded that we 
do not have a material financial market risk exposure.

61

Item 8. Financial Statements and Supplementary Data

NEUROCRINE BIOSCIENCES, INC.

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Income and Comprehensive Income

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

Page

63

65

66

67

68

69

62

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Neurocrine Biosciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Neurocrine Biosciences, Inc. (the “Company”) as 
of December 31, 2020 and 2019, the related consolidated statements of income and comprehensive income, 
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the 
related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated 
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 
2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended 
December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United 
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on 
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations 
of the Treadway Commission (2013 framework), and our report dated February 5, 2021 expressed an unqualified 
opinion thereon.

Adoption of New Accounting Standard

ASU No. 2016-02

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for 
leases effective January 1, 2019, due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases 
(Topic 842), and the related amendments.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an 
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with 
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal 
securities laws and the applicable rules 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 
perform the audit to obtain reasonable assurance about whether the financial statements are free of material 
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of 
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that 
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and 
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and 
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 
We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters 

The critical audit matter communicated below is a matter arising from the current period audit of the financial 
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 financial statements and (2) involved our especially challenging, 
subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our 
opinion on the consolidated financial 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 account or disclosure to which 
it relates.

63

Description of the 
Matter

Reserves for government rebates related to product sales

The Company sells drugs to specialty pharmacies and specialty distributors in the U.S. 
(collectively, “customers”). As described in Note 1 to the consolidated financial statements, 
the Company recognizes revenues for sales of INGREZZA to its customers after deducting 
management’s estimates of reserves, including drug coverage gap rebates, it will provide 
under government rebate programs (“government rebates”). Estimated government rebates are 
presented within accounts payable and accrued liabilities on the consolidated balance sheets.

Auditing the estimates of government rebates was complex and judgmental due to the level of 
uncertainty involved in management’s assumptions used in the measurement process. In 
particular, management was required to estimate, for product that remains in the distribution 
channel at December 31, 2020, the portion of product that is expected to be subject to a 
government rebate and the applicable contractual government rebate percentage by forecasting 
the revenue, the payor type underlying the revenue and the applicable rebate amount for the 
payor type.

How We 
Addressed the 
Matter in Our 
Audit

We tested the Company’s internal controls over management’s process for estimating the 
portion of product that is expected to be subject to a government rebate for product that 
remains in the distribution channel at December 31, 2020, including controls over 
management’s forecast of revenue and the accuracy of data used in the calculation.

To test management’s estimate of government rebate reserves our audit procedures included, 
among others, evaluating the methodologies used, testing the significant assumptions 
discussed above and testing the completeness and accuracy of the underlying data used by the 
Company in its analyses. Specifically, we compared the significant assumptions to third-party 
reports used by the Company to estimate product remaining in the distribution channel at 
December 31, 2020. In addition, we compared the underlying government rebate percentages 
used in the Company’s analyses to those published by the applicable government entity. We 
assessed the historical accuracy of management’s rebate estimates, tested payments of rebates 
and performed a sensitivity analysis of significant assumptions to evaluate the changes in the 
rebate allowance that would result from changes in the assumptions.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1992.

San Diego, California

February 5, 2021

64

NEUROCRINE BIOSCIENCES, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)
Assets
Current assets:

Cash and cash equivalents
Debt securities available-for-sale (amortized cost $612.4 million at December 31, 2020 and 

$557.3 million at December 31, 2019)

Accounts receivable
Inventories
Other current assets

Total current assets
Debt securities available-for-sale (amortized cost $226.7 million at December 31, 2020 and 

$299.3 million at December 31, 2019)

Right-of-use assets
Equity securities
Property and equipment, net
Deferred tax assets
Restricted cash
Other long-term assets
Total assets

Liabilities and Stockholders’ Equity
Current liabilities:

Accounts payable and accrued liabilities
Convertible senior notes
Other current liabilities

Total current liabilities
Convertible senior notes
Noncurrent operating lease liabilities
Other long-term liabilities
Total liabilities

Stockholders’ equity:

Preferred stock, $0.001 par value; 5.0 shares authorized; no shares issued and outstanding at 

December 31, 2020 and 2019

Common stock, $0.001 par value; 220.0 shares authorized; issued and outstanding shares were 

93.5 million and 92.3 million at December 31, 2020 and 2019, respectively

Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit

Total stockholders’ equity
Total liabilities and stockholders’ equity

See accompanying notes to consolidated financial statements.

65

December 31,

2020

2019

$ 

187.1  $ 

112.3 

613.9 
157.1 
28.0 
30.1 
1,016.2 

227.1 
82.8 
38.2 
44.6 
319.4 
3.2 
3.2 
1,734.7  $ 

168.7  $ 
— 
17.8 
186.5 
317.9 
94.4 
9.7 
608.5 

558.2 
126.6 
17.3 
16.6 
831.0 

299.7 
74.3 
55.9 
41.9 
— 
3.2 
— 
1,306.0 

141.3 
408.8 
15.2 
565.3 
— 
86.7 
17.1 
669.1 

— 

— 

0.1 
1,849.7 
1.8 
(725.4) 
1,126.2 
1,734.7  $ 

0.1 
1,768.1 
1.4 
(1,132.7) 
636.9 
1,306.0 

$ 

$ 

$ 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NEUROCRINE BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS INCOME

AND COMPREHENSIVE INCOME

(in millions, except per share data)
Revenues:

Product sales, net
Collaboration revenue

Total revenues
Operating expenses:

Cost of sales
Research and development
Acquired in-process research and development
Selling, general and administrative

Total operating expenses
Operating income
Other (expense) income: 

Interest expense
Unrealized loss on restricted equity securities
Loss on extinguishment of convertible senior notes
Investment income and other, net

Total other expense, net
Income before (benefit from) provision for income taxes
(Benefit from) provision for income taxes
Net income
Unrealized gain (loss) on debt securities available-for-sale
Comprehensive income
Net income per share, basic
Net income per share, diluted
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted

Year Ended December 31,

2020

2019

2018

$ 

994.1  $ 
51.8 
1,045.9 

752.9  $ 
35.2 
788.1 

10.1 
275.0 
164.5 
433.3 
882.9 
163.0 

(32.8) 
(17.7) 
(18.4) 
12.6 
(56.3) 
106.7 
(300.6) 
407.3 
0.4 
407.7  $ 
4.38  $ 
4.16  $ 
93.1 
97.8 

7.4 
200.0 
154.3 
354.1 
715.8 
72.3 

(32.0) 
(13.0) 
— 
19.2 
(25.8) 
46.5 
9.5 
37.0 
3.4 
40.4  $ 
0.40  $ 
0.39  $ 
91.6 
95.7 

$ 
$ 
$ 

409.6 
41.6 
451.2 

4.9 
155.8 
4.8 
248.9 
414.4 
36.8 

(30.5) 
— 
— 
15.5 
(15.0) 
21.8 
0.7 
21.1 
(0.1) 
21.0 
0.23 
0.22 
90.2 
95.4 

See accompanying notes to consolidated financial statements.

66

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NEUROCRINE BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock

Shares

$

Additional
Paid-In Capital

Accumulated
Other
Comprehensive 
Income (Loss) 

88.8  $ 

0.1  $ 

  — 

  — 

1,572.8  $ 
— 

Total 
Stockholders’ 
Equity

(1.9)  $ 

Accumulated 
Deficit
(1,198.8)  $ 
21.1 

(in millions)
Balances at December 31, 2017
Net income
Unrealized loss on debt securities available-

for-sale

Share-based compensation expense
Issuance of common stock for vested 

restricted stock units

Issuance of common stock for stock option 

exercises

Balances at December 31, 2018
Net income
Unrealized gain on debt securities available-

for sale

Share-based compensation expense
Cumulative-effect adjustment to equity due 

Issuance of common stock for vested 

restricted stock units

Issuance of common stock for stock option 

exercises

Issuance of common stock for employee 

stock purchase plan

Balances at December 31, 2019
Net income
Unrealized gain on debt securities available-

for-sale, net of tax

Share-based compensation expense
Equity component of repurchased 
convertible senior notes, net

Issuance of common stock for vested 

restricted stock units

Issuance of common stock for stock option 

exercises

Issuance of common stock for employee 

stock purchase plan

Balances at December 31, 2020

  — 
  — 

  — 
  — 

0.4 

  — 

  — 

1.6 
90.8  $ 

0.1  $ 

  — 

  — 

  — 
  — 

  — 
  — 

— 
58.1 

— 

29.5 
1,660.4  $ 
— 

— 
75.3 

— 

— 

0.4 

  — 

1.0 

  — 

27.3 

— 

(0.1) 
— 

— 

— 

(2.0)  $ 

— 

3.4 
— 

— 

— 

— 

—  
—  

—  

—  
(1,177.7)  $ 
37.0 

— 
— 

8.0 

— 

— 

  — 

0.1 
92.3  $ 

0.1  $ 

  — 

  — 

5.1 
1,768.1  $ 
— 

— 
1.4  $ 
— 

— 
(1,132.7)  $ 
407.3 

  — 
  — 

  — 
  — 

— 
100.0 

  — 

  — 

(47.5) 

0.5 

  — 

0.6 

  — 

— 

23.5 

0.4 
— 

— 

— 

— 

— 
— 

— 

— 

— 

372.2 
21.1 

(0.1) 
58.1 

— 

29.5 
480.8 
37.0 

3.4 
75.3 

8.0 

— 

27.3 

5.1 
636.9 
407.3 

0.4 
100.0 

(47.5) 

— 

23.5 

  — 

0.1 
93.5  $ 

0.1  $ 

5.6 
1,849.7  $ 

— 
1.8  $ 

— 
(725.4)  $ 

5.6 
1,126.2 

to adoption of ASU 2016-02

  — 

  — 

See accompanying notes to consolidated financial statements.

67

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NEUROCRINE BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)
Cash Flows from Operating Activities:
Net income
Reconciliation of net income to net cash provided by operating activities:

Share-based compensation expense
Depreciation
Amortization of debt discount
Amortization of debt issuance costs
Change in fair value of equity securities
Deferred income taxes (including benefit from valuation allowance release)
Loss on extinguishment of convertible senior notes
Other

Changes in operating assets and liabilities:

Accounts receivable
Inventories
Accounts payable and accrued liabilities
Other assets and liabilities, net

Net cash provided by operating activities

Cash Flows from Investing Activities:
Purchases of debt securities available-for-sale
Sales and maturities of debt securities available-for-sale
Purchases of equity securities
Purchases of property and equipment
Net cash provided by (used in) investing activities

Cash Flows from Financing Activities:
Issuances of common stock under benefit plans
Partial repurchase of convertible senior notes
Net cash (used in) provided by financing activities
Change in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at beginning of period
Cash and cash equivalents and restricted cash at end of period

Supplemental Disclosure:
Non-cash capital expenditures
Right-of-use assets acquired through operating leases
Cash paid for interest 
Cash paid for income taxes

$ 

$ 
$ 
$ 
$ 

Year Ended December 31,

2020

2019

2018

$ 

407.3  $ 

37.0  $ 

21.1 

100.0 
8.6 
20.0 
1.4 
17.7 
(310.7) 
18.4 
3.7 

(30.5) 
(10.7) 
26.9 
(23.6) 
228.5 

(735.5) 
750.5 
— 
(10.9) 
4.1 

75.3 
7.4 
18.9 
1.4 
13.0 
— 
— 
(1.2) 

(69.2) 
(6.4) 
54.0 
16.8 
147.0 

(797.2) 
669.7 
(68.9) 
(14.7) 
(211.1) 

29.1 
(186.9) 
(157.8) 
74.8 
115.5 
190.3  $ 

32.4 
— 
32.4 
(31.7) 
147.2 
115.5  $ 

58.1 
4.0 
17.6 
1.3 
— 
— 
— 
1.0 

(25.1) 
(3.5) 
24.2 
2.7 
101.4 

(545.9) 
327.8 
— 
(24.8) 
(242.9) 

29.5 
— 
29.5 
(112.0) 
259.2 
147.2 

1.4  $ 
12.8  $ 
11.6  $ 
15.3  $ 

1.0  $ 
77.1  $ 
11.6  $ 
0.5  $ 

2.3 
— 
11.6 
— 

See accompanying notes to consolidated financial statements.

68

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NEUROCRINE BIOSCIENCES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Business Activities. Neurocrine Biosciences, Inc., or Neurocrine, the Company, we, our or us, was incorporated in 
California in 1992 and reincorporated in Delaware in 1996. Neurocrine Continental, Inc., is a Delaware corporation 
and a wholly owned subsidiary of Neurocrine. We also have two wholly-owned Irish subsidiaries, Neurocrine 
Therapeutics, Ltd. and Neurocrine Europe, Ltd. both of which were formed in December 2014 and are inactive.

We are a neuroscience-focused biopharmaceutical company dedicated to discovering, developing and delivering 
life-changing treatments for patients with serious, challenging and under-addressed neurological, endocrine and 
psychiatric disorders. Our diverse portfolio includes FDA-approved treatments for tardive dyskinesia, Parkinson’s 
disease, endometriosis*, uterine fibroids* and clinical programs in multiple therapeutic areas. For nearly three 
decades, we specialize in targeting and interrupting disease-causing mechanisms involving the interconnected 
pathways of the nervous and endocrine systems. (*in collaboration with AbbVie Inc.)

Principles of Consolidation. The consolidated financial statements include the accounts of Neurocrine as well as our 
wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally 
accepted in the United States of America, or GAAP, requires management to make estimates and assumptions that 
affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from 
those estimates.

Industry Segment and Geographic Information. We operate in a single industry segment – the discovery, 
development and marketing of pharmaceuticals for the treatment of neurological, endocrine and psychiatric-based 
diseases and disorders. We had no foreign-based operations during any of the years presented.

Reclassifications. Certain amounts in prior year periods have been reclassified to conform with the presentation 
adopted in the current year.

Cash Equivalents. We consider all highly liquid investments that are readily convertible into cash and have an 
original maturity of three months or less at the time of purchase to be cash equivalents.

Accounts Receivable. Accounts receivable are recorded net of customer allowances for prompt payment discounts, 
chargebacks and any allowance for doubtful accounts. We estimate the allowance for doubtful accounts based on 
existing contractual payment terms, actual payment patterns of our customers and individual customer 
circumstances. To date, an allowance for doubtful accounts has not been material.

Debt Securities. Debt securities consist of investments in certificates of deposit, corporate debt securities, and 
securities of government-sponsored entities. We classify debt securities as available-for-sale. Debt securities 
available-for-sale are recorded at fair value, with unrealized gains and losses included in other comprehensive 
income or loss, net of tax. We exclude accrued interest from both the fair value and amortized cost basis of debt 
securities. A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 
days delinquent. Interest accrued but not received for a debt security placed on nonaccrual status is reversed against 
interest income.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on debt securities 
are amortized using the effective interest rate method. Gains and losses on sales of debt securities are recorded on 
the trade date in investment income and other, net, and determined using the specific identification method.

Allowance for Credit Losses. For debt securities available-for-sale in an unrealized loss position, we first assess 
whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of 
its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized 
cost basis is written down to fair value through earnings. For debt securities available-for-sale that do not meet the 
aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. 
In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes in 
interest rates, and any changes to the rating of the security by a rating agency, among other factors. If this 

69

assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the 
security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be 
collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, 
limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been 
recorded through an allowance for credit losses is recognized in other comprehensive income or loss, as applicable.

Accrued interest receivables on debt securities available-for-sale totaled $3.7 million at December 31, 2020. We do 
not measure an allowance for credit losses for accrued interest receivables. For the purposes of identifying and 
measuring an impairment, accrued interest is excluded from both the fair value and amortized cost basis of the debt 
security. Uncollectible accrued interest receivables associated with an impaired debt security are reversed against 
interest income upon identification of the impairment. No accrued interest receivables were written off during 2020, 
2019 or 2018.

Fair Value of Financial Instruments. We record cash equivalents, debt securities available-for-sale and equity 
securities at fair value based on a fair value hierarchy that distinguishes between assumptions based on market data 
(observable inputs) and our own assumptions (unobservable inputs). The fair value hierarchy consists of the 
following three levels:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets 
or liabilities in markets that are not active or inputs that are observable, either directly or indirectly, for substantially 
the full term of the asset or liability.

Level 3 – Unobservable inputs that reflect our own assumptions about the assumptions that market participants 
would use in pricing the asset or liability when there is little, if any, market activity for the asset or liability at the 
measurement date.

Investments in debt securities available-for-sale are classified as Level 2 and carried at fair value. We estimate the 
fair value of debt securities available-for-sale by utilizing third-party pricing services. These pricing services utilize 
industry standard valuation models, including both income and market-based approaches, for which all significant 
inputs are observable, either directly or indirectly, to estimate fair value. Such inputs include market pricing based 
on real-time trade data for similar instruments, issuer credit spreads, benchmark yields, broker/dealer quotes and 
other observable inputs. We validate valuations obtained from third-party pricing services by understanding the 
models used, obtaining market values from other pricing sources, and analyzing data in certain instances.

Investments in equity securities of certain companies that are subject to holding period restrictions longer than one 
year are classified as Level 3 and carried at fair value using an option pricing valuation model. The most significant 
assumptions within the option pricing valuation model are the stock price volatility, which is based on the historical 
volatility of similar companies, and the discount for lack of marketability related to the term of the restrictions.

The carrying amounts of accounts receivable and accounts payable and accrued liabilities approximate their fair 
values due to their short-term maturities.

There were no transfers between levels in the fair value hierarchy during 2020 or 2019.

Inventory. Inventory is valued at the lower of cost or net realizable value. We determine the cost of inventory using 
the standard-cost method, which approximates actual cost based on the first-in, first-out method. We assess the 
valuation of our inventory on a quarterly basis and adjust the value for excess and obsolete inventory to the extent 
management determines that the cost cannot be recovered based on estimates about future demand. Inventory costs 
resulting from these adjustments are recognized as cost of sales in the period in which they are incurred. When 
future commercialization is considered probable and the future economic benefit is expected to be realized, based on 
management’s judgment, we capitalize pre-launch inventory costs prior to regulatory approval.

Property and Equipment. Property and equipment are stated at cost and depreciated over the estimated useful lives 
of the assets using the straight-line method. Equipment is depreciated over an average estimated useful life of three 
to seven years. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the 
remaining lease term. Depreciation expense was $8.6 million for 2020, $7.4 million for 2019 and $4.0 million for 
2018.

70

Impairment of Long-Lived Assets. We review long-lived assets for impairment whenever events or changes in 
circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment exist, 
we assess the recoverability of the affected long-lived assets by determining whether the carrying value of such 
assets can be recovered through undiscounted future operating cash flows. If the carrying amount is not recoverable, 
we measure the amount of any impairment by comparing the carrying value of the asset to the present value of the 
expected future cash flows associated with the use of the asset.

Revenue Recognition. We recognize revenue when the customer obtains control of promised goods or services, in 
an amount that reflects the consideration which we expect to receive in exchange for those goods or services. 
Revenue is recognized using a five-step model: (i) identify contract(s) with a customer; (ii) identify the performance 
obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance 
obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. We only 
apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in 
exchange for the goods or services we transfer to the customer.

Product Sales, Net. In the U.S., our product sales, net consist of sales of INGREZZA, primarily to specialty 
pharmacy providers and a specialty distributor, and sales of ONGENTYS, primarily to wholesale distributors. We 
recognize product sales, net when the customer obtains control of our product, which occurs at a point in time, 
typically upon delivery of our product to the customer.

Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that 
are offered within contracts with our customers, payors and other third parties. Such estimates are based on 
information received from external sources (such as written or oral information obtained from our customers with 
respect to their period-end inventory levels and sales to end-users during the reporting period), as supplemented by 
management’s judgement. Our process for estimating reserves established for these variable consideration 
components does not differ materially from historical practices. The transaction price, which includes variable 
consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the 
net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative 
revenue recognized will not occur in a future period. Actual amounts may ultimately differ from our estimates. If 
actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.

Our significant categories of sales discounts and allowances are as follows:

Product Discounts. Product discounts are based on payment terms extended to our customers at the time of sale, 
which include incentives offered for prompt payment. We maintain a reserve for product discounts based on our 
historical experience, including the timing of customer payments. To date, actual product discounts have not differed 
materially from our estimates.

Government Rebates. We are obligated to pay rebates for mandated discounts under the Medicaid Drug Rebate 
Program. The liability for such rebates consists of invoices received for claims from prior quarters that remain 
unpaid, or for which an invoice has not been received, and estimated rebates for the current applicable reporting 
period. Such estimates are based on actual historical rebates by state, estimated payor mix, state and federal 
regulations and relevant contractual terms, as supplemented by management’s judgement. Our rebate accrual 
calculations require us to project the magnitude of our sales, by state, that will be subject to these rebates. There is a 
significant time-lag in our receiving rebate notices from each state (generally, several months or longer after a sale is 
recognized). Estimated rebates are recorded as a reduction of revenue in the period the related sale is recognized. To 
date, actual government rebates have not differed materially from our estimates.

Chargebacks. The difference between the list price, or the price at which we sell our products to our customers, and 
the contracted price, or the price at which our customers sell our products to qualified healthcare professionals, is 
charged back to us by our customers. In addition to actual chargebacks received, we maintain a reserve for 
chargebacks based on estimated contractual discounts on product inventory levels on-hand in our distribution 
channel. To date, actual chargebacks have not differed materially from our estimates.

Payor and Pharmacy Rebates. We are obligated to pay rebates as a percentage of sales under payor and pharmacy 
contracts. We estimate these rebates based on actual historical rebates, contractual rebate percentages, sales made 
through the payor channel and purchases made by pharmacies. To date, actual payor and pharmacy rebates have not 
differed materially from our estimates.

71

Co-payment Assistance. We offer financial assistance to qualified patients with prescription drug co-payments 
required by insurance. We accrue for copay assistance based on estimated claims and the cost per claim we expect to 
receive associated with inventory that remains in the distribution channel at period end. To date, actual copay 
assistance has not differed materially from our estimates.

Distributor and Other Fees. In connection with the sales of our products, we pay distributor and other fees to certain 
customers that provide us with inventory management, data and distribution services, which are generally recorded 
as a reduction of revenue. To the extent we can demonstrate a separable benefit and fair value for these services, we 
classify the associated costs in selling, general and administrative expenses. These costs are typically known at the 
time of sale, resulting in minimal adjustments subsequent to the period of sale.

Product Returns. For INGREZZA, we offer our customers product return rights primarily limited to errors in 
shipment and damaged product. We do not permit returns of INGREZZA for expiring or expired product. 
Accordingly, we have limited return risk resulting from INGREZZA product sales and therefore do not record an 
associated returns allowance. For ONGENTYS, we offer our customers product return rights primarily limited to 
errors in shipment, damaged product, and expiring or expired product, provided it is within a specified period around 
the product expiration date, as set forth in the associated distribution agreement. Once product is returned, it is 
destroyed. Where actual returns history is not available, we estimate the associated returns allowance based on 
benchmarking data for similar products and industry experience. We record this estimate as a reduction of revenue 
in the period the related sale is recognized. To date, actual product returns have not differed materially from our 
estimates.

Collaboration Revenues. We have entered into collaboration and licensing agreements under which we license 
certain rights to our product candidates to third parties. The terms of these arrangements typically include payment 
to us of one or more of the following: non-refundable, up-front license fees; development, regulatory, and/or 
commercial milestone payments; and royalties on net sales of licensed products.

Licenses of Intellectual Property. If the license to our intellectual property is determined to be distinct from the other 
performance obligations identified in the arrangement, we recognize revenue from non-refundable, up-front fees 
allocated to the license when the license is transferred to the customer and the customer is able to use and benefit 
from the license. For licenses that are bundled with other promises, we use judgment to assess the nature of the 
combined performance obligation to determine whether the combined performance obligation is satisfied over time 
or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing 
revenue from non-refundable, up-front fees. We evaluate the measure of progress each reporting period and, if 
necessary, adjust the measure of performance and related revenue recognition.

Milestone Payments. At the inception of each arrangement that includes developmental, regulatory or commercial 
milestone payments, we evaluate whether achieving the milestones is considered probable and estimate the amount 
to be included in the transaction price using the most likely amount method. If it is probable that a significant 
revenue reversal would not occur, the value of the associated milestone is included in the transaction price. 
Milestone payments that are not within our control, such as approvals from regulators or where attainment of the 
specified event is dependent on the development activities of a third party, are not considered probable of being 
achieved until those approvals are received or the specified event occurs. Revenue is recognized from the 
satisfaction of performance obligations in the amount billable to the customer.

Royalty Revenues. For arrangements that include sales-based royalties, including milestone payments based on the 
level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize 
revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all 
of the royalty has been allocated has been satisfied (or partially satisfied). Each quarterly period, sales-based 
royalties are recorded based on estimated quarterly net sales of the associated collaboration products. Differences 
between actual results and estimated amounts are adjusted for in the period in which they become known, which 
typically follows the quarterly period in which the estimate was made. To date, actual royalties received have not 
differed materially from our estimates.

Concentration of Credit Risk. Financial instruments that potentially subject us to concentration of credit risk consist 
primarily of cash, cash equivalents and marketable securities. We have established guidelines to limit our exposure 
to credit risk by diversifying our investment portfolio and by placing investments with high credit quality financial 

72

institutions and maturities that maintain safety and liquidity. To date, we have not experienced any credit losses and 
do not believe we are exposed to any significant credit risk in relation to these financial instruments.

We are also subject to credit risk from our accounts receivable related to our product sales. Our two largest 
customers represented approximately 86% of our product revenues for both 2020 and 2019, and the significant 
majority of our accounts receivable balances at December 31, 2020 and 2019. For 2018, our three largest customers 
represented approximately 93% of our product revenue and substantially all of our accounts receivable balance at 
December 31, 2018. To date, we have not experienced any significant losses with respect to the collection of these 
accounts receivable.

Cost of Sales. Cost of sales includes third-party manufacturing, transportation, freight and indirect overhead costs 
associated with the manufacture and distribution of INGREZZA and ONGENTYS, royalty fees on net sales of 
ORILISSA and ORIAHNN, and adjustments for excess and obsolete inventory to the extent management 
determines that the cost cannot be recovered based on estimates about future demand.

Research and Development Expenses. R&D expenses consist primarily of salaries, payroll taxes, employee benefits 
and share-based compensation charges for those individuals involved in ongoing R&D efforts; as well as scientific 
consulting fees, preclinical and clinical trial costs, R&D facilities costs, laboratory supply costs and depreciation of 
scientific equipment. All such costs are charged to R&D expense as incurred. These expenses result from our 
independent R&D efforts, as well as efforts associated with collaborations, in-licenses and third-party funded 
research arrangements, including event based milestones.

Asset Acquisitions. We account for acquisitions of an asset or group of assets that do not meet the definition of a 
business 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 fair values. No goodwill is recognized in an 
asset acquisition. Intangible assets that are acquired in an asset acquisition for use in R&D activities which have no 
alternative future use are expensed as in-process research and development, or IPR&D, on the acquisition date. 
Future costs to develop these assets are recorded to R&D expense as they are incurred.

Advertising Expense. Advertising costs are expensed when services are performed, or goods are delivered. We 
incurred advertising costs related to INGREZZA and ONGENTYS of $64.8 million for 2020, $40.6 million for 2019 
and $20.5 million for 2018.

Share-Based Compensation. We grant stock options to purchase our common stock to eligible employees and 
directors and also grant certain employees restricted stock units, or RSUs, and performance-based restricted stock 
units, or PRSUs. Additionally, we allow employees to participate in an employee stock purchase plan, or ESPP.

We estimate the fair value of stock options and shares to be issued under the ESPP using the Black-Scholes option-
pricing model on the date of grant. Restricted stock units are valued based on the closing price of our common stock 
on the date of grant. The fair value of equity instruments expected to vest are recognized and amortized on a 
straight-line basis over the requisite service period of the award, which is generally three to four years; however, 
certain provisions in our equity compensation plans provide for shorter vesting periods under certain circumstances. 
The fair value of shares to be issued under the ESPP are recognized and amortized on a straight-line basis over the 
purchase period, which is generally six months. Additionally, we granted certain PRSUs that vest upon the 
achievement of certain predefined company-specific performance-based criteria. Expense related to these PRSUs is 
generally recognized ratably over the expected performance period once the predefined performance-based criteria 
for vesting becomes probable.

Income Taxes. Our income tax benefit (provision) is computed under the asset and liability method. Significant 
estimates are required in determining our income tax benefit (provision). Some of these estimates are based on 
interpretations of existing tax laws or regulations. We recognize deferred tax assets and liabilities for the expected 
future tax consequences of events that have been included in the financial statements or tax returns. Under this 
method, deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of 
assets and liabilities and their respective financial reporting amounts (temporary differences) at enacted tax rates in 
effect for the years in which the differences are expected to reverse. A valuation allowance is established for 
deferred tax assets for which it is more likely than not that some portion or all of the deferred tax assets, including 
net operating losses and tax credits, will not be realized. We periodically re-assess the need for a valuation 
allowance against our deferred tax assets based on various factors including our historical earnings experience by 

73

taxing jurisdiction, and forecasts of future operating results and utilization of net operating losses and tax credits 
prior to their expiration. Significant judgment is required in making this assessment and, to the extent that a reversal 
of any portion of our valuation allowance against our deferred tax assets is deemed appropriate, a tax benefit will be 
recognized against our income tax provision in the period of such reversal. Prior to 2020, we recorded a valuation 
allowance that fully offset our deferred tax assets. On December 31, 2020, based on our evaluation of various 
factors, such as our achievement of a cumulative three-year income position as of December 31, 2020, as well as our 
consideration of forecasts of future operating results and utilization of net operating losses and tax credits prior to 
their expiration, we released substantially all of our valuation allowance against our deferred tax assets and recorded 
a corresponding income tax benefit. Refer to Note 9 to the consolidated financial statements for more information.

We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be 
sustained upon examination by the tax authorities based on the technical merits of the position. An adverse 
resolution of one or more of these uncertain tax positions in any period could have a material impact on the results 
of operations for that period.

Net Income Per Share. Basic net income per share is computed using the weighted average number of common 
shares outstanding during the period. Diluted net income per share is computed using the weighted average number 
of common and potentially dilutive shares outstanding during the period, including the potentially dilutive shares 
resulting from the conversion of the 2024 Notes and excluding the effect of stock options and restricted stock 
outstanding for periods when their effect is anti-dilutive, using the treasury stock method.

Convertible debt instruments that may be settled entirely or partly in cash (such as the 2024 Notes) may, in certain 
circumstances where the borrower has the ability and intent to settle in cash, be accounted for under the treasury 
stock method. We issued the 2024 Notes with a combination settlement feature, which we have the ability and intent 
to use upon conversion of the 2024 Notes, to settle the principal amount of debt for cash and the excess of the 
principal portion in shares of our common stock. As a result, of the approximately 5.0 million shares underlying the 
2024 Notes at December 31, 2020, only the shares required to settle the excess of the principal portion would be 
considered dilutive under the treasury stock method. Further, approximately 0.2 million PRSUs were excluded from 
the calculation of diluted net income per share as the performance condition has not been achieved. In loss periods, 
basic net loss per share and diluted net loss per share are identical because the otherwise dilutive potential common 
shares become anti-dilutive and are therefore excluded.

Recently Adopted Accounting Pronouncements.

ASU 2016-13. On January 1, 2020, we adopted Accounting Standards Update, or ASU, 2016-13, Financial 
Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, using the 
modified retrospective transition method. For debt securities available-for-sale, the standard requires an investor to 
determine whether a decline in the fair value below the amortized cost basis of the investment is due to credit-related 
factors. Credit-related impairment is recognized as an allowance for credit loss on the balance sheet with a 
corresponding adjustment to earnings. Credit losses are limited to the amount by which the investment’s amortized 
cost basis exceeds its fair value and may be subsequently reversed if conditions change. Any impairment that is not 
credit related is recognized in other comprehensive income or loss, as applicable, net of applicable taxes.

The adoption of ASU 2016-13 did not result in a cumulative-effect adjustment to retained earnings. The comparative 
prior period information continues to be reported under the accounting standards in effect during those periods.

Recently Issued Accounting Pronouncements.

ASU 2019-12. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the 
Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to 
the general principles in Topic 740 and amends existing guidance to improve consistent application of Topic 740. 
ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those 
fiscal years, with early adoption permitted in any interim period for which financial statements have not yet been 
made available for issuance. We are currently evaluating the effect ASU 2019-12 will have on our condensed 
consolidated financial statements and related disclosures.

ASU 2020-06. In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options 
(Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-40): Accounting 

74

for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for certain 
financial instruments with characteristics of liabilities and equity, including convertible instruments, and amends 
existing earnings-per-share, or EPS, guidance by requiring that an entity use the if-converted method when 
calculating diluted EPS for convertible instruments. ASU 2020-06 is effective for fiscal years beginning after 
December 15, 2021, including interim periods within those fiscal years, with early adoption permitted for fiscal 
years beginning after December 15, 2020, including interim periods within those fiscal years. We plan to adopt ASU 
2020-06 effective January 1, 2022 and are currently evaluating the effect ASU 2020-06 will have on our 
consolidated financial statements and related disclosures.

2. License and Collaboration Agreements

Under the terms of the following license and collaboration agreements, we may be required to make milestone 
payments upon achievement of certain development and regulatory activities of up to $8.5 billion and pay royalties 
on future sales, if any, of commercial products resulting from these agreements.

Takeda Pharmaceutical Company Limited. We entered into an exclusive license agreement with Takeda 
Pharmaceutical Company Limited, or Takeda, which became effective in July 2020, to develop and commercialize 
certain compounds in Takeda’s early to mid-stage psychiatry pipeline. Specifically, Takeda granted us an exclusive 
license to the following seven assets: (i) NBI-1065844 (TAK-831) for schizophrenia, (ii) NBI-1065845 (TAK-653) 
for treatment-resistant depression, (iii) NBI-1065846 (TAK-041) for anhedonia (which together with the 
NBI-1065845 are referred to as the Phase II Ready Assets), and (iv) four non-clinical stage assets, or the Non-
Clinical Assets.

NBI-1065844 is deemed a royalty-bearing product under the license agreement pursuant to which we will be 
responsible for all costs and expenses associated with the development, manufacture, and commercialization of such 
asset, subject to certain exceptions, and Takeda will be eligible to receive development and commercial milestones 
and royalties with respect to such asset, or a Royalty-Bearing Product, and Takeda will retain the right to opt-in to a 
profit sharing arrangement pursuant to which we and Takeda will equally share in the operating profits and losses 
related to such asset, subject to certain exceptions, in lieu of receiving milestones and royalties, or a Profit-Share 
Product. Subject to specified conditions, Takeda may elect to exercise such opt-in right for NBI-1065844 before we 
initiate a Phase III clinical trial. Each of the Phase II Ready Assets is deemed a Profit-Share Product and Takeda will 
retain the right to opt-out of the profit-sharing arrangement for such asset pursuant to which such asset would 
become a Royalty-Bearing Product. Takeda may elect to exercise such opt-out rights with respect to a Phase II 
Ready Asset immediately following the completion of the second Phase II clinical trial for such Phase II Ready 
Asset. In addition, under certain circumstances related to the development and commercialization activities to be 
performed by us, Takeda may elect to opt-out of the profit-sharing arrangement for a Profit-Share Product before the 
initiation of a Phase III clinical trial for such product.

Each of the Non-Clinical Assets will be Royalty-Bearing Products pursuant to which we will be responsible for all 
costs and expenses associated with the development, manufacture, and commercialization of such assets, subject to 
certain exceptions.

In connection with the agreement, we paid Takeda $120.0 million upfront, which, including certain transaction 
related costs, was expensed as in-process research and development, or IPR&D, in the third quarter of 2020. 
Pursuant to the terms of the agreement, Takeda may also be entitled to receive additional payments of up to 
$1.9 billion upon the achievement of certain event-based milestones associated with Royalty-Bearing Products, as 
well as receive royalties on the future net sales of Royalty-Bearing Products. On a country-by-country and product-
by-product basis, royalty payments would commence on the first commercial sale of a Royalty-Bearing Product and 
terminate on the later of (i) the expiration of the last patent covering such Royalty-Bearing Product in such country, 
(ii) a number of years from the first commercial sale of such Royalty-Bearing Product in such country and (iii) the 
expiration of regulatory exclusivity for Royalty-Bearing Product in such country.

Idorsia Pharmaceuticals Ltd. In May 2020, we entered a collaboration and licensing agreement with Idorsia 
Pharmaceuticals Ltd, or Idorsia, to license the global rights to NBI-827104 (ACT-709478), a potent, selective, orally 
active and brain penetrating T-type calcium channel blocker, in clinical development for the treatment of a rare 
pediatric epilepsy. The agreement also includes a research collaboration to discover and identify additional novel T-
type calcium channel blockers as development candidates. 

75

In connection with the exercise of the option, we paid Idorsia $45.0 million upfront, which we expensed as IPR&D 
in the second quarter of 2020. Further, as part of the research collaboration, we provided Idorsia with an incremental 
$7.2 million in funding, which we recorded as a prepaid asset and is being expensed over the two-year research 
collaboration term.

Pursuant to the terms of the agreement, upon the achievement of certain development and regulatory milestones, 
Idorsia may be entitled to receive additional payments of up to $365.0 million with respect to NBI-827104 and 
$620.0 million with respect to the development candidates. Idorsia may also be entitled to receive additional 
payments of up to $750.0 million upon the achievement of certain commercial milestones, as well as receive 
royalties on the future net sales of any collaboration product. Further, we will be responsible for all manufacturing, 
development and commercialization costs of any collaboration product.

Xenon Pharmaceuticals, Inc. In December 2019, we entered into a license and collaboration agreement with Xenon 
Pharmaceuticals Inc., or Xenon, to identify, research, and develop sodium channel inhibitors, including clinical 
candidate NBI-921352 (XEN901) and three preclinical candidates, which compounds we will have the exclusive 
right to further develop and commercialize under the terms and conditions set forth in the agreement.

We will be solely responsible, at our sole cost and expense, for all development and manufacturing of the 
compounds and any pharmaceutical product that contains a compound, subject to Xenon’s right to elect to co-fund 
the development of one product in a major indication and thus receive a mid-single digit percentage increase in 
royalties owed on the net sales of such product in the U.S. If Xenon exercises such option, the parties will share 
equally all reasonable and documented costs and expenses incurred in connection with the development of such 
product in the applicable indication, except costs and expenses that are solely related to the development of such 
product for regulatory approval outside the U.S.

In connection with the agreement, we paid Xenon $30.0 million upfront and purchased $20.0 million of Xenon’s 
common stock at $14.196 per share, representing approximately 1.4 million shares. Pursuant to the terms of the 
agreement, Xenon may also be entitled to receive additional payments of up to $1.7 billion upon the achievement of 
certain event-based milestones, as well as receive royalties on the future net sales of any collaboration product.

We accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business. 
Our equity investment in Xenon was recorded at a fair value of $14.1 million after considering Xenon’s stock price 
on the date of closing and certain lock-up and voting provisions applicable to the acquired shares. The remaining 
$36.2 million of the purchase price, which includes the applicable transaction costs, was expensed as IPR&D in the 
fourth quarter of 2019.

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

In connection with the agreement, we paid Voyager $115.0 million upfront and purchased $50.0 million of 
Voyager’s common stock at $11.9625 per share, representing approximately 4.2 million shares. Pursuant to the 
terms of the agreement, Voyager may also be entitled to receive additional payments of up to $1.7 billion upon the 
achievement of certain event-based milestones, as well as receive royalties on the future net sales of any 
collaboration product.

Pursuant to development plans agreed to by us and Voyager, unless Voyager exercises its co-development and co-
commercialization rights as provided for in the agreement, we will be responsible for all development costs. Further, 
upon the occurrence of a specified event for each program, we will assume responsibility for the development, 
manufacturing, and commercialization activities of such program.

We accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business. 
Our equity investment in Voyager was recorded at a fair value of $54.7 million after considering Voyager’s stock 
price on the date of closing and certain lock-up and voting provisions applicable to the acquired shares. The 
remaining $113.1 million of the purchase price, which includes the applicable transaction costs, was expensed as in-
process research and development, or IPR&D, in the first quarter of 2019.

76

In June 2019, we entered into an amendment to the collaboration and license agreement with Voyager. Under the 
terms of the amendment, we paid Voyager $5.0 million upfront to obtain rights outside the U.S. to the Friedreich’s 
ataxia program in connection with the early return of those rights to Voyager pursuant to a restructuring of 
Voyager’s gene therapy relationship with Sanofi Genzyme. The upfront payment was expensed as IPR&D in the 
second quarter of 2019.

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

BIAL – Portela & Ca, S.A. We acquired the U.S. and Canada rights to ONGENTYS® from BIAL in the first quarter 
of 2017. We launched ONGENTYS in the U.S. in September 2020, after receiving FDA approval for ONGENTYS 
as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients in April 
2020. FDA approval for ONGENTYS for Parkinson’s disease resulted in a $20.0 million event-based payment to 
BIAL, which we expensed as R&D in the second quarter of 2020. We further recognized R&D expense of 
$10.0 million in each 2019 and 2018 in connection with BIAL’s achievement of certain regulatory event-based 
milestones related to then ongoing development of ONGENTYS. Pursuant to the terms of the agreement, BIAL may 
also be entitled to receive additional payments of up to $75.0 million upon the achievement of certain event-based 
milestones.

Under the terms of the agreement, we are responsible for the commercialization of ONGENTYS in the U.S. and 
Canada. Further, we rely on BIAL for the commercial supply of ONGENTYS. Upon our written request prior to the 
estimated expiration of the term of a licensed product, the parties shall negotiate a good faith continuation of BIAL’s 
supply of such licensed product after the term. After the term, and if BIAL is not supplying a certain licensed 
product, we shall pay BIAL a trademark royalty based on the net sales of such licensed product.

Upon commercialization of ONGENTYS, we determined certain annual sales forecasts. In the event we fail to meet 
the minimum sales requirements for a particular year, we would be obligated to pay BIAL an amount equal to the 
difference between the actual net sales and minimum sales requirements for such year.

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

Since inception of the agreement, we have recognized revenue of $19.8 million associated with the delivery of a 
technology license and existing know-how and $15.0 million associated with the achievement of a certain event-
based milestone. We further recognized revenue of $2.7 million in 2020 and $0.9 million in 2019 in connection with 
the ongoing KINECT-HD study, a placebo-controlled Phase III study of valbenazine in adult Huntington’s disease 
patients with chorea. In accordance with our continuing performance obligations, $6.7 million of the $30.0 million 
upfront payment received from MTPC is being deferred and will be recognized as revenue over the ongoing study 
period using an input method according to costs incurred to-date relative to estimated total costs associated with the 
study.

Pursuant to the terms of the agreement, we may also be entitled to receive additional payments of up to 
$70.0 million upon the achievement of certain event-based milestones, receive payments for the manufacture of 
certain pharmaceutical products, as well as receive royalties on the future net sales of any collaboration product in 
select territories in Asia.

Under the terms of the agreement, MTPC is responsible for all third-party development, marketing, and 
commercialization costs in Japan and other select Asian markets and we would be entitled to a percentage of sales of 
INGREZZA in Japan and other select Asian markets for the longer of ten years or the life of the related patent rights. 
Further, the collaboration effort between the parties to advance INGREZZA towards commercialization in Japan and 
other select Asian markets is governed by joint steering and development committees with representatives from both 
parties.

77

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

AbbVie received approval for ORILISSA for the management of moderate to severe endometriosis pain in women 
from the FDA in July 2018 and Health Canada in October 2018. In May 2020, AbbVie received FDA approval for 
ORIAHNN for the management of heavy menstrual bleeding associated with uterine fibroids in pre-menopausal 
women. We recognized sales-based royalties on AbbVie net sales of ORILISSA and ORIAHNN of $19.2 million in 
2020, $14.3 million in 2019 and $1.6 million in 2018.

FDA approval for ORIAHNN for uterine fibroids resulted in the achievement of a $30.0 million event-based 
milestone, which we recognized as collaboration revenue in the second quarter of 2020. In 2019, we recognized 
collaboration revenue of $20.0 million in connection with the FDA’s acceptance of AbbVie’s NDA submission for 
the approval of ORIAHNN for uterine fibroids. In 2018, we recognized collaboration revenue of $40.0 million in 
connection with the FDA’s approval for ORILISSA for endometriosis.

Since inception of the agreement, we have recognized revenue of $75.0 million associated with the delivery of a 
technology license and existing know-how and $165.0 million associated with the achievement of certain event-
based milestones. Pursuant to the terms of the agreement, we may also be entitled to receive additional payments of 
up to $366.0 million upon the achievement of certain event-based milestones.

Under the terms of the agreement, AbbVie is responsible for all third-party development, marketing, and 
commercialization costs. We are entitled to a percentage of worldwide sales of GnRH Compounds for the longer of 
ten years or the life of the related patent rights.

3. Debt Securities

The following table summarizes the amortized cost, unrealized gain and loss recognized in accumulated other 
comprehensive income (loss), allowance for credit losses, and fair value of debt securities available-for-sale at 
December 31, 2020, aggregated by major security type and contractual maturity:

Contractual
Maturity
(in millions)
Within 1 year
Commercial paper
Corporate debt securities
Within 1 year
Securities of government-sponsored entities Within 1 year

Corporate debt securities
1 to 2 years
Securities of government-sponsored entities 1 to 2 years

Amortized
Cost

Unrealized
Gain

Unrealized
Loss

Allowance 
for Credit 
Losses

Fair
Value

$ 

$ 

$ 

82.2  $ 
299.3 
230.9 
612.4  $ 

144.8  $ 
81.9 

$ 

226.7  $ 

—  $ 
1.4 
0.1 
1.5  $ 

0.4  $ 
0.1 

0.5  $ 

—  $ 
— 
— 
—  $ 

—  $ 
— 
— 
—  $ 

82.2 
300.7 
231.0 
613.9 

—  $ 

(0.1) 

—  $ 
— 

145.2 
81.9 

(0.1)  $ 

—  $ 

227.1 

The following table summarizes the amortized cost, unrealized gain and loss recognized in accumulated other 
comprehensive income, and fair value of debt securities available-for-sale at December 31, 2019, aggregated by 
major security type and contractual maturity:

(in millions)
Commercial paper
Corporate debt securities
Securities of government-sponsored entities

Contractual
Maturity
Within 1 year
Within 1 year
Within 1 year

Corporate debt securities
Securities of government-sponsored entities

1 to 2 years
1 to 2 years

Amortized
Cost

Unrealized
Gain

Unrealized
Loss

Fair
Value

$ 

$ 

$ 

$ 

144.5  $ 
270.5 
142.3 
557.3  $ 

250.5  $ 
48.8 
299.3  $ 

—  $ 
0.5 
0.4 
0.9  $ 

0.5  $ 
— 
0.5  $ 

—  $ 
— 
— 
—  $ 

(0.1)  $ 

— 

(0.1)  $ 

144.5 
271.0 
142.7 
558.2 

250.9 
48.8 
299.7 

78

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table summarizes debt securities available-for-sale in an unrealized loss position for which an 
allowance for credit losses has not been recorded at December 31, 2020, aggregated by major security type and 
length of time in a continuous unrealized loss position:

(in millions)
Securities of government-sponsored 

entities

Less Than 12 Months

12 Months or Longer

Total

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

$ 

95.0  $ 

(0.1)  $ 

—  $ 

—  $ 

95.0  $ 

(0.1) 

At December 31, 2020, our security portfolio consisted of 148 securities related to investments in debt securities 
available-for-sale, of which 30 securities were in an unrealized loss position.

Our investments in corporate debt securities in an unrealized loss position at December 31, 2020 are of high credit 
quality (rated A or higher). Unrealized losses on these investments were primarily due to changes in interest rates. 
We do not intend to sell these investments and it is not more likely than not that we will be required to sell these 
investments before recovery of their amortized cost basis.

The following table summarizes debt securities available-for-sale in an unrealized loss position at December 31, 
2019, aggregated by major security type and length of time in a continuous unrealized loss position:

(in millions)
Corporate debt securities

4. Fair Value Measurements

Less Than 12 Months

12 Months or Longer

Total

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

$ 

186.1  $ 

(0.1)  $ 

—  $ 

—  $ 

186.1  $ 

(0.1) 

Investments at December 31, 2020, which were measured at fair value on a recurring basis, consisted of the 
following:

(in millions)
Cash and cash equivalents:

Cash and money market funds
Total cash and cash equivalents
Restricted cash:

Certificates of deposit

Total restricted cash
Debt securities available-for-sale:

Commercial paper
Corporate debt securities
Securities of government-sponsored entities

Total debt securities available-for-sale
Equity securities:

Equity securities–biotechnology industry

Total equity securities
Total recurring fair value measurements

Fair Value

Level 1

Level 2

Level 3

Fair Value Measurements Using

$ 

187.1  $ 
187.1 

187.1  $ 
187.1 

—  $ 
— 

3.2 
3.2 

82.2 
445.9 
312.9 
841.0 

3.2 
3.2 

— 
— 
— 
— 

— 
— 

82.2 
445.9 
312.9 
841.0 

— 
— 

— 
— 

— 
— 
— 
— 

38.2 
38.2 
1,069.5  $ 

$ 

— 
— 
190.3  $ 

— 
— 
841.0  $ 

38.2 
38.2 
38.2 

79

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments at December 31, 2019, which were measured at fair value on a recurring basis, consisted of the 
following:

(in millions)
Cash and cash equivalents:

Cash and money market funds
Total cash and cash equivalents
Restricted cash:

Certificates of deposit

Total restricted cash
Debt securities available-for-sale:

Commercial paper
Corporate debt securities
Securities of government-sponsored entities

Total debt securities available-for-sale
Equity securities:

Equity securities–biotechnology industry

Total equity securities
Total recurring fair value measurements

Fair Value

Level 1

Level 2

Level 3

Fair Value Measurements Using

$ 

112.3  $ 
112.3 

112.3  $ 
112.3 

—  $ 
— 

3.2 
3.2 

144.5 
521.9 
191.5 
857.9 

3.2 
3.2 

—  
—  
—  
—  

—
—

144.5 
521.9 
191.5 
857.9 

— 
— 

—
—

—
—
—
—

55.9 
55.9 
1,029.3  $ 

$ 

—
—
115.5  $ 

—  
—  

857.9  $ 

55.9 
55.9 
55.9 

The following table presents a reconciliation of equity securities, which were measured at fair value on a recurring 
basis using significant unobservable inputs (Level 3):

(in millions)
Beginning balance
Purchases
Unrealized loss included in earnings
Ending balance

Year Ended December 31,

2020

2019

2018

$ 

$ 

55.9  $ 
— 
(17.7) 
38.2  $ 

—  $ 

68.9 
(13.0)   
55.9  $ 

— 
— 
— 
— 

At December 31, 2020, the discount for lack of marketability used in the valuation analysis of equity securities 
ranged from 15.0% to 34.0% (weighted average of 24.8%). The discount for lack of marketability was weighted by 
the relative fair value of the instruments. A significant increase (decrease) in the discount for lack of marketability in 
isolation would result in a significantly lower (higher) fair value measurement. Unrealized gains and losses on 
equity securities are included in other income (expense), net.

5. Convertible Senior Notes

On May 2, 2017, we completed a private placement of $517.5 million in aggregate principal amount 
of 2.25% convertible senior notes due 2024, or the 2024 Notes, and entered into an indenture agreement, or the 2024 
Indenture, with respect to the 2024 Notes. The 2024 Notes accrue interest at a fixed rate of 2.25% per year, payable 
semiannually in arrears on May 15 and November 15 of each year, beginning on November 15, 2017. The 2024 
Notes mature on May 15, 2024. The net proceeds from the issuance of the 2024 Notes were approximately $502.8 
million, after deducting commissions and the offering expenses payable by us.

Holders of the 2024 Notes may convert the 2024 Notes at any time prior to the close of business on the business day 
immediately preceding May 15, 2024, only under the following circumstances:

(i) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of our 

common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive 
trading days ending on the last trading day of the immediately preceding calendar quarter is greater 
than 130% of the conversion price on each applicable trading day;

(ii) during the 5 business-day period immediately after any 5 consecutive trading-day period (the measurement 
period) in which the trading price (as defined in the 2024 Indenture) per $1,000 principal amount of the 

80

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2024 Notes for each trading day of the measurement period was less than 98% of the product of the last 
reported sale price of our common stock and the conversion rate on each such trading day;

(iii) upon the occurrence of specified corporate events, including a merger or a sale of all or substantially all of 

our assets; or

(iv) if we call the 2024 Notes for redemption, until the close of business on the business day immediately 

preceding the redemption date.

On or after January 15, 2024, until the close of business on the scheduled trading day immediately preceding 
May 15, 2024, holders may convert their 2024 Notes at any time.

Upon conversion, holders will receive the principal amount of their 2024 Notes and any excess conversion value, 
calculated based on the per share volume-weighted average price for each of the 30 consecutive trading days during 
the observation period (as more fully described in the 2024 Indenture). For both the principal and excess conversion 
value, holders may receive cash, shares of our common stock or a combination of cash and shares of our common 
stock, at our option.

It is our intent and policy to settle conversions through combination settlement, which essentially involves 
repayment of an amount of cash equal to the “principal portion” and delivery of the “share amount” in excess of the 
principal portion in shares of common stock or cash. In general, for each $1,000 in principal, the “principal portion” 
of cash upon settlement is defined as the lesser of $1,000, and the conversion value during the 25-day observation 
period as described in the notes. The conversion value is the sum of the daily conversion value which is the product 
of the effective conversion rate divided by 25 days and the daily volume-weighted average price, or VWAP, of our 
common stock. The “share amount” is the cumulative “daily share amount” during the observation period, which is 
calculated by dividing the daily VWAP into the difference between the daily conversion value (i.e., conversion rate 
x daily VWAP) and $1,000. 

The initial conversion rate for the 2024 Notes is 13.1711 shares of common stock per $1,000 principal amount, 
which is equivalent to an initial conversion price of approximately $75.92 per share of our common stock. At the 
initial conversion rate, settlement of the 2024 Notes for shares of our common stock would approximate 5.0 million 
shares. The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and 
unpaid interest. The initial conversion price of the 2024 Notes represented a premium of approximately 42.5% to the 
closing sale price of $53.28 per share of our common stock on the Nasdaq Global Select Market on April 26, 2017, 
the date that we priced the private offering of the 2024 Notes.

In the event of conversion, holders would forgo all future interest payments, any unpaid accrued interest and the 
possibility of further stock price appreciation. Upon the receipt of conversion requests, the settlement of the 2024 
Notes will be paid pursuant to the terms of the 2024 Indenture. In the event that all of the 2024 Notes are converted, 
we would be required to repay the outstanding principal value and any conversion premium in any combination of 
cash and shares of its common stock (at our option).

We may not redeem the 2024 Notes prior to May 15, 2021. On or after May 15, 2021, we may redeem for cash all or 
part of the 2024 Notes if the last reported sale price (as defined in the 2024 Indenture) of our common stock has 
been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) 
during any 30 consecutive trading-day period ending on, and including, the trading day immediately before the date 
which we provide notice of redemption. The redemption price will equal the sum of (i) 100% of the principal 
amount of the 2024 Notes being redeemed, plus (ii) accrued and unpaid interest, including additional interest, if any, 
to, but excluding, the redemption date. No sinking fund is provided for the 2024 Notes.

If we undergo a fundamental change, as defined in the 2024 Indenture, subject to certain conditions, holders of the 
2024 Notes may require us to repurchase for cash all or part of their 2024 Notes at a repurchase price equal 
to 100% of the principal amount of the 2024 Notes to be repurchased, plus accrued and unpaid interest to, but 
excluding, the fundamental change repurchase date. In addition, if a ‘‘make-whole fundamental change’’ (as defined 
in the 2024 Indenture) occurs prior to January 15, 2024, we will, in certain circumstances, increase the conversion 
rate for a holder who elects to convert their notes in connection with the make-whole fundamental change.

81

The 2024 Notes are our general unsecured obligations that rank senior in right of payment to all of our indebtedness 
that is expressly subordinated in right of payment to the 2024 Notes, and equal in right of payment to our unsecured 
indebtedness.

We are required to separately account for the liability and equity components of the 2024 Notes, as they may be 
settled entirely or partially in cash upon conversion in a manner that reflects our economic interest cost. The liability 
component of the instrument was valued in a manner that reflects the market interest rate for a similar 
nonconvertible instrument at the date of issuance. The initial carrying value of the liability component of $368.3 
million was calculated using a 7.5% assumed borrowing rate. The equity component of $149.2 million, representing 
the conversion option, was determined by deducting the fair value of the liability component from the par value of 
the 2024 Notes and was recorded in additional paid-in capital on the consolidated balance sheet at the issuance date. 
That equity component is treated as a discount on the liability component of the 2024 Notes, which is amortized 
over the seven-year term of the 2024 Notes using the effective interest rate method. The equity component is not re-
measured as long as it continues to meet the conditions for equity classification. At December 31, 2020, the 
remaining period over which the discount on the liability component will be amortized was approximately 3.4 years.

We allocated the total transaction costs of approximately $14.7 million related to the issuance of the 2024 Notes to 
the liability and equity components of the 2024 Notes based on their relative values. Transaction costs attributable to 
the liability component are amortized to interest expense over the seven-year term of the 2024 Notes, and transaction 
costs attributable to the equity component are netted with the equity component in stockholders’ equity.

The 2024 Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, 
the issuance of other indebtedness or the issuance or repurchase of securities by us. The 2024 Indenture contains 
customary events of default with respect to the 2024 Notes, including that upon certain events of default, 100% of 
the principal and accrued and unpaid interest on the 2024 Notes will automatically become due and payable.

In November 2020, we entered into separate, privately negotiated transactions with certain holders of the 2024 Notes 
to repurchase $136.2 million aggregate principal amount of the 2024 Notes for an aggregate repurchase price of 
$186.9 million in cash. We accounted for the partial repurchase of the 2024 Notes as a debt extinguishment. As a 
result, we attributed $130.7 million of the aggregate repurchase price to the liability component based on the fair 
value of the liability component immediately before extinguishment. The fair value of the liability component was 
calculated at settlement using a discounted cash flow analysis with a discount rate of 3.37%, which was the market 
rate for similar notes that have no conversion rights. The difference of $56.3 million between the fair value of the 
aggregate consideration remitted to certain holders of the 2024 Notes and the fair value of the liability component 
was attributed to the reacquisition of the equity component and recognized as a reduction to additional paid-in 
capital. The carrying amount of the liability of $112.4 million at settlement was recognized as a reduction to 
convertible senior notes and resulted in an $18.4 million loss on extinguishment.

The 2024 Notes, net of discounts and deferred financing costs, consisted of the following:

(in millions)
Principal
Deferred financing costs
Debt discount, net
Net carrying amount

December 31,

2020

2019

$ 

$ 

381.3  $ 
(4.0) 
(59.4) 
317.9  $ 

517.5 
(6.9) 
(101.8) 
408.8 

The 2024 Notes were recorded at the estimated value of a similar non-convertible instrument on the date of issuance 
and accretes to the face value of the 2024 Notes over their seven-year term. The fair value of the 2024 Notes, which 
was estimated utilizing market quotations from an over-the-counter trading market (Level 2), was $514.3 million 
and $596.8 million at December 31, 2020 and 2019, respectively.

82

 
 
 
 
 
6. Other Balance Sheet Details

Inventories consisted of the following:

(in millions)
Raw materials
Work in process
Finished goods
Total inventories

Property and equipment, net, consisted of the following:

(in millions)
Tenant improvements
Scientific equipment
Computer equipment
Furniture and fixtures

Less accumulated depreciation
Total property and equipment, net

Accounts payable and accrued liabilities consisted of the following:

(in millions)
Accrued employee related costs 
Revenue-related reserves for discounts and allowances
Accrued development costs
Accrued Branded Prescription Drug Fee
Accounts payable and other accrued liabilities
Total accounts payable and accrued liabilities

December 31,

2020

2019

16.6  $ 
2.4 
9.0 
28.0  $ 

14.1 
1.5 
1.7 
17.3 

December 31,

2020

2019

29.5  $ 
39.2 
13.9 
3.7 
86.3 
(41.7) 
44.6  $ 

26.3 
33.5 
12.5 
3.2 
75.5 
(33.6) 
41.9 

December 31,

2020

2019

38.2  $ 
34.6 
32.9 
23.6 
39.4 
168.7  $ 

38.9 
30.6 
25.5 
4.9 
41.4 
141.3 

$ 

$ 

$ 

$ 

$ 

$ 

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the 
consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of 
cash flows.

(in millions)
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash

December 31,

2020

2019

$ 

$ 

187.1  $ 
3.2 
190.3  $ 

112.3 
3.2 
115.5 

83

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7. Net Income Per Share

Net income per share was calculated as follows:

(in millions, except per share data)
Net income - basic and diluted
Weighted-average common shares outstanding:
Basic
Effect of dilutive securities:

Stock options
Restricted stock units
2024 Notes

Diluted
Net income per share:

Basic
Diluted

Year Ended December 31,

2020

2019

2018

$ 

407.3  $ 

37.0  $ 

21.1 

93.1 

2.4 
0.5 
1.8 
97.8 

91.6 

2.6 
0.4 
1.1 
95.7 

$ 
$ 

4.38  $ 
4.16  $ 

0.40  $ 
0.39  $ 

90.2 

3.2 
0.6 
1.3 
95.4 

0.23 
0.22 

Shares which have been excluded from diluted per share amounts because their effect would have been anti-dilutive 
were 2.5 million, 2.1 million and 0.9 million for 2020, 2019 and 2018, respectively.

Note 8. Share-Based Compensation

In May 2011, we adopted the 2011 Equity Incentive Plan, as amended, or the 2011 Plan. The 2011 Plan authorized 
21 million shares of common stock for issuance and allowed for the grant of stock options, stock appreciation rights, 
restricted stock awards, restricted stock unit awards, or RSUs, performance stock awards, performance-based 
restricted stock units, or PRSUs, and certain other awards. During 2020, the 2011 Plan was merged into the 2020 
Plan (defined below). As a result, there were no shares of common stock remaining available for future grant under 
the 2011 Plan.

In May 2018, we adopted the 2018 Employee Stock Purchase Plan, or ESPP, pursuant to which 0.3 million shares of 
common stock are authorized for issuance. At December 31, 2020, 0.2 million shares of common stock remain 
available for future grant under the 2018 ESPP.

In May 2020, we adopted the 2020 Equity Incentive Plan, or the 2020 Plan. The 2020 Plan authorized 3.3 million 
shares of common stock for issuance and allows for the grant of stock options, stock appreciation rights, restricted 
stock awards, RSUs, performance stock awards, PRSUs and certain other awards. The 2011 Plan was merged into 
the 2020 Plan and, as a result, all remaining shares in the 2011 Plan were transferred into the 2020 Plan. At 
December 31, 2020, 8.2 million shares of common stock remain available for future grant under the 2020 Plan.

Share-Based Compensation Expense. The effect of share-based compensation expense on our consolidated 
statements of income and comprehensive income by line-item follows:

(in millions)
Selling, general and administrative expense
Research and development expense
Total share-based compensation expense

Share-based compensation expense by award-type follows:

(in millions)
Stock options
RSUs
PRSUs
ESPP
Total share-based compensation expense

Year Ended December 31,

2020

2019

2018

66.3  $ 
33.7 
100.0  $ 

49.5  $ 
25.8 
75.3  $ 

31.9 
26.2 
58.1 

Year Ended December 31,

2020

2019

2018

47.5  $ 
44.2 
5.3 
3.0 
100.0  $ 

36.5  $ 
30.5 
5.6 
2.7 
75.3  $ 

35.4 
21.9 
— 
0.8 
58.1 

$ 

$ 

$ 

$ 

84

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2020, unrecognized share-based compensation expense by award-type and the weighted-average 
period over which such expense is expected to be recognized, as applicable, were as follows:

(dollars in millions)
Stock options
RSUs

Unrecognized 
Expense

$ 
$ 

86.2 
99.5 

Weighted-Average 
Recognition Period
2.3 years
2.3 years

Stock Options. Typically, stock options have a ten-year term and vest over a three to four-year period. The exercise 
price of stock options granted is equal to the closing price of our common stock on the date of grant. We estimate 
the fair value of stock options using the Black-Scholes option-pricing model on the date of grant. The Black-Scholes 
option-pricing model incorporates various and highly sensitive assumptions including expected volatility, term and 
interest rates. The weighted-average grant-date fair values of stock options granted were $45.67, $41.74 and $43.42 
for 2020, 2019 and 2018, respectively.

The fair value of each stock option granted was estimated on the date of grant using the Black-Scholes option-
pricing valuation model with the following weighted-average assumptions: 

Risk-free interest rate
Expected volatility of common stock
Dividend yield
Expected option term

Year Ended December 31,

2020

 1.4 %
 48.5 %
 0.0 %
5.3 years

2019

 2.4 %
 54.8 %
 0.0 %
5.4 years

2018

 2.5 %
 59.5 %
 0.0 %
4.7 years

The weighted-average valuation assumptions were determined as follows:

•

•

•

The expected volatility of common stock is estimated based on the historical volatility of our common 
stock over the most recent period commensurate with the estimated expected term of our stock options.

The expected option term is estimated based on historical experience as well as the status of the employee. 
For example, directors and officers have a longer expected option term than all other employees. 

The risk-free interest rate for periods within the contractual life of a stock option is based upon observed 
interest rates appropriate for the expected term of our employee stock options. 

• We have not historically declared or paid dividends and do not intend to do so in the foreseeable future. 

A summary of activity related to stock options follows:

(in millions, except weighted average data)
Outstanding at December 31, 2019
Granted
Exercised
Canceled
Outstanding at December 31, 2020
Exercisable at December 31, 2020

Number of 
Stock Options

Weighted
Average
Exercise Price

Weighted-Average 
Remaining 
Contractual Term

Aggregate 
Intrinsic Value

6.1  $ 
1.3  $ 
(0.6)  $ 
—  $ 
6.8  $ 
4.7  $ 

52.62 
103.44 
43.90 
— 
62.98 
49.80 

6.4 years $ 
5.5 years $ 

235.4 
218.2 

The total intrinsic value of stock options exercised during 2020, 2019 and 2018 was $40.2 million, $64.3 million and 
$117.0 million, respectively. Cash received from stock option exercises during 2020, 2019 and 2018 was $23.5 
million, $27.3 million and $29.5 million, respectively.

Restricted Stock Units. Typically, RSUs vest over a four-year period. The fair value of RSUs is based on the closing 
sale price of our common stock on the date of issuance. RSUs may be subject to a deferred delivery arrangement at 
the election of eligible employees.

85

 
 
 
 
 
 
A summary of activity related to RSUs follows:

(in millions, except weighted average data)
Unvested at December 31, 2019
Granted
Released
Canceled
Unvested at December 31, 2020

Number of 
RSUs

Weighted-Average 
Grant Date 
Fair Value

Weighted-Average 
Remaining 
Contractual Term

Aggregate 
Intrinsic Value

1.4  $ 
0.7  $ 
(0.5)  $ 
(0.1)  $ 
1.5  $ 

74.77 
102.92 
67.86 
84.95 
89.60 

1.3 years $ 

147.5 

The total fair value of RSUs that vested during 2020, 2019 and 2018 was $49.7 million, $36.1 million and $35.5 
million, respectively.

Performance-Based Restricted Stock Units. PRSUs vest based on the achievement of certain predefined Company-
specific performance criteria and expire four to five years from the grant date. The fair value of PRSUs is estimated 
based on the closing sale price of our common stock on the date of grant. Expense recognition for PRSUs 
commences when attainment of the performance-based criteria is determined to be probable. 

A summary of activity related to PRSUs follows:

(in millions, except weighted average data)
Unvested at December 31, 2019
Granted
Released
Canceled
Unvested at December 31, 2020

Number of 
PRSUs

Weighted-Average 
Grant Date 
Fair Value

Weighted-Average 
Remaining 
Contractual Term

Aggregate 
Intrinsic Value

0.3  $ 
0.2  $ 
(0.1)  $ 
(0.2)  $ 
0.2  $ 

59.62 
102.90 
82.04 
45.67 
102.90 

2.2 years $ 

15.8 

At December 31, 2020, unrecognized share-based compensation expense for PRSUs was $17.0 million. The total 
fair value of PRSUs that vested during 2020 was $13.5 million. No PRSUs vested during 2019 or 2018.

Employee Stock Purchase Plan. Under the ESPP, eligible employees may purchase shares of our common stock at 
a discount semi-annually based on a percentage of their annual compensation. The discounted purchase price is 
equal to the lower of 85% of (i) the market value per share of the common stock on the first day of the offering 
period or (ii) the market value per share of common stock on the purchase date.

Note 9. Income Taxes

Components of income tax expense for continuing operations were as follows:

Year Ended December 31,

2020

2019

2018

$ 

—  $ 

10.1 
10.1 

(287.5) 
(23.2) 
(310.7) 
(300.6)  $ 

—  $ 
9.5 
9.5 

— 
— 
— 
9.5  $ 

(0.1) 
0.8 
0.7 

— 
— 
— 
0.7 

(in millions)
Current:
Federal
State

Total current taxes
Deferred:
Federal
State

Total deferred taxes
(Benefit from) provision for income taxes

$ 

86

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The provision for income taxes on earnings subject to income taxes differs from the statutory federal rate due to the 
following: 

(in millions)
Federal income taxes at 21% for 2020, 2019, 2018
State income tax, net of federal benefit
Non-deductible expenses
Branded prescription drug fee
Share-based compensation expense
Officer compensation
Change in tax rate
Expired tax attributes
Research credits
Change in valuation allowance
Other
(Benefit from) provision for income taxes

Year Ended December 31,

2020

2019

2018

$ 

$ 

22.4  $ 
5.5 
0.6 
4.9 
(6.7) 
3.7 
3.3 
1.1 
(39.0) 
(296.3) 
(0.1) 
(300.6)  $ 

9.8  $ 
4.0 
0.8 
3.7 
(12.8) 
3.1 
(4.1) 
1.2 
(10.4) 
13.9 
0.3 
9.5  $ 

4.6 
0.4 
0.4 
— 
(9.8) 
0.9 
(0.2) 
13.9 
(13.5) 
4.3 
(0.3) 
0.7 

Significant components of our deferred tax assets as of December 31, 2020 and 2019 are listed below. 

(in millions)
Deferred tax assets:

Net operating losses
Research and development credits
Capitalized research and development
Share-based compensation expense
Operating lease assets
Intangible assets
Other

Total deferred tax assets
Deferred tax liabilities:

Convertible senior notes
Operating lease liabilities
Other

Total deferred tax liabilities
Net of deferred tax assets and liabilities
Valuation allowance
Net deferred tax assets

December 31,

2020

2019

111.4  $ 
109.6 
24.7 
29.8 
25.2 
86.7 
23.9 
411.3 

(13.8) 
(19.9) 
(8.4) 
(42.1) 
369.2 
(49.8) 
319.4  $ 

181.3 
71.9 
28.0 
22.9 
23.3 
49.3 
18.5 
395.2 

(24.1) 
(18.2) 
(6.9) 
(49.2) 
346.0 
(346.0) 
— 

$ 

$ 

At December 31, 2020, our deferred tax assets were primarily the result of federal net operating loss carry forwards, 
capitalized research costs, acquired intangible assets and tax credit carryforwards. At December 31, 2020 and 2019, 
we recorded a valuation allowance of $49.8 million and $346.0 million, respectively, against our gross deferred tax 
asset balance.

At each reporting date, management considers new evidence, both positive and negative, that could affect its 
assessment of the future realizability of our deferred tax assets. At December 31, 2020, in part because we achieved 
three years of cumulative pretax income, management determined there is sufficient positive evidence to conclude 
that it is more likely than not deferred tax assets of $319.4 million are realizable. Accordingly, we recorded a net 
valuation release of $296.3 million on the basis of management’s assessment. The remaining valuation allowance of 
$49.8 million consists primarily of state net operating loss and credit carryforwards for which management cannot 
conclude it is more likely than not to be realized. The release of the valuation allowance is reported under continuing 
operations as a benefit to income tax expense.

87

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2020, we had federal and state income tax net operating loss carryforwards of $518.2 million and 
$340.8 million, respectively. The federal net operating losses will begin to expire in 2028, unless previously utilized.

California net operating losses will begin to expire in 2028 unless previously utilized and the net operating losses 
related to other states will begin to expire in 2026.

In addition, we have federal and California R&D tax credit carryforwards of $92.1 million and $56.4 million, 
respectively. A portion of the federal R&D tax credit carryforwards expired in 2020. The remaining federal R&D 
tax credits will continue to expire beginning in 2021, unless previously utilized. The California R&D tax credits 
carry forward indefinitely.

Additionally, the future utilization of our net operating loss and R&D tax credit carryforwards to offset future 
taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code Sections 382 and 383, as 
a result of ownership changes that could occur in the future. No ownership changes have occurred through 
December 31, 2020.

The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount 
that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax 
position will not be recognized if it has less than a 50% likelihood of being sustained.

Our policy is to recognize interest or penalties related to income tax matters in income tax expense. Interest and 
penalties related to income tax matters were not material for 2020, 2019 or 2018.

We are subject to taxation in the U.S. and various state jurisdictions. Our tax years for 2001 (federal) and 2008 
(California) and forward are subject to examination by federal and state tax authorities due to the carryforward of 
unutilized net operating losses and R&D tax credits.

A summary of activity related to unrecognized tax benefits follows:

(in millions)
Balance at January 1
(Decrease) increase related to prior year tax positions
Increase related to current year tax positions
Settlements related to prior year tax positions
Expiration of the statute of limitations for the assessment of taxes
Balance at December 31

$ 

$ 

Year Ended December 31,

2020

2019

2018

63.9  $ 
(5.7) 
3.9 
(0.2) 
(1.1) 
60.8  $ 

54.8  $ 
0.3 
9.5 
— 
(0.7) 
63.9  $ 

37.4 
6.1 
11.7 
— 
(0.4) 
54.8 

We excluded those deferred tax assets that are not more-likely-than-not to be sustained under the technical merits of 
the tax position. Such unrecognized tax benefits total $3.9 million for current year tax positions, as reflected in the 
table above.

At December 31, 2020, we had $53.9 million of unrecognized tax benefits that, if recognized and realized, would 
affect the effective tax rate, subject to the valuation allowance. We do not expect a significant change in our 
unrecognized tax benefits in the next twelve months.

Note 10. Leases

We have operating leases for our office and laboratory facilities, including our corporate headquarters, with terms 
that expire from 2025 through 2031. We have two options to extend the term of the operating lease for our corporate 
headquarters for a period of ten years each. However, as we were not reasonably certain to exercise either of those 
options at lease commencement, neither option was recognized as part of the associated operating lease right-of-use, 
or ROU, asset or liability. In connection with our operating leases, in lieu of cash security deposits, Wells Fargo 
Bank, N.A., issued letters of credit on our behalf, which are secured by deposits totaling $3.2 million.

Our operating lease cost was $10.1 million for 2020 and $8.1 million for 2019. Cash paid for amounts included in 
the measurement of lease liabilities was $8.6 million for 2020 and $7.7 million for 2019.

88

 
 
 
 
 
 
 
 
 
 
 
 
Our operating leases had a weighted-average remaining lease term of approximately 10.3 years and 11.2 years at 
December 31, 2020 and 2019, respectively, and a weighted-average discount rate of 5.6% and 5.8% at December 31, 
2020 and 2019, respectively.

Approximate future minimum lease payments under operating leases were as follows:

(in millions)
Year ending December 31, 2021
Year ending December 31, 2022
Year ending December 31, 2023
Year ending December 31, 2024
Year ending December 31, 2025
Thereafter
Total operating lease payments
Less accreted interest
Total operating lease liabilities
Less current operating lease liabilities
Noncurrent operating lease liabilities

December 31,
2020

$ 

$ 

10.7 
12.4 
12.7 
13.1 
13.5 
77.5 
139.9 
35.2 
104.7 
10.3 
94.4 

Note 1: Amounts presented in the table above exclude $19.7 million of non-cancelable future minimum lease payments for 
operating leases that have not yet commenced.

Note 2: Current operating lease liabilities are included in other current liabilities on the consolidated balance sheets.

Note 11. Retirement Plan

We have a 401(k) defined contribution savings plan, or the 401(k) Plan. The 401(k) Plan is for the benefit of all 
qualifying employees and permits voluntary contributions by employees up to 60% of base salary limited by the 
IRS-imposed maximum. Employer contributions were $6.7 million, $4.9 million, and $1.8 million for 2020, 2019 
and 2018, respectively.

89

 
 
 
 
 
 
 
 
 
Note 12. Selected Quarterly Financial Data (Unaudited)

A summary of our quarterly results follows:

(in millions, except per share data)
Year Ended December 31, 2020:
Total revenues
Total operating expenses (1)
Net income (loss) (1)
Net income (loss) per share, basic (1)
Net income (loss) per share, diluted (1)
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted

Year Ended December 31, 2019:
Total revenues
Total operating expenses (2)
Net (loss) income (2)
Net (loss) income per share, basic (2)
Net (loss) income per share, diluted (2)
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

$ 
$ 
$ 
$ 
$ 

$ 
$ 
$ 
$ 
$ 

237.1  $ 
178.2  $ 
37.4  $ 
0.40  $ 
0.39  $ 
92.6 
97.0 

138.4  $ 
239.4  $ 
(102.1)  $ 
(1.12)  $ 
(1.12)  $ 
91.1 
91.1 

302.4  $ 
225.8  $ 
79.6  $ 
0.86  $ 
0.81  $ 
93.0 
98.2 

183.5  $ 
149.1  $ 
51.3  $ 
0.56  $ 
0.54  $ 
91.4 
94.8 

258.5  $ 
302.8  $ 
(57.6)  $ 
(0.62)  $ 
(0.62)  $ 
93.3 
93.3 

222.1  $ 
132.0  $ 
53.8  $ 
0.59  $ 
0.56  $ 
91.9 
96.1 

247.9 
176.1 
347.9 
3.72 
3.58 
93.5 
97.2 

244.1 
195.3 
34.0 
0.37 
0.35 
92.2 
97.2 

(1) In connection with the payment of the upfront fee pursuant to our collaboration and license agreement with Idorsia, we 
recorded a charge of $46.0 million, accounted for as IPR&D, in the second quarter of 2020. In connection with the payment of 
the upfront fee pursuant to our collaboration with Takeda, we recorded a charge of $118.5 million, accounted for as IPR&D, in 
the third quarter of 2020.

(2) In connection with the payment of the upfront fee pursuant to our collaboration and license agreement with Voyager, we 
recorded a charge of $113.1 million, accounted for as IPR&D, in the first quarter of 2019. In the second quarter of 2019, we 
entered into an amendment to the collaboration and license agreement with Voyager, pursuant to which we paid Voyager 
$5.0 million upfront, accounted for as IPR&D, to obtain outside the U.S. rights to the Friedreich’s ataxia program. In connection 
with the payment of the upfront fee pursuant to our collaboration with Xenon, we recorded a charge of $36.2 million, accounted 
for as IPR&D, in the fourth quarter of 2019.

90

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 9. Changes and Disagreements with Accountants on Accounting and Financial 
Disclosure

Not applicable.

Item 9A. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed 
in our Exchange Act reports is recorded, processed, summarized and reported within the timelines specified in the 
SEC’s rules and forms, and that such information is accumulated and communicated to our management, including 
our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required 
disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any 
controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of 
achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily 
was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation 
of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the 
design and operation of our disclosure controls and procedures as of the end of the year covered by this report. 
Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure 
controls and procedures were effective at the reasonable assurance level.

91

Management’s Report on Internal Control Over Financial Reporting

Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief 
Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other 
personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of 
financial statements for external purposes in accordance with generally accepted accounting principles, and includes 
those policies and procedures that:

(1)

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect 

the transactions and dispositions of our assets;

(2)

Provide reasonable assurance that transactions are recorded as necessary to permit 

preparation of financial statements in accordance with generally accepted accounting principles, and that our 
receipts and expenditures are being made only in accordance with authorization of our management and 
directors; and

(3)

Provide reasonable assurance regarding prevention or timely detection of unauthorized 

acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting 
objectives because of its inherent limitations. Internal control over financial reporting is a process that involves 
human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human 
failures. Internal control over financial reporting also can be circumvented by collusion or improper management 
override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on 
a timely basis by internal control over financial reporting. However, these inherent limitations are known features of 
the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not 
eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over 
financial reporting for the company.

Management has used the framework set forth in the report entitled Internal Control-Integrated Framework 
(2013 framework) published by the Committee of Sponsoring Organizations of the Treadway Commission 
(2013 framework), known as COSO, to evaluate the effectiveness of our internal control over financial reporting. 
Based on this assessment, management has concluded that our internal control over financial reporting was effective 
as of December 31, 2020. Ernst & Young, LLP, our independent registered public accounting firm, has issued an 
attestation report on our internal control over financial reporting as of December 31, 2020, which is included herein.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that 
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

92

 
 
 
Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Neurocrine Biosciences, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Neurocrine Biosciences, Inc.’s internal control over financial reporting as of December 31, 2020, 
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring 
Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Neurocrine 
Biosciences, Inc. (the Company) maintained, in all material respects, effective internal control over financial 
reporting as of December 31, 2020, based on the COSO criteria. 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United 
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related 
consolidated statements of income and comprehensive income, stockholders‘ equity, and cash flows, for each of the 
three years in the period ended December 31, 2020, and the related notes and our report dated February 5, 2021 
expressed an unqualified opinion thereon. 

Basis for Opinion 

The Company’s management is responsible for maintaining effective internal control over financial reporting and 
for its assessment of the effectiveness of internal control over financial 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 financial reporting based on our audit. We are a public accounting firm 
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the 
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and 
the PCAOB. 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and 
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting 
was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a 
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on 
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We 
believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance 
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in 
accordance with generally accepted accounting principles. A company’s internal control over financial reporting 
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, 
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable 
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance 
with generally accepted accounting principles, and that receipts and expenditures of the company are being made 
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable 
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s 
assets that could have a material effect on the financial statements. 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 
Also, projections of any evaluation of effectiveness to future 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, California
February 5, 2021

93

Item 9B. Other Information

None.

94

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information required by this item will be contained in our Definitive Proxy Statement for our 2021 Annual Meeting 
of Stockholders, to be filed pursuant to Regulation 14A with the Securities and Exchange Commission within 
120 days of December 31, 2020. Such information is incorporated herein by reference.

We have adopted a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, and to all of 
our other officers, directors, employees and agents. The code of ethics is available at the Corporate Governance 
section of the Investors page on our website at www.neurocrine.com. We intend to disclose future amendments to, 
or waivers from, certain provisions of our code of ethics on the above website within four business days following 
the date of such amendment or waiver. Information found on, or accessible through, our website is not part of, and is 
not incorporated into, this Annual Report on Form 10-K.

Item 11. Executive Compensation

Information required by this item will be contained in our Definitive Proxy Statement for our 2021 Annual Meeting 
of Stockholders, to be filed pursuant to Regulation 14A with the Securities and Exchange Commission within 
120 days of December 31, 2020. Such information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related 
Stockholder Matters

Information required by this item will be contained in our Definitive Proxy Statement for our 2021 Annual Meeting 
of Stockholders, to be filed pursuant to Regulation 14A with the Securities and Exchange Commission within 
120 days of December 31, 2020. Such information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information required by this item will be contained in our Definitive Proxy Statement for our 2021 Annual Meeting 
of Stockholders, to be filed pursuant to Regulation 14A with the Securities and Exchange Commission within 
120 days of December 31, 2020. Such information is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

Information required by this item will be contained in our Definitive Proxy Statement for our 2021 Annual Meeting 
of Stockholders, to be filed pursuant to Regulation 14A with the Securities and Exchange Commission within 
120 days of December 31, 2020. Such information is incorporated herein by reference.

95

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) Documents filed as part of this report.

1. List of Financial Statements. The following are included in Item 8 of this report:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2020, 2019 and 
2018

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018

Notes to the Consolidated Financial Statements (includes unaudited Selected Quarterly Financial Data)

2. List of all Financial Statement schedules. All schedules are omitted because they are not applicable, or the 
required information is shown in the Financial Statements or notes thereto.

3. List of Exhibits required by Item 601 of Regulation S-K. See part (b) below.

(b) Exhibits. The following exhibits are filed as part of, or incorporated by reference into, this report:

Exhibit

3.1

3.2

3.3

3.4

4.1

Description: Certificate of Incorporation, as amended
Reference:

Incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q filed on 
November 5, 2018

Description: Bylaws
Reference:

Incorporated by reference to Exhibit 3.2 of the Company’s Quarterly Report on Form 10-Q filed on 
November 5, 2018

Description: First Amendment of Bylaws
Reference:

Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on 
February 4, 2020

Description: Second Amendment of Bylaws
Reference:

Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on 
August 28, 2020

Description: Form of Common Stock Certificate
Reference:

Incorporated by reference to the Company’s Registration Statement on Form S-1 (Registration No. 
333-03172)

4.2

Description:

Reference:

Indenture, dated as of May 2, 2017, by and between the Company and U.S. Bank National 
Association, as Trustee
Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on May 
2, 2017

4.3

4.4

21.1

23.1

Description: Form of Note representing the Company’s 2.25% Convertible Notes due 2024
Reference:

Incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on 
May 2, 2017

Description: Description of Common Stock of the Company
Reference:

Incorporated by reference to Exhibit 4.4 of the Company’s Annual Report on Form 10-K filed on 
February 7, 2020

Description: Subsidiaries of the Company

Description: Consent of Independent Registered Public Accounting Firm

96

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31.1

Description: Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the 

Securities Exchange Act of 1934

31.2

Description: Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the 

Securities Exchange Act of 1934

32***

Description: Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS Description:

Inline XBRL Instance Document. – the instance document does not appear in the Interactive Data 
File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH Description:

Inline XBRL Taxonomy Extension Schema Document.

101.CAL Description:

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF Description:

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB Description:

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE Description:

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Description: Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension 

information contained in Exhibit 101)

Collaboration and License Agreements:

10.1*

Description: Collaboration Agreement dated June 15, 2010, by and between Abbott International Luxembourg 

Reference:

S.a.r.l. and the Company as amended on August 31, 2011
Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on 
July 29, 2010

10.2*

Description: First Amendment to Collaboration and License Agreement Dated August 31, 2011 between the 

Reference:

Company and Abbott International Luxemburg S.a.r.l.
Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on 
October 31, 2011

10.3*

Description: Collaboration and License Agreement dated March 31, 2015 between Mitsubishi Tanabe Pharma 

Reference:

Corporation and the Company
Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on 
April 30, 2015

10.4*

Description: License Agreement dated February 9, 2017 between BIAL– Portela & CA, S.A. and the Company
Incorporated by reference to Exhibit 99.4 of the Company’s Current Report on Form 8-K filed on 
Reference:
April 25, 2017

10.5*

Description: Collaboration and License Agreement dated January 28, 2019 between Voyager Therapeutics, Inc. 

Reference:

and the Company
Incorporated by reference to Exhibit 10.5 of the Company’s Annual Report on Form 10-K filed on 
February 7, 2019

10.6

Description: Stock Purchase Agreement dated January 28, 2019 between Voyager Therapeutics, Inc. and the 

Reference:

Company
Incorporated by reference to Exhibit 10.6 of the Company’s Annual Report on Form 10-K filed on 
February 7, 2019

10.7

Description:
Reference:

Investor Agreement dated January 28, 2019 between Voyager Therapeutics, Inc. and the Company
Incorporated by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K filed on 
February 7, 2019

10.8

Description: Amendment No. 1 to Collaboration and License Agreement dated June 14, 2019 between Voyager 

Reference:

Therapeutics, Inc. and the Company
Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on 
July 29, 2019

10.9**

Description: Exclusive License Agreement dated June 12, 2020 between Takeda Pharmaceutical Company 

Reference:

Limited and the Company
Incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on 
August 3, 2020

97

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Plans and Related Agreements:

10.10+

10.11+

10.12+

10.13+

10.14+

10.15+

10.16+

Description: Neurocrine Biosciences, Inc. 2011 Equity Incentive Plan, as amended
Reference:

Incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on 
May 30, 2018

Description: Form of Stock Option Grant Notice and Option Agreement for use under the Neurocrine Biosciences, 

Reference:

Inc. 2011 Equity Incentive Plan, and Form of Restricted Stock Unit Grant Notice and Restricted 
Stock Unit Agreement for use under the Neurocrine Biosciences, Inc. 2011 Equity Incentive Plan
Incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on 
June 1, 2015

Description: Neurocrine Biosciences, Inc. Inducement Plan, as amended
Reference:

Incorporated by reference to Exhibit 10.17 of the Company’s Annual Report on Form 10-K filed on 
February 13, 2018

Description: Form of Stock Option Grant Notice and Option Agreement for use under the Neurocrine Biosciences, 

Reference:

Inc. Inducement Plan, and Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit 
Agreement for use under the Neurocrine Biosciences, Inc. Inducement Plan
Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on 
July 29, 2015

Description: Neurocrine Biosciences, Inc. 2018 Employee Stock Purchase Plan dated May 30, 2018
Reference:

Incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on 
May 30, 2018

Description: Neurocrine Biosciences, Inc. 2020 Equity Incentive Plan
Reference:

Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on 
August 3, 2020

Description: Form of Stock Option Grant Notice and Option Agreement for use under the Neurocrine Biosciences, 

Inc. 2020 Equity Incentive Plan, and Form of Restricted Stock Unit Award Grant Notice and 
Restricted Stock Unit Award Agreement for use under the Neurocrine Biosciences, Inc. 2020 Equity 
Incentive Plan
Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on 
August 3, 2020

Reference:

Agreements with Officers and Directors:

10.17+

Description: Amended and Restated Employment Agreement effective August 1, 2007 between the Company and 

Reference:

Kevin C. Gorman, Ph.D.
Incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on 
August 3, 2007

10.18+

Description: Form of Amendment to Employment Agreement for executive officers, effective as of December 15, 

Reference:

2010
Incorporated by reference to Exhibit 10.32 of the Company’s Annual Report on Form 10-K filed on 
February 11, 2008

10.19+

10.20+

10.21+

10.22+

Description: Employment Agreement dated November 3, 2014 between the Company and Kyle Gano

Incorporated by reference to Exhibit 10.16 of the Company’s Annual Report on Form 10-K filed on 
February 6, 2020

Description: Employment Agreement dated May 26, 2015 between the Company and Eric Benevich
Reference:

Incorporated by reference to Exhibit 10.3 of the Company’s Annual Report on Form 10-K filed on 
February 14, 2017

Description: Employment Agreement effective November 29, 2017 between the Company and Matthew C. 

Reference:

Abernethy
Incorporated by reference to Exhibit 10.26 of the Company’s Annual Report on Form 10-K filed on 
February 13, 2018

Description: Form of Indemnity Agreement entered into between the Company and its officers and directors
Reference:

Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on 
November 1, 2017

98

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.23+

Description: Employment Agreement dated January 8, 2018 between the Company and Eiry W. Roberts, M.D.
Reference:

Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on 
July 29, 2019

Agreements Related to Real Property:

10.24

Description: Amended and Restated Lease dated November 1, 2011 between the Company and Kilroy Realty, 

Reference:

L.P.
Incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on 
January 18, 2012

10.25

Description: First Amendment to Amended and Restated Lease between the Company and Kilroy Realty, L.P., 

Reference:

dated June 5, 2017
Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on 
August 3, 2017

10.26

Description: Second Amendment to Amended and Restated Lease between the Company and Kilroy Realty, L.P., 

Reference:

dated October 12, 2017
Incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on 
November 1, 2017

10.27

Description: Letter of Credit dated December 3, 2007, issued by Wells Fargo Bank, N.A. for the benefit of Kilroy 

Reference:

Realty, L.P., as amended on November 20, 2014 and June 19, 2017
Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on 
December 10, 2007; Exhibit 10.5 of the Company’s Annual Report on Form 10-K filed on February 
9, 2015; and Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on August 3, 2017

10.28

Description: Third Amendment to Amended and Restated Lease between the Company and Kilroy Realty, L.P. 

Reference:

dated August 7, 2019
Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on 
November 4, 2019

+

*

**

***

Management contract or compensatory plan or arrangement.

Confidential treatment has been granted with respect to certain portions of the exhibit.

Certain portions of the exhibit have been omitted because the omitted information is not material and would 
likely cause competitive harm if publicly disclosed.

These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. 
Section 1350 and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and 
are not to be incorporated by reference into any filing of Neurocrine Biosciences, Inc., whether made before 
or after the date hereof, regardless of any general incorporation language in such filing.

Except as specifically noted above, the Company’s Annual Reports on Form 10-K, Quarterly Reports on 
Form 10-Q and Current Reports on Form 8-K have a Commission File Number of 000-22705.

(c) Financial Statement Schedules. See Item 15(a)(2) above.

99

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly 
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

NEUROCRINE BIOSCIENCES, INC.
(Registrant)

By:

/s/ Kevin C. Gorman
Kevin C. Gorman
Chief Executive Officer

Date: February 5, 2021

By:

/s/ Matthew C. Abernethy
Matthew C. Abernethy
Chief Financial Officer

Date: February 5, 2021

100

 
 
POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and 
appoints Kevin C. Gorman and Matthew C. Abernethy, and each of them, as his or her true and lawful attorneys-in-
fact and agents, with full power of substitution for him or her, and in his or her name in any and all capacities, to 
sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and 
other documents in connection therewith, with the Securities and Exchange Commission, granting unto said 
attorneys-in-fact and agents, and each of them, full power of authority to do and perform each and every act and 
thing requisite and necessary to be done therewith, as fully to all intents and purposes as he or she might or could do 
in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and any of them, his or her 
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following 
persons on behalf of the Registrant and in the capacities indicated as of February 5, 2021:

Signature

/s/ Kevin C. Gorman
Kevin C. Gorman, Ph.D.

/s/ Matthew C. Abernethy
Matthew C. Abernethy

/s/ William H. Rastetter
William H. Rastetter, Ph.D.

/s/ Gary A. Lyons
Gary A. Lyons

/s/ George J. Morrow
George J. Morrow

/s/ Leslie V. Norwalk
Leslie V. Norwalk

/s/ Richard F. Pops
Richard F. Pops

/s/ Stephen A. Sherwin
Stephen A. Sherwin, M.D.

/s/ Shalini Sharp
Shalini Sharp

Title

Chief Executive Officer and Director
(Principal Executive Officer)

Chief Financial Officer
(Principal Financial and Accounting Officer)

Chairman of the Board of Directors

Director

Director

Director

Director

Director

Director

101

 
 
 
 
 
 
 
[THIS PAGE INTENTIONALLY LEFT BLANK]

Neurocrine Biosciences 
Corporate Information

CORPORATE

MANAGEMENT

Kevin C. Gorman, Ph.D. 
Chief Executive Officer

BOARD OF

DIRECTORS

Matthew C. Abernethy 
Chief Financial Officer

Eric Benevich 
Chief Commercial Officer

David W. Boyer 
Chief Corporate Affairs Officer

Julie S. Cooke 
Chief Human Resources Officer

William H. Rastetter, Ph.D. 
Chairman of the Board, 
Neurocrine Biosciences, Inc. 
and Fate Therapeutics

Kevin C. Gorman, Ph.D. 
Chief Executive Officer, 
Neurocrine Biosciences, Inc.

Gary A. Lyons 
Former President and Chief Executive 
Officer, Neurocrine Biosciences, Inc.

George J. Morrow 
Former Executive Vice President, Global 
Commercial Operations, Amgen Inc.

Leslie V. Norwalk 
Former Acting Administrator for the Centers 
for Medicare & Medicaid Services

Kyle W. Gano, Ph.D. 
Chief Business Development  
and Strategy Officer 

Dimitri E. Grigoriadis, Ph.D. 
Chief Research Officer

Darin M. Lippoldt, J.D. 
Chief Legal Officer

Malcolm C. Lloyd-Smith 
Chief Regulatory Officer

Eiry W. Roberts, M.D. 
Chief Medical Officer

Richard F. Pops 
Chairman of the Board 
and Chief Executive Officer, 
Alkermes plc

Shalini Sharp 
Former Chief Financial Officer and  
Executive Vice President  
of Ultragenyx

Stephen A. Sherwin, M.D. 
Former Chairman of the Board 
and Chief Executive Officer, 
Cell Genesys, Inc.

STOCKHOLDER

INFORMATION

Transfer Agent 
American Stock Transfer

Auditors 
Ernst & Young LLP

Corporate Counsel 
Cooley LLP

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