2023
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 diseases and disorders
across neurology,
neuroendocrinology,
and neuropsychiatry.
COMMERCIALLY AVAILABLE MEDICINES INCLUDE:
IN THE U.S.
IN THE U.S. AND EU
ENDOMETRIOSIS
ADRENAL INSUFFICIENCY
IN EUROPE
TARDIVE DYSKINESIA
CHOREA-HUNTINGTON’S
DISEASE
UTERINE
FIBROIDS
CONGENITAL ADRENAL
HYPERPLASIA
PIPELINE OF INVESTIGATIONAL THERAPIES INCLUDE6:
Phase 1
Phase 2
Phase 3
NEUROLOGY
valbenazine1 Dyskinetic Cerebral Palsy
NBI-8271042 Rare Pediatric Epilepsy: Epileptic Encephalopathy with Continuous Spike-and-Wave During Sleep
NBI-9213523 Rare Pediatric Epilepsy: SCN8A Development and Epileptic Encephalopathy Syndrome
NBI-1076986 Movement Disorders
NEUROENDOCRINOLOGY
crinecerfont Congenital Adrenal Hyperplasia in Adults
crinecerfont Congenital Adrenal Hyperplasia in Children & Adolescents
(cid:736)(cid:738)(cid:727)(cid:732)(cid:1027)(cid:728)(cid:727)(cid:672)(cid:741)(cid:728)(cid:735)(cid:728)(cid:724)(cid:742)(cid:728)(cid:3)(cid:731)(cid:748)(cid:727)(cid:741)(cid:738)(cid:726)(cid:738)(cid:741)(cid:743)(cid:732)(cid:742)(cid:738)(cid:737)(cid:728) Congenital Adrenal Hyperplasia
(cid:736)(cid:738)(cid:727)(cid:732)(cid:1027)(cid:728)(cid:727)(cid:672)(cid:741)(cid:728)(cid:735)(cid:728)(cid:724)(cid:742)(cid:728)(cid:3)(cid:731)(cid:748)(cid:727)(cid:741)(cid:738)(cid:726)(cid:738)(cid:741)(cid:743)(cid:732)(cid:742)(cid:738)(cid:737)(cid:728)(cid:3)(cid:692)(cid:727)(cid:741)(cid:728)(cid:737)(cid:724)(cid:735)(cid:3)(cid:700)(cid:737)(cid:742)(cid:744)(cid:729)(cid:1027)(cid:726)(cid:732)(cid:728)(cid:737)(cid:726)(cid:748)
NEUROPSYCHIATRY
valbenazine1 Adjunctive Treatment of Schizophrenia
NBI-10658454 Inadequate Response to Treatment in Major Depressive Disorder
(cid:735)(cid:744)(cid:745)(cid:724)(cid:727)(cid:724)(cid:747)(cid:732)(cid:742)(cid:743)(cid:724)(cid:743)4 Cognitive Impairment Associated with Schizophrenia
NBI-11175685 Schizophrenia
NBI-10707704 Major Depressive Disorder
NBI-11175675 CNS Indications
NBI-11175695 CNS Indications
NBI-11175705 CNS Indications
NBI-1065890 CNS Indications
* Mitsubishi Tanabe Pharma Corporation (MTPC) has commercialization rights in
Japan and other select Asian markets
2 Licensed from Idorsia Ltd.
3 Licensed from Xenon Pharmaceuticals, Inc.
† AbbVie has global commercialization rights
Neurocrine Biosciences has global rights unless otherwise noted. Neurocrine
(cid:693)(cid:732)(cid:738)(cid:742)(cid:726)(cid:732)(cid:728)(cid:737)(cid:726)(cid:728)(cid:742)(cid:3)(cid:742)(cid:731)(cid:724)(cid:741)(cid:728)(cid:742)(cid:3)(cid:739)(cid:741)(cid:738)(cid:1027)(cid:743)(cid:742)(cid:3)(cid:724)(cid:737)(cid:727)(cid:3)(cid:735)(cid:738)(cid:742)(cid:742)(cid:728)(cid:742)(cid:3)(cid:738)(cid:737)(cid:3)(cid:705)(cid:693)(cid:700)(cid:672)(cid:676)(cid:675)(cid:681)(cid:680)(cid:683)(cid:679)(cid:680)(cid:3)(cid:746)(cid:732)(cid:743)(cid:731)(cid:3)(cid:711)(cid:724)(cid:734)(cid:728)(cid:727)(cid:724)(cid:3)(cid:707)(cid:731)(cid:724)(cid:741)(cid:736)(cid:724)(cid:726)(cid:728)(cid:744)(cid:743)(cid:732)(cid:726)(cid:724)(cid:735)(cid:3)
Company Limited.
1 Mitsubishi Tanabe Pharma Corporation (MTPC) has commercialization rights in
Japan and other select Asian markets.
4 Licensed from Takeda Pharmaceutical Company Limited.
5 Licensed from Sosei Heptares.
6 Investigational therapies are not approved for use in any country
Dear Fellow Shareholders,
Kevin C. Gorman, Ph.D.
Chief Executive Officer
Neurocrine Biosciences is a company dedicated
to brave science – because the people we
serve need and deserve it. Since our founding
in 1993, we’ve focused in areas that lacked
recent innovation or, in some cases, had no
treatment options. With that focus, we have built
a leading neuroscience company dedicated to
treatments across neurology, neuropsychiatry,
neuroendocrinology and someday,
neuroimmunology. As we look to the future,
we remain focused on optimizing INGREZZA®,
gaining approval for crinecerfont in congenital
adrenal hyperplasia (CAH), advancing our
growing and diverse pipeline, and improving
the lives of our patients.
In October 2023, we reported strong results
in two Phase 3 studies in adult and pediatric
CAH patients reflecting the potential of a
much-needed new treatment paradigm.
Following these results, the U.S. Food and Drug
Administration (FDA) granted crinecerfont
Breakthrough Therapy designation which serves
as an acknowledgement of the serious and
life-threatening nature of CAH, highlighting
the significant unmet need that exists and
identifying the product as a potentially valuable
treatment. The New Drug Application submission
is anticipated to occur in the second quarter of
2024, and we look forward to potentially bringing
crinecerfont to CAH patients next year.
We are proud of the continued success of
INGREZZA® and remain optimistic about its
untapped potential. While we’ve made good
progress improving the diagnosis and treatment
rates of the estimated 600,000 people in the U.S.
who have tardive dyskinesia (TD), we estimate
only 20% of people living with TD have been
offered treatment with a VMAT2 inhibitor like
INGREZZA. INGREZZA continues to be the #1
prescribed treatment for patients with TD and
we expect to generate sales of over $2 billion
in 2024. Last year, we expanded the label to
include the treatment of the chorea movements
associated with Huntington’s disease (HD).
With patent protection to 2038, we have a
meaningful opportunity to help even more
patients with TD and HD.
While crinecerfont represents the most advanced
potential new therapy in our pipeline, there are
several other exciting programs underway. We
have a number of pipeline candidates that will
be reporting out Phase 2 proof-of-concept data
throughout 2024. In the first half of this year,
we expect a data readout for NBI-‘845, an AMPA
potentiator for the treatment of inadequate
response in major depressive disorder. We also
expect data in the second half of this year for
luvadaxistat, a DAAO inhibitor, for cognitive
impairment associated with schizophrenia.
Our muscarinic portfolio represents the most
broad and diverse number of compounds with
what has been a validated asset class.
“
Our lead asset, NBI-‘568, is a highly selective
orthosteric agonist of the M4 receptor, and we
expect a Phase 2 data readout in the second half of
2024. If successful, we will rapidly move NBI-‘568 into
registrational studies in schizophrenia and potentially
into other neurological conditions.
At our 2023 Analyst Day, we shared insight into our
R&D Organization’s transformational progression.
As our clinical programs advance, we’ve been hard
at work revamping our pre-clinical research and
development efforts. Over the last few years, we’ve
built and transformed Neurocrine’s R&D Organization
for scale, sustainability, and competitiveness.
Our vision is to be a true global leader in
neuroscience and advance a steady flow of
innovative molecules from the clinic all the way to
commercialization. In the near term, we’ve built a
robust R&D innovation engine designed to rapidly
deliver four to six development candidates a
year. In the long-term, we expect to produce one
commercial launch product every other year. This
will be accomplished through both internal and
external innovation across a range of modalities
including biologics and will be focused on higher
probability, best-in-class and next-in-class
opportunities where we can win.
It has been a humbling journey to grow Neurocrine
to the leader it is today. On behalf of our Board,
management team, and roughly 1,500 team
members around the world, I thank our investors,
clinical partners and especially patients for the trust
you put in us. Seven years ago, Neurocrine was a
clinical stage company with no sales and a limited
pipeline. Today, Neurocrine is a fully integrated
biopharmaceutical enterprise with a broad pipeline,
a strong financial position, a growing blockbuster
in INGREZZA and a potential second blockbuster
in crinecerfont. Now more than ever before, the
Neurocrine team is confident we have the right
foundation, the right strategy and the right mission
to weather the unavoidable setbacks of drug
development and to drive our success in helping
more patients.
Thank you for your unwavering support.
Sincerely,
Kevin C. Gorman, PH.D.
Chief Executive Officer
NEUROCRINE BIOSCIENCES, INC.
6027 Edgewood Bend Court
San Diego, CA 92130
Notice of Annual Meeting of Stockholders
To Be Held on May 22, 2024
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 2024 Annual Meeting of Stockholders of Neurocrine Biosciences, Inc., a Delaware
corporation (the “Company”), will be held on May 22, 2024, at 10:30 a.m., local time, at the Company’s corpor
6027 Edgewood Bend Court, San Diego, Califorff nia 92130, for the following purpos
accompanying this Notice:
r
es as more fully described in the Proxy Statement
rate offiff ces located at
1. The election of the four nominees for Class I directors named herein to the Board of Directors to serve for a term of
three years;
2. An advisory vote on the compensation paid to the Company’s named executive offiff cers;
3. To approve an amendment to the Company’s 2020 Equity Incentive Plan to increase the number of shares of common
stock reserved forff
issuance thereunder by 3,635,000 shares;
4. The ratificff ation of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2024; and
5. To transact such other business as may properly come beforff e the Annual Meeting of Stockholders or any continuation,
adjod urnment or postponement thereof.
Only stockholders of record at the close of business on March 25, 2024 are entitled to receive notice of and to vote at the
Annual Meeting of Stockholders.
lAlll sto kckh lholdders ar
ie i
invitedd to atte dnd hthe Annu lal Meetiingg of Sto kckh lholdders iin person. However, we stronglnglyy u grge our
kholdders not to atte dnd hthe Annuall Meetiing ig in person a dnd to iinst dead subbmu
stockh l
func itional il in forff mat to com lplyy wi hith hthe r lelevan lt l geg lal re
iwillll bbe pr
ioviddedd. Your vote is important. Whether or not you plan to attend the Annual Meeting, we encourage you to submit
your proxy or voting instructions as soon as possible to vote your shares. You may vote over the Internet, as well as by telephone
or by mailing a proxy or voting instrucr
proxy materials. Stockholders attending the Annual Meeting may vote in person even if they have returt ned a proxy. If you hold shares
through an account with a brokerage firm, bank or other nominee, please folff
other nominee to vote your shares.
tion forff m. Please review the instructions on each of your voting options described in these
iquirements. hThere willill bbe no presenta itions or exhihibibi itions. No refreff
low the instructions you receive from such firff m, bank or
yoxy votes. Our Annuall Meetiingg willill bbe pur lelyy
hshments
iit pr
By Order of the Board of Directors,
San Diego, Califorff nia
April 10, 2024
pp
Darin Lippol
Chief Legal Offiff cer and Corpor
dtl
rr
ate Secretary
Important Notice Regarding the Availability of Proxy Materials forff
the Stockholders’
Meeting to be Held on May 22, 2024 at 10:30 a.m. Local Time at
6027 Edgewood Bend Court, San Diego, California 92130.
The Proxy Statement and Annual Report to stockholders are available at
p
. Please have the control number on your proxy card available.
y
www.proxyvote.com
A copy of the Company’s Annual Report to the Securities and Exchange Commission on Form 10-K forff
the fisff cal year ended
December 31, 2023 is available without charge upon written request to the Company’s Corporate Secretary at
12780 El Camino Real, San Diego, California 92130.
TABLE OF CONTENTS
Our Compensation Practices
Role of the Compensation Committee
Compensation Philosophy
Overall Compensation Determination Process
Compensation Consultant
Competitive Assessment of Compensation—Peer Group and
Market Data
Components of Executive Compensation
2023 Named Executive Officer Compensation Decisions
Officer Equity Ownership Guidelines
Equity Trading Policies and Procedures
Compensation Recoupment Policy
Tax and Accounting Considerations
Risk Analysis of Our Compensation Program
Executive Compensation and Other Information
Summary Compensation Table
Grants of Plan-Based Awards During 2023
Agreements with Named Executive Officers
Outstanding Equity Awards at Fiscal Year-End
Option Exercises and Stock Vested During the Year
Potential Payments upon Termination or Change-in-Control
CEO Pay Ratio
Item 402(v) Pay Versus Performance
Directors Compensation Summary
Non-Employee Director Compensation Philosophy
Non-Employee Director Compensation for 2023
Director Compensation Table
Non-Employee Director Compensation for 2024
Non-Employee Director Equity Ownership Guidelines
Additional Information
Related Person Transactions
Other Matters
Additional Information
Special Note Regarding Forward-Looking Statements
Appendix A - 2020 Equity Incentive Plan
44
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50
54
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55
56
56
57
59
60
60
64
65
69
69
70
71
71
71
71
71
72
73
Proxy Summary
About the Annual Meeting
Security Ownership of Certain Beneficial Owners and
Management
Our Board of Directors
General
Director Biographies of Class I Directors Nominated for
Reelection at the 2024 Annual Meeting of Stockholders
Director Biographies of Class II and Class III Directors not
Nominated for Reelection at the 2024 Annual Meeting of
Stockholders
1
2
5
7
7
7
8
The Board of Directors and Corporate Governance Matters 10
10
10
11
12
12
12
12
13
13
14
14
15
15
15
15
16
16
General
Corporate Governance Best Practices
Board of Directors Overview
Board Leadership Structure
Board Independence
Classified Board Structure
Overboarding Policy
Board and Committee Meetings During 2023
Information About Board Committees
Compensation Committee Interlocks and Insider Participation
Director Nomination Process
Board Diversity Matrix
Board Self Assessment
Board Education
Identification and Evaluation of Nominees for Director
Proxy Access
Process for Stockholder Communications with the Board of
Directors
The Board's Role in Risk Oversight
Corporate Responsibility and Sustainability
Risk Assessment Concerning Compensation Practices and
Policies
Role of Board in Succession Planning
Policy Regarding Board Member Attendance at the Company's
Annual Meeting
Report of the Audit Committee
Principal Accountant Fees and Services
Compensation Committee Report
Proposal One: Election of Directors
Proposal Two: Advisory Vote on Compensation Paid to the
Company's Named Executive Officers
Proposal Three: Approval of an Amendment to the 2020
Equity Incentive Plan
Equity Compensation Plans
Proposal Four: Ratification of Appointment of Independent
Registered Public Accounting Firm
Executive Officers
Compensation Discussion and Analysis
Executive Summary
Committee Actions in Connection with Say-on-Pay Vote
Pay for Performance / At-Risk Pay
16
17
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25
37
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[THIS PAGE INTENTIONALLY LEFT BLANK]
This summary highlights inforff mation that is described in more detail elsewhere in this proxy statement. This summary does
ly before
not contain all the inforff mation you should consider before you vote, and you should read the entire proxy statement carefulff
voting.
PROXY SUMMARY
General Inforff mation
Annual Meeting of Stockholders
Meeting Date:
May 22, 2024
Time:
Place:
10:30 a.m. Local Time
6027 Edgewood Bend Court, San Diego, California 92130
Record Date:
March 25, 2024
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:
one: Call 1-800-690-6903 from any touch-tone telephone to transmit your voting instrucr
Telephee
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 submu
properly recorded.
it your proxy and confirff m your instructions have been
tions up until 11:59 P.M.
Internet: Visit www.proxyvote.com to transmit your voting instrucr
the Internet up uu
that your instructions have been properly recorded.
ntil 11:59 P.M. Eastern Time the day beforff e the meeting date. As with telephone voting, you can confirff m
tions and forff
electronic delivery orr
f inforff mation via
Mail: Mark, sign and date your proxy card and returt n it in the postage-paid envelope we have provided or returt n it to
Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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: Approve an amendment to the Company’s 2020 Equity
Incentive Plan to increase the number of shares of common stock reserved
for issuance thereunder by 3,635,000 shares
Proposal Four: Ratify Eff
public accounting firff m
rnst & Young LLP as independent registered
FOR
FOR
FOR
22
24
25
38
1
6027 Edgewood Bend Court
San Diego, California 92130
PROXY STATEMENT
This Proxy is solicited on behalf of Neurocrine Biosciences, Inc., a Delaware corpor
r
ation (the “Company” or “Neurocrine
use at its 2024 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on May 22, 2024 beginning at
Biosciences”), forff
10:30 a.m., local time, or at any continuations, postponements or adjournments thereof forff
statement and the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at the Company’s
corporate offices, located at 6027 Edgewood Bend Court, San Diego, Califorff nia 92130. The Company’s phone number is
(858) 617-7600.
th in this proxy
the purpos
es set forff
r
Why dh
iddd
I receive these proxyoo materials?ll
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
a
April 10, 2024 to all stockholders of record entitled to vote at the Annual
Meeting.
What is the purpos
rr
e of to hett Annual MeetMM intt g?
At the Annual Meeting, stockholders will act upon
u
the matters outlined in these proxy materials, including the election of the
four nominees forff Class I directors named herein, an advisory vote on the compensation paid to the Company’s named executive
offiff cers, approval of an amendment increasing the number of shares of common stock reserved for issuance under the Company’s
2020 Equity Incentive Plan by 3,635,000 shares; and ratificff ation of the appointment of Ernst & Young LLP as the Company’s
independent registered public accounting firff m forff
the fisff cal year ending December 31, 2024.
Who can attett nd the Annual MeetMM intt g?
All stockholders of record at the close of business on March 25, 2024 (the “Record Date”), or their duly appoi
a
nted proxies,
may attend the Annual Meeting. If you attend, please note that you may be asked to present valid picturt e identificff ation, 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 refleff cting your stock ownership as of the record date and check in at the registration desk at the Annual
Meeting.
Who is eii ntitltt edll
to vote at the Annual MeetMM intt g?
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, 100,580,497 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.
Each outstanding share of the Company’s common stock will be entitled to one vote on each proposal considered at the
Annual Meeting.
2
What constitutes a quorum? WhaWW t are broker non-votestt ? WhaWW t are advisory vr
otestt ?
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 quorumr
Meeting. As of the Record Date, 100,580,497 shares of common stock, representing the same number of votes, were outstanding.
Thus, the presence of the holders of common stock representing at least 50,290,249 shares will be required to establish a quorumrr
presence of a quorumr
will be determined by the Inspector of Elections (the “Inspector”).
, permitting the Company to conduct its business at the Annual
. The
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 ratificff ation of our independent registered public accounting firff m under Proposal Four is considered a routine matter,
meaning that if you do not return voting instrucrr
tions to your broker by its deadline, your shares may be voted by your broker in its
discretion on Proposal Four.
The vote on Proposal Two is advisory. The outcome of this vote will not be binding on the Company or the Board of Directors
and will not create or imply any change to the fidff ucd iary 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 futff urt e decisions about compensation of the
Company’s named executive offiff cers.
How do Idd
vote my shares in person at thett Annual MeeMM tingii
?
You may vote your shares held in your name as the stockholder of record in person at the Annual Meeting. You may vote your
tee,
shares held beneficially in street name in person at the Annual Meeting only if you obtain a legal proxy from the broker, bank, trusr
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 submu
decide not to attend the Annual Meeting.
tions as described below so that your vote will be counted if you later
it your proxy or voting instrucr
How can I vote mtt
y sm hares withott ut attett ndindd g thett Annual MeeMM tingii
?
Whether you hold shares directly as the stockholder of record or beneficff
ially 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.
tions provided on the enclosed proxy card. If you
You can vote by proxy over the Internet, by mail or by telephone pursuant to instrucr
hold shares beneficff
following the voting instrucrr
or electronically is 11:59 p.m., Eastern Time, on May 21, 2024.
ially in street name, you may also vote by proxy over the Internet or you can also vote by telephone or mail by
tion forff m provided to you by your broker, bank, trusrr
tee, or nominee. The deadline forff
voting by telephone
Who will bear the cost of so olicll
itintt g votestt
for thett Annual MeeMM tingii
?
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 beneficff
material to beneficial owners. To assist in soliciting proxies (votes), the Company has retained the profesff
Alliance Advisors, LLC, at an appr
offiff cers and regular employees, without additional compensation, personally, by telephone or by other appr
oximate cost of $30,000. Proxies also may be solicited by certain of the Company’s directors,
ial owners of shares in forff warding solicitation
sional proxy solicitation firm
opriate means.
a
a
Can I change my vote afteff r I return my pm roxyoo ?
r
Yes. Even afteff
r you have submu
itted your proxy, you may change your vote at any time before the proxy is exercised by filff ing
ate Secretary of the Company either a notice of revocation or a duly executed proxy bearing a later date. Your proxy
with the Corpor
will also be revoked if you attend the Annual Meeting and vote in person; however, we encourage you to vote your shares via the
Internet, telephone or mail, and instructions regarding all three methods of voting are provided on the proxy card. If you hold shares
through an account with a brokerage firm, bank or other nominee, please folff
low the instructions you receive from such firff m, bank or
other nominee to vote your shares.
What does it mii
ean if Ii
receive more thatt n one set of po
roxyoo materials?ll
If you receive more than one set of proxy materials, then your shares of common stock are registered in more than one name or
rent accounts. Please complete a proxy for each separate set of proxy materials that you receive to ensure that all
are registered in diffeff
of your shares are voted.
3
What are thett Board of Do
irectors’ recommendatdd iott ns?
Unless you give other instrucr
tions 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,rr
the Board of Directors unanimously recommends a vote:
•
•
•
•
election of the four nominees for Class I Directors named herein (see Proposal One);
an advisory vote on the compensation paid to the Company’s named executive officers (see Proposal Two);
approval of an amendment to the Company’s 2020 Equity Incentive Plan to increase the number of shares of common
forff
forff
forff
stock reserved forff
forff
firm for the fiscal year ending December 31, 2024 (see Proposal Four).
ratificff ation of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting
issuance thereunder by 3,635,000 shares (see Proposal Three) and;
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 iteii m?
Election of Directors. The affirmative vote of a plurality of the shares represented in person or by proxy at the Annual
Meeting and entitled to vote on the election of directors is required forff
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 purpos
.
es of determining whether there is a quorumr
r
Other Items. For each other item, the affirmative vote of the holders of a majority of the shares represented in person or by
approval. A properly executed proxy marked “ABSTAIN” with respect to
es of determining the number of shares represented in person
proxy and entitled to vote on the item will be required forff
any such matter will not be voted, although it will be counted for purpos
or by proxy at the Annual Meeting. Accordingly, an abstention will have the effect of a negative vote forff
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 Four. Thus, if you do not give your broker or
nominee specific instrucrr
than Proposal Four. Shares represented by such “broker non-votes” will, however, be counted in determining whether there is a
.
quorumr
tions, your shares will not be voted on and will not be counted for any other matter to be acted upon, other
r
Who counts t
tt hett
votes?
Votes cast by proxy or in person at the Annual Meeting will be tabulated by the Inspector.
How can I finff d out the resultsll of the votintt g at thett Annual MeeMM ting?
Preliminary vrr
oting 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 availabla e 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 r
the finff al results.
esults and, within four business days after the finff al results are known to us, file an amended Form 8-K to publish
rr
What proxy materials all
re availaii ble oll
n thett
internet?
The Proxy Statement and annual report to stockholders are available under the “Investors” tab oa
n 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 availabla e.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The folff
lowing tabla e sets forff
th certain inforff mation regarding the ownership of our common stock as of March 25, 2024 by
(i) each director; (ii) each of the executive officers named in the Summary Compensation Table; (iii) our executive officers and
directors as a group; and (iv) all those known by us to be beneficff
otherwise indicated in the foot
stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 100,580,497 shares of common stock outstanding on March 25, 2024, adjud sted as required by
rules promulgated by the SEC. The tabla e 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. Unless otherwise indicated below, the address forff
each beneficial owner listed is c/o Neurocrine Biosciences, Inc., 12780 El Camino Real, San Diego, CA 92130.
notes to this tabla e and subju ect to community property laws where applicable, we believe that each of the
ial owners of more than fivff e percent of our common stock. Unless
ff
Name and Address of Beneficff
Stockholders Owning Greater than 5%:
ial Owner
Number of
Shares of
Common Stock
Percent of
Common Stock
BlackRock, Inc. (1) ..................................................................................................................................
The Vanguard Group (2) ..........................................................................................................................
13,647,679
9,710,328
Directors and Named Executive Offiff cers:
Kevin C. Gorman, Ph.D. (3).....................................................................................................................
Matthew C. Abernethy (4) .......................................................................................................................
Kyle W. Gano, Ph.D. (5)..........................................................................................................................
Jude Onyia, Ph.D. (6) ...............................................................................................................................
Eiry W. Roberts, M.D. (7)........................................................................................................................
William H. Rastetter, Ph.D. (8)................................................................................................................
Gary A. Lyons (9) ....................................................................................................................................
Johanna Mercier (10) ...............................................................................................................................
George J. Morrow (11).............................................................................................................................
Leslie V. Norwalk (12).............................................................................................................................
Christine A. Poon (13) .............................................................................................................................
Richard F. Pops (14).................................................................................................................................
Shalini Sharp (15).....................................................................................................................................
Stephen A. Sherwin, M.D. (16)................................................................................................................
All current executive officers and directors as a group (19 persons) (17) ...............................................
1,575,454
321,147
577,993
114,078
209,162
178,895
225,412
42,127
81,274
37,965
4,549
110,786
39,947
128,579
4,496,606
13.6 %
9.7 %
1.6 %
*
*
*
*
*
*
*
*
*
*
*
*
*
4.3%
*
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Represents beneficff
ial ownership of less than one percent (1%) of the outstanding shares of the Company’s common stock as of March 25, 2024.
Based on Amendment No. 12 to Schedule 13G filed by BlackRock, Inc. (“BlackRock”) on January 23, 2024, reporting ownership as of December 31, 2023.
According to such filinff
g, BlackRock beneficially owns 13,647,679 shares of common stock and sole voting power as to 12,980,857 shares of common stock.
Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds froff m 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. The principal business address forff BlackRock Inc. is listed in such filinff
g as 50 Hudson Yards, New York, NY 10001.
Based on Amendment No. 8 to Scheduld e 13G filed by The Vanguard Group, Inc. (“Vanguard Group”) on February 1rr
December 29, 2023. According to such filinff
common stock. Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds froff m the sale of shares of the
common stock held by Vanguard Group. No one other person’s interest in the common stock held by Vanguard Group is more than five percent of the
Company’s total outstanding common stock. The principal business address forff
PA 19355.
g, Vanguard Group beneficially owns 9,710,328 shares of common stock and sole voting power as to 0 shares of
the Vanguard Group is listed in such filinff
3, 2024, reporting ownership as of
g as 100 Vanguard Blvd., Malvern,
Consists of (a) 514,596 shares of common stock, and (b) 1,060,858 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of
March 25, 2024. All of the outstanding shares of common stock are held by The Gorman & Blais Family Trusrr
investment power.
t, of which Dr. Gorman has voting and
Consists of (a) 31,528 shares of common stock and (b) 289,619 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of
March 25, 2024.
Consists of (a) 135,392 shares of common stock and (b) 442,601 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of
March 25, 2024.
Consists of (a) 13,354 shares of common stock and (b) 100,724 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of
March 25, 2024.
Consists of (a) 23,716 shares of common stock and (b) 185,446 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of
March 25, 2024. 22,531 of the outstanding shares of common stock are held by The Stephen Taylor and Eiry W. Roberts Joint Trusrr
t Agreement, of which
Dr. Eiry hrr
as voting and investment power.
Consists of (a) 51,741 shares of common stock and (b) 127,154 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of
March 25, 2024. All of the outstanding shares of common stock are held by the Rastetter Family Trusrr
has voting and investment power.
t established September 2, 2010, of which Dr. Rastetter
5
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
Consists of (a) 116,947 shares of common stock, (b) 106,365 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of
March 25, 2024, and (c) 2,100 shares of common stock issuable pursuant to the vesting of restricted stock units within 60 days of March 25, 2024. 110,964
of the outstanding shares of common stock are held by the Gary A. Lyons Revocable Living Trusrr
investment power.
t U/A 6/8/12, of which Mr. Lyons has voting and
Consists of (a) 40,027 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of March 25, 2024, and (b) 2,100 shares of
common stock issuable pursuant to the vesting of restricted stock units within 60 days of March 25, 2024.
Consists of (a) 77,075 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of March 25, 2024, and (b) 4,199 shares of
common stock issuable pursuant to the vesting of restricted stock units within 60 days of March 25, 2024.
Consists of (a) 35,865 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of March 25, 2024, and (b) 2,100 shares of
common stock issuable pursuant to the vesting of restricted stock units within 60 days of March 25, 2024.
Consists of 4,549 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of March 25, 2024.
Consists of (a) 29,512 shares of common stock, (b) 77,075 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of
March 25, 2024, and (c) 4,199 shares of common stock issuable pursuant to the vesting of restricted stock units within 60 days of March 25, 2024.
Consists of (a) 37,847 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of March 25, 2024, and (b) 2,100 shares of
common stock issuable pursuant to the vesting of restricted stock units within 60 days of March 25, 2024.
Consists of (a) 22,305 shares of common stock, (b) 102,075 shares of common stock issuable pursuant to stock options exercisabla e within 60 days of
March 25, 2024, and (c) 4,199 shares of common stock issuable pursuant to the vesting of restricted stock units within 60 days of March 25, 2024.
Consists of (a) 1,127,090 shares of common stock held by our current directors and executive officers, (b) 3,425,269 shares of common stock issuable
pursuant to stock options held by our current directors and executive officers that are exercisabla e within 60 days of March 25, 2024, and (c) 20,997 shares of
common stock issuable pursuant to the vesting of restricted stock units within 60 days of March 25, 2024.
6
General
OUR BOARD OF DIRECTORS
The Company’s bylaws, as amended and restated, provide that the Board of Directors is comprised of ten directors. The
r
Company’s Certificff ate of Incorpor
ation provides that the Board of Directors is divided into three classes. There are currently four
directors in Class I (William H. Rastetter, Ph.D., George J. Morrow, Leslie V. Norwalk, and Christine A. Poon), three directors in
Class II (Richard F. Pops, Shalini Sharp, and Stephen A. Sherwin, M.D.), and three directors in Class III (Kevin C. Gorman, Ph.D.,
Gary A. Lyons, and Johanna Mercier). With the exception of Kevin C. Gorman, Ph.D., who is the Chief Executive Officff er of the
Company, all current members of the Board of Directors meet the definition of “independent director” under the Nasdaq Stock Market
qualificff ation standards.
ff
The directors in Class I hold office until the 2024 Annual Meeting of Stockholders, the directors in Class II hold office until
the 2025 Annual Meeting of Stockholders, and the directors in Class III hold office until the 2026 Annual Meeting of Stockholders
(or, in each case, until their earlier resignation, removal froff m officff e, 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 duld y elected and qualifieff d. Offiff cers of the Company serve at
the discretion of the Board of Directors. There are no family relationships among the Company’s directors and executive offiff cers.
The term of officff e forff
directors William H. Rastetter, Ph.D., George J. Morrow, Leslie V. Norwalk, and Christine A. Poon will
expire at the 2024 Annual Meeting of Stockholders.
Director Biographies of Class I Directors Nominated for Reelection at the 2024 Annual Meeting of Stockholders
Williaii m H. RHH astettertt
, Pr h.PP D. has served on the Board of Directors since Februar
ry 2010 and as Chairman of the Board of
a
atory arr
ial intelligence and labor
utomation to design and develop medicinal chemicals initially for oncology indications.
Directors since May 2011. Currently, he serves as the Chairman of the Board of Directors forff Fate Therapeutics, a publicly traded
company focff used on cellular therapia es, as well as forff Daré Bioscience, Inc. (previously known as Cerulrr ean Pharma Inc.), a publicly
traded company focff used on women’s healthcare. Dr. Rastetter also serves on the Board of Directors forff Regulus Therapeutics Inc., a
publicly traded company focff used on RNA-based therapea utics, and on the Board of Directors of Iambic, Inc., a private company using
artificff
Dr. Rastetter previously served on the board of Grail, Inc., a private company developing deep sequencing appr
oaches for disease
diagnosis, with an initial focus on the early diagnosis of cancer. Dr. Rastetter serves as an advisor to Illumina Ventures, and is the
Chairman of San Diego Squared, a nonprofitff
Dr. Rastetter was a partner in the venture capital firff m, 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 Corpor
its merger with Biogen Inc. in 2003; he joined IDEC Corporation as its Chief Executive Officer at the company’s foundi
From 1984 to 1986, Dr. Rastetter was Director of Corporate Ventures at Genentech, where from 1982 to 1984 he held scientificff
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 an S.B. degree in Chemistry f
roff m MIT and received M.A. and doctorate degrees in Chemistryrr
from Harvard University.
focused on STEM awareness and education forff
nts in underserved communities.
ng in 1986.
ration until
t
stude
a
ff
rr
The continued service of Dr. Rastetter on the Company’s Board of Directors is based on Dr. Rastetter’s scientificff
and technical
expertise combined with his business experience in leading rapidly growing companies in the life sff
continued growth is dependent on scientificff
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 sff
Directors as a whole.
ciences industry.rr The Company’s
and technical advances, and the Board of Directors believes that Dr. Rastetter offerff s both
ciences companies provides valuabla e strategic and governance insight to the Board of
Georger
J. Morrow has served on the Board of Directors since October 2015. Mr. Morrow served as Executive Vice President,
ff
tions for Amgen’s broad spectrum of products in more than 50 countries worldwide, and the introduction of multiple
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 func
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 Vu
(U.K.), and most recently as President and Chief Executive Officff er of Glaxo Wellcome, Inc. (U.S.). Mr. Morrow currently serves on
the Board of Directors of Align Technology, Inc., a publicly traded 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 Publu ic Health, and the Duke University Fuqua School of Business. Mr. Morrow holds a B.S. in Chemistryrr
from Southampton College, Long Island University, an M.S. in Biochemistry f
University.
ice President for Commercial Operations (U.S.), Managing Director
roff m Bryn Mawr College and an M.B.A. fromff
Duke
rr
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.
7
Lesliell V. Norwalkll 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
advises several private equity firms on healthcare matters. She serves as a director of Globus Medical, Inc., Modivcare 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 Centene, Endologix, Magellan Health, NuVasive, Inc., prior to its acquisition by Globus Medical, and Press
Ganey. Ms. Norwalk began her career in the public sector in The White House Office of Presidential Personnel under the first Bush
administration, following which, she practiced law at the Washington, D.C. offiff ce of Epstein Becker Green, P.C. From 2001 to 2007,
she served in several roles at the Centers forff 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 J.D. froff m the George Mason University School of Law and a B.A. in Economics and International Relations from
Wellesley College.
The continued service of Ms. Norwalk to the Company’s Board of Directors is based on her deep knowledge of, aff nd
experience with, the healthcare industry arr
knowledge and experience provides valuabla e guidance and insight to the Board of Directors.
nd government regulations, as well as corpor
r
ate governance and risk management. Such
Christii
intt e A. PoonPP
has served on the Board of Directors since July 2023. Ms. Poon iis hthe forff mer Execu itive-iin-Resididence iin hthe
iFi hsher Collllegge of Bu isiness at hThe Ohihio State Uniiver isi yty, whhere hshe
ir in Busiiness froff m 2009 to 2014. hShe servedd as Viice Chhaiirman a dnd Me bmber of hthe
Department of Managgement andd Human Resources at hthe Max M.
serv ded as Dean andd thhe Johhn W. Be yrry, Sr. hCh iai
Boardd of Diirectors of J hohnson & J hohnson from 2005 untilil hher retiiremen it in Mar hch 2009. Ms. Poon jojoiin ded Johhnson & J hohnson iin 2000
as Companyy Group hCh iai
Wo lrlddwidide Chhaiir, Phharmaceutiic lals Group, iin 2001, andd servedd as Worldld iwidde hCh iair, Medidi icines a dnd Nutri iitionalls, froff m 2003 to 2005.
Priior to jo j ioi ini gng Johhnson & J hohnson, hshe spent 15 yyears at B irist lol-Myyers Sq iuibbbb iin va irious managgement posi iitions. Ms. Poon was allso
a Viice Chhaiir of hthe Super iviso yry Boardd of R yoyall Phihililips Ellectro inics andd a me bmber of hthe Boa drd of
iDirectors of D iecibbell Thherapea utiics,
Inc. hShe currentlyly serves on hthe Boa drd of
serves as hth le l dead iinddepe dndent didirector, a dnd hThe Shherwiin-Wililliliams Compa yny. Ms. Poon was nam ded Woman of thhe Year byby hthe
He lal hthcare Busiinesswomen’s Asso iciatiio in in 2004 andd nam ded Bu isiness Le dader of hthe Futurt
ir in thhe hPharmaceu itic lals Group. hSh be became a membber of J hohnson & J hohnson’s Execu itive Com imittee a dnd
iDirectors of Pruddentiiall Fiinan ici lal, Inc., Reggeneron Phharmaceu itic lals, Inc., whhere hshe currentlyly
lWalll Street Journal il in 2005.
be byy CNB /C/
The continued service of Ms. Poon on the Company’s Board of Directors is based on her expertise in U.S. and international
business operations, including extensive experience in capia tal allocation, and her strategic and operational knowledge of the
pharmaceutical industry.rr
Director Biographies of Class II and Class III Directors not Nominated forff Reelection at the 2024 Annual Meeting of
Stockholders
. GCC orG marr
n, Ph.D. has been employed with the Company since 1993. He was appoi
r having served as Executive Vice President and Chief Operating Officer since September 2006 and prior
Kevin Cii
Offiff cer in January 2008 afteff
to that, as Executive Vice President and Chief Business Offiff cer and Senior Vice President of Business Development. He currently
serves as Chief Executive Offiff cer and has served on the Board of Directors since January 2008. Dr. Gorman currently serves as a
director of Xencor, Inc. a publicly traded clinical-stage biopharmaceutical company. Additionally, he serves on the Board of Directors
of the Biotechnology Innovation Organization (BIO) and the Pharmaceutical Research and Manufact
urt ers of America (PhRMA).
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.,
Idund
from the University of California, Los Angeles and did furff
Pharmaceuticals, Inc. and ARIAD Pharmaceuticals, Inc. Dr. Gorman received his Ph.D. in immunology and M.B.A. in Finance
ther post-doctoral training at The Rockefelff
nted President and Chief Executive
ler University.
a
ff
The continued service of Dr. Gorman on the Company’s Board of Directors is based on the fact
that as Chief Executive Offiff cer
of the Company, Dr. Gorman has extensive knowledge of our commercial products and our product candidates, our employees and the
industry i
commitment to the Company.
n which we operate. Dr. Gorman has also demonstrated exceptional leadership skills, sound business judgment and a strong
rr
ff
Gary A. Lyons has served on the Board of Directors since joining Neurocrine Biosciences in Februar
ry 1993. Mr. Lyons served
as the President and Chief Executive Officer of the Company from February 1rr
993 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 of Travere Therapeutics, a
publicly traded ultra-orpha
for the treatment of inflammatory/autoimmune and metabolic diseases.
traded biotechnology company focff used on developing drugs
Mr. Lyons previously served on the Board of Directors of Fresh Tracks Therapea utics, Inc. (formerly Brickell Biotech, Inc.), Eledon
Pharmaceuticals, Inc. (formerly Novus 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. froff m Northwestern University’s J.L. Kellogg Graduad te School of Management.
n disease commercial-stage company, and serves as a director of Rigel Pharmaceuticals, Inc., a publicly
r
r
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 forff mer Chief Executive Officer, his in-depth understanding
of the Company’s strategic plans, business operations, management and culture. With this history wrr
ith the Company and management,
Mr. Lyons brings a unique perspective and point of view to the Company’s Board of Directors.
8
Johanna Mercier has served on the Board of Directors since April 2021. Ms. Mercier is the Chief Commercial Officer of
Gilead Sciences, with responsibility for the global commercialization of Gilead’s medicines across virology, liver and oncology
franchises. Ms. Mercier is actively engaged with the policy and advocacy community to ensure affoff
company’s medicines in both the developed and resource-limited countries. She is a staunch advocate forff
is the executive sponsor for the Women@Gilead employee resource group. Ms. Mercier joined Gilead in 2019 afteff
r 25 years at Bristol
Myers Squibb, where she served in a number of executive leadership positions, gaining broad experience across geographies and in all
aspects of the commercial business. Ms. Mercier holds a B.S. in Biology from the University of Montreal and an M.B.A. fromff
Concordia University. She currently serves on the Board of Directors of Arcus Biosciences, Inc., a publicly traded company, and the
University of Southern California’s Leonard D. Schaeffeff
r Center forff Health Policy and Economics. Ms. Mercier is also a member of
World 50.
diversity and inclusion and
rdability and access to the
The continued service of Ms. Mercier on the Company’s Board of Directors is based on Ms. Mercier’s extensive
commercialization experience at both Gilead Sciences and Bristol Myers Squibb, as well as her executive leadership experience across
geographies and in all aspects of the commercial business.
Richard F. PFF opsPP
has served on the Board of Directors since April 1998. Mr. Pops is the Chairman and Chief Executive
Offiff cer of Alkermes Publu ic Limited Company. He joined Alkermes as Chief Executive Officer in Februar
leadership, Alkermes has grown froff m a privately held research-based company with 25 employees to an international, publicly traded
pharmaceutical company with more than 2,000 employees. In addition to Alkermes, he currently serves on the Board of Directors of
the Biotechnology Innovation Organization (BIO) and the Pharmaceutical Research and Manufact
urt ers of America (PhRMA).
Previously, Mr. Pops served on the Board of Directors of Epizyme, Inc., a biotechnology company focff used on epigenetics, and
Acceleron Pharma, Inc., a biopharmaceutical company. He holds a B.A. in Economics froff m Stanforff d University.
ry 1991. Under his
ff
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 finff ancial acumen and capital markets experience. In addition,
Mr. Pops is recognized for his service to the biopharmaceutical industry arr
Organization and the Pharmaceutical Research and Manufact
operations and strategy is a significant contribution to the Board of Directors.
urt ers of America. His breadth and range of industry err
s a member of the Boards of the Biotechnology Innovation
xperience from
ff
Shalini ShaSS rp has served on the Board of Directors since Februarr
ry 2020. She also serves on the Board of Directors of
Organon & Co., a publicly traded healthcare company focused on improving the health of women throughout their lives. Previously,
erved on the Board of Directors of Mirati Therapea utics, prior to its acquisition by Bristol-Myers Squibb Company, Sutro
Ms. Sharp srr
prior to its merger with Nuvation Bio, Precision BioSciences, Inc., TB Alliance, Array
Biopharma, Inc., Panacea Acquisition Corp.,
Biopharma, prior to its acquisition by Pfizer, and Agenus Inc. Ms. Sharp hr
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 Offiff cer at Agenus Inc., a clinical-stage immuno-oncology
company focff used on the discovery and development of therapia es that engage the body’s immune system to fight cancer. Ms. Sharpr
previously served in strategic planning and as Chief of Staff tff o the Chairman of the Board of Directors of Elan Pharmaceuticals, and as
a management consultant at McKinsey & Company as well as an investment banker at Goldman Sachs. She holds a B.A. and an
M.B.A. from Harvard University.
as held the positions of Chief Financial Offiff cer and
rr
The continued service of Ms. Sharp t
r
o the Company’s Board of Directors is based on her extensive experience as a Chief
Financial Officer of a public company, her finff ancial acumen, and her management and leadership skills.
Steptt hen A. SheSS rwin, M.DMM . has served on the Board of Directors since April 1999. Dr. Sherwin currently divides his time
a
ciences industry arr
Previously, Dr. Sherwin was Chairman and Chief Executive Officer of Cell Genesys, a
company, from 1990 until the company’s merger in 2009 with BioSante Pharmaceuticals (now ANI
nd patient care and teaching in his specialty of medical oncology. He is a Clinical
sor of Medicine at the University of Califorff nia, San Francisco, and a volunteer Attending Physician in Hematology-Oncology at
between advisory work in the life sff
Profesff
the Zuckerberg San Francisco General Hospital. Dr. Sherwin currently serves on the Board of Directors of Biogen Inc., a publicly
traded company. He is an Advisory Partner with Third Rock Ventures and a member of the Scientificff Steering Committee of the
Parker Institute for Cancer Immunotherapy.
cancer immunotherapya
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 off
Biotech, BioPlus Acquisition Corporation, Neon Therapeutics, and Rigel Pharmaceuticals, Inc., as well as the Biotechnology
Innovation Organization (BIO) 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 Drugr Development froff m 2011 to 2013. Dr. Sherwin
holds a B.A. in biology, summa cum laude, froff m Yale University and an M.D. froff m Harvard Medical School, is board-certified in
internal medicine and medical oncology, and is a Fellow of the American College of Physicians.
f the National Cancer Institute. In addition, Dr. Sherwin previously served on the Board of Directors of Aduro
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 arr
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 Innovation Organization (BIO). 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.
s the former Chief Executive Officer of Cell Genesys, Inc., the former Chairman and co-
9
THE BOARD OF DIRECTORS AND CORPORATRR E GOVERNANCE MATTERS
General
We have long believed that good corporate governance is i
ii mportant to ensure that Neurocrine Biosciences is managed forff
of its stt
long-term benefite
has adopted Corporate Governance Guidelines which desdd cribe our corporate governance practices and address corpor
governance issuii
www.neurocrine.com.
es such as Board composm ition, responsibilities and director qualifications. TheTT se guidelines are available at
rs. We periodically review our corporate governance policies and practices. TheTT Board of Do
kk
tockhol
ate
del
r
the
irectorsrr
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 informff
ation
about our corporate governance policies and practices, including our committee charters, Corporate Governance Guidelines, Code of
Business Conduct and Ethics, Comprehensive Compliance Program, and Incentive Compensation Recoupment Policy, can be found
ate social responsibility and
on our website, www.neurocrine.com. Additionally, forff more information on our commitment to corpor
stewardship, including environmental sustainability, diversity and inclusion and other key initiatives, please see our 2024 Corporate
Sustainabia lity Report, which is posted on our website referenced above under the “Sustainability” section of the website. We believe
these efforff
information posted on or accessible through our website is not incorporated into this Proxy Statement.
ts reflect the best interests of our patients, our stockholders and the communities in which we operate and serve. The
r
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 Officff er.
The folff
lowing tabla e highlights some of our key corpor
r
ate governance practices:
☒
Director resignation policy forff
t
majoa rity suppor
u
directors receiving less than
☒ Stockholder abia lity to call special meetings
☒ Director overboarding policy
☒ Stockholder action by written consent
Corporate Governance Best Practices
☒
Diverse Board and policies emphasizing diversity in all new
director searches
☒ No poison pill in forff ce
☒ Separate Chairman and CEO
☒ Clawback policy
☒
All directors attended at least 75% of Board and relevant
committee meetings
☒ Code of Business Conduct and Ethics
☒ New director orientation and continuing director educd ation
☒
Executive sessions of independent directors held at every
regular Board meeting
☒ Annual board and committee assessment
☒ Active stockholder engagement
☒ Proxy access forff
stockholders
☒
Robust commitment to corpor
responsibility
r
ate, environmental and social
10
Board of Directors Overview
As we continue to focus on discovering an developing life-ff changing treatments forff
neuroendocrine, and neuropsychiatric disorders, we rely on our talented and experienced Board to provide leadership, guidance and
oversight. Our Board is comprised of individuals with a strong background in executive leadership, capital management and
allocation, scientificff
of our directors’ backgrounds and experiences results in different perspectives, ideas, and viewpoints, which make our Board more
effeff ctive in carrying out its dutd ies. We believe that our directors hold themselves to the highest standards of integrity and that they are
committed to representing the long-term interests of our stockholders.
research and drug development experience, and Company and industry krr
patients with under-addressed neurological,
nowledge. We believe that the diversity
Our Directors exhibit an effeff ctive mix of skills, experience, diversity and perspectives.
90%
13.3 years
65.8 years
40%
20%
of Board members are
independent
average Director tenure
average Director age
of Board members are
female
of Board members are
underrepresented
minorities
The folff
lowing matrix highlights the mix of key skills and experiences of our director nominees and continuing directors. This matrix is
intended to depict notable areas of focff us for each director, and not having a mark does not mean that a particular director does not
possess that skill or experience. Nominees have developed competencies in these skills through educd ation, direct experience and
oversight responsibilities. Additional biographical information on each nominee is set out above.
Experience, Expertise, or
Attribute
Industry Err
xpertise
Finance / Capia tal Management
and Allocation
Commercial Experience
Scientificff Research & Drug
Development Experience
Governance / Public Company
Board
Investor Relations /
Stockholder Engagement
International Markets
irs / Publu ic
Government Affaff
Policy
Executive Leadership
Experience
Accounting / Financial
Reporting
Risk Oversight / Risk
Management
Human Capital Management
IT / Cybersecurity
Pricing and Market Access -
U.S.
Director Nominees
Continuing Directors
William
Rastetter,
Ph.D.
George
Morrow
Leslie
Norwalk
Christine
Poon
Kevin
Gorman,
Ph.D.
Gary
Lyons
Johanna
Mercier
Richard
Pops
Shalini
Sharp
Stephen
Sherwin,
M.D.
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
(cid:4)
11
Board 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 Offiff cer.
The Chief Executive Officer and the balance of the Board of Directors set Company goals with the Chief Executive Officff er 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 affaff
irs of the Company,
and creates an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing
management accountabia lity and improving the abia lity of the Board of Directors to monitor whether management’s actions are in the
best interests of the Company and its stockholders.
Board Independence
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 qualificff ation standards.
Classified Board Structure
The Board of Directors is divided into three classes, designated Class I, Class II and Class III. Our Nominating / Corporate
Governance Committee annually reviews the Company’s classifieff d Board structurt e to evaluate whether it continues to be the
appropriate structurt e forff
believe that maintaining this strucr
Governance Committee and the Board believe that the classified board structurt e:
the Company. At this time, the Nominating / Corporate Governance Committee and the Board continue to
ial to our stockholders. Specifically, the Nominating / Corporate
ture is appropriate and beneficff
•
•
•
promotes stabia lity and continuity, allowing our Board and management to remain focused on our long-term strategic
objectives;
enhances independence of our non-employee directors by decreasing potential pressures froff m special interest groups or
others who may have motives or interests contrary to the creation of sustainable stockholder value; and
allows for the development of institutional knowledge at the board level, which is particularly important in the
pharmaceutical industry,rr
given the multi-year development cycles of our clinical programs.
The Board and the Nominating / Corporate Governance Committee will periodically review and continue to consider whether the
classified Board strucr
ture aligns with the Company’s long-term strategic objectives.
Overboarding Policy
The overboarding policy set forth in our Corporate Governance Guidelines limits directors to a maximum of fivff e public
company boards, with named executive officers of public companies limited to a maximum of three public company boards and
members of the Audit Committee limited to a maximum of three public company audit committees. The Nominating / Corporate
Governance Committee reviews our overboarding policy as part of its annual review of our corporate governance practices, which
includes the Corporate Governance Guidelines, and compliance with our overboarding policy is reviewed at least annually by the
Nominating / Corporate Governance Committee. All directors are currently compliant with our overboarding policy.
Certain proxy advisory firms have adopted overboarding policies, where they will recommend a vote against directors who serve
on what the proxy advisory firm believes to be too many boards. Further, certain institutional investors will vote against directors if
they believe they are overboarded. These policies are generally intended to address concerns that directors on multiple boards may
lack sufficient time to perform their board duties effectively. The Nominating / Corporate Governance Committee and the Board
acknowledge these concerns, but believe additional facff
boards should continue to serve on the Company’s Board of Directors. Among other things, the Board of Directors believe that
consideration should be given to the skills and abia lities that a director brings to the Board, how a director contributes to the diversity
opriate time, attention
and the overall mix of perspectives and backgrounds on the Board, and whether the director dedicates the appr
and energy to his or her director dutd ies. The Board of Directors discusses these considerations generally in connection with its
evaluation and assessment process and specifically with both current Board members and director candidates who serve on multiple
boards of directors.
tors should be considered in determining whether a director serving on multiple
a
All of our directors comply with our overboarding policy, but certain institutional investors may still consider directors to be
overboarded if they serve on other audit committees or in roles with heightened responsibilities – such as directors serving as
executives of other public companies, board chairs, or lead independent directors. In the case of Dr. Rastetter, who serves as our Board
chair and as board chair forff
in leading rapidly growing companies in the life sff
other companies, we believe his scientific and technical expertise, combined with his business experience
brings a unique, highly relevant and valuable skill set to the Board.
ciences industry,rr
12
a
nted to our Board in July 2023 and also currently serves on hthe Boa drds of Diirectors of Pr dude
Dr. Rastetter has attended every Board of Directors meeting over the last three years and dedicates significant time outside of meetings
to engage with, and provide advice and counsel to, members of management. Further, Dr. Rastetter joined the Board in February 2010
and durd ing his tenure as a director, the Company's stock price has increased approximately 5,000% as measured through the Record
Date. Ms. Poon was appoi
ntiiall Fiinan ici lal,
Inc., R gegeneron hPharmaceutiic lals, Inc., whhere hshe serves as thhe lle dad iinddepe dndent didirector, a dnd hThe Shherwiin-Williilliams Companyy. Ms.
Poon bbriinggs ddeep strategigi kc knowlledgedge of hthe phharmaceu itical il i dndustryy t
rr
Wo lrlddwidide Chhaiir of hPharmaceutiic lals at J hohnson andd & Johhnson. She also has broad expertise in pharmaceutical operations, including
capia tal allocation decisions, as a result of her 30-year career in the healthcare industry.rr Upon her appoi
ntment to the Board, Ms. Poon
did not immediately join any committees to ensure a smooth onboarding process and to provide the Board with an opportunity to
evaluate her other time commitments. Afteff
account her exceptional experience and the Company’s evolving needs, Ms. Poon joined the Audit Committee and Nominating /
Corporate Governance Committee in February 2rr
r a series of discussions with Ms. Poon over the course of several months and taking into
o our Boardd as shhe previiouslyly serv ded as
iVice hCh iair a dnd
024.
a
r
Board and Committee Meetings During 2023
The Board of Directors held a total of eight meetings during 2023. For 2023, 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
establa ished and approved by the Board of Directors and current copies of the charters forff
the Company’s website at www.neurocrine.com. During 2023, no director attended fewff
meetings of the Board of Directors and no director attended fewff
the Board of Directors on which such director served.
er than 75% of the total number of meetings held by any committee of
each of the committees have been posted on
er than 75% of the aggregate of the total
Information About Board Committees
The table below provides membership inforff mation forff
a
oved revisions to the membership of our committees (see page 22 forff
Board appr
each of the committees of the Board during 2023. In February 2024, our
our Board's current committee membership).
Name of Director
Audit
Compensation
Nominating /
Corporate Governance
Committee Composition
Committee
William H. Rastetter, Ph.D. (Board Chair)
Kevin C. Gorman, Ph.D.
Gary A. Lyons
Johanna Mercier
George J. Morrow
Leslie V. Norwalk
Christine A. Poon
Richard F. Pops
Shalini Sharp
Stephen A. Sherwin, M.D.
MEMBER
CHAIR
MEMBER
MEMBER
CHAIR
MEMBER
MEMBER
MEMBER
CHAIR
MEMBER
The Company’s Audit Committee is comprised entirely of directors who meet the independence requirements set forth in
Nasdaq Stock Market RulRR e 5605(c)(2)(A). Information regarding the func
number of meetings held during the fiscal year is set forff
The members of the Audit Committee forff
serving as the Audit Committee Chair. The Board of Directors has determined that Mr. Pops, Ms. Sharp,r
committee finff ancial experts” within the meaning of item 407(d)(5) of SEC Regulation S-K. This committee met five times durd ing
2023.
tions performed by the committee, its membership, and the
th in the “Report of the Audit Committee,” included in this Proxy Statement.
2023 were Richard F. Pops, Shalini Sharp, and Stephen A. Sherwin, M.D., with Ms. Sharpr
and Dr. Sherwin are “audit
ff
The Company’s Compensation Committee consists of directors George J. Morrow, Richard F. Pops, and Shalini Sharp, with
Mr. Pops serving as the Compensation Committee Chair. 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 appr
a
Committee is an “independent director” as definff ed by Nasdaq Stock Market RulRR e 5605(a)(2). This committee met seven times during
2023. Please also referff
Analysis” forff
to “Role of the Compensation Committee” section under the section titled “Compensation Discussion and
additional inforff mation regarding the role of the Compensation Committee.
opriate. Each of the current members of the Compensation
13
During 2023, the Company’s Nominating / Corporate Governance Committee consisted of directors Johanna Mercier, George
J. Morrow, and Leslie V. Norwalk, and Stephen A. Sherwin, M.D., with Ms. Norwalk serving as the Nominating / Corporate
Governance Committee Chair. Ms. Mercier, Mr. Morrow, Ms. Norwalk, and Dr. Sherwin, are all “independent directors” as defined
by Nasdaq Stock Market RulRR e 5605(a)(2). The Nominating / Corporate Governance Committee is responsible for recommending
nominees for election to the Board of Directors, succession planning, developing and implementing policies and practices relating to
corporate governance, and providing oversight with respect to the folff
lowing matters: sustainability matters, supply chain risk, quality
systems and drugr
safety. The Nominating / Corporate Governance Committee also administers 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 naturt e 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 four times durd ing 2023.
In January 2024, the Board formed the Science and Medical Technology Committee, which provides oversight of significant
judgments relating to the Company’s research and development, including clinical development, activities, portfolff
scientificff
potential business development transactions. The Science and Medical Technology Committee consists of directors Stephen A.
Sherwin, M.D., William H. Rastetter, Ph.D., Gary A. Lyons, and Richard F. Pops, with Dr. Sherwin serving as the Science and
Medical Technology Committee Chair.
io, and
Although Dr. Rastetter was not a member of any Board Committee in 2023, as Board Chair he attended most Board committee
meetings.
Compensation Committee Interlocks and Insider Participation
During 2023, 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.
Director Nomination Process
In selecting non-incumbent candidates and reviewing the qualifications of incumbent candidates forff
the Board of Directors, the
Nominating / Corporate Governance Committee considers the Company’s corpor
following:
r
ate governance principles, which include the
•
•
•
•
tively engage their felff
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 construcr
low Board members and management in dialogue and
the decision-making process.
Directors must be willing to devote suffiff cient time to carrying out their dutd ies and responsibilities effectively, and
should be committed to serve on the Board of Directors forff
Directors should notify t
ate Governance
Committee in the event of any significant change in their employment responsibilities or affiliations. Director
nominees should meet the director qualificff ation requirements set forth in the Company’s Corpor
Guidelines.
In evaluating director nominees, the Nominating / Corporate Governance Committee considers the following factors:
personal and profesff
corporate management and the biopharmaceutical industry,rr
held company; gender and ethnic diversity; experience as a board member of another publicly held company; and
additionally, forff
compliance with Company policies.
nominees seeking re-election, meeting attendance, gender and ethnic diversity, and participation and
sional integrity, ethics and values including any potential confliff cts of interest; experience in
he Chairman of the Board and Chairman of the Nominating / Corpor
such as serving as an officer or former offiff cer of a publicly
an extended period of time.
ate Governance
ff
rr
r
It is the Company’s policy to have a diversity of skills, profesff
sional experience, educd ation, 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 self-iff dentifieff d diversity characteristics, when
assessing board composition and evaluating candidates forff
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 profesff
sional experience.
14
The Board Diversity Matrix, below, provides the diversity statistics for our Board of Directors as of the date of this Proxy
Statement.
ard Diversity Matrix
Total Number of Directors
Part I: Gender Identity
Directors
Part II: Demographic Background
Asian
White
Female
Male
10
4
2
2
6
—
6
In addition to the foregoing, the Nominating / Corporate Governance Committee Charter and Corpor
rr
ate Governance
ff
th minimum criteria forff
s as it may deem are in the best interests of the Company and its stockholders. The Nominating / Corporate Governance
Guidelines set forff
such other fact
Committee does believe that several members of the Board of Directors meet the criteria forff
defined by SEC rules. We believe that all of our directors should have a reputation forff
and should demonstrate business acumen, an ability to exercise sound judgment and a commitment to serve the Company.
an “audit committee finff ancial expert” as
honesty, integrity and highest ethical standards,
director nominees. The Nominating / Corporate Governance Committee may also consider
Board Self-Assessment
The Nominating / Corporate Governance Committee ensures that each member of the Board, the Committees, and the Chair of
rent evaluations in order to
the Board are assessed annually aimed at enhancing effectiveness. Directors complete a number of diffeff
provide performance feedbad ck and suggestions for improved effectiveness or contributions. The assessments are done by way of a
questionnaire prepared and distributed by our external corporate counsel, Cooley LLP. The assessments are treated on a confidff ential
basis, with the results tallied on an anonymous basis forff
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, procedurd es, composition or Committee strucrr
and groups were effeff ctively fulff
ture. The evaluation carried out in 2023 indicated that all individuals
filling their responsibilities.
Board Education
The Board recognizes the importance of ongoing director educd ation. In order to faci
ff
litate the Board’s educd ational 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 affaff
Nominating / Corporate Governance Committee to discuss best practices and new developments relating to corpor
the operation of public company boards. The Company also provides fundi
director continuing educd ation programs sponsored by educd ational and other institutions.
ate governance and
ng for members of the Board of Directors to attend outside
irs. In addition, on an annual basis an external expert meets with the
ff
r
Identification and Evaluation of Nominees for Director
The Nominating / Corporate Governance Committee identifieff s nominees for director by first evaluating the current members
service and who are willing to continue are considered for re-
a new perspective. If any member of the Board of Directors does not wish to continue in service, or if the
of the Board of Directors willing to continue in service. Current members with qualificff ations and skills that are consistent with the
Nominating / Corporate Governance Committee’s criteria forff
nomination, balancing the value of continuity of service by existing members of the Board of Directors with that of obtaining
members who would offerff
Board of Directors decides not to re-nominate a member forff
the desired skills and experience of a new nominee in light of the criteria above
generally polls the Board of Directors and members of management forff
party search firms. The Nominating / Corporate Governance Committee may also seek input from industry err
Nominating / Corporate Governance Committee reviews the qualificff ations, 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 perpetuat
interests through the exercise of sound judgment. Afteff
Governance Committee makes its recommendation to the Board of Directors.
re-election, the Nominating / Corporate Governance Committee identifieff s
. The Nominating / Corporate Governance Committee
their recommendations and may also seek input from third-
xperts or analysts. The
r review and deliberation of all feedbad ck and data, the Nominating / Corporate
te the success of the Company and represent stockholder
a
We have not received director candidate recommendations from the Company’s stockholders and do not have a forff mal policy
regarding consideration of such recommendations. However, any recommendations received froff m 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.
15
Proxy Access
In Februar
ry 2023, our Board of Directors amended and restated our bylaws to provide for proxy access, which, subju ect to
certain limitations as set forff
th in our bylaws, allows a stockholder or a group of no more than 20 stockholders owning at least three
percent or more of the voting power of our outstanding capia tal stock continuously for at least three years to nominate and include in
o the greater of two individuals or 20% of the number
our Proxy Statement forff
of directors in office, provided that (i) the number of such nominees may not exceed 50% of the number of directors in the class whose
term expires at such annual meeting and (ii) the stockholders satisfy t
he procedurd al, disclosure and other requirements specified in our
ff
bylaws. For furff
provision included in our bylaws does not purpor
ther information, please see “Additional Inforff mation”. The foregoing description of the stockholder proxy access
t to be complete and is qualifieff d in its entirety by referff ence to our bylaws.
an annual meeting director nominees constituting up tu
rr
Process forff
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: Corpor
ate Secretary. Each communication must set forth:
r
•
•
the name and address of the Company stockholder on whose behalf the communication is sent; and
the number of Company shares that are beneficff
ially owned by such stockholder as of the date of the communication.
Each stockholder communication will be reviewed by the Company’s Corpor
r
ate Secretary t
rr
o 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 Corpor
r
ate Secretary to be appropriate for presentation to the Board or such director will be
submu
itted to the Board or such director on a periodic basis.
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 finff ancial risk, legal/compliance risk, scientificff
/clinical development risk, cybersecurity risk management, and strategic risk.
The Audit Committee focff uses on majoa r finff ancial risk exposures and the steps our management has taken to monitor and control these
exposures. The Audit Committee also has oversight of risk related to data privacy, technology and inforff mation and cybersecurity,
including: (i) access to various reports, summaries or presentations related to cybersecurity threats, risk, and mitigation (ii) the
potential impact of those exposures on the Company’s business, financial results, operations and reputation, (iii) the steps management
has taken to monitor and mitigate such exposures, (iv) the Company’s inforff mation governance policies and programs and (v) major
legislative and regulatory drr
evelopments that could materially impact the Company’s privacy and data security risk exposure. 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 and compliance oversight with respect
to the folff
safety. 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 scientificff
Directors forff med the Science and Medical Technology Committee, which provides oversight of significant scientificff
relating to the Company’s research and development, including clinical development, activities, portfolff
development transactions.
lowing matters: sustainability, supply chain risk, quality systems and drugr
the Company overall. Additionally, in January 2024, the Board of
judgments
io, and potential business
and strategic risks forff
16
Corporate Responsibility and Sustainability
At Neurocrine Biosciences, we uphol
u
d an unwavering spirit of ingenuity and seek to provide lifesaving solutions to patients
who have great needs, but few options. We believe operating responsibly and effiff ciently is paramount to creating long-term value for
our Company and stakeholders. Our focus as a Company is to operate with the highest standards of business ethics, adhere to the
highest product quality and safetff y standards, invest in our people and communities, and minimize the impact on the environment. Our
key sustainability areas, programs and strategies are guided by our stakeholders and third-party fraff meworks, including the
Sustainability Accounting Standards Board (SASB) biotechnology and pharmaceuticals standard and Task Force on Climate-related
Financial Disclosures (TCFD). The Company’s Board of Directors has delegated the oversight of sustainabia lity strategies and policies
to the Nominating / Corpor
rate Governance Committee and the below grapha
ic outlines our sustainabia lity governance strucr
ture:
For more information on our commitment to corpor
rate social responsibility and stewardship, including environmental
sustainability, diversity and inclusion and other key initiatives, please see our 2024 Corporate Sustainability Report, which can be
found on our website, www.neurocrine.com, under the “Sustainability” section. The informff
website is not incorporated into this Proxy Statement.
ation posted on or accessible through our
Risk Assessment Concerning Compensation Practices and Policies
During fisff cal 2023, the Compensation Committee 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 are consistent with
industry practices forff
effeff ct on the Company.
similar biopharmaceutical companies and do not create risks that are reasonabla y likely to have a material adverse
17
Role of the Board in Succession Planning
A key responsibility of the Board is succession planning for the CEO and other members of the executive management team.
In consultation with the Company's CEO and Chief Human Resources Offiff cer, the Nominating / Corporate Governance Committee
regularly reviews succession planning relating to the Company's CEO as well as the Company's other executive officers. The
Nominating / Corporate Governance Committee then consults with the fulff
plans forff
Compensation Committee discusses executive management talent, including the readiness of individuals to take on additional
leadership roles and developmental opportunities needed to prepare senior leaders forff
assessment conducted by the Board and its committees includes a review of both a long-term succession plan and an emergency
succession plan.
the CEO and the executive team align with the Company's short and long-term strategic goals. Additionally, the
l Board to ensure that development, retention and succession
greater levels of responsibility. The review and
u
In suppor
t of the Company’s commitment to investing in its employees, high-potential leaders are provided with the
opportunity to meet with Board members through formal presentations and at inforff mal events. This engagement gives the Board
insight into the Company’s talent and helps to faci
planning at the Board and Committee level.
litate a regular review and discussion of leadership development and succession
ff
Policy Regarding Board Member Attendance at the Company’s Annual Meeting
The Company does not have a forff mal policy regarding attendance by members of the Board of Directors at the Annual
Meeting. Directors Dr. Gorman and Dr. Rastetter attended the 2023 Annual Meeting of Stockholders.
18
REPORT OF THE AUDIT COMMITTEE
The folff
lowing Repor
e
t of to hett Audit ComCC mittee does not constitute soliciting material and should nl
ot be deemed filed or
incorporated by refee rence into any othett
of 1934, as amended, except to thett
m
r ComCC pany
filing under thett
Securities Act of 1933, as amended, or the SecuSS
rities Exchange Act
extent thett Company specifii cally incorporates this Repor
e
t by rb
eferff ence therein.
The Audit Committee oversees the Company’s finff ancial reporting process on behalf of the Board of Directors. Management
rr
esponsibility for the Company’s finff ancial statements and the reporting process, including the Company’s systems of
has the primary r
internal controls. In fulff
Company’s audited finff ancial statements as of and forff
the acceptabia lity, of the accounting principles, the reasonabla eness of significant judgments and the clarity of disclosures in the
financial statements.
filling its oversight responsibilities, the Audit Committee has reviewed and discussed with management the
the year ended December 31, 2023, including a discussion of the quality, not just
The Audit Committee also has reviewed and discussed the Company’s audited finff ancial statements as of and forff
the year
ended December 31, 2023 with the Company’s independent registered public accounting firff m, who are responsible for expressing an
opinion on the conforff mity of those audited finff ancial statements with accounting principles generally accepted in the United States, as
well as their judgments as to the quality, not just the acceptabia lity, 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 Publu ic Company Accounting
Oversight Board (United States) (the “PCAOB”) and the Securities and Exchange Commission. The independent registered public
accounting firff m also is responsible for performing an independent audit of the Company’s internal control over finff ancial reporting in
accordance with the auditing standards of the PCAOB. In addition, the Audit Committee has discussed the independent registered
public accounting firff m’s independence froff m management and the Company, including the matters in the written disclosures and the
letter froff m the independent registered public accounting firff m required by appl
icable requirements of the PCAOB and considered the
compatibility of non-audit services with the auditors’ independence.
a
The Audit Committee discussed with the Company’s independent registered public accounting firff m the overall scope and
their audits. The Audit Committee meets with the independent registered public accounting firff m, with and without
plans forff
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 finff ancial reporting.
In reliance on the reviews and discussions referred to above
a
, the Audit Committee recommended to the Board of Directors that
the audited finff ancial statements be included in the Company’s Annual Report on Form 10-K forff
for filinff
stockholder ratificff ation of the selection of the Company’s independent registered public accounting firff m forff
December 31, 2024.
g with the Securities and Exchange Commission. The Audit Committee and the Board of Directors are also seeking
the year ending
the year ended December 31, 2023,
Respectfulff
AUDIT COMMITTEE
ly submu
itted by:
Shalini Sharp
Stephen A. Sherwin, M.D.
Richard F. Pops
19
Principal Accountant Fees and Services
The aggregate feeff
s billed to the Company by Ernst & Young LLP, the Company’s independent registered public accounting
firm, forff
the indicated services for each of the last two fiscal years were as folff
lows:
ff
(1) ................................................................................................................................................................ $
Audit fees
Audit related fees (2) ....................................................................................................................................................
Tax fees
(3)...................................................................................................................................................................
ff
Total.............................................................................................................................................................................. $
2023
1,708,578
—
545,664
2,254,242
$
$
2022
1,170,175
—
533,346
1,703,521
for professional services performed by Ernst & Young LLP for the integrated audit of the Company’s annual finff ancial statements
gs and services that are normally
(1)
(2)
(3)
ff
ff
consist of fees
Audit fees
and internal control over finff ancial reporting and review of financial statements included in the Company’s 10-Q filinff
provided in connection with statutt ory arr
Audit related fees consist of fees
audit or review of the Company’s finff ancial statements.
Tax fees consist of fees
includes appr
oximately $263,000 in 2023 and $221,000 in 2022 for tax compliance.
gs or engagements.
nd regulatory f
ilinff
a
ff
ff
rr
for professional services performed by Ernst & Young LLP with respect to tax compliance, tax advice and tax planning. Total
for assurance and related services performed by Ernst & Young LLP that are reasonabla y related to the performance of the
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 firff m. All of the services rendered by Ernst & Young LLP were pre-approved by the Audit Committee in
accordance with the Audit Committee pre-appr
oval policy described below.
a
The Company’s Audit Committee has establa ished a policy that all audit and permissible non-audit services provided by the
Company’s independent registered public accounting firff m will be pre-appr
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 firff m. Pre-approval
is detailed as to the particular service or category orr
f services and is generally subju ect to a specific budget. The Company’s independent
registered public accounting firff m 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 firff m in accordance with this pre-approval,
and the fees for the services performed to date.
oved by the Audit Committee. These services may include
a
20
COMPENSATION COMMITTEE REPORT
The folff
lowing Repor
e
by refee rence into any othett
amended, except to thett
t of to hett Committee does not constitute soliciting material and should nl
Securities Act of 1o
specifici ally incorporates this Repor
933, as amended, or the SecuSS
eferff ence therein.
r ComCC pany
filing under thett
m
m
extent the ComCC pany
t by rb
e
ot be deemed filed or incorpor
rr
ange Act of 1o
ated
934, as
rities ExchEE
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.
Respectfulff
COMPENSATION COMMITTEE
itted by:
ly submu
George J. Morrow
Richard F. Pops
Shalini Sharp
21
PROPOSAL ONE: ELECTION OF DIRECTORS
The Company’s bylaws, as amended, provide that the Board of Directors is comprised of ten directors. The Company’s
rr
and Stephen A. Sherwin, M.D.), and three directors in Class III (Kevin C. Gorman, Ph.D., Gary A.
ation provides that the Board of Directors is divided into three classes. There are currently four directors in
Certificff ate of Incorpor
Class I (William H. Rastetter, Ph.D., George J. Morrow, Leslie V. Norwalk, and Christine A. Poon), three directors in Class II
(Richard F. Pops, Shalini Sharp,r
Lyons, and Johanna Mercier). With the exception of Kevin C. Gorman, Ph.D., who is the Chief Executive Officer of Neurocrine
ition of “independent director” under the Nasdaq Stock
Biosciences, all current members of the Board of Directors meet the definff
Market qualificff ation standards. Additionally, our Corporate Governance Guidelines contain a director resignation policy, which
provides that any director nominee who receives a greater number of votes “withheld” than votes “forff ” such election shall tender his
or her resignation to the Board of Directors. The Nominating / Corporate Governance Committee will consider all of the relevant facts
and circumstances and recommend to the Board of Directors whether to accept or reject the resignation. The Board of Directors will
act on the Nominating / Corporate Governance Committee's recommendation within 90 days of the annual meeting. Following the
Board’s decision on the Nominating / Corporate Governance Committee’s recommendation, the Company will publicly disclose the
Board’s decision whether to accept the resignation as tendered in a Form 8-K fileff d with the Securities and Exchange Commission (the
"SEC").
The directors in Class I hold office until the 2024 Annual Meeting of Stockholders, the directors in Class II hold office until
the 2025 Annual Meeting of Stockholders and the directors in Class III hold office until the 2026 Annual Meeting of Stockholders (or,
in each case, until their earlier resignation, removal froff m office, or death). After each such election, the elected directors will then
serve in succeeding terms of three years and until a successor is duld y elected and qualifieff d. Offiff cers of the Company serve at the
discretion of the Board of Directors. There are no famff
ily relationships among the Company’s directors and executive officff ers.
The term of officff e forff
directors William H. Rastetter, Ph.D., George J. Morrow, Leslie V. Norwalk, and Christine A. Poon will
expire at the 2024 Annual Meeting of Stockholders.
Nominees for Election at the Annual Meeting
All of the nominees (William H. Rastetter, Ph.D., George J. Morrow, Leslie V. Norwalk, and Christine A. Poon) are currently
Class I directors of the Company. Information about
a
the nominees is set forff
th below as of the date of this Proxy Statement:
Name of Director
William H. Rastetter, Ph.D. (1) ...............................................................
George J. Morrow (2)(3) .........................................................................
Leslie V. Norwalk (3)..............................................................................
Christine A. Poon (3)(4) ..........................................................................
Age
75
72
58
71
Position in the Company
Chairman of the Board
Director
Director
Director
Director Since
2010
2015
2019
2023
Directors Continuing in Offiff ce
The Class II and III directors will remain in officff e after the 2024 Annual Meeting of Stockholders. The names and certain
the directors whose terms of offiff ce continue afteff
r the Annual Meeting are set forff
th below:
Age
66
73
54
62
49
75
Position in the Company
Chief Executive Officff er and Director
Director
Director
Director
Director
Director
Director Since
2008
1993
2021
1998
2020
1999
a
other current information about
Name of Director
Kevin C. Gorman, Ph.D. .........................................................................
Gary A. Lyons (1) ...................................................................................
Johanna Mercier (3) ................................................................................
Richard F. Pops (1)(2).............................................................................
Shalini Sharp (2)(4).................................................................................
Stephen A. Sherwin, M.D. (1)(4) ............................................................
(1)
(2)
(3)
(4)
Member of the Science and Medical Technology Committee.
Member of the Compensation Committee.
Member of the Nominating / Corporate Governance Committee.
Member of the Audit Committee.
22
Vote Required
The nominees receiving the affirmative vote of a plurality of the shares represented in person or by proxy at the 2024 Annual
Meeting of Stockholders and entitled to vote on the election of directors will be elected to the Board of Directors. If a nominee
receives a greater number of votes “withheld” than votes “forff ” such election, the nominee shall tender his or her resignation to the
Board of Directors in accordance with our director resignation policy. The Nominating / Corporate Governance Committee will
consider all of the relevant factors and recommend to the Board of Directors whether to accept or reject the resignation. The Board of
Directors will act on the Nominating / Corporate Governance Committee's recommendation within 90 days of the annual meeting.
Following the Board’s decision on the Nominating / Corporate Governance Committee’s recommendation, the Company will publicly
disclose the Board’s decision whether to accept the resignation as tendered in a Form 8-K fileff d with the SEC.
Votes withheld from any director are counted for purpos
r
es of determining the presence or absence of a quorumr
, but have no
other legal effeff ct under Delaware law.
the Company’s Class I nominees
. If any of the Company’s nominees is unabla e or declines to serve as a director at the time of the Annual Meeting, the
Unless otherwise instrucr
named above
a
proxies will be voted for any nominee who is designated by the present Board of Directors to fillff
any of the Company’s nominees will be unabla e or will decline to serve as a director. The Board of Directors unanimously
recommends that stockholders vote “FOR” the Class I nominees named above.
ted, the proxy holders will vote the proxies received by them forff
the vacancy. It is not expected that
23
PROPOSAL TWO: ADVISORY VOTE ON
COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS
General
At the 2023 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 99% of the stockholder votes cast at the 2023 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 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 Compensation Committee in establa ishing the Company’s compensation policy forff
as well as all other employees is to:
executive officff ers
•
•
•
•
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 offeff
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 forff
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.
ring compensation that compares favff orably to other employers who
stockholders; and
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 92% for each of the 2021, 2022 and 2023 Annual Meetings of Stockholders. The
Compensation Committee and our Board of Directors believe that this level of appr
indicative of our stockholders’ strong suppor
executive compensation by the Compensation Committee and the Board of Directors.
t of our compensation philosophy and goals as well as the overall administration of
oval of our executive compensation program is
u
a
You are being asked to approve on an advisory basis, the compensation paid to the Company’s Named Executive Offiff cers as
th in the Compensation Discussion and Analysis, Summary Crr
set forff
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.
ompensation Table and related notes and narrative set forth herein.
Vote Required
The say-on-pay vote is advisory and therefore not binding on the Company, the Compensation 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 futff urt e 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 affiff rmative vote of the majoa rity
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 Offiff cers compensation.
24
PROPOSAL THREE: APPROVAL OF AN AMENDMENT TO THE 2020 EQUITY INCENTIVE PLAN
We are asking our stockholders to approve an amendment to the Neurocrine Biosciences, Inc. 2020 Equity Incentive Plan
(the “2020 Plan”) at the Annual Meeting. We refer to such amendment of the 2020 Plan in this Proxy Statement as the “Amended
2020 Plan”.
In this Proposal Three, we are seeking stockholder appr
a
oval of the Amended 2020 Plan to make the folff
lowing material
changes froff m the 2020 Plan:
•
•
increase the aggregate number of shares of our common stock that may be issued under the Amended 2020 Plan by
3,635,000 shares, subject to adjud stment for certain changes in our capitalization; and
increase the aggregate maximum number of shares of our common stock that may be issued pursuant to the exercise of
incentive stock options under the Amended 2020 Plan by 3,635,000 shares (for a total of 34,135,000 shares), subju ect to
adjud stment for certain changes in our capitalization.
If this Proposal Three is appr
oved by our stockholders, the Amended 2020 Plan will become effeff ctive as of the date of the
Annual Meeting. In the event that our stockholders do not approve this Proposal Three, the Amended 2020 Plan will not become
effeff ctive and the 2020 Plan will continue to be effeff ctive in accordance with its terms.
a
Why We Are Asking Our Stockholders to Approve the Amended 2020 Plan
We are seeking stockholder appr
a
oval of the Amended 2020 Plan to increase the number of shares availabla e forff
the grant of
stock options, restricted stock unit awards and other awards to our employees, directors and consultants, which will enable us to have a
competitive equity incentive program to compete with our peer group for key talent.
Approval of the Amended 2020 Plan by our stockholders will allow us to continue to grant stock options, restricted stock unit
awards and other awards at levels determined appropriate by the Board of Directors or Compensation Committee. The Amended 2020
Plan will also allow us to continue to utilize a broad array of equity incentives in order to secure and retain the services of our
employees, directors and consultants, and to provide long-term incentives that align the interests of our employees, directors and
consultants with the interests of our stockholders.
Requested Shares
If this Proposal Three is appr
a
oved by our stockholders, then subject to adjud stment for certain changes in our capitalization, an
additional 3,635,000 shares of our common stock will be availabla e forff
issuance under the Amended 2020 Plan.
Stockholder Approval
If this Proposal Three is appr
a
oved by our stockholders, the Amended 2020 Plan will become effeff ctive as of May 22, 2024. In
the event that our stockholders do not approve this Proposal Three, the Amended 2020 Plan will not become effeff ctive and the 2020
Plan will continue in its current form.
Why You Should Vote to Approve the Amended 2020 Plan
Equityii Awards Add
yh
re an Imporm tant Part of Our ComCC pem nsatiott n PhiPP loii sopho
The Board of Directors believes that the grant of equity awards is a key element underlying our ability to attract, retain and
highly trained and experienced individuals
motivate our employees, directors and consultants because of the strong competition forff
among biopharmaceutical companies. Therefore, the Board of Directors believes that the Amended 2020 Plan is in the best interests of
our business and our stockholders and unanimously recommends a vote in favff or of this Proposal Three.
The Amended 2020 Plan will allow us to continue to utilize equity awards as long-term incentives to secure and retain the
services of our employees, directors and consultants, consistent with our compensation philosophy and common compensation
practice forff
our industry.rr To date, equity awards have been a key aspect of our program to attract and retain key employees, directors
and consultants. We believe the use of equity awards strongly aligns the interests of our employees with those of our stockholders by
placing a considerable proportion of our employees’ total compensation “at risk” because it is contingent on the appr
eciation in value
of our common stock. In addition, we believe equity awards encourage employee ownership of our common stock and promote
retention through the reward of long-term Company performance.
a
25
We Carefue
lly Managea
the UseUU of Equityii Awards add
nd Diluii
tion is Reasonablell
Our compensation philosophy reflects broad-based eligibility for equity awards, and we grant awards to substantially all of our
employees. However, we recognize that equity awards dilute existing stockholders, and, thereforff e, we are mindfulff
manage the growth of our equity compensation program. We are committed to effectively monitoring our equity compensation share
reserve, including our “burn rate,” to ensure that we maximize stockholders’ value by granting the appropriate number of equity
awards necessary to attract, reward, and retain employees, directors and consultants.
to responsibly
The folff
lowing tabla e provides detailed inforff mation regarding our burn rate and the activity related to our equity incentive plans
for 2023, 2022 and 2021.
Total number of shares of common stock subju ect to stock options granted
Total number of shares of common stock subju ect to full value awards granted
Weighted-average number of shares of common stock outstanding
Burn Rate (1)
2023
1,900,000
1,300,000
97,700,000
3.28%
2022
2,200,000
1,400,000
95,800,000
3.76%
2021
1,800,000
1,400,000
94,600,000
3.38%
(1)
Burn Rate is calculated as (shares subju ect to stock options granted + shares subju ect to full value awards granted)/weighted average common stock outstanding.
Overharr ng
The folff
lowing tabla e provides certain information regarding our use of equity awards as of the Record Date.
Total number of shares of common stock subju ect to outstanding stock options
Weighted-average exercise price of outstanding stock options
Weighted-average remaining term of outstanding stock options
Total number of shares of common stock subju ect to outstanding full value awards
Total number of shares of common stock availabla e forff
Total number of shares of common stock availabla e forff
Total number of shares of common stock subju ect to outstanding stock options and outstanding full value awards
Total number of shares of common stock outstanding
Per-share closing price of common stock as reported on Nasdaq Global Select Market
grant under the 2020 Plan (1)
grant under the Neurocrine Biosciences, Inc. Inducement Plan (1)
As of
Record Date
10,131,428
$94.12
6.81 years
2,712,755
7,494,995
55,182
12,844,183
100,580,497
$140.25
(1)
As of the Record Date, there were no shares of common stock availabla e forff
Neurocrine Biosciences, Inc. Inducement Plan.
grant under any of our equity incentive plans, other than the 2020 Plan and the
The SizSS e of Oo
ur Share Reserve IncII
rease Request Is Reasonablell
If this Proposal Three is appr
will have 3,635,000 new shares availabla e forff
returning to stockholders for additional shares in 2025.
a
oved by our stockholders, then subject to adjud stment for certain changes in our capitalization, we
ent any unforff eseen circumstances, we anticipate
grant after the Annual Meeting, and absa
26
The Amendeddd
2020 Planll Combines Compensation and Governance Best Practices
The Amended 2020 Plan includes provisions that are designed to protect our stockholders’ interests and to refleff ct corporate
governance best practices, including:
•
•
•
•
•
•
•
a
a
a
r appr
the next
oval is required forff
eciation rightgg stt . All stock options and stock appreciation rights granted under
r market value of our common stock
additional shares. The Amended 2020 Plan does not contain an annual “evergreen”
oval is required to issue
service as a non-employee director with respect to any period commencing on the date of the annual
a particular year and ending on the date of the annual stockholders meeting forff
Stockholdel
provision. The Amended 2020 Plan authorizes a fixff ed number of shares, so that stockholder appr
any additional shares.
No discii ounted stock opto ions or stock appr
the Amended 2020 Plan must have an exercise price equal to or greater than the faiff
on the date the stock option or stock appreciation right is granted.
Limit on non-emplm oyee director compensation. The aggregate value of all compensation granted or paid by us to any
individual forff
stockholders meeting forff
subsu equent year (such period, the “annual period”), including awards granted under the Amended 2020 Plan and cash
fees paid to such non-employee director, will not exceed $1,250,000 in total value. In addition, the aggregate value of
any equity award(s) granted by us to any individual forff
service as a non-employee director upon or in connection with
ntment to the Board of Directors will not exceed $2,000,000 in total value (such that the
a
his or her initial election or appoi
aggregate compensation granted or paid by us to any individual forff
service as a non-employee director with respect to an
annual period in which such individual is firff st appointed or elected to the Board of Directors will not exceed $3,250,000
es of these limitations, the value of any equity awards is calculated based on the grant date fair
in total value). For purpos
financial reporting purpos
value of such awards forff
Awards subject to forff
fer iture/cl// awback. Awards granted under the Amended 2020 Plan will be subju ect to recoupment in
accordance with the Neurocrine Biosciences, Inc. Incentive Compensation Recoupment Policy and any other clawback
policy that the Company adopts. In addition, the Board may impose other clawback, recovery or recoupment provisions
in an award agreement, including a reacquisition right in respect of previously acquired shares or other cash or property
upon the occurrence of cause.
Restrit ctions on dividends. The Amended 2020 Plan provides that dividends or dividend equivalents may not be paid or
credited to any awards granted under the Amended 2020 Plan.
No liberal change in controt
l defdd inff
definition. A change in control transaction must actuat
Amended 2020 Plan to be triggered.
No liberal share counting provisiii ons. The following shares will not become availabla e again for issuance under the
Amended 2020 Plan: (i) any shares that are reacquired or withheld (or not issued) by us to satisfy the exercise or
purchase price of an award; (ii) any shares that are reacquired or withheld (or not issued) by us to satisfy a tax
withholding obligation in connection with an award; (iii) any shares repurchased by us on the open market with the
proceeds of the exercise or purchase price of an award; and (iv) in the event that a stock appr
shares, the gross number of shares subject to such award.
ition in the Amended 2020 Plan is not a “liberal”
the change in control provisions in the
ition. The change in control definff
eciation right is settled in
lly occur in order forff
es.
a
rr
rr
• Material amendments require stockholdel
a
r appr
oval. Consistent with Nasdaq rules, the Amended 2020 Plan requires
oval of any material revisions to the Amended 2020 Plan. In addition, certain other amendments to the
stockholder appr
Amended 2020 Plan require stockholder appr
a
a
oval.
Vote Required
At the Annual Meeting, the stockholders are being asked to appr
a
ove an amendment of the Company’s 2020 Equity Incentive
Plan. The affiff rmative 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 appr
ove the amendment of the Company’s 2020 Equity Incentive Plan. The Board of
Directors unanimously recommends voting “FOR” the approval of an amendment of the Company’s 2020 Equity Incentive
Plan.
a
Summary of the Amended 2020 Plan
The material feaff
lowing description of the Amended 2020 Plan is
a summary only and is qualifieff d in its entirety by referff ence to the complete text of the Amended 2020 Plan. Stockholders are urged to
read the actuat
l text of the Amended 2020 Plan in its entirety, which is attached hereto as Appendix A.
tures of the Amended 2020 Plan are described below. The folff
Purpose
The Amended 2020 Plan is designed to secure and retain the services of our employees, non-employee directors and
the success of the Company and our affiff liates, and to
consultants, to provide incentives for such persons to exert maximum efforts forff
provide a means by which such persons may be given an opportunity to benefit froff m increases in the value of our common stock. The
Amended 2020 Plan is also designed to align employees’ interests with stockholder interests.
27
Typeyy
s of Ao wardsdd
The terms of the Amended 2020 Plan provide for the grant of incentive stock options, nonstatutory stock options, stock
appreciation rights, restricted stock awards, restricted stock unit awards, performance awards, and other awards.
Shares Available f
orff Awards
ll
Subju ect to adjud stment for certain changes in our capia talization, the aggregate number of shares of our common stock that may
the grant of
lowing the
be issued under the Amended 2020 Plan will not exceed the sum of: (ff
i) the number of shares that remained availabla e forff
new awards under the Neurocrine Biosciences, Inc. 2011 Equity Incentive Plan (the “2011 Plan”) as of immediately folff
effeff ctive date of the 2020 Plan; (ii) 3,300,000 shares that were approved at our 2020 annual meeting of stockholders; (iii) an additional
5,900,000 shares that were approved at our 2022 annual meeting of stockholders; (iv) an additional 6,600,000 shares that were
approved at our 2023 annual meeting of stockholders; (v) an additional 3,635,000 shares that are subject to approval by our
stockholders under this Proposal Three; and (vi) the Prior Plan’s Returt ning Shares (as definff ed below), as such shares become availabla e
from time to time.
The “Prior Plan’s Returt ning Shares” are shares of our common stock subject to outstanding awards granted under the 2011
Plan (referred to as the “Prior Plan” in this Proposal Three) that following the effective date of the 2020 Plan: (i) are not issued
because such award or any portion thereof expires or otherwise terminates without all of the shares covered by such award having
been issued; (ii) are not issued because such award or any portion thereof is settled in cash; or (iii) are forff
by us because of the faiff
lure to meet a contingency or condition required forff
the vesting of such shares.
feited back to or repurchased
The folff
lowing actions will not result in an issuance of shares of our common stock under the Amended 2020 Plan and
accordingly will not reduce the number of shares of our common stock availabla e forff
expiration or termination of any portion of an award granted under the Amended 2020 Plan without the shares covered by such portion
of the award having been issued; or (ii) the settlement of any portion of an award granted under the Amended 2020 Plan in cash.
issuance under the Amended 2020 Plan: (i) the
If any shares of our common stock issued pursuant to an award granted under the Amended 2020 Plan are forff
lure to meet a contingency or condition required forff
repurchased by us because of the faiff
the vesting of such shares, then such shares
will become availabla e again for issuance under the Amended 2020 Plan (such shares, the “Amended 2020 Plan Returning Shares”).
feited back to or
The folff
lowing shares of our common stock will not become availabla e again for issuance under the Amended 2020 Plan: (i) any
shares that are reacquired or withheld (or not issued) by us to satisfy the exercise or purchase price of an award granted under the
Amended 2020 Plan or the Prior Plan (including any shares subject to such award that are not delivered because such award is
exercised through a reducd tion of shares subju ect to such award); (ii) any shares that are reacquired or withheld (or not issued) by us to
satisfy a tax withholding obligation in connection with an award granted under the Amended 2020 Plan or the Prior Plan; (iii) any
shares repurchased by us on the open market with the proceeds of the exercise or purchase price of an award granted under the
Amended 2020 Plan or the Prior Plan; and (iv) in the event that a stock appreciation right granted under the Amended 2020 Plan or the
Prior Plan is settled in shares, the gross number of shares subject to such award.
The number of shares of our common stock available for issuance under the Amended 2020 Plan will be reduced by: (i) one
share forff
share issued pursuant to a full value award granted under the Amended 2020 Plan on or afteff
each share issued pursuant to an appr
eciation award granted under the Amended 2020 Plan; and (ii) 2.13 shares for each
r May 18, 2022.
a
The number of shares of our common stock available for issuance under the Amended 2020 Plan will be increased by: (i) one
each Prior Plan’s Returt ning Share or Amended 2020 Plan Returning Share subju ect to an appreciation award; and (ii) 2.13
share forff
shares for each Prior Plan’s Returt ning Share or Amended 2020 Plan Returning Share subju ect to a fulff
Amended 2020 Plan on or afteff
l value award that returt ns to the
r May 18, 2022.
For purpos
r
es of this Proposal Three, (i) an “appreciation award” is a stock option or a stock appr
a
eciation right with respect to
which the exercise or strike price is at least 100% of the faiff
value award” is a stock award that is not an appreciation award.
r market value of our common stock on the date of grant and (ii) a “full
Eligll
ibilitytt
Under the terms of the Amended 2020 Plan, all of our (including our affiff liates’) employees, non-employee directors and
consultants are eligible to participate in the Amended 2020 Plan and may receive all types of awards other than incentive stock
options. Incentive stock options may be granted under the Amended 2020 Plan only to our (including our affiff liates’) employees.
Generally, we do not provide equity grants to consultants.
As of the Record Date, we (including our affiff liates) had approximately 1,400 employees, nine non-employee directors, and
approximately 24 consultants.
28
Admindd
istratiott n
The Amended 2020 Plan will be administered by our Board of Directors, which may in turn delegate some or all of the
administration of the Amended 2020 Plan to a committee or committees composed of members of the Board of Directors. Our Board
of Directors has delegated concurrent authority to administer the Amended 2020 Plan to our Compensation Committee, but may, at
any time, revest in itself some or all of the power delegated to our Compensation Committee. Our Board of Directors and
Compensation Committee are each considered to be a Plan Administrator for purpos
es of this Proposal Three.
r
Subju ect to the terms of the Amended 2020 Plan, the Plan Administrator may determine the recipients, the types of awards to be
granted, the number of shares of our common stock subju ect to or the cash value of awards, and the terms and conditions of awards
granted under the Amended 2020 Plan, including the period of their exercisabia lity and vesting. The Plan Administrator also has the
authority to provide for accelerated exercisability and vesting of awards. Subject to the limitations set forff
Administrator also determines the faiff
appreciation rights granted under the Amended 2020 Plan.
r market value applicable to an award and the exercise or strike price of stock options and stock
th below, the Plan
The Plan Administrator may also delegate to one or more executive officers the authority to designate employees who are not
executive officers to be recipients of certain awards and the number of shares of our common stock subju ect to such awards. Under any
such delegation, the Plan Administrator will specify the total number of shares of our common stock that may be subject to the awards
granted by such executive officer. The executive officer may not grant an award to himself or herself.ff
Repree
icing; Cancellall
tion and Re-GraGG nt of Stoctt k OptOO iott ns or Stoctt k ApprA
eciatiott n Rightgg stt
Under the Amended 2020 Plan, except in connection with a corporate transaction or a change in control or an adjustment forff
certain changes in our capia talization, or unless our stockholders have approved such an action within 12 months prior to such an event,
the Plan Administrator does not have the authority to reprice any outstanding stock option or stock appreciation right by (1) reducd ing
the exercise or strike price of the stock option or stock appreciation right or (2) canceling any outstanding stock option or stock
appreciation right that has an exercise or strike price greater than the then-current fair market value of our common stock in exchange
for cash or other awards.
Dividends add
nd Dividend Equivalentstt
The Amended 2020 Plan provides that dividends or dividend equivalents may not be paid or credited to any awards granted
under the Amended 2020 Plan.
ii
Limit
on Non-Em-
plm oyll
ee Direii ctortt Compensation
The aggregate value of all compensation granted or paid by us to any individual forff
service as a non-employee director with
the next subsequent year (such period, the “annual period”), including awards granted under the
respect to any period commencing on the date of the annual stockholders meeting forff
the annual stockholders meeting forff
Amended 2020 Plan and cash fees
aggregate value of any equity award(s) granted by us to any individual forff
with his or her initial election or appoi
a
aggregate compensation granted or paid by us to any individual forff
period in which such individual is firff st appointed or elected to the Board of Directors will not exceed $3,250,000 in total value). For
purpos
es of these limitations, the value of any equity awards is calculated based on the grant date fair value of such awards for
rr
financial reporting purpos
paid to such non-employee director, will not exceed $1,250,000 in total value. In addition, the
ntment to the Board of Directors will not exceed $2,000,000 in total value (such that the
service as a non-employee director with respect to an annual
service as a non-employee director upon or in connection
a particular year and ending on the date of
es.
ff
rr
Stoctt k OptOO iott ns
Stock options may be granted under the Amended 2020 Plan pursuant to stock option agreements. The Amended 2020 Plan
s incentive stock options, or ISOs, and nonstatutory stock options, or
permits the grant of stock options that are intended to qualify aff
NSOs.
The exercise price of a stock option granted under the Amended 2020 Plan may not be less than 100% of the faiff
r market value
of the common stock subju ect to the stock option on the date of grant and, in some cases (see “Limitations on Incentive Stock Options”
below), may not be less than 110% of such fair market value.
29
The term of stock options granted under the Amended 2020 Plan may not exceed ten years froff m the date of grant and, in some
cases (see “Limitations on Incentive Stock Options” below), may not exceed five years froff m the date of grant. Except as otherwise
provided in a participant’s stock option agreement or other written agreement with us or one of our affiff liates, if a participant’s service
relationship with us or any of our affiff liates (referred to in this Proposal Three as “continuous service”) terminates (other than for cause
(as definff ed in the Amended 2020 Plan) or the participant’s death or disability (as definff ed in the Amended 2020 Plan)), the participant
may exercise any vested stock options for up tu
o three months following the participant’s termination of continuous service. Except as
otherwise provided in a participant’s stock option agreement or other written agreement with us or one of our affiff liates, if a
participant’s continuous service terminates due to the participant’s disability, the participant may exercise any vested stock options for
up to 12 months following the participant’s termination dued
participant’s stock option agreement or other written agreement with us or one of our affiff liates, if a participant’s continuous service
terminates due to the participant’s death (or the participant dies within a specified period following termination of continuous service),
the participant’s beneficff
explicitly provided otherwise in a participant’s stock option agreement or other written agreement with us or one of our affiff liates, if a
participant’s continuous service is terminated for cause, all stock options held by the participant will terminate upon
the participant’s
termination of continuous service and the participant will be prohibited froff m exercising any stock option froff m and afteff
termination date. Except as otherwise provided in a participant’s stock option agreement or other written agreement with us or one of
our affiff liates, the term of a stock option may be extended if a participant’s continuous service terminates for any reason other than forff
cause and, at any time during the applicable post-termination exercise period, the exercise of the stock option would be prohibited by
applicable laws or the sale of any common stock received upon
however, may a stock option be exercised afteff
such exercise would violate our insider trading policy. In no event,
to the participant’s disability. Except as otherwise provided in a
o 18 months following the participant’s death. Except as
iary may exercise any vested stock options for up tu
r its original expiration date.
r such
u
u
In addition, the current form of stock option agreement forff
employees (other than Dr. Gorman) under the Amended 2020 Plan
provides that if an employee’s continuous service terminates dued
option agreement and described below), the employee’s stock option will become fully vested as of the date of such retirement, and
the employee may exercise such stock option forff
“retirement” generally means a termination of an employee’s continuous service upon
least fivff e years of continuous service, provided that the employee complies with any other requirements in the Company’s then-
current policy regarding retirement. The current form of stock option agreement forff Dr. Gorman under the Amended 2020 Plan does
.
not provide for any retirement-related benefitsff
es of the forff egoing,
r the employee has reached age 60 with at
to the employee’s retirement (as defined in the employee’s stock
up to 12 months following such retirement. For purpos
or afteff
u
r
Acceptabla e forff ms of consideration forff
the purchase of our common stock pursuant to the exercise of a stock option under the
Amended 2020 Plan will be determined by the Plan Administrator and may include payment: (i) by cash, check, bank draft or money
order payable to us; (ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board; (iii) by
delivery t
r attestation); (iv) by a net exercise arrangement (for NSOs
l delivery orr
only); or (v) in other legal consideration appr
o us of shares of our common stock (either by actuat
oved by the Plan Administrator.
a
rr
Stock options granted under the Amended 2020 Plan may become exercisable in cumulative increments, or “vest,” as
determined by the Plan Administrator at the rate specified in the stock option agreement. Shares covered by diffeff
granted under the Amended 2020 Plan may be subject to different vesting scheduld es as the Plan Administrator may determine.
rent stock options
The Plan Administrator may impose limitations on the transferabia lity of stock options granted under the Amended 2020 Plan
a stock option granted under the Amended 2020 Plan other than by will or
in its discretion. Generally, a participant may not transferff
the laws of descent and distribution or, subju ect to approval by the Plan Administrator, pursuant to a domestic relations order. However,
the Plan Administrator may permit transfer of a stock option in a manner that is not prohibited by appl
Options may not be transferff
red to a third party financial institutt
icable tax and securities laws.
ion forff
value.
a
Limita
ii
tions on Incentivtt e StoSS ck Options
In accordance with current federal tax laws, the aggregate faiff
r market value, determined at the time of grant, of shares of our
common stock with respect to ISOs that are exercisabla e forff
stock plans may not exceed $100,000. The stock options or portions of stock options that exceed this limit or otherwise faiff
as ISOs are treated as NSOs. No ISO may be granted to any person who, at the time of grant, owns or is deemed to own stock
possessing more than 10% of our total combined voting power unless the following conditions are satisfied:
the firff st time by a participant durd ing any calendar year under all of our
l to qualifyff
•
•
the exercise price of the ISO must be at least 110% of the faiff
the date of grant; and
the term of the ISO must not exceed five years froff m the date of grant.
r market value of the common stock subju ect to the ISO on
Subju ect to adjud stment for certain changes in our capia talization, the aggregate maximum number of shares of our common stock
that may be issued pursuant to the exercise of ISOs under the Amended 2020 Plan is 34,135,000 shares.
30
Stoctt k ApprA
eciatiott n Rightgg stt
Stock appr
a
eciation rights may be granted under the Amended 2020 Plan pursuant to stock appreciation right agreements. Each
a
eciation right is denominated in common stock share equivalents. The strike price of each stock appr
stock appr
r market value of the common stock subju ect to
determined by the Plan Administrator, but will in no event be less than 100% of the faiff
the stock appreciation right on the date of grant. The term of stock appr
eciation rights granted under the Amended 2020 Plan may not
a
exceed ten years from the date of grant. The Plan Administrator may also impose restrictions or conditions upon the vesting of stock
appreciation rights that it deems appropriate. The appreciation distribution payable upon exercise of a stock appreciation right may be
paid in shares of our common stock, in cash, in a combination of cash and stock, or in any other form of consideration determined by
the Plan Administrator and set forth in the stock appr
conditions upon termination of continuous service and restrictions on transferff
as stock options under the Amended 2020 Plan.
eciation rights will be subju ect to the same
eciation right agreement. Stock appr
eciation right will be
a
a
a
Restritt ctedtt
Stoctt k Awardsdd
Restricted stock awards may be granted under the Amended 2020 Plan pursuant to restricted stock award agreements. A
cash, check, bank draft or money order payabla e to us, the participant’s
restricted stock award may be granted in consideration forff
services performed for us, or any other form of legal consideration acceptabla e to the Plan Administrator. Shares of our common stock
acquired under a restricted stock award may be subject to forfeiff
ture to or repurchase by us in accordance with a vesting scheduld e to be
determined by the Plan Administrator. Rights to acquire shares of our common stock under a restricted stock award may be transferred
only uponu
continuous service forff
termination date may be forfeited to or repurchased by us.
such terms and conditions as are set forth in the restricted stock award agreement. Upon a participant’s termination of
any reason, any shares subject to restricted stock awards held by the participant that have not vested as of such
Restritt ctedtt
Stoctt k UniUU t Aii wardsdd
Restricted stock unit awards may be granted under the Amended 2020 Plan pursuant to restricted stock unit award agreements.
Payment of any purchase price may be made in any forff m of legal consideration acceptabla e to the Plan Administrator. A restricted
stock unit award may be settled by the delivery orr
other forff m of consideration determined by the Plan Administrator and set forth in the restricted stock unit award agreement. Restricted
stock unit awards may be subju ect to vesting in accordance with a vesting scheduld e to be determined by the Plan Administrator. Except
as otherwise provided in a participant’s restricted stock unit award agreement or other written agreement with us, restricted stock units
that have not vested will be forfeited upon
f shares of our common stock, in cash, in a combination of cash and stock, or in any
the participant’s termination of continuous service forff
any reason.
u
Perforff marr
nce Awardsdd
The Amended 2020 Plan allows us to grant performance awards. A performance award is an award that may vest or may be
exercised, or that may become earned and paid, contingent upon the attainment of certain performance goals during a performance
period. A performance award may require the completion of a specifieff d period of continuous service. The length of any performance
period, the performance goals to be achieved durd ing the performance period, and the measure of whether and to what degree such
performance goals have been attained will be determined by the Plan Administrator in its discretion. In addition, to the extent
permitted by appl
payment of performance awards.
icable award agreement, the Plan Administrator may determine that cash may be used in
icable law and the appl
a
a
Performance goals under the Amended 2020 Plan will be based on any one or more of the folff
lowing performance criteria:
(1) earnings (including earnings per share and net earnings, in either case beforff e or after any or all of: iff nterest, taxes, depreciation and
amortization, legal settlements or other income (expense), or stock-based compensation, other non-cash expenses and changes in
deferred revenue); (2) total stockholder returt n; (3) returt n on equity or average stockholder’s equity; (4) return on assets, investment, or
capital employed; (5) stock price; (6) margin (including gross margin); (7) income (beforff e or after taxes); (8) operating income;
(9) operating income after taxes; (10) pre-tax profit; (11) operating cash floff w; (12) sales, prescriptions, or revenue targets;
(13) increases in revenue or product revenue; (14) expenses and cost reducd tion goals; (15) improvement in or attainment of working
capital levels; (16) economic value added (or an equivalent metric); (17) market share; (18) cash floff w; (19) cash floff w per share;
(20) cash burn; (21) share price performance; (22) debt reduction; (23) implementation or completion of projeo cts or processes
(including, without limitation, discovery of a pre-clinical drugr
clinical trial initiation, clinical trial enrollment and dates, clinical trial results, regulatory f
acceptances, regulatory orr
plans, compliance programs or education campaigns); (24) customer satisfaction; (25) stockholders’ equity; (26) capital expenditures;
(27) debt levels; (28) financings; (29) operating profit or net operating profit; (30) workforce diversity; (31) growth of net income or
operating income; (32) billings; (33) employee hiring; (34) funds from operations; (35) budget management; (36) strategic
partnerships or transactions (including acquisitions, joint venturt es or licensing transactions); (37) engagement of thought leaders and
patient advocacy groups; (38) enhancement of intellectuat
l property portfolff
(39) litigation preparation and management; and (40) any other measure of performance selected by the Plan Administrator.
candidate to enter a clinical trial,
rr
ovals, presentation of studies and launch of commercial
a
r advisory committee interactions, regulatory arr
ppr
candidate, recommendation of a drugrr
ications and granting of patents;
g submissions, regulatory f
g of patent appl
io, filinff
g
ilinff
ilinff
a
rr
31
Performance goals may be based on a Company-wide basis, with respect to one or more business units, divisions, affiliates or
th the performance goals at the time the performance goals are
non-U.S. dollar denominated performance goals; (3) to exclude the effects of changes to
business segments, and in either absa olute terms or relative to the performance of one or more comparable companies or the
performance of one or more relevant indices. Unless specified otherwise by the Plan Administrator (i) in the award agreement at the
time the award is granted or (ii) in such other document setting forff
establa ished, the Plan Administrator will appropriately make adjud stments in the method of calculating the attainment of the
performance goals for a performance period as follows: (1) to exclude restructurt
exchange rate effeff cts, as applicable, forff
generally accepted accounting principles; (4) to exclude the effects of any statutt ory arr
the effects of items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles;
(6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by us achieved
performance objectives at targeted levels durd ing the balance of a performance period following such divestiture; (8) to exclude the
effeff ct of any change in the outstanding shares of our common stock by reason of any stock dividend or split, stock repurchase,
rate change,
reorganization, recapitalization, merger, consolidation, spin-off, cff ombination or exchange of shares or other similar corpor
or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock based compensation
and the award of bonuses under our bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or
divestitures that are required to be expensed under generally accepted accounting principles; (11) to exclude the goodwill and
intangible asset impairment charges that are required to be recorded under generally accepted accounting principles; and (12) to
exclude the effects of the timing of acceptance forff
ody.
any other regulatory brr
review and/or approval of submissions to the U.S. Food and Drug Administration or
ing and/or other nonrecurring charges; (2) to exclude
ate tax rates; (5) to exclude
djustments to corpor
rr
In addition, the Plan Administrator retains the discretion to define the manner of calculating the performance criteria it selects
to use forff
performance goal.
a performance period and to reducd e or eliminate the compensation or economic benefit dued
upon the attainment of any
Othett
r Awardsdd
Other forff ms of awards valued in whole or in part by referff ence to, or otherwise based on, our common stock may be granted
either alone or in addition to other awards under the Amended 2020 Plan. Subject to the terms of the Amended 2020 Plan, the Plan
Administrator will have sole and complete authority to determine the persons to whom and the time or times at which such other
awards will be granted, the number of shares of our common stock to be granted and all other terms and conditions of such other
awards.
Clawll
back PolPP icll yc
Awards granted under the Amended 2020 Plan will be subju ect to recoupment in accordance with the Neurocrine Biosciences,
Inc. Incentive Compensation Recoupment Policy and any other clawback policy that the Company adopts. In addition, the Board may
impose other clawback, recovery or recoupment provisions in an award agreement, including a reacquisition right in respect of
previously acquired shares or other cash or property uponu
the occurrence of cause.
Changes to Ctt
apiCC taii
l StrSS ucture
In the event of certain capitalization adjud stments, the Plan Administrator will appropriately and proportionately adjud st: (i) the
class(es) and maximum number of shares of our common stock subject to the Amended 2020 Plan; (ii) the class(es) and maximum
number of shares of our common stock that may be issued pursuant to the exercise of ISOs; and (iii) the class(es) and number of
shares of our common stock and the exercise, strike or purchase price per share of our common stock subju ect to outstanding awards.
Corporate Ttt
raTT nsaction and Change in Contrott
l
The folff
lowing applies to each outstanding award under the Amended 2020 Plan in the event of a corpor
r
ate transaction (as
defined in the Amended 2020 Plan and described below) or a change in control (as defined in the Amended 2020 Plan and described
below), unless provided otherwise in the appl
Company or an affiliate, or in any director compensation policy of the Company. For purpos
“Transaction” will mean such corporate transaction or change in control.
icable award agreement, in any other written agreement between a participant and the
r
es of this Proposal Three, the term
a
32
In the event of a Transaction, any awards outstanding under the Amended 2020 Plan may be assumed, continued or substitutt ed
for by any surviving or acquiring corporation (or its parent company) (such entity, the “acquiring entity”), and any reacquisition or
repurchase rights held by us with respect to the award may be assigned to the acquiring entity. If the acquiring entity does not assume,
continue or subsu titute for such awards, then (i) with respect to any such awards that are held by participants who are employees or
non-employee directors and, in each case, whose continuous service has not terminated prior to the effeff ctive time of the Transaction
(such participants, the “current employee and director participants”), the vesting (and exercisability, if appl
be accelerated in full (and with respect to any such awards that are subju ect to performance-based vesting conditions or requirements,
vesting will be deemed to be satisfieff d at the greater of (x) the target level of performance or (y) the actuat
measured in accordance with the appl
icable performance goals as of the date of the Transaction) to a date prior to the effective time of
the Transaction (contingent upon the effectiveness of the Transaction), and such awards will terminate if not exercised (if applicable)
at or prior to the effeff ctive time of the Transaction, and any reacquisition or repurchase rights held by us with respect to such awards
will lapsa e (contingent upon the effectiveness of the Transaction), and (ii) any such awards that are held by persons other than current
employee and director participants will terminate if not exercised (if applicable) at or prior to the effective time of the Transaction,
except that any reacquisition or repurchase rights held by us with respect to such awards will not terminate and may continue to be
exercised notwithstanding the Transaction.
icable) of such awards will
l level of performance
a
a
In the event an award will terminate if not exercised at or prior to the effective time of a Transaction, the Plan Administrator
may provide that the holder of such award may not exercise such award but instead will receive a payment equal in value to the
excess, if any, of (i) the value of the property the participant would have received upon
price payable by such holder in connection with such exercise.
the exercise of the award, over (ii) any exercise
u
Except as otherwise provided in the applicable award agreement, in any other written agreement between a participant and the
u
or within 12 months following the effective time of a Transaction, the vesting (and exercisability, if appl
Company or an affiliate, or in any director compensation policy of the Company, in the event that an employee or director’s
to such employee or director’s death
continuous service is involuntarily terminated without cause (including any such termination dued
or disabia lity) upon
icable) of
any assumed awards (as defined in the Amended 2020 Plan and described below) held by such employee or director as of the date of
such termination will be accelerated in fulff
l
conditions or requirements, vesting will be deemed to be satisfieff d at the greater of (x) the target level of performance or (y) the actuat
level of performance measured in accordance with the appl
icable performance goals as of the date of such termination), effective as of
the date of such termination. For purpos
Amended 2020 Plan that was assumed or continued, or any outstanding similar award that was granted in subsu titution forff
under the Amended 2020 Plan, in each case by the acquiring entity in connection with the appl
es of the forff egoing, an “assumed award” generally means any outstanding award under the
an award
l (and with respect to any such awards that are subju ect to performance-based vesting
icable Transaction.
a
a
a
r
Under the Amended 2020 Plan, a “corpor
r
ate transaction” generally means the consummation of any one or more of the
following events: (1) a sale or other disposition of all or subsu tantially all of our assets; (2) a sale or other disposition of at least 90% of
our outstanding securities; (3) a merger, consolidation or similar transaction where we do not survive the transaction; or (4) a merger,
consolidation or similar transaction where we do survive the transaction but the shares of our common stock outstanding immediately
before such transaction are converted or exchanged into other property by virtue of the transaction.
Under the Amended 2020 Plan, a “change in control” generally means the occurrence of any one or more of the folff
lowing
events: (1) the acquisition by any person, entity or group of our securities representing more than 50% of the combined voting power
of a merger, consolidation, or similar transaction; (2) a merger, consolidation or
of our then outstanding securities, other than by virtuet
similar transaction in which our stockholders immediately beforff e such transaction do not own, directly or indirectly, more than 50% of
the combined voting power of the surviving entity (or the parent of the surviving entity) in substantially the same proportions as their
ownership immediately prior to such transaction; (3) our stockholders approve or our Board of Directors appr
oves our complete
dissolution or liquidation, or our complete dissolution or liquidation otherwise occurs; (4) a sale, lease, exclusive license or other
disposition of all or subsu tantially all of our assets, other than to an entity, more than 50% of the combined voting power of which is
owned by our stockholders in subsu tantially the same proportions as their ownership of our outstanding voting securities immediately
prior to such transaction; or (5) when a majoa rity of our Board of Directors becomes comprised of individuals who were not serving on
our Board of Directors on the date the 2020 Plan was adopted by our Compensation Committee (the “incumbent Board of Directors”),
or whose nomination, appointment, or election was not approved by a majoa rity of the incumbent Board of Directors still in offiff ce.
a
Planll Amendments and TerTT mirr naii
tion
The Plan Administrator will have the authority to amend or terminate the Amended 2020 Plan at any time. However, except as
otherwise provided in the Amended 2020 Plan, no amendment or termination of the Amended 2020 Plan may materially impair a
participant’s rights under his or her outstanding awards without the participant’s consent. We will obtain stockholder appr
amendment to the Amended 2020 Plan as required by appl
Administrator, the Amended 2020 Plan will automatically terminate on March 15, 2030, which is the day beforff e the tenth anniversaryrr
of the date the 2020 Plan was adopted by our Compensation Committee.
oval of any
icable law and listing requirements. Unless terminated sooner by the Plan
a
a
33
U.S. Federal Income Tax Consequences
The folff
lowing is a summary of the principal United States federal income tax consequences to participants and us with respect
to participation in the Amended 2020 Plan. This summary is not intended to be exhaustive and does not discuss the income tax laws of
any local, state or foreign jurisdiction in which a participant may reside. The inforff mation is based upon current federal income tax
rules and thereforff e is subject to change when those rulr es change. Because the tax consequences to any participant may depend on his
or her particular situation, each participant should consult the participant’s tax adviser regarding the fedff
eral, state, local and other tax
consequences of the grant or exercise of an award or the disposition of stock acquired under the Amended 2020 Plan. The Amended
2020 Plan is not qualifieff d under the provisions of Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Internal
Revenue Code”), and is not subju ect to any of the provisions of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”). Our abia lity to realize the benefit of any tax deducd tions described below depends on our generation of taxable income as
well as the requirement of reasonableness and the satisfaction of our tax reporting obligations.
Nonstatutory Stoctt k OptOO iott ns
r
Generally, there is no taxation upon the grant of an NSO if the stock option is granted with an exercise price equal to the faiff
market value of the underlying stock on the grant date. Upon exercise, a participant will recognize ordinary income equal to the
excess, if any, of the faiff
participant is employed by us or one of our affiff liates, that income will be subju ect to withholding taxes. The participant’s tax basis in
those shares will be equal to his or her faiff
r market value on the date of exercise of the stock option, and the participant’s capital gain
holding period for those shares will begin on that date.
r market value of the underlying stock on the date of exercise of the stock option over the exercise price. If the
Subju ect to the requirement of reasonabla eness, the provisions of Section 162(m) of the Internal Revenue Code, and the
satisfaction of a tax reporting obligation, we will generally be entitled to a tax deducd tion equal to the taxabla e ordinary i
by the participant.
rr
ncome realized
Incentive StoSS ck Options
The Amended 2020 Plan provides forff
the grant of stock options that are intended to qualify aff
s “incentive stock options,” as
defined in Section 422 of the Internal Revenue Code. Under the Internal Revenue Code, a participant generally is not subju ect to
ordinary income tax upon
the grant or exercise of an ISO. If the participant holds a share received upon
than two years froff m the date the stock option was granted and more than one year from the date the stock option was exercised, which
is referred to as the required holding period, the diffeff
of that share and the participant’s tax basis in that share will be long-term capital gain or loss.
rence, if any, between the amount realized on a sale or other taxabla e disposition
exercise of an ISO forff more
u
u
If, however, a participant disposes of a share acquired upon
u
exercise of an ISO beforff e the end of the required holding period,
red to as a disqualifyiff ng disposition, the participant generally will recognize ordinary income in the year of the
which is referff
disqualifyiff ng disposition equal to the excess, if any, of the faiff
over the exercise price. However, if the sales proceeds are less than the faiff
stock option, the amount of ordinary income recognized by the participant will not exceed the gain, if any, realized on the sale. If the
amount realized on a disqualifying disposition exceeds the fair market value of the share on the date of exercise of the stock option,
that excess will be short-term or long-term capital gain, depending on whether the holding period for the share exceeds one year.
r market value of the share on the date of exercise of the stock option
r market value of the share on the date of exercise of the
r
For purpos
es of the alternative minimum tax, the amount by which the fair market value of a share of stock acquired upon
u
exercise of an ISO exceeds the exercise price of the stock option generally will be an adjud stment included in the participant’s
alternative minimum taxable income for the year in which the stock option is exercised. If, however, there is a disqualifyiff ng
disposition of the share in the year in which the stock option is exercised, there will be no adjud stment for alternative minimum tax
purpos
es with respect to that share. In computing alternative minimum taxable income, the tax basis of a share acquired uponu
rr
of an ISO is increased by the amount of the adjustment taken into account with respect to that share forff
rr
purpos
es in the year the stock option is exercised.
alternative minimum tax
exercise
We are not allowed a tax deducd tion with respect to the grant or exercise of an ISO or the disposition of a share acquired upon
u
exercise of an ISO after the required holding period. If there is a disqualifyiff ng disposition of a share, however, we will generally be
entitled to a tax deducd tion equal to the taxabla e ordinary i
reasonabla eness, the provisions of Section 162(m) of the Internal Revenue Code, and provided that either the employee includes that
amount in income or we timely satisfy our reporting requirements with respect to that amount.
ncome realized by the participant, subju ect to the requirement of
rr
34
Restritt ctedtt
Stoctt k Awardsdd
Generally, the recipient of a restricted stock award will recognize ordinary income at the time the stock is received equal to the
r market value of the stock received over any amount paid by the recipient in exchange for the stock. If,ff
excess, if any, of the faiff
however, the stock is not vested when it is received (for example, if the employee is required to work forff
have the right to sell the stock), the recipient generally will not recognize income until the stock becomes vested, at which time the
recipient will recognize ordinary income equal to the excess, if any, of the faiff
over any amount paid by the recipient in exchange for the stock. A recipient may, however, fileff
Service, within 30 days following his or her receipt of the restricted stock award, to recognize ordinary income, as of the date the
recipient receives the restricted stock award, equal to the excess, if any, of the faiff
stock award is granted over any amount paid by the recipient for the stock.
r market value of the stock on the date it becomes vested
an election with the Internal Revenue
r market value of the stock on the date the restricted
a period of time in order to
The recipient’s basis for the determination of gain or loss upon
u
stock award will be the amount paid for such shares plus any ordinary income recognized either when the stock is received or when
the stock becomes vested.
the subsequent disposition of shares acquired fromff
a restricted
Subju ect to the requirement of reasonabla eness, the provisions of Section 162(m) of the Internal Revenue Code, and the
satisfaction of a tax reporting obligation, we will generally be entitled to a tax deducd tion equal to the taxabla e ordinary i
by the recipient of the restricted stock award.
rr
ncome realized
Restritt ctedtt
Stoctt k UniUU t Aii wardsdd
Generally, the recipient of a restricted stock unit award structurt ed to comply with the requirements of Section 409A of the
Internal Revenue Code or an exception to Section 409A of the Internal Revenue Code will recognize ordinary income at the time the
stock is delivered equal to the excess, if any, of the faiff
exchange for the stock. To comply with the requirements of Section 409A of the Internal Revenue Code, the stock subject to a
lowing events: a fixed calendar date (or dates),
restricted stock unit award may generally only be delivered upon one of the folff
separation froff m service, death, disability or a change in control. If delivery orr
ccurs on another date, unless the restricted stock unit
award otherwise complies with or qualifieff s forff
(including delivery urr
ponu
an additional 20% federal tax and interest on any taxes owed.
achievement of a performance goal), in addition to the tax treatment described above
an exception to the requirements of Section 409A of the Internal Revenue Code
r market value of the stock received over any amount paid by the recipient in
, the recipient will owe
a
the subsequent disposition of shares acquired fromff
stock unit award will be the amount paid for such shares plus any ordinary income recognized when the stock is delivered.
The recipient’s basis for the determination of gain or loss upon
u
a restricted
Subju ect to the requirement of reasonabla eness, the provisions of Section 162(m) of the Internal Revenue Code, and the
satisfaction of a tax reporting obligation, we will generally be entitled to a tax deducd tion equal to the taxabla e ordinary i
by the recipient of the restricted stock unit award.
rr
ncome realized
Stoctt k ApprA
eciatiott n Rightgg stt
Generally, if a stock appr
a
on the grant date, the recipient will recognize ordinary income equal to the fair market value of the stock or cash received uponu
exercise.
eciation right is granted with an exercise price equal to the fair market value of the underlying stock
such
Subju ect to the requirement of reasonabla eness, the provisions of Section 162(m) of the Internal Revenue Code, and the
satisfaction of a tax reporting obligation, we will generally be entitled to a tax deducd tion equal to the taxabla e ordinary i
by the recipient of the stock appr
eciation right.
a
rr
ncome realized
Sectiott n 162(m)
((
Limita
ii
tions
Under Section 162(m) of the Internal Revenue Code, compensation paid to any publicly held corporation’s “covered
employees” that exceeds $1 million per taxabla e year for any covered employee is generally non-deductible. Awards granted under the
Amended 2020 Plan will be subju ect to the deducd tion limit under Section 162(m) of the Internal Revenue Code and will not be eligible
to qualify f
transition relief provided by the Tax Cuts and Jobs Act. For furff
the Internal Revenue Code and such transition relief, please see the section entitled “Compensation Discussion and Analysis—Tax
Considerations—Internal Revenue Code Section 162(m).”
the performance-based compensation exception under Section 162(m) of the Internal Revenue Code pursuant to the
ther information regarding the deducd tion limit under Section 162(m) of
orff
ff
35
New Plan Benefitff s under the Amended 2020 Plan
The folff
lowing tabla e sets forff
th certain information regarding future benefits under the Amended 2020 Plan.
Name
Kevin C. Gorman, Ph.D.
Matthew C. Abernethy
Kyle W. Gano, Ph.D.
Jude Onyia, Ph.D.
Eiry W. Roberts, M.D.
All current executive officers as a group
All current directors who are not executive officers as a group
All current employees, including current offiff cers who are not executive officers, as a group
Position
Chief Executive Officff er
Chief Financial Officff er
Chief Business Development
and Strategy Officer
Chief Scientificff Offiff cer
Chief Medical Offiff cer
Number of
Shares
(1)
(1)
(1)
(1)
(1)
(1)
(2)
(1)
(1)
(2)
a
oval of this Proposal Three. Accordingly, the benefitsff
Awards granted under the Amended 2020 Plan to our executive officers and other employees are discretionary and are not subju ect to set benefitsff
or amounts
under the terms of the Amended 2020 Plan, and the Board of Directors and the Compensation Committee have not granted any awards under the Amended
2020 Plan that are subject to stockholder appr
or amounts that will be received by or allocated to our
executive officers and other employees under the Amended 2020 Plan are not determinable.
or amounts under the terms
Awards granted under the Amended 2020 Plan to our non-employee directors are discretionary and are not subju ect to set benefitsff
of the Amended 2020 Plan, and the Board of Directors and the Compensation Committee have not granted any awards under the Amended 2020 Plan that are
subju ect to stockholder appr
oval of this Proposal Three. However, pursuant to our current equity compensation program for non-employee directors, each of
our current non-employee directors are granted annual awards in the form of a stock option, a restricted stock unit award, or a stock option and a restricted
stock unit award, depending on each individual’s election, on the date of each of our annual meetings of stockholders, provided that such individual is a non-
employee director on such date and will be continuing as a non-employee director following such date. The total dollar value of each non-employee director’s
annual awards in 2024 will be $400,000. The number of shares of our common stock subju ect to each such award will be based on the valuation methodology
establa ished by the Board, which is in part based on the faiff
On and after the date of the Annual Meeting, any such awards will be granted under the Amended 2020 Plan if this Proposal Three is approve
stockholders. For additional inforff mation regarding our equity compensation program for non-employee directors, see the “Directors Compensation Summary”
sectiion abbove
r market value of our common stock on the grant date and, thereforff e, is not determinable at this time.
d by our
a
a
a
.
Plan Benefits under the 2020 Plan
The folff
lowing tabla e sets forff
th, forff
each of the individuals and various groups indicated, the total number of shares of our
common stock subju ect to awards that have been granted (even if not currently outstanding) under the 2020 Plan as of the Record Date.
Position
Chief Executive Officff er
Chief Financial Officff er
Chief Business Development
and Strategy Officer
Chief Scientificff Offiff cer
Chief Medical Offiff cer
Name
Kevin C. Gorman, Ph.D.
Matthew C. Abernethy
Kyle W. Gano, Ph.D.
Jude Onyia, Ph.D.
Eiry W. Roberts, M.D.
All current executive officff ers as a group
All current directors who are not executive officers as a group
Each nominee for election as a director:
William H. Rastetter, Ph.D.
George J. Morrow
Leslie V. Norwalk
Christine A. Poon
Each associate of any executive officers, current directors or director nominees
Each other person who received or is to receive 5% of purchase rights
All current employees, including all current offiff cers who are not executive officers, as a group
Number of
Shares
714,432
291,523
306,842
337,360
276,450
3,029,527
228,747
27,136
22,756
24,947
16,375
—
—
11,388,239
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” PROPOSAL THREE
36
The folff
lowing tabla e sets forff
th information regarding all of the Company’s equity compensation plans as of December 31,
2023:
EQUITY COMPENSATION PLANS
Plan Category
Equity compensation plans approved by security holders (1) .........................
Equity compensation plans not approved by security holders (2) ...................
Total .................................................................................................................
Number of
Securities to be
Issued upon
Exercise of
Outstanding
Options, Warrants
and Rights
(a)
12,463,037
50,140
12,513,177
Weighted Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
(b) (3)
$84.51
$74.03
$84.46
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column a)
(c)
10,985,754
55,182
11,040,936
(1)
(2)
(3)
future issuance under equity compensation plans approved by security holders as of December 31, 2023 are
issuance under the 2020
The number of securities remaining availabla e forff
from the 2020 Plan and the Neurocrine Biosciences, Inc. 2018 Employee Stock Purchase Plan (the "ESPP"). The shares availabla e forff
Plan may be issued in the forff m of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit
awards, performance awards, and other awards, subju ect to limitations set forff
future
issuance, which are included under column (c).
Consists of stock options and restricted stock unit awards that were issued to certain employees under the Neurocrine Biosciences, Inc. Inducement Plan,
-year vesting period and the restricted stock unit awards generally have
which was not approved by security holders. These stock option grants have a four
vesting periods of three to four
The weighted average exercise price excludes restricted stock unit awards, which have no exercise price.
th in the 2020 Plan. The ESPP had 460,579 shares remaining availabla e forff
years.
ff
ff
37
PROPOSAL FOUR: 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 forff
the current fiscal
year ending December 31, 2024. Ernst & Young LLP has audited the Company’s finff ancial 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 availabla e to respond to appropriate questions.
Stockholders are not required to ratify t
ff
he selection of Ernst & Young LLP as the Company’s independent registered public
accounting firff m. 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 t
he selection, the Audit Committee will reconsider whether or
not to retain that firm. Even if the selection is ratifieff d, the Audit Committee in their discretion may direct the selection of a different
independent registered public accounting firff m at any time durd ing the year if they determine that such a change would be in the best
interests of the Company and its stockholders.
ff
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 appr
he Audit Committee’s selection of Ernst & Young LLP. The Board
of Directors unanimously recommends voting “FOR” approval and ratificff ation of such selection. In the event of a negative vote
on such ratificff ation, the Audit Committee will reconsider its selection.
ove and ratify t
a
ff
38
The folff
lowing tabla e sets forff
th information regarding our executive officers and other management team members as of the
Record Date:
EXECUTIVE OFFICERS
Name
Kevin C. Gorman, Ph.D................................................................
Matthew C. Abernethy .................................................................
Eric Benevich ...............................................................................
David W. Boyer............................................................................
Julie S. Cooke...............................................................................
Ingrid Delaet .................................................................................
Kyle W. Gano, Ph.D.....................................................................
Darin M. Lippoldt.........................................................................
Jude Onyia, Ph.D. .........................................................................
Eiry W. Roberts, M.D...................................................................
Age
66
44
58
45
58
58
51
58
60
60
Position
rr
Chief Executive Officff er and Director
Chief Financial Offiff cer
Chief Commercial Officff er
Chief Corpor
ate Affairs Officer
Chief Human Resources Offiff cer
Chief Regulatory Orr
Chief Business Development and Strategy Officer
Chief Legal Offiff cer and Corpor
Chief Scientific Officer
Chief Medical Offiff cer
ate Secretaryr
fficer
rr
a
See above
for biographical inforff mation concerning Kevin C. Gorman, Ph.D.
Matthew C. Abernethyh was appoi
a
nted Chief Financial Offiff cer in November 2017 and is responsible for leading corpor
rr
ate
finance activities, commercial supply chain operations, inforff mation technology, investor relations, faci
at Neurocrine Biosciences. Mr. Abernethy has over 15 years of biotech and medical device experience in finance and investor
relations. He joined Neurocrine Biosciences from Zimmer Biomet, where he held various positions from February 2rr
2017, including most recently, Vice President, Investor Relations and Treasurer and Vice President of Finance forff
Global Product Engines. He began his career with KPMG LLP and became a certifieff d public accountant (inactive). Mr. Abernethy
earned his B.S. in Accounting and Business Administration froff m Grace College and an MBA from the University of Chicago.
lities, and European operations
009 to November
the Americas and
ff
Eric Benevich was appoi
a
nted Chief Commercial Officer in May 2015 and is responsible for all aspects of commercial
development, marketing and sales of the Neurocrine Biosciences product portfolff
experience in the pharmaceutical industry arr
nd previously served in various positions of increasing responsibility at AstraZeneca,
Amgen, Peninsula Pharmaceuticals and Avanir Pharmaceuticals in the sales and marketing of drugs such as Prilosec®, Epogen®,
,,
Enbrel®
and Neudexta®. Mr. Benevich has a BBA in International Business froff m Washington State University.
io. Mr. Benevich has over 30 years of commercial
David W. BWW oyer was appoi
a
nted Chief Corpor
r
ate Affaiff
rs Offiff cer in September 2019 and is responsible for patient advocacy and
r
irs, specializing in the life sff
ate communications, government relations, and public policy at Neurocrine Biosciences. Mr. Boyer brings nearly
engagement, corpor
20 years of experience in public affaff
Biosciences afteff
r nine years with the BGR Group, where he served as a Principal and the Head of the Health & Lifesff ciences Practice,
leading the firm’s healthcare advocacy, policy and strategy development, and strategic consulting team. During his tenure at the BGR
Group, Mr. Boyer led public policy, advocacy, and strategic communications initiatives for a wide range of healthcare clients. Prior to
joining the BGR Group, Mr. Boyer served as Special Assistant to the President forff Legislative Affairs under President George W.
Bush, Assistant Commissioner forff Legislation at the U.S. Food and Drug Administration, and Special Assistant to the Secretary arr
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 Manufact
holds a B.A. in Government from Georgetown University.
ciences and biopharmaceutical sectors. He joins Neurocrine
urt ers of America (PhRMA). Mr. Boyer
t the
ff
a
Julie S. Cooke was appoi
nted Chief Human Resources Offiff cer in September 2017. She joined Neurocrine Biosciences from
the Sanford Burnham Prebys Medical Research Institute where she served as Senior Vice President forff 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 Tff
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 froff m Colorado College.
echnologies,
Ingrid Delaet, Ptt h.PP D. was appoi
a
nted Vice President, Regulatory Arr
ffairs in 2021, and Chief Regulatory Orr
fficer in October
ffairs, quality assurance, medical writing, and program management teams. Dr.
irs at Intercept Pharmaceuticals, which she joined in 2016. Between 1997 and 2016, Dr. Delaet held various positions of
2022. She is responsible for leading the regulatory arr
Delaet has more than 25 years of drug development experience in several therapea utic areas, including immunology, hepatology,
cardiovascular, and metabol
ic diseases. Prior to joining Neurocrine Biosciences, she served as Senior Vice President, Regulatoryrr
Affaff
increasing responsibility at Bristol-Myers Squibb in the United States, firff st in Clinical Research and Development and then in Global
Regulatory Arr
ffairs, where she served as Therapeutic Area Lead for Immunology. Prior to Bristol-Myers Squibb, she held positions in
clinical research at CellPro, Inc. and Wyeth-Ayerst Research. She received her Ph.D. in Immunology and her M.Sc. in Pharmaceutical
Sciences from The Free University of Brusrr
sels, Belgium.
a
39
Kyle W. Gano, Ph.PP D. was appoi
a
nted Chief Business Development Officer in 2011, and Chief Business Development and
a
ations with AbbVie, Mitsubishi Tanabe Pharma, Sentia Medical Sciences, Jnana Therapeutics, Voyager Therapea utics,
Strategy Offiff cer in 2020, and is responsible for all business and corporate development activities, including the management of
ongoing collabor
Xenon Pharmaceuticals, Idorsia, Takeda Pharmaceutical Company Limited, and Sosei Heptares. 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 f
his Ph.D. in Organic Chemistry arr
roff m the University of Oregon, B.S. in Biochemistry f
nd M.B.A. in Finance froff m the University of Califorff nia, Los Angeles.
roff m the University of Washington, and
rr
rr
Darin Mii
pp
. LMM ippol
dtll was appoi
a
nted Chief Legal Offiff cer and Corporate Secretary i
rr
n October 2014 and has oversight of all legal,
l property, and compliance matters. Mr. Lippoldt is also serving as Chair of the Biotechnology Innovation Organization
intellectuat
(BIO) General Counsels’ Committee forff
President, General Counsel, Chief Compliance Officer and Corpor
r
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.
2023-2024. Prior to joining Neurocrine Biosciences, Mr. Lippoldt served as Executive Vice
ation, a company he joined in 2010.
f Volcano Corpor
ate Secretary orr
r
Jude Onyin a, Ph.D. was appoi
a
nted Chief Scientific Officer in November 2021 and leads the drug discovery and non-clinical
development teams responsible for bolstering and advancing the company’s pipeline of therapea utic candidates. Additionally, in
Februar
ry 2023, Dr. Onyia joined Voyager Therapea utics, Inc.'s board of directors. A scientist with more than 25 years of experience in
the pharmaceutical industry,rr Dr. Onyia is the former Vice President of Biotechnology Discovery Research at Eli Lilly and Company.
At Lilly, Dr. Onyia contributed to the discovery and/or advancement of more than 60 clinical candidates across multiple therapeutic
areas, which led to seven approved medicines. He also was responsible for more than 50 pre-candidate programs across multiple
therapeutic areas. Dr. Onyia holds a B.S. in Forest Biology from the State University of New York (SUNY)UU
Science and Forestry, as well as a Ph.D. in Cell and Molecular Biology from the SUNYU
College of Environmental
Health Science Center, both at Syracuse NY.
Eiryii W. Roberts,tt M.D. was appoi
a
nted Chief Medical Offiff cer in January 2018 and is responsible for all clinical development
irs activities at Neurocrine Biosciences. Dr. Roberts has over 25 years of research and development experience in the
cross all phases of drug development froff m research through commercialization in multiple therapeutic areas,
and medical affaff
pharmaceutical industry arr
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 Lilly, Dr. Roberts held various positions of increasing
responsibility, including Vice President, Clinical Pharmacology/Managing Director of Chorusr
, a position she held from October 2014
until December 2017, and Vice President of Research and Development, BioMedicines Business Unit. Dr. Roberts is a physician who
trained in pharmacology and medicine in the United Kingdom, qualifyiff ng from the University of London in 1987. Her post-graduad te
clinical training was in clinical pharmacology and cardiology at St. Bartholomew’s Hospital and the Royal London Hospital.
Dr. Roberts also serves as a director of Amicus Therapeutics, a clinical-stage biopharmaceutical company focff used on rare diseases.
40
This Compensation Discussion and Analysis describes Neurocrine Biosciences’ executive officer compensation program for
2023. It provides qualitative information on the factors relevant to these decisions and the manner in which compensation is awarded
to the folff
lowing individuals who are our Named Executive Officers (“NEOs”) for 2023:
COMPENSATION DISCUSSION AND ANALYSIS
Kevin C. Gorman, Ph.D., Chief Executive Officer
•
• Matthew C. Abernethy, Chief Financial Offiff cer
•
•
•
KylKK e W. Gano, Ph.D., Chief Business Development and Strategy Offiff cer
Jude Onyia, Ph.D., Chief Scientificff Offiff cer
Eiry Wrr
. Roberts, M.D., Chief Medical Officer
Executive Summary
Busineii
ss Overview
Neurocrine Biosciences is a neuroscience-focused, biopharmaceutical company with a simple purpos
people with great needs, but few options. We are dedicated to discovering and developing life-ff changing treatments forff
under-addressed neurological, neuroendocrine, and neuropsychiatric disorders. The Company’s diverse portfolff
and Drug Administration (“FDA”) appr
oved treatments forff
insufficiency, endometriosis and uterine fibroids in collabor
approved treatment for classic congenital adrenal hyperplasia ("CAH") and a diversified portfolff
in multiple therapeutic areas. For three decades, we have appl
between brain and body systems to treat complex conditions. We relentlessly pursue medicines to ease the burden of debilitating
diseases and disorders.
patients with
io includes U.S. Food
tardive dyskinesia, chorea associated with Huntington's disease, adrenal
ation with AbbVie Inc. ("AbbVie"), a European Medicines Agency
ied our unique insight into neuroscience and the interconnections
io of advanced clinical-stage programs
e: to relieve suffering for
a
a
a
r
We launched INGREZZA® (valbenazine) in the U.S. as the firff st FDA-approved drug forff
the treatment of tardive dyskinesia in
the treatment of aduld ts with chorea associated with Huntington's disease in August 2023. INGREZZA net product
2023 and accounted for appr
a
oximately 99% of our total net product sales for 2023.
May 2017 and forff
sales totaled over $1.8 billion forff
In addition to our marketed products:
•
•
•
We have a robust pipeline including multiple compounds in mid- to late-phase clinical development across our core
therapeutic areas. Our diverse portfolff
neuroendocrinology and neuropsychiatry.
io featurt es novel mechanisms to treat intractable diseases focused on neurology,
ration ("MTPC") launched DYSVAL® (valbenazine) in Japan for the
Our partner Mitsubiu shi Tanabe Pharma Corpor
treatment of tardive dyskinesia in June 2022 and subsequently in other select Asian markets, where it is marketed as
REMLEAS® (valbenazine). We receive royalties at tiered percentage rates on MTPC net sales of valbenazine.
Our partner AbbVie launched ORILISSA® (elagolix tabla ets) in the U.S. forff
associated with endometriosis in August 2018 and ORIAHNN® (elagolix, estradiol and norethindrone acetate capsules
and elagolix capsa ules) in the U.S. for the treatment of heavy menstrual bleeding dued
receive royalties at tiered percentage rates on AbbVie net sales of elagolix.
the treatment of moderate to severe pain
to uterine fibff
roids in June 2020. We
2023 Corporate Ptt
erPP for
rmance Highlgg igll htgg stt
We delivered a strong performance in 2023, as demonstrated by the folff
lowing achievements and developments:
•
•
•
•
•
•
INGREZZA net product sales for 2023 increased 28.6% year-over-year to over $1.8 billion, reflecting higher
prescription demand and increased commercial activities, including continued investment in our branded direct-to-
consumer INGREZZA advertising campaign and benefit froff m the expansion of our sales forff ce completed in April 2022.
In the third quarter of 2023, the FDA approved INGREZZA for the treatment of aduld ts with chorea associated with
Huntington's disease.
Announced positive top-line data from the Phase 3 clinical studi
Crinecerfont subsu equently received Breakthrough Therapy designation froff m the FDA forff
from the Phase 3 studi
2024.
es will suppor
u
t
t
es of crinecerfont in aduld ts and pediatrics with CAH.
the treatment of CAH. Data
t a New Drug Application ("NDA") submission to the FDA in the second quarter of
In the fourth quarter of 2023, we announced that all patent litigation brought by Neurocrine Biosciences against the
companies that filff ed an Abbreviated New Drugr Application ("ANDA"
versions of INGREZZA prior to the expiration of the Orange Book-listed patents have been resolved. Pursuant to the
terms of the respective settlement agreements, such companies have the right to sell generic versions of INGREZZA in
the U.S. beginning March 1, 2038, or earlier under certain circumstances.
) to the FDA seeking appr
oval to market generic
A
a
Expanded strategic partnership with Voyager Therapea utics Inc. ("Voyager") to advance multiple gene therapy programs,
ERTM capsids, forff
each enabled by Voyager's next-generation TRACRR
the treatment of neurological diseases.
In the third quarter of 2023, we announced the FDA accepted the NDA for INGREZZA oral granules, a new sprinkle
formulation of INGREZZA capsules forff
oral administration. The agency set a Prescription Drug User Fee Act target
action date of April 30, 2024.
41
2023 Compensation ProPP gro am Highlgg igll htgg stt
Consistent with our goal of attracting, motivating and retaining a high-caliber executive team, our executive officff er
compensation program is designed to pay for performance. A summary orr
outcomes aligned with this philosophy are highlighted below forff
2023.
f key compensation decisions and compensation related
•
•
•
•
•
Pay for Perfor rmance / At-Risk Pay - Our executive compensation program is designed so that a significant portion of pay is
variable or “at risk” and the realized value of compensation is linked with Company performance and value delivered to
stockholders. For 2023, the percentage of pay that is “at risk” forff
respectively, helping us align pay with performance (refer to "Pay forff Performance / At-Risk Pay" below).
our CEO and NEOs is approximately 80% and 73%,
djustments - Salary increases forff
2023 were generally dued
Base Salary Ar
competitive market positioning relative to market data. Merit based increases for NEOs ranging from 4.5% – 11.0% were
approved forff
to Company performance in 2022 and maintaining
2023.
Annual Cash Incentives - Our annual cash award opportunity is based on corpor
corporate goals and the individual performance of each executive officer. Corpor
our specific strategic goals that we believe will create long-term stockholder value. For 2023, we achieved our corporate
goals at an overall level of 110% and we paid an annual cash incentive award to our CEO at 110% of target and to our other
NEOs at 110% - 121% of target.
ate performance compared to pre-establa ished
ate goals are selected to directly align with
rr
r
Long-Term Equity Awards: Equity Mixii
the forff m of long-term equity awards comprised of a mix of stock options, performance-based restricted stock units
("PRSUs") and restricted stock units ("RSUs"). For our CEO, the aggregate grant date fair value of long-term equity awards
granted in 2023 consisted of appr
oximately 50% stock options, 35% PRSUs and 15% RSUs. For NEOs other than our CEO,
the aggregate grant date fair value of long-term equity awards granted in 2023 consisted of appr
options, 15-25% PRSUs and 15-20% RSUs.
- A significant portion of our CEO’s and other NEO’s compensation is delivered in
oximately 55-65% stock
a
a
inked to Perfor rmance - The performance conditions for PRSUs granted to our NEOs in 2021 with a
PRSU Payouts Ltt
perforff mance period ending in March 2023 were not achieved and no portion of these PRSUs vested. The Compensation
Committee did not take any actions to mitigate the negative impact on payouts forff
performance philosophy.
these awards consistent with our pay forff
Committee Actions in Connection with Say-on-Pay Vote
The Compensation Committee of the Board of Directors (the “Committee”) is committed to ensuring that our executive offiff cer
compensation program is effeff ctive and aligned with our stockholders’ interests and concerns. Accordingly, critical components of our
Committee’s process continue to be (1) reviewing emerging compensation “best practices”, with a focff us toward companies of similar
size, as measured by market capitalization and revenues, (2) soliciting advice from our Committee’s independent compensation
consultant and (3) listening and responding to feedbad ck from our stockholders via our annual say-on-pay vote and through our
stockholder outreach effoff
rts.
We seek a say-on-pay advisory vote froff m our stockholders regarding our executive officer compensation program on an
annual basis. 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 offiff cers.
2023 Say-on-Pay Voting Results
Over the last ten years, we have received 97% (on average) of votes cast in support of our
executive compensation programs. Given the significant level of stockholder support, the
Committee concluded that:
a
In 2023, we received appr
oximately
93% of votes cast in support of our
2023 executive officer compensation
program.
(cid:4) executive offiff cer compensation program continues to align executive officff er pay with
stockholder interests;
(cid:4) our executive offiff cer compensation program provides competitive pay that encourages
retention and effeff ctively incentivizes performance of talented NEOs and executive
offiff cers;
(cid:4) no significant changes to the structurt e of our programs are necessary; and
(cid:4) 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 offiff cers.
42
During 2023, we continued our stockholder engagement effoff
rts in order to solicit feeff dback on a variety of topics, including
sustainabia lity and executive compensation practices. We contacted a number of our largest stockholders and spoke with all
stockholders that wanted to provide us with feedbad ck. Specifically, we reached out to 21 of our largest stockholders (representing
approximately 53% of the outstanding shares of our common stock) and met with stockholders representing appr
oximately 13% of the
outstanding shares of our common stock. While the engagements are primarily conducted by management, Board members (including
Compensation Committee members) are also availabla e to participate, when appr
suppor
t forff
u
stockholder feedff
compensation program and our stockholders’ interests.
our sustainabia lity and executive compensation practices. We are pleased with our say-on-pay advisory vote results and
bad ck, and we will continue to engage with our stockholders to ensure alignment between our executive officff er
opriate. Overall, stockholders have expressed strong
a
a
Pay forff Perforff mance / At-Risk Pay
Our executive officer compensation program is designed to reward achievement of the specific strategic goals that we believe
our stockholders. Consistent with our goal of attracting, motivating
will advance our business strategy and create long-term value forff
and retaining a high-caliber executive team, our executive officer compensation program is designed to pay for performance. We
utilize compensation elements that meaningfulff
ly align our NEOs’ interests with those of our stockholders to create long-term value.
As such, a significant portion of our Chief Executive Officer’s and other executive officers’ compensation is “at-risk,” performance-
based compensation, in the forff m of long-term equity awards that have performance-based vesting criteria or have value directly
dependent on the Company’s stock price (or in the case of stock options, only if the Company's stock price increases), and annual cash
incentives that are only earned if we achieve pre-establa ished corpor
ate goals.
r
With respect to long-term equity awards, the Committee annually considers the appropriate mix of equity awards. The
Committee believes that combining performance-based vesting equity awards with time-based vesting equity awards appropriately
promotes a focff us on delivering sustainable long-term value to our stockholders, while also suppor
executive officers.
ting the long-term retention of our
u
The graphi
a
cs below illustrate the primary err
lements of our Chief Executive Officer’s compensation mix for 2023 and the
aggregate compensation mix for 2023 for the other NEOs as a group. The percentages in the chart below reflect the actuat
earned, cash incentives paid, and the grant date fair value of equity awards granted, in each case as reported in our 2023 Summaryrr
Compensation Table.
l base salaryrr
CEO 2023 Compensation Mix
All Other NEOs 2023 Compensation Mix
43
Our Compensation Practices
Below are key elements of our executive officer compensation program, as well as problematic pay practices that we avoid:
WHAT WE DO
WHAT WE DON'T DO
(cid:4) Heavily weight our executive officff er compensation toward
“at risk,” performance-based compensation
(cid:4) Balance short-term and long-term incentive compensation
(cid:4) Use multi-year vesting forff
all executive offiff cer equity
awards
(cid:4) Grant performance-based equity awards annually in the
form of performance-based restricted stock units
("PRSUs")
(cid:4) Have an incentive compensation recoupment or clawback
policy
(cid:4) Structurt e our executive offiff cer compensation program to
opriate risk-taking and encourage
minimize inappr
a
appropriate risk-taking
(cid:4) Cap aa
nnual cash incentives at a maximum payout amount
(cid:4) Select peer companies that we compete with for executive
offiff cer talent, have a similar business and are of similar
size as us, and review their pay practices
(cid:4) Solicit advice from the Committee’s independent
compensation consultant
(cid:4) Have meaningfulff
equity ownership guidelines forff
executive officers and the Board of Directors
× Provide guaranteed bonuses or base salary increases
× Allow forff
the repricing of stock options without
stockholder appr
a
oval
× Pay dividends or dividend equivalents on unearned
shares
× Permit hedging or other forff ms of speculative transactions
by employees or directors
× Permit pledging by employees or directors
× Provide single-trigger change in control benefitsff
× Include gross-ups in executive employment agreements
or change-in-control arrangements (excluding the Chief
Executive Officff er's employment agreement, which was
last amended in 2007)
× Provide excessive perquisites to our executive officers
× Provide retirement or pension benefitff s to our executive
offiff cers that are not availabla e to employees generally
(cid:4) 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 strucr
Committee’s complete roles and responsibilities are set forff
availabla e at http://w// ww.neurocrine.com/investors/co//
Committee include reviewing, revising, and appr
rporate-governance/. S//
oving:
a
th in a written charter, which was adopted by the Board of Directors and is
ome of the significant roles and responsibilities of the
ture for the Company. The
•
•
•
•
•
•
•
•
•
•
r
all executive officers, including perquisite benefits, if any;
the compensation philosophy of the Company;
the corporate goals and objectives relating to the compensation of the Company’s employees, including executive
offiff cers, and evaluating the performance of the Company, and its executive officers, in light of these corpor
and objectives;
compensation forff
all promotions to executive officer positions and the hiring of all new executive officers, including employment
agreements;
recommendations to the fulff
group data and advice from an independent compensation consultant;
guidelines forff
grants for all non-executive officer employees of the Company;
equity and incentive plans, including amendments or modifications to such equity and incentive plans;
equity ownership guidelines forff
the Compensation Discussion and Analysis forff
registration statements, proxy statements or information statements; and
the Committee report on executive compensation to be included in the Company's annual proxy statement in accordance
with applicable SEC rulrr es and regulations.
salaries, merit salary increases, cash incentive payments, stock-based grants and performance-based stock
l Board of Directors regarding all director compensation by taking into consideration peer
inclusion in any of the Company's annual reports on Form 10-K,
executive officff ers and directors;
ate goals
44
In addition, the Committee also has the folff
lowing oversight responsibilities:
•
•
•
•
•
•
overseeing the development, implementation and effeff ctiveness of the Company’s policies and strategies with respect to
human capital and talent management, including diversity and inclusion initiatives;
administering the Company’s equity and incentive plans and employee benefitff plans;
overseeing the implementation of clawback policies allowing the Company to recoup certain compensation paid to
employees;
reviewing and taking into consideration stockholder feedff
say-on-pay vote;
retaining independent compensation consultants and advisors when appropriate to advise the Committee on
compensation policies and plans; and
complying with requirements established by the SEC, assessing the risks arising froff m the Company’s compensation
policies and taking any actions required as a result thereof.
bad ck regarding compensation matters, including our annual
Compensation Philosophy
We believe that in order to create value for our stockholders, it is critical to attract, motivate and retain key executive offiff cer
talent by providing competitive compensation packages. Accordingly, we design our executive officer compensation program to:
ATTRACT, DEVELOP & RETAIN
MOTIVATE & REWARD
MAXIMIZE
executive officers with the skills and expertise
to execute our business plans within the
highly competitive life sciences industry
executives fairly over time for actions
consistent with creating long-term stockholder
value
stockholder value via an appropriate blend of
short-term and long-term incentives
Our compensation philosophy for executive offiff cers provides that cash compensation should be strucr
tured such that at least
one-third of each executive officer’s target total cash compensation, consisting of base salary arr
dependent upon the Company’s achievement of specific corporr
Chief Executive Officer’s target total cash compensation is at risk under our annual cash incentive plan. Long-term equity
compensation forff
designed to motivate executive officers to increase long-term stockholder value and to reward and retain key employees.
executive offiff cers is generally a combination of performance-based and time-based vesting equity awards, and it is
rate goals that drive stockholder value. Starting in 2020, 50% of our
nd target cash incentives, is at risk and
Overall Compensation Determination Process
The implementation of the compensation philosophy is carried out under the supeu rvision 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
the new fiscal year, as well as performance-based compensation payouts forff
and long-term equity award components of compensation to be awarded to our executive officers, including our Chief Executive
Offiff cer, forff
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 fisff cal
year, as well as performance-based compensation payouts forff
making the finff al decisions on compensation forff
during discussions of their respective compensation packages nor do they participate in appr
NEO compensation packages.
all of our NEOs. Our NEOs, including our Chief Executive Officer, are not present
oving any portion of their own or other
a
the prior fiscal year. The Committee remains solely responsible for
the prior fiscal year. In setting compensation
45
The Committee considers a variety of facff
tors, 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
profesff
sional experience and judgment:
(cid:4) Company performance
(cid:4) Market data from the independent compensation consultant
(cid:4) Individual performance
(cid:4) Retention risk
(cid:4) Independent compensation consultant recommendations
(cid:4) Chief Executive Offiff cer’s recommendations (other than for himself),ff based on direct knowledge of NEO performance
and his extensive industry err
xperience
(cid:4) Internal pay equity among individuals and positions
(cid:4) Criticality and scope of job funff
(cid:4) Total targeted and historical compensation
(cid:4) Any other factors the Committee determines appr
ction
a
opriate
In addition, during the first quarter of the year, Company-wide performance goals for the then current year are finff alized 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 procedurd es. Committee meetings in the four
of the year generally focus on Company goal achievement, selection of the peer group for the following year and executive offiff cer
performance.
th quarter
ff
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
ractices. In the summer of 2022, the Committee engaged the services of Frederic W. Cook & Co., Inc. (“FW Cook”) as its
industry prr
independent compensation consultant to assist the Committee with evaluating our executive and director compensation programs and
to make recommendations for our 2023 compensation programs, including updating the Committee on new developments in areas that
fall within the Committee's oversight. FW Cook serves solely at the pleasure of the Committee and their fees
Committee. FW Cook conducted analyses and provided advice on, among other things, the appropriate peer group, executive offiff cer
compensation and compensation trends in the life sff
ciences industry.rr
oved by the
a
are appr
ff
In weighing its recommendations for executive offiff cer compensation forff
2023, the Committee directed FW Cook to advise the
Committee on both best practices and peer practices when designing and modifying our executive officer compensation program in
order to achieve our objectives. As part of its duties, FW Cook provided the Committee with the folff
lowing services with respect to
2023 compensation decisions:
•
•
•
•
•
•
•
•
the peer group and relevant executive officer pay survey data and an analysis of the
carried out a comprehensive review of our peer group for use in making 2023 executive officer compensation decisions;
provided compensation data forff
compensation of the Company’s executive offiff cers as compared to this market data;
provided a competitive assessment of, and comparison to, incentive design and executive officer pay program structurt e
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 2023;
assisted the Committee with the design of 2023 pay programs consistent with the Company’s business strategy and pay
philosophy;
provided background information and data for 2023 adjud stments to the Company’s executive officff er compensation
program consistent with good governance practices and the Company’s objectives; and
prepared an analysis of the Board of Directors’ 2023 compensation program.
ff
The Committee annually assesses whether the work of its compensation consultant has raised any conflicff
t of interest, taking
ors: (i) the provision of other services, if any, to the Company by the compensation consultant;
into consideration the following fact
(ii) the amount of fees the Company paid to the compensation consultant as a percentage of the firff m’s total revenue; (iii) the
compensation consultant’s policies and procedurd es that are designed to prevent conflicff
relationship of the compensation consultant or the individual compensation advisors employed by the firm with an executive officff er 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 the compensation consultant or the individual compensation advisors employed by the
t of interest with respect to
a
firm. The Committee has determined, based on its analysis of the above
FW Cook providing services to the Committee.
ts of interest; (iv) any business or personal
factors, that there was no conflicff
46
Competitive Assessment of Compensation—Peer Group and Market Data
2023 Peer Group. In September 2022, when developing a proposed list of our peer group companies to be used in connection
with making compensation decisions for 2023, FW Cook selected primarily recently commercial biopharmaceutical companies or late-
stage high valuation pre-commercial companies with revenues generally between $200 million and $2.5 billion, market capia talization
generally between $2.6 billion and $26.4 billion and employee headcount generally under 3,000, which FW Cook recommended as a
reasonabla e range in relation to our then-current revenue, market capitalization and headcount.
Based on these criteria, FW Cook recommended, and our Committee appr
a
oved, the folff
lowing peer group for 2023:
ACADIA Pharmaceuticals, Inc.
BeiGene, Ltd.
Exelixis, Inc.
Ionis Pharmaceuticals, Inc.
Sarepta Therapea utics, Inc.
United Therapea utics Corpor
r
ation
Alkermes plc
Biohaven Ltd.
Horizon Therapeutics plc
Jazz Pharmaceuticals plc
Seagen Inc.
Alnylam Pharmaceuticals, Inc.
BioMarin Pharmaceuticals, Inc.
Incyte Corpor
ration
Mirati Therapeutics, Inc.
Ultragenyx Pharmaceutical Inc
The 2023 peer group reflects the folff
lowing changes froff m our 2022 peer group: (i) the removal of Alexion Pharmaceuticals,
to its acquisition by AstraZeneca, and (ii) the removal of Nektar Therapea utics, as its market cap and revenue fell below the
Inc., dued
targeted range. At the time of approval of our 2023 peer group, our Company was approximately in the 55th percentile of the peer
group for market capitalization and forff
revenue.
2023 Marketkk Data. In late 2022, FW Cook completed an assessment of executive officer compensation based on the 2023 peer
group to inform the Committee’s determinations of executive officer compensation forff
compiled froff m multiple sources, including: (i) the 2023 peer group companies’ publicly disclosed inforff mation, or public peer data; and
(ii) survey data from the Radforff d Global Compensation Database forff
companies that had annual revenue between $$500
of sufficient comparative data for an executive officer’s position. The public peer data and survey data, collectively referff
Proxy Statement together as market data, were reviewed by the Committee, with the assistance of FW Cook, and used as one reference
point, in addition to other factors, in setting our executive offiff cers’ compensation forff
illimillion and $d $3.0 bib llion. The components of this data were based on the availabia lity
red to in this
peer companies and biotechnology and pharmaceutical
this assessment was
2023. The data forff
2023.
Use of 2o
023 Marketkk Data. The Committee generally reviews target total direct compensation, comprising both target cash
compensation and equity compensation, against the market data described above
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 with respect to target total direct compensation, target total cash compensation (including both base salary arr
nd the
oximation of grant date fair value). In making
target annual cash incentive) and equity compensation (valued based on an appr
compensation determinations, the Committee considers the market data, along with the other factors described above under “Overall
Compensation Determination Process.”
primarily to ensure that our executive officff er
a
a
Components of Executive Compensation
The Committee considers each executive officer’s performance, contributions to Company goals, responsibilities, experience,
qualificff ations, and where in the competitive range the executive offiff cer’s compensation compares to the Company’s peer group when
determining the appropriate compensation forff
independently and each component in the context of each executive officer’s total compensation. Compensation forff
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 ("RSUs"), and
stock options, which both vest based on continued service over time, and PRSUs, which vest upon
that we believe will create stockholder value. The tabla e below summarizes the purpos
.
Element, with those associated with at-risk pay shown in pink font
each executive officff er. The Committee considers each component of compensation
e and key characteristics of each Compensation
achievement of key corpor
our NEOs
ate goals
u
r
ff
r
47
Compensation Element
Base Salary
Purpose of This Element
Designed to compensate competitively at levels
necessary to attract and retain qualifieff d
executive officers in the life sff
ciences industry;rr
generally based on the scope of each executive
offiff cer’s responsibilities, as well as his/her
qualificff ations, breadth of experience,
performance record and depth of applicable
functional expertise; establa ished and adjud sted to
be appropriate as compared to the appl
icable
market data, enabla ing the Company to attract,
motivate, reward and retain highly skilled
executive officers; gives executive officers a
degree of certainty in light of having a majoa rity
of their compensation at risk.
a
Key Characteristics
Fixed cash compensation where year-to-year
adjud stments 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
and any average merit
within our industry,r
such year for all employees
salary increase forff
of the Company establa ished by the Committee,
as well as other fact
ors the Committee judges to
be pertinent durdd ing an assessment period.
ff
In making base salary decisions, the Committee
exercises its judgment to determine the
appropriate weight to be given to each of these
factors. Although adjud stments may also be
made during the year for special circumstances,
no mid-year adjud stments have been made in the
past five years.
Annual Cash Incentives
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.
Long-Term Equity Incentives (RSUs)
Long-Term Equity Incentives
(Stock Options)
Long-Term Equity Incentives (PRSUs)
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 effeff ctive tool
for incentivizing and retaining those executive
offiff cers who are most responsible for
influencing stockholder value.
tivates 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.
Creates a strong link to the Company’s long-
term perforff mance, creates an ownership culture
and closely aligns the interests of our executive
offiff cers with those of our stockholders because
the value that the grants deliver is directly
dependent on attainment of performance metrics
and our stock price.
48
Annual cash award opportunity based on
corporate performance compared to pre-
establa ished corpor
target and maximum payout opportunities forff
each executive officer.
ate goals with pre-establa ished
rr
oved by the Committee annually and
The cash incentive program, including
corporate goals and target payouts, are reviewed
and appr
a
may include individual performance targets forff
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 forff
the
year. Cash incentive payments are linked to the
attainment of overall corporate goals and the
individual performance of each executive
offiff cer, or other factors the Committee
determines appropriate.
RSUs generally vest on an annual basis, ratably
years subject to executive officer’s
ff
over four
continued service; the ultimate value realized
varies with our common stock price.
ff
years subject to
Stock options with an exercise price equal to the
fair market value on the date of grant generally
vest monthly over four
executive offiff cer’s continued service; the
ultimate realizable value, if any, depends on the
appreciation of our common stock price froff m
the date of grant. The Committee views stock
options as performance-based compensation, as
stock options provide a returt n to our executive
offiff cers only if the market price of our common
shares appreciates over the stock option term.
u
achievement of
PRSUs only vest upon
objectively measurable performance metrics
tied to our business strategy that focff us executive
offiff cers on achieving these long-term Company
performance metrics and increasing stockholder
value.
Other Compensation
Provides benefitff s that promote employee health
and welfare, which assists in attracting and
retaining our executive officers; certain
additional benefitff s refleff ct market standards and
are reasonabla e 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.
Executive officers are eligible to participate in
the Company’s employee benefitff plans on the
l-time employees.
same terms as all other fulff
These plans include medical, dental and lifeff
insurance and eligibility to participate in the
Company’s employee stock purchase plan.
Additional benefitff s include disabia lity 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
offiff cer 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
rves our retention objectives by helping our
executive officers maintain continued focff us 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.”
tive
r the
executive
Compensation components forff
offiff cers in the event of a termination by the
Company without cause or termination by the
executive offiff cer due to construcrr
termination within six months afteff
consummation of a change in control include
payments for annual base salary,r
compensation payment, cash compensation forff
the value of all outstanding stock awards,
limited Company-paid health insurance
benefits, and any accruerr d vacation and any
accruerr d benefitff s 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 offiff cer.
a cash
Pursuant to his employment agreement, which
was last amended in 2007, our Chief Executive
Offiff cer is entitled to tax gross-ups in the event
of certain levels of payments he may receive
upon a change in control. We have not entered
into any new change in control gross-upsu
executive offiff cers since 2007, nor does the
Company intend to enter into any new
agreements containing such gross-ups.
Accordingly, Dr. Gorman is the only NEO
entitled to such tax gross-ups.
for
49
2023 Named Executive Offiff cer Compensation Decisions
2023 Base Salaries
In Februar
ry 2023, our Committee approved the 2023 base salaries for the NEOs as set forff
th in the table below. In making these
2023 decisions, the Committee considered the Company’s performance in 2022, market data for each individual NEO’s position, as
well as the individual’s historical salary l
responsibilities forff
forth above
a
Company’s performance in 2022, (ii) maintaining competitive positioning relative to the market data, (iii) retention of our NEOs and
(iv) our NEOs’ experience, job criticality and performance.
the coming year, along with the other factors described under “Overall Compensation Determination Process” set
. Specifically, the Committee determined that the increases reflected in the table below were appr
evels, our then-current budget forff
djustments, anticipated role and
opriate due to (i) the
employee salary arr
a
rr
Named Executive Offiff cer
Kevin C. Gorman, Ph.D., Chief Executive Officer
Matthew C. Abernethy, Chief Financial Offiff cer
Kyle W. Gano, Ph.D., Chief Business Development & Strategy Officer
Jude Onyia, Ph.D., Chief Scientificff Offiff cer
Eiry W. Roberts, M.D., Chief Medical Offiff cer
2023 Annual CasCC h IncII
entives
2023
Base Salary
$946,000
$646,061
$602,912
$638,250
$660,348
%
Change
from 2022 Base
Salary
10.0%
4.5%
9.5%
11.0%
4.5%
In Februar
ry 2023, the Committee appr
a
oved the 2023 target bonus opportunities as a percentage of base salary f
orff
rr
the NEOs as
th in the table below. Afteff
set forff
opportunities of our NEOs.
r considering market data forff
Executive Offiff cer
Chief Executive Officer
All Other Executive Officers
each NEO’s position, no changes were made to the target bonus
2023
Target Bonus
(% of Base Salary)
100%
50%
In March 2023, the Committee appr
oved the corporate goals for our 2023 annual cash incentive plan. The most significant and
a
impactful goals and achievements are summarized in the table below. Our corpor
strategic goals that we believe will create long-term stockholder value, including achieving a net revenue target from sales of
INGREZZA, ensuring commercial readiness forff
disease, scaling pre-launch commercial infraff structurt e forff
and achieving certain other corpor
goals for 2023 in order to enabla e a holistic assessment of complementary goals that collectively refleff ct achievement of our 2023
performance objectives and build the founda
150% of their target bonus opportuni
the launch of INGREZZA for the treatment of chorea associated with Huntington's
crinecerfont to treat CAH, advancing and expanding our clinical pipeline,
rate and finff ancial goals. The Committee did not assign specific relative weightings to the corpor
long-term success. The maximum bonus payout for each NEO was capped at
ate goals are directly aligned with our specificff
tion forff
ff
ty.
ate
r
r
t
During meetings conducted throughout the year and culminating in February 2rr
024, the Committee engaged in a robust dialogue
with management, the Board Chair and other Board members (including at Board meetings), and its independent compensation
consultant to evaluate the accomplishments and performance of the Company relative to the 2023 corporate goals. The Committee
discussed the relative importance of each of these goals and ultimately determined that the folff
to
lowing goals were the most impactfulff
the creation of long-term stockholder value: (i) the INGREZZA net sales goal; (ii) the advancement of our clinical pipeline, including
positive top-line results in two phase 3 studies of crinecerfont in aduld ts and pediatrics forff
resolution of all patent litigation brought by us against the companies that fileff d ANDAs
INGREZZA. The Committee furff
ther determined that the Company achieved the high-end of the range for INGREZZA net sales goal,
over achieved the most critical goals associated with the advancement of the Company's clinical pipeline, overachieved with respect to
the resolution of all patent litigation brought by us against the companies seeking appr
oval to market generic versions of INGREZZA,
and partially achieved other important goals. After these discussions, the Committee determined our 2023 corporate goal achievement
at 110%.
the treatment of CAH; and (iii) a positive
seeking appr
oval to market generic versions of
AA
a
a
50
Business Area /
Initiative
Target
Achievements / Relevant Developments
Achieve INGREZZA net sales in 2023 between
$1.70B and $1.84B
Achieved INGREZZA net sales of $1.84B
Commercial
Activities
Prepare forff
associated with Huntington's disease
launch of INGREZZA for chorea
Completed launch-ready activities
Stage-appropriate crinecerfont launch readiness
Completed foundational activities and build-out of
initial commercial team
sNDA Approval:
Obtain FDA appr
treatment of chorea associated with Huntington
disease
oval of sNDA for valbenazine for
a
Obtained FDA appr
a
oval in August 2023
Phase 2 and Phase 3 Clinical Pipeline:
• Report topline data in two Phase 3 studt
CAH (aduld ts and pediatrics)
ies in
• Reported positive top-line data froff m the Phase 3
clinical studi
t
pediatrics with CAH
es of crinecerfont in aduld ts and
Advance and Expand
Clinical Pipeline
• Achieve enrollment targets in all studi
t
es
• Met enrollment targets in most studies
Overall
Achievement
Achieved High
End of Range
Achieved
Achieved
Achieved
Over Achieved
in Part*
• Report top-line data on two Phase 2 studt
ies
• Reported top-line data on one Phase 2 study
t
Phase 1 Studies:
Complete IND/CTA submission for 4 new chemical
entities
IND/CTA submissions completed forff
chemical entities.
five new
Development:
Identify 3 n
ff
one biologic
ew development candidates, including
Identifieff d two new development candidates
Over Achieved
Achieved in
Part
• Meet annual budget forff
expense by year-end
non-GAAP operating
• Met annual budget forff
expense by year-end
non-GAAP operating
Achieved in
Part
Financial/Operational
• Retire convertible notes due May 2024
• Company made strategic decision in 2023 not to
retire the convertible notes. As of December 31,
2023, $170.4 million aggregate principal
amount of the convertible notes remained
outstanding
General Business and
People
• Maintain or improve sustainabia lity ratings
• Improved overall sustainabia lity ratings over
Achieved
prior year
• Continue to maintain company culture of
• Enhanced compliance training and related
integrity, ethics and compliance
communication
Legal
Manage litigation matters to a positive outcome
ly resolved all patent litigation brought
Successfulff
by us against the companies seeking appr
market generic versions of INGREZZA
oval to
a
Over Achieved
Overall Achievement:
110%
* Although the enrollment goals associated with the Phase 2 and Phase 3 Clinical Pipeline were partially achieved, the Committee considered the
es in CAH to be the most impactful to the Company and the long-term benefit of stockholders and
t
reporting of top-line data in two Phase 3 studi
this specific goal was deemed to be “Over Achieved”.
51
Notwithstanding the Committee’s determination of our 2023 corporate goal achievement at 110%, the Committee had
discretion to eliminate any NEO’s bonus or to reduce or increase the amount of any NEO’s bonus payout amount. However, our
ry 2024, the
CEO's bonus payment cannot be increased above the corpor
Committee determined whether to exercise its discretion to increase or decrease the bonus payout amount for each NEO after
considering their individual performance contributing to achievement of our corporate goals. Following such review, Dr. Roberts was
awarded an increased bonus payout amount in recognition of her success in advancing and expanding our clinical development
programs, including the generation of positive top-line data froff m the Phase 3 clinical studi
with CAH.
es of crinecerfont in aduld ts and pediatrics
ate goal achievement level forff
the Company. In Februar
r
t
Afteff
r making these determinations, the Committee appr
a
Named Executive Offiff cer
Kevin C. Gorman, Ph.D.
Matthew C. Abernethy
Kyle W. Gano, Ph.D.
Jude Onyia, Ph.D.
Eiry W. Roberts, M.D.
oved the bonus payout amounts set forth in the tabla e below.
2023 Target Bonus
2023 Actual Bonus Paid
% of Base
Salary
100%
50%
50%
50%
50%
$
$946,000
$323,030
$301,456
$319,125
$330,174
% of Target
Bonus
110%
110%
110%
110%
121%
$
$1,040,600
$355,335
$331,602
$351,038
$399,511
2023 Long-Tgg erTT m Err
quity Att
wardsdd
2023 Equity Award MixMM . In 2023, the Committee granted long-term equity awards to our NEOs in the forff m of stock options,
opriate balance of long-term
RSUs and PRSUs afteff
r determining that these three types of equity awards continued to provide the appr
and performance-based incentives for our executive officff ers. The Committee generally maintained the overall value of the equity
awards provided to the NEOs, with the exception of Dr. Gorman, and continued to place emphasis on performance-based incentives
that align our NEOs’ finff ancial interests with those of our stockholders. For Dr. Gorman, the Committee altered the mix of equity
awards in 2023 to slightly decrease the amount of RSUs and PRSUs and increase the amount of stock options to further tie incentive
compensation to the appreciation of our common stock and long-term stockholder value creation. For Dr. Gorman, the Committee
allocated approximately 50% of the aggregate value of Dr. Gorman's long-term equity awards in the forff m of stock options, 35% of
such value in the form of PRSUs and approximately 15% of such value in the form of RSUs. The 35% allocation of Dr. Gorman’s
long-term equity awards to PRSUs is consistent with other companies in the Company’s peer group. For the NEOs, other than Dr.
Gorman, the Committee decided to generally allocate appr
awards in the forff m of stock options, 15-25% of such value in the form of PRSUs and 15-20% of such value in the form of RSUs,
primarily based on each NEO’s expected impact on the achievement of the performance metrics underlying the PRSUs.
oximately 55-65% of the aggregate value of each NEO’s long-term equity
a
a
Sizeii
of 2023 Equity Awards. In determining the size of the total equity compensation opportunity in 2023, the Committee:
•
•
•
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;
focff used a larger portion of total direct compensation in the form of long-term performance equity awards which only
vest upon achievement of the specificff
, 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 forff
the other NEOs.
The folff
lowing tabla e summarizes the annual 2023 long-term equity awards for the NEOs:
Named Executive Offiff cer
Kevin C. Gorman, Ph.D.
Matthew C. Abernethy
Kyle W. Gano, Ph.D.
Jude Onyia, Ph.D.
Eiry W. Roberts, M.D.
Stock Options
RSUs
PRSUs
$*
$ 6,678,750
$ 3,187,500
$ 3,187,500
$ 3,375,000
$ 2,625,000
# of Shares
$*
# of Shares
$*
133,656 $ 2,226,250
63,789 $ 1,062,500
63,789 $ 1,062,500
67,541 $ 1,125,000
875,000
52,532 $
21,506 $ 4,795,000
10,264 $
750,000
750,000
10,264 $
10,868 $ 1,500,000
8,453 $ 1,250,000
# of Shares
(Target)
Total ($*)
50,979 $13,700,000
7,974 $5,000,000
7,974 $5,000,000
15,948 $6,000,000
13,290 $4,750,000
*
Represents the target grant date faiff
but the PRSUs were granted in May 2023 following Committee appr
Compensation Table and the Grants of Plan-Based Awards Table included in this Proxy Statement forff
oved by the Compensation. The Committee appr
r value of the awards appr
oval of performance metrics and vesting requirements forff
a
a
a
oved the PRSU award values in February 2rr
023,
these awards. See the Summary
the actuat
l grant date fair value of such awards.
52
heach fof hwhiichh must occu br byy thhe endd off a hthree-yyear pe frforff mance periiodd e dindi gng on Decembber 31, 2025. The metrics
2023 Equity Award VesVV ting CriCC teria. The Committee determined that the 2023 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 on the date, or dates, that the Committee determines achievement of two u dnde lrlyiyi gng performance
metriics,
underlying the PRSUs target certain regulatory mrr
ilestones and the advancement of certain clinical programs, including advancing our
late-stage clinical pipeline, that we believe will drive stockholder value within the three-year performance period ending on December
31, 2025. The actuat
metrics, with minimum, target, upsu ide, and maximum levels specified in the Grants of Plan-Based Awards During the Fiscal Year
Ended December 31, 2023 tabla e. The Committee set the specific performance targets underlying each performance metric at
challenging levels that the Committee determined would require subsu tantial effort to be achieved. We believe disclosing the specific
performance targets while the performance period is ongoing could cause competitive harm, as providing this information could
provide competitors with insights in our strategy and clinical development programs that would be harmfulff
disclose the specific performance targets in 2026 following the Committee’s determination of performance and certificff ation.
l number of earned units subju ect to the PRSUs will be determined based on the level of achievement of such
to us. However, we will
Prior YeaYY r PRSPP Us Perforff marr
nce
2021 PRSUs. In Februar
ry 2021, the Company granted PRSUs to the NEOs, except for Dr. Onyia who received his PRSU
grant in November 2021 in connection with his new hire employment package, with a performance condition based on the Company's
achievement of certain clinical and regulatory orr
both adult and adolescent studies of crinecerfont for the treatment of CAH
within the 27-month performance period commencing on January 1, 2021 and ending on March 31, 2023 (the “2021 PRSUs”). The
Committee believed achievement of this performance metric would substantially increase stockholder value. The specificff performance
conditions underlying the 2021 PRSUs, as well as payout levels at minimum, target, and maximum achievement are set forth in the
following tabla e:
utcomes forff
Achievement
Level
Minimum
Target
Max
Perforff mance
Condition
Payout Level
(as a % of target)
Positive Phase 3 data in both adult and adolescent studies of crinecerfont for the
treatment of CAH.
CEO & Chief Medical Offiff cer: 75%
Other NEOs: 67%
Positive Phase 3 data in both adult and adolescent studies of crinecerfont for the
treatment of CAH and submu
adolescent or adult indication.
ission of an NDA to the FDA for either the
CEO & Chief Medical Offiff cer: 100%
Other NEOs: 100%
Positive Phase 3 data in both adult and adolescent studies of crinecerfont for the
treatment of CAH and submu
ission of two NDAs to the FDA, one for each of the
adolescent and aduldd t indications.
CEO & Chief Medical Offiff cer: 125%
Other NEOs: 133%
lAl hthough
ough hthe Compa yny dididd announce pposiitiive top-lilin de data froff m thhe hPhase 3 lcliiniic lal st diudi
t
es of criinecerfont iin dad luldd ts andd
iwi hth CA iH in 2023, hthese res lults were not re iceivedd p irior to hthe e
ppedidiat irics
Marchh 31, 2023 for thhe 2021 PRSUs. Acco drdiinglglyy, hthe performance co dindi itions of hthe 2021 PRSUs were not
hthe 2021 PRSUs vestedd, andd eachh of our NEOs forfeiit ded hthe 2021 PRSUs.
ixpira ition of thhe 27-monthh performance pe iri dod endidi gng on
hachiievedd, no por ition of
hachiievement of two u dnde lrlyiyi gng separate performance metriics r lelat ded to regulgulatoryy,rr
2022 PRSUs.UU In January 2022, the Company granted PRSUs to the NEOs that vest on hth de date, or ddates, hthat hthe Com imittee
ddetermiines
lcliiniic lal andd commerciiall mililestones,
each within the three-year performance ending on December 31, 2024 (the “2022 PRSUs”). One of the two performance conditions
underlying the 2022 PRSUs is based on the Company receiving FDA appr
oval of INGREZZA for the treatment of aduld ts with chorea
associated with Huntington's disease (the “INGREZZA HD Metric”). The specific performance condition underlying the INGREZZA
HD Metric, as well as payout levels at target and maximum achievement of the INGREZZA HD Metric are set forth in the tabla e
below. Assuming a target level of achievement for both the INGREZZA HD Metric and the second performance condition, the
relative weight of the INGREZZA HD Metric is 40% of the total 2022 PRSU award. If the Company failed to achieve the INGREZZA
HD Metric within the performance period, then no portion of the underlying RSUs associated with the INGREZZA HD Metric would
vest.
a
INGREZZA HD
Metric Achievement
Level
Target
Max
Perforff mance Condition for INGREZZA HD Metric
Company receives FDA approval of INGREZZA for the treatment of aduld ts with
chorea associated with Huntington's disease
Company receives FDA approval of INGREZZA for the treatment of aduld ts with
chorea associated with Huntington's disease and such approval does not require a
black box warning
Payout Level
(as a % of target with respect to the
INGREZZA HD Metric)
100%
175%
53
In August 2023, the Committee certifieff d that the Company had received FDA approval of INGREZZA for the treatment of
aduld ts with chorea associated with Huntington's disease and that the INGREZZA HD Metric was achieved at the target performance
level. Accordingly, the Committee appr
HD Metric. As of the date of this Proxy Statement, the performance period for the second performance condition forff
related to regulgulatoryy arr
pperformance co dindi ition whihille hthe performance pe iri dod iis ongoi
ppr
didiscllose hthe spe icifific performance co dindi ition f lolff
ppe iri dod.
louldd
to us. However, we willill
llo iwi gng hthe Com imittee's cer iftifiicfff atiion of a hchiievement or ex ipira ition of thhe performance
oved a payout at 100% of each NEO’s target amount of RSUs associated with the INGREZZA
the 2022 PRSUs
ilmilestones is s ongoing. We bbeliliev de diis lclosiingg thhe specififiicfff performance ta grget for thihis seco dnd
is in our strategygy andd cliliniic lal ddevellopment proggrams thhat w lould bd b he harmf lulff
ongoi gng co luldd cause competi iitiv he harm, as pr
iovididi gng hthiis iinformatiion c
iovidde competiitors
dnd commer ici lal
iwi hth iin isightght
a
Retirement Benefitsff
The Company’s matching contribution to the 401(k) Plan for 2023 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 2023.
Offiff cer Equity Ownership Guidelines
Since 2014, we have maintained equity ownership guidelines forff
our executive officers. The Committee amended these
our Chief Executive Officer from three to six times his base salary. The
guidelines in November 2018 to increase the guideline forff
equity ownership guidelines are designed to furff
ensuring that our executive officers have a meaningfulff
guidelines establa ish 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. When creating our equity ownership guidelines, the Committee adopted
the view that the in-the-money value of vested stock options are of equivalent ownership value to the value of such stock options had
they been exercised forff
shares of our common stock. Accordingly, all shares directly or beneficially owned by the executive offiff cer,
including the net exercisabla e 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.
ther align the interests of the executive officers with those of our stockholders by
financial stake in the Company’s long-term success. The equity ownership
The equity ownership requirements are as follows:
Chief Executive Officer
All other executive officers
6 times base salaryrr
1 times base salary
New executive officers are granted a fivff e-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 durd ing this fivff e-year period. When an executive
offiff cer does not meet the equity ownership requirements set forth in the guidelines, he/she is restricted froff m 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 froff m any shares necessary to fulfillff
guidelines is attained.
such transaction related tax obligations, until full compliance with the equity ownership
Annual compliance with the equity ownership guidelines is assessed durd ing the first quarter of each year. As of March 25,
2024, each of our executive officers was in compliance with the equity ownership guidelines.
Equity Trading Policies and Procedures
a
arance of impropriety. Such prohibited activities would include the purchase of put or call options, or the
The Company has policies and procedurd es 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 naturt e
may give rise to an appe
writing of such options as well as short sales, hedging transactions such as “cashless” collars, forff ward sales, equity swaps and other
related arrangement which may indirectly involve short-sale and any other transactions designed forff
in the Company’s stock price. In addition, no offiff cer, director or employee of the Company may margin, or make any offeff
any Company common stock, including without limitation, borrowing against such stock, at any time. Under the policies, a
contribution of the Company’s securities to an exchange fund not designed to hedge any decrease in the market value of Neurocrine's
equity securities is not considered a forff m of hedging; however, such contribution by an employee or director remains subject to the
other provisions of the Company’s insider trading policy, including provisions regarding quarterly trading blackout periods and pre-
clearance requirements.
from short-term movement
r to margin,
profitff
To the Company’s knowledge, there were no transactions involving hedging, pledging or margining Company common stock
during 2023, nor were there any such transactions as of the Record Date.
54
The Company also requires directors and executive offiff cers 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 forff
plans are required to have a waiting period from the election date to the date of the firff st transaction. Additionally, Company policy
restricts the executive officers froff m amending a 10b5-1 trading plan.
the vesting of RSUs. All 10b5-1
tax payments upon
u
Compensation Recoupment Policy
In Februar
ry 2017, we adopted a clawback policy, which provides that, in the event (i) we are required to prepare an accounting
restatement forff
any fisff cal quarter or year due to our material noncompliance with any finff ancial 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 froff m any offiff cer 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 offiff cer during
the twelve-month period preceding the restatement obligation (the "Prior Clawback Policy").
The SEC and the Nasdaq recently adopted final rulr es implementing the incentive-based compensation recovery provisions of
the Dodd-Frank Wall Street Reforff m and Consumer Protection Act, which require listed companies to develop and implement a policy
providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officff ers. In
October 2023 and in accordance with these finff al rules, the Committee appr
oved an Incentive Compensation Recoupment Policy (the
"Clawback Policy") that provides forff
recoupment of certain cash and equity-based incentive compensation paid to current and forff mer
executive officers of the Company in the event of an accounting restatement of the Company’s finff ancial statements. The Clawback
Policy appl
r October 2, 2023 (the "Effective Date"),
and replaces and supersedes our Prior Clawback Policy with respect to all incentive compensation that is received by a covered officer
on or afteff
covered officer prior to the Effective Date. For mor
to our 2023 Annuall Report on Form 10-K.
ies to all incentive compensation that is received by a covered officer on or afteff
r the October 2, 2023. The Prior Clawback Policy continues to appl
y to any incentive compensation that is received by a
lClawbba kck Polili ycy, whihi hch iis fifilledd as an e hixhibibit
ie inforff ma ition, see thhe fullll text of our
a
a
a
Tax and Accounting Considerations
Internal Revenue Code Sectiott n 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 taxabla e year is generally non-deductible unless the compensation qualifieff s forff
grandfatff hered exceptions (including the “performance-based compensation” exception) for certain compensation paid pursuant to a
written binding contract in effeff ct on November 2, 2017 and not materially modified on or afteff
r such date.
certain
In light of the repeal of the performance-based compensation exemption under Section 162(m), the Committee may authorize
compensation that is not deductible if it is determined to be appropriate and in the best interests of the Company and our stockholders.
Accountintt g ConCC siderations
The Company accounts forff
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 structurt e 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 reasonabla y likely to
have a material adverse effect on the Company. As part of its assessment, the Committee considered, among other fact
allocation of compensation among base salary and short- and long-term compensation, our approach to establa ishing Company-wide
and individual finff ancial, operational and other performance targets, our bonus structurt e 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.
ors, the
ff
55
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The folff
lowing tabla es set forff
th the compensation paid by the Company forff
2021, 2022 and 2023 to the NEOs named below.
Name and Principal Position (1)
Kevin C. Gorman, Ph.D.....................
Chief Executive Officff er
Matthew C. Abernethy ......................
Chief Financial Offiff cer
Kyle W. Gano, Ph.D..........................
Chief Business Development
and Sd Sttr tateg Oy Offifficer
Jude Onyia, Ph.D. ..............................
Chief Scientificff Offiff cer
Eiry W. Roberts, M.D........................
Chief Medical Offiff cer
Year
2021
2022
2023
2021
2022
2023
2021
2022
2023
2021
2022
2023
2021
2022
2023
Summary Compensation Table
Salary
($) (2)
$825,000
$860,000
$946,000
$588,800
$618,240
$646,061
$517,000
$550,605
$602,912
$52,340
$575,000
$638,250
$604,700
$631,912
$660,348
Bonus
($) (2)
$701,250
$989,000
$1,040,600
$264,960
$373,262
$355,335
$271,425
$332,428
$331,602
$26,170
$330,625
$351,038
$272,115
$345,182
$399,511
Option
Awards
($) (3)
$6,093,752
$4,875,106
$6,678,790
$2,625,019
$2,310,061
$3,187,536
$2,625,018
$2,775,053
$3,187,536
$4,500,035
$225,008
$3,375,024
$2,625,019
$2,625,057
$2,625,024
Stock
Awards
($) (4)
$6,406,366
$5,125,079
$7,021,386
$2,375,068
$1,570,128
$1,812,563
$2,375,067
$1,725,086
$1,812,563
$3,000,136
$1,275,146
$2,625,124
$2,875,113
$2,075,144
$2,125,112
All
Other
Compensation
($) (5)
$55,044
$53,342
$64,036
$53,003
$52,632
$56,387
$22,814
$38,485
$55,602
$2,949
$55,520
$233,780
$48,649
$57,986
$63,852
Total ($)
$14,081,412
$11,902,527
$15,750,812
$5,906,850
$4,924,323
$6,057,882
$5,811,324
$5,421,657
$5,990,215
$7,581,630
$2,461,299
$7,223,216
$6,425,596
$5,735,281
$5,873,847
(1)
(2)
(3)
(4)
(5)
a
are as of December 31, 2023.
2021, 2022 and 2023 (other than Dr. Onyia's 2021 new hire award) are based on per share Black-Scholes values of
l grant date fair value in accordance with Accounting Standards Codification 718-10, Compensation—Stock Compensation
nd bonus figures represent amounts earned durdd ing each respective fisff cal year, regardless of whether part or all of such amounts were paid in
The titles and capacities set forth in the tabla e above
Salary arr
subsu equent fiscal year(s). Bonuses are awarded pursuant to a bonus program.
The amounts shown are the fulff
(ASC 718). The assumptions used to calculate the grant date fair value of option awards are set forff
Statements included in the Company’s Annual Report on Form 10-K forff
date fair values of option awards forff
$53.52, $34.81 and $49.97, respectively. The grant date fair value of Dr. Onyia's new hire option award granted in 2021 is based on per share Black-Scholes
value of $37.45.
Stock awards consist of RSUs and PRSUs and may be subject to deferred delivery arr
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 9 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on
Form 10-K forff
r values of RSUs and PRSUs granted in 2021, 2022 and
RSUs granted in 2023 are based on the Company’s closing market price per share on the grant date, which was $117.63 for all 2021 grants, $79.02 for all
2022 grants and $103.52 for all 2023 RSU grants (other than Dr. Onyia's 2021 new hire grant, forff which the Company's closing market price per share on the
grant date was $84.74). The fair values of PRSUs granted in 2023 are based on the Company's closing market price per share on the grant date, which was
$94.06 for 2023 PRSU grants. The PRSU values included in the tabla e above
highest level of performance metrics are achieved, the PRSU values based on the maximum number of shares issuable to each NEO forff
Dr. Gorman – $9,590,075, Mr. Abernethy – $1,499,975, Dr. Gano – $1,499,975, Dr. Onyia – $2,999,950, and Dr. Roberts – $2,500,021.
Includes all other compensation as described in the table below.
are based on the target number of shares subject to the PRSU awards. If the
the year ended December 31, 2023 filed with the SEC on Februarr
the year ended December 31, 2023 filed with the SEC on Februarr
th under Note 9 of the Notes to the Consolidated Financial
rrangements. The amounts shown are the fulff
l grant date fair value in
ry 9, 2024. The faiff
2023 are as folff
lows:
a
ry 9, 2024. The grant
56
All Oll
ell
ther Compensation TablTT
Name
Kevin C. Gorman, Ph.D. .........................................
Matthew C. Abernethy ............................................
Kyle W. Gano, Ph.D................................................
Jude Onyia, Ph.D.....................................................
Eiry W. Roberts, M.D. ............................................
401(k)
Employer
Match
$17,100
$18,500
$19,800
$17,100
$18,500
$19,800
$15,510
$17,895
$19,800
—
$18,500
$19,800
$17,100
$18,500
$19,800
Insurance
Premiums (1)
$37,944
$34,842
$44,236
$33,431
$32,732
$34,987
$7,304
$20,590
$33,155
$2,249
$35,620
$37,380
$30,149
$38,086
$42,452
Year
2021
2022
2023
2021
2022
2023
2021
2022
2023
2021
2022
2023
2021
2022
2023
Inducement
Advance (2)
Other (3)
—
—
—
—
—
—
—
—
—
—
—
$175,000
—
—
—
—
—
—
$2,472
$1,400
$1,600
—
—
$2,647
$700
$1,400
$1,600
$1,400
$1,400
$1,600
Total
Other
$55,044
$53,342
$64,036
$53,003
$52,632
$56,387
$22,814
$38,485
$55,602
$2,949
$55,520
$233,780
$48,649
$57,986
$63,852
(1)
(2)
(3)
The amounts in this column represent the costs for medical insurance forff Company-wide plans, as well as disabia lity insurance premiums and related tax gross-
up amounts.
For Dr. Onyia, the amount in this column reflects a one-time cash inducement advance in the amount of $175,000, which was deemed earned on November
29, 2023 when Dr. Onyia completed two fulff
l years of employment with the Company. The cash inducement advance was granted as part of Dr. Onyia's new
hire package when he joined the Company in November 2021.
The amounts in this column include expenses associated with executive physical examinations and employer contributions to health savings accounts.
Grants of Plan-Based Awards During 2023
The folff
lowing tabla e sets forff
th certain information regarding plan based awards granted by the Company during 2023 to the
NEOs below:
timated Future Payouts Under PRSU Awards (1)
Name
Kevin C. Gorman, Ph.D.
Approval
Date
2/1/2023
Grant
Date
2/13/2023
Minimum
(#)
Target
(#)
Upside
(#)
Maximum
(#)
5/19/2023
5/19/2023 (1)
28,038
50,979
76,468
101,957
Matthew C. Abernethy ..
Kyle W. Gano, Ph.D......
Jude Onyia, Ph.D. ..........
Eiry W. Roberts, M.D....
2/1/2023
2/1/2023
5/19/2023
2/1/2023
2/1/2023
2/13/2023
2/13/2023
5/19/2023 (1)
4,385
7,974
11,960
15,947
2/13/2023
2/13/2023
5/19/2023
5/19/2023 (1)
4,385
7,974
11,960
15,947
2/1/2023
2/1/2023
5/19/2023
2/1/2023
2/1/2023
5/19/2023
2/1/2023
2/13/2023
2/13/2023
5/19/2023 (1)
8,771
15,948
23,920
31,894
2/13/2023
2/13/2023
5/19/2023 (1)
2/13/2023
7,309
13,290
19,934
26,579
All Other
Stock Awards:
Number of
Shares of
Stock or Units
(#)(2)
All Other
Option Awards:
Number of
Securities
Underlying
Options (#)(2)
Exercise
Price of
Option
Awards
($/Sh)(2)
Grant Date
Fair
Value (3)
21,506
10,264
10,264
10,868
8,453
— $2,226,301
— $4,795,085
133,656
$103.52 $6,678,790
— $1,062,529
— $750,034
63,789
$103.52 $3,187,536
— $1,062,529
— $750,034
63,789
$103.52 $3,187,536
— $1,125,055
— $1,500,069
67,541
$103.52 $3,375,024
— $875,055
— $1,250,057
52,532
$103.52 $2,625,024
(1)
Represents the number of shares that may be earned under the PRSUs granted to NEOs in 2023 under the Company’s Amended 2020 Plan. The PRSUs will
vest on the date, or dates, that the Committee determines achievement of two underlying performance metrics, each of which must occur beforff e December 31,
2025. Such metrics relate to the advancement of certain regulatory mrr
ilestones and clinical programs which we believe will drive stockholder value within the
36-month performance period commencing on January 1, 2023 and ending on December 31, 2025. The actuat
determined based on the level of achievement of such metrics, with minimum, target, upsu ide and maximum levels specified.
l number of units subju ect to the PRSUs will be
57
(2)
(3)
Option awards granted have 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
over a four-year period.
Refleff cts the grant date per share Black-Scholes value of $49.97 for option awards and the grant date per share value of $103.52 for RSUs, each granted on
Februarr
ry 13, 2023, and $94.06 for PRSUs which were granted on May 19, 2023, all of which were calculated in accordance with ASC 718.
years and have an option term of ten years. RSUs vest annually, on a pro-rata basis,
ff
Agreements with Named Executive Offiff cers
Kevin Cii
. GCC orG marr
n, 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 orr
to annual adjustment by the Board of Directors (subsu equent to entering into the employment contract, Dr. Gorman became Chief
Executive Officer and his annual base salary f
the Company with or without cause, construcr
annual bonus as determined by the Board of Directors, based upon
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.
esignation; (iii) Dr. Gorman is eligible for a discretionary
achieving certain performance criteria; and (iv) each year starting
2023 is $946,000); (ii) the agreement terminates upon death, disabia lity, termination by
orff
tive termination or voluntary r
f $400,000, subju ect
u
rr
rr
Matthew C. Abernethyh has an employment contract that provides that: (i) Mr. Abernethy will be entitled to receive an initial
tive termination or voluntary r
base salary of $420,000 per year, which was his base salary f
salary for 2023 is $646,061); (ii) the agreement terminates upon death, disabia lity, termination by the Company with or without cause,
esignation; (iii) Mr. Abernethy is eligible for a discretionary annual bonus as determined by the
construcr
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 shall receive 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 shall receive relocation benefitsff
relocation advance in the amount of $140,000.
2018, subju ect to future adjud stments (Mr. Abernethy’s annual base
, including a one-time cash
orff
u
rr
rr
Kyle W. Gano, Ph.PP D. has an employment contract that provides that: (i) Dr. Gano will serve as the Company’s Chief Business
f $310,000, subju ect to annual adjustment by the
Development Officer commencing on November 12, 2014 at an initial annual salary orr
Board of Directors (Dr. Gano’s annual base salary f
termination by the Company with or without cause, construcr
discretionary annual bonus as determined by the Board of Directors, based upon
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.
esignation; (iii) Dr. Gano is eligible for a
achieving certain performance criteria; and (iv) Dr.
2023 is $602,912); (ii) the agreement terminates upon death, disabia lity,
tive termination or voluntary r
u
orff
rr
rr
Jude Onyin a, Ph.D. has an employment contract that provides that: (i) Dr. Onyia will serve as the Company’s Chief Scientificff
Offiff cer commencing on November 29, 2021 at an initial annual salary orr
orff
Directors (Dr. Onyia's annual base salary f
the Company with or without cause, construcr
annual bonus as determined by the Board of Directors, based upon
u
receive stock option awards and equity awards with the number of shares, vesting terms, and exercise price as set forth in the
agreement and as shall be determined by the Board of Directors; and (v) Dr. Onyia shall receive a one-time cash inducement advance
in the amount of $175,000, which was deemed earned on November 29, 2023 when Dr. Onyia completed two fulff
employment with the Company).
death, disabia lity, termination by
esignation; (iii) Dr. Onyia is eligible for a discretionary
2023 is $638,250); (ii) the agreement terminates upon
rr
tive termination or voluntary r
achieving certain performance criteria; (iv) Dr. Onyia is eligible to
f $575,000, subju ect to annual adjustment by the Board of
l years of
u
rr
Eiryii W. Roberts,tt 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 orr
Directors (Dr. Roberts’ annual base salary f
orff
the Company with or without cause, construcr
annual bonus as determined by the Board of Directors, based upon
u
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 shall receive a one-time cash inducement advance in the amount of $225,000,
which was deemed earned in early 2021 when Dr. Roberts completed two fulff
(vi) Dr. Roberts shall receive relocation benefitsff
f $520,000, subju ect to annual adjustment by the Board of
2023 is $660,348); (ii) the agreement terminates upon death, disabia lity, termination by
esignation; (iii) Dr. Roberts is eligible for a discretionary
tive termination or voluntary r
achieving certain performance criteria; (iv) Dr. Roberts is eligible
, including a one-time cash relocation advance in the amount of $220,000.
l years of employment with the Company; and
rr
rr
58
Outstanding Equity Awards at Fiscal Year-End. The folff
of December 31, 2023:
lowing tabla e sets forff
th the outstanding equity awards held by the NEOs as
Outstanding Equity Awards Table
Option Awards
Stock Awards
Award
Grant and
Commence
ment
of Vesting
Date
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Name
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
Option
Exercise
Price ($)
Option
Expiration
Date
Number
of
Shares
or Units
of
Stock
That
Have
Not
Vested (#) (3)
Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested ($)
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested ($)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
26,576 (4)
$3,501,654
—
$0
5
0,979 (5
)
$
6,716,993
—
—
—
—
—
—
—
—
6,075 (4)
$800,442
—
—
—
—
—
—
5,771
8,635
15,424
2
1,506
—
—
—
2,430
3,720
7,309
—
—
—
—
—
—
$760,387
$1,137,748
$2,032,266
$2,833,631
—
—
—
$320,177
$490,147
$963,034
10,264
$1,352,385
—
—
—
—
—
—
—
—
—
3,037
3,720
8,780
10,264
—
8,852
713
—
—
—
—
—
—
—
$400,155
$490,147
$1,156,853
$1,352,385
7,974 (5)
$1,050,654
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6,075 (4)
$800,442
—
—
—
7,974 (5)
$1,050,654
$1,166,340
$93,945
—
—
9,112 (4)
$1,200,597
Kevin C. Gorman, Ph.D. ..........
1/16/2014
2/3/2015
2/5/2016
2/6/2017
2/5/2018
2/7/2019
2/6/2020
2/8/2021
1/31/2022
2/13/2023
5/19/2023
12/1/2017
2/7/2019
2/6/2020
2/8/2021
1/31/2022
2/13/2023
5/19/2023
1/16/2014
2/3/2015
2/5/2016
2/6/2017
2/5/2018
2/7/2019
2/6/2020
2/8/2021
1/31/2022
2/13/2023
5/19/2023
44529
1/31/2022
2/13/2023
5/19/2023
1/8/2018
2/7/2019
2/6/2020
2/8/2021
1/31/2022
2/13/2023
5/19/2023
Matthew C. Abernerr
thy .............
Kyle W. Gano, Ph.D.................
Jude Onyia, Ph.D......................
Eiry W. Roberts, M.D ..............
167,858
146,105
109,100
207,400
104,200
133,345
139,627
80,653
67,107
27,845
—
45,000
83,341
58,791
34,743
31,798
13,289
—
75,000
65,000
36,400
60,000
30,400
66,673
73,488
34,743
38,199
13,289
—
62,588
3,097
14,071
—
5,140
40,673
51,441
34,743
21,994
10,944
—
—
—
—
—
—
—
6,071
33,210
72,942
105,811
—
—
—
2,556
14,306
34,564
50,500
—
—
—
—
—
—
—
3,195
14,306
41,521
50,500
—
57,581
3,367
53,470
—
—
—
2,237
14,306
39,277
41,588
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$19.59
$32.99
$35.99
$43.24
$81.49
$81.05
$102.90
$117.63
$79.02
$
103.52
—
$73.60
$81.05
$102.90
$117.63
$79.02
$103.52
—
$19.59
$32.99
$35.99
$43.24
$81.49
$81.05
$102.90
$117.63
$79.02
$103.52
—
$84.74
$79.02
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)
2/8/2031 (2)
1/31/2032 (2)
2/13/2033 (2
)
12/1/2027 (1)
2/7/2029 (2)
2/6/2030 (2)
2/8/2031 (2)
1/31/2032 (2)
2/13/2033 (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)
2/8/2031 (2)
1/31/2032 (2)
2/13/2033 (2)
11/29/2031 (1)
1/31/2032 (2)
$103.52
2/13/2033 (2)
10,868
$1,431,968
—
—
—
$77.81
$81.05
$102.90
$117.63
$79.02
$103.52
—
1/8/2028 (1)
2/7/2029 (2)
2/6/2030 (2)
2/8/2031 (2)
1/31/2032 (2)
2/13/2033 (2
)
—
—
—
2,126
3,720
8,306
8
,453
—
—
—
—
$280,122
$490,147
$1,094,399
$1,113,767
15,948 (5)
$2,101,308
—
—
—
—
—
—
—
—
9,112 (4)
$1,200,597
—
—
—
13,290 (5)
$1,751,090
(1)
(2)
(3)
(4)
(5)
ff
ff
ff
years, subju ect to an initial one-year “cliff.ff ”
years.
years.
Vests monthly over four
Vests monthly over four
Vests annually over four
Consists of PRSUs. Represents the target number of shares that may be earned under the PRSUs granted to NEOs in 2022 under the Company’s 2020 Plan.
The PRSUs will vest on the date, or dates, that the Committee determines achievement of two underlying performance metrics, each of which must occur by
December 31, 2024. Such metrics relate to the advancement of certain clinical programs which we believe will drive stockholder value within the 36-month
l number of units subju ect to the PRSUs will be determined
performance period commencing on January 1, 2022 and ending on December 31, 2024. The actuat
based on the level of achievement of such metrics, with minimum, target and maximum levels specified.
Consists of PRSUs. Represents the target number of shares that may be earned under the PRSUs granted to NEOs in 2023 under the Company’s 2020 Plan.
The PRSUs will vest on the date, or dates, that the Committee determines achievement of two underlying performance metrics, each of which must occur by
December 31, 2025. Such metrics relate to regulatory mrr
value within the 36-month performance period commencing on January 1, 2023 and ending on December 31, 2025. The actuat
PRSUs will be determined based on the level of achievement of such metrics, with minimum, target and maximum levels specified.
ilestones and the advancement of certain clinical programs which we believe will drive stockholder
l number of units subju ect to the
59
Option Exercises and Stock Vested During the Year. The folff
vested during 2023 along with their respective values at December 31, 2023 for the NEOs:
lowing tabla e sets forff
th the options exercised and stock awards that
Option Exercises and Stock Vested Table
Name
Kevin C. Gorman, Ph.D.............................................................................
Matthew C. Abernethy...............................................................................
Kyle W. Gano, Ph.D. .................................................................................
Jude Onyia, Ph.D. ......................................................................................
Eiry W. Roberts, M.D. ...............................................................................
Option Awards (1)
Stock Awards (2)
Number of
Shares
Acquired on
Exercise (#)
—
—
—
—
100,000
Value
Realized on
Exercise ($) (3)
—
—
—
—
4,151,021
Number of
Shares
Acquired on
Vesting (#)
77,989
38,930
39,256
19,293
40,212
Value
Realized on
Vesting ($) (4)
$8,222,913
$4,081,420
$4,119,477
$2,075,033
$4,225,625
(1)
(2)
(3)
(4)
Inforff mation relates to stock option exercises during 2023.
Inforff mation relates to RSUs and PRSUs that vested during 2023.
Calculated by multiplying the number of shares acquired upon
the Company’s common stock at the time of exercise.
Calculated by multiplying the number of shares acquired upon
federal and state income tax liabia lities.
u
u
exercise of stock options by the diffeff
rence between the exercise price and the market price of
vesting of RSUs and PRSUs by the average price of shares sold for purpos
rr
es of satisfying
Potential Payments Upon Termination or Change-in-Control. The folff
payabla e to the NEOs in the event of a termination prior to or following a change in control, assuming such event occurred on
December 31, 2023:
th the potential severance benefits
lowing tabla es set forff
Potential Payment Upon Termination Table*
Name
Kevin C. Gorman, Ph.D........................
Matthew C. Abernethy .........................
Kyle W. Gano, Ph.D.............................
Jude Onyia, Ph.D. .................................
Eiry W. Roberts, M.D...........................
Salary (1)
$1,182,500
$646,061
$602,912
$638,250
$660,348
Bonus (2)
$1,182,500
$323,031
$301,456
$319,125
$330,174
Accrued
Compensation (3)
$136,443
$93,183
$86,958
$76,713
$79,395
Stock
Awards (4)
$8,801,736
$2,796,723
$3,135,805
$2,947,024
$2,771,321
Medical (5)
$55,305
$34,992
$33,156
$37,380
$42,456
Total
$11,358,484
$3,893,990
$4,160,287
$4,018,492
$3,883,694
*
(1)
(2)
(3)
(4)
(5)
tive termination, or deemed termination, prior to a change in control.
Refleff cts a termination without cause or due to a construcrr
Based on salary as of December 31, 2023.
Based on bonus targets established by the Board of Directors forff
Accruerr d compensation is comprised of vacation pay earned and unpaid as of December 31, 2023.
The amounts in this column represent the intrinsic value of ‘in-the money’ unvested options and RSUs as of December 31, 2023 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 29, 2023 of
$131.76.
Medical is comprised primarily of health insurance premiums for the period specified in each executive officer’s employment contract.
2023.
60
Potential Payment Upon Change-in-Control Table*
Name
Kevin C. Gorman, Ph.D........................
Matthew C. Abernethy .........................
Kyle W. Gano, Ph.D.............................
Jude Onyia, Ph.D. .................................
Eiry W. Roberts, M.D...........................
Salary (1)
$1,892,000
$969,092
$904,368
$957,375
$990,522
Bonus (2)
$1,892,000
$484,546
$452,184
$478,688
$495,261
Accrued
Compensation (3)
$136,443
$93,183
$86,958
$76,713
$79,395
Stock
Awards (4)
$24,462,209
$8,501,775
$9,160,926
$10,389,185
$9,442,741
Medical (5)
$88,488
$52,488
$49,734
$56,070
$63,684
Total (6)
$28,471,140
$10,101,084
$10,654,170
$11,958,031
$11,071,603
*
(1)
(2)
(3)
(4)
(5)
(6)
u
to a construcrr
to be provided upon
a termination without cause, or dued
tive termination, within a specified time following a change-in-control.
Refleff cts benefitsff
Based on salary as of December 31, 2023.
Based on bonus targets established by the Board of Directors forff
Accruerr d compensation is comprised of vacation pay earned and unpaid as of December 31, 2023.
The amounts in this column represent the intrinsic value of ‘in-the money’ unvested options, PRSUs, and RSUs as of December 31, 2023 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 29, 2023 of $131.76. See the discussion that follows these tables forff
presented assuming they are paid out at target.
Medical is comprised primarily of health insurance premiums for the period specified in each executive officer’s employment contract.
The totals shown here do not take into account the appl
ication of any “best-afteff
otherwise be subject to the excise tax provisions of Section 280G of the Internal Revenue Code.
a description of the applicable vesting provisions. Unvested PRSUs are
y if an executive officer’s payments would
r-tax” provision that may appl
2023.
a
a
Potential Payment Upon Termination by Disability Table*
Name
Kevin C. Gorman, Ph.D. ......................
Matthew C. Abernethy .........................
Kyle W. Gano, Ph.D.............................
Jude Onyia, Ph.D..................................
Eiry W. Roberts, M.D. .........................
Salary (1)
$1,182,500
$646,061
$602,912
$638,250
$660,348
Bonus (2)
$1,182,500
$323,031
$301,456
$319,125
$330,174
Accrued
Compensation (3)
$136,443
$93,183
$86,958
$76,713
$79,395
Stock
Awards (4)
$8,801,736
$2,796,723
$3,135,805
$2,947,024
$2,771,321
Medical (5)
$55,305
$34,992
$33,156
$37,380
$42,456
Total
$11,358,484
$3,893,990
$4,160,287
$4,018,492
$3,883,694
*
(1)
(2)
(3)
(4)
(5)
to disabia lity.
Refleff cts a termination dued
Based on salary as of December 31, 2023.
Based on bonus targets established by the Board of Directors forff
Accruerr d compensation is comprised of vacation pay earned and unpaid as of December 31, 2023.
The amounts in this column represent the intrinsic value of ‘in-the money’ unvested options and RSUs as of December 31, 2023 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 29, 2023 of
$131.76.
Medical is comprised primarily of health insurance premiums for the period specified in each executive officer’s employment contract.
2023.
Potential Payment Upon Termination by Death Table*
Name
Kevin C. Gorman, Ph.D................................................................................
Matthew C. Abernethy .................................................................................
Kyle W. Gano, Ph.D.....................................................................................
Jude Onyia, Ph.D. .........................................................................................
Eiry W. Roberts, M.D...................................................................................
Bonus (1)
$946,000
$323,031
$301,456
$319,125
$330,174
Accrued
Compensation (2)
$136,443
$93,183
$86,958
$76,713
$79,395
Stock
Awards (3)
$8,801,736
$2,796,723
$3,135,805
$2,947,024
$2,771,321
Total
$9,884,179
$3,212,937
$3,524,219
$3,342,862
$3,180,890
*
(1)
(2)
(3)
to death.
Refleff cts a termination dued
Based on bonus targets established by the Board of Directors forff
Accruerr d compensation is comprised of vacation pay earned and unpaid as of December 31, 2023.
The amounts in this column represent the intrinsic value of ‘in-the money’ unvested options and RSUs as of December 31, 2023 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 29, 2023 of
$131.76.
2023.
61
The folff
lowing is a description of the arrangements under which the NEOs may be entitled to potential payments uponu
a
termination without cause or resignation dued
lowing one or more of the folff
or death. Resignation dued
material adverse changes in the nature of such executive’s employment, as specified in the agreement, which is not cured folff
notificff ation:
tive termination may include an executive’s resignation folff
tive termination (including following a change-in-control) or upon disabia lity
lowing
lowing
to a construcrr
to construcrr
a significant reduction in the executive or the executive supervisor’s duties or responsibilities,
a material reduction in base salary,
•
•
• material relocation, or
• material breach of the executive’s employment agreement.
Dr. Grr
orG marr
n is entitled to 1.25 times the amount of his annual base salary arr
nd target annual bonus to be paid equally over
r the date of termination, and
15 months, an acceleration of unvested shares that would have vested over the 15 continuous months afteff
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 construcr
tive termination. In the event of such termination
within six months afteff
r 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 forff
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 dued
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 fulff
denominator of which is 12, an acceleration of unvested shares that would have vested over the 15 continuous months afteff
termination, and payment of COBRA bRR
the event of a termination dued
unvested shares that would have vested over the 15 continuous months afteff
target annual bonus multiplied by a fraff ction the numerator of which is the number of fulff
fiscal year and the denominator of which is 12 and any accrued and unpaid compensation on the date of termination.
l months of employment by Dr. Gorman in the fisff cal year and the
r the date of
to continue then-current coverage for a period of 15 months following termination. In
r the date of termination, a lump sum amount equal to his
iaries or estate, would be entitled to an acceleration of
l months of employment by Dr. Gorman in the
to Dr. Gorman’s death, his beneficff
eral and state income
to disabia lity, Dr. Gorman is
the increase in fedff
enefitsff
Mr. Abernethyh is entitled to 1.0 times the amount of his annual base salary arr
nd target annual bonus to be paid equally over
r the date of termination, and
r-tax” provision. The best-afteff
r the consummation of a change in control, Mr. Abernethy is entitled to 1.5 times the amount of his annual base
12 months, an acceleration of unvested shares that would have vested over the 12 continuous months afteff
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 construcr
tive termination. In the event of such termination
within six months afteff
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 afteff
afteff
subju ect to the excise tax provisions of Section 280G of the Internal Revenue Code, the Company may reduce the change in control
icable taxes, the finff al payments would be larger than if the change in control payments
payments to Mr. Abernethy if, aff
were not reduced and therefor subject to an excise tax. In the event of termination dued
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 fulff
of which is 12, an acceleration of unvested shares that would have vested over the 12 continuous months afteff
and payment of COBRA bRR
termination dued
to Mr. Abernethy’s death, his beneficff
would have vested over the 12 continuous months afteff
multiplied by a fraction the numerator of which is the number of fulff
the denominator of which is 12 and any accruer d and unpaid compensation on the date of termination.
l months of employment by Mr. Abernethy in the fiscal year and the denominator
r the date of termination,
enefitff s to continue then-current coverage for a period of 12 months following termination. In the event of a
iaries or estate, would be entitled to an acceleration of unvested shares that
r the date of termination, a lump sum amount equal to his target annual bonus
l months of employment by Mr. Abernethy in the fiscal year and
r-tax provision provides that if the change in control payment due to Mr. Abernethy would be
r a change in control is subject to a “best-
to disabia lity, Mr. Abernethy is entitled to
fter all appl
a
62
Dr. Grr
anGG o is entitled to 1.0 times the amount of his annual base salary arr
nd target annual bonus to be paid equally over
r the date of termination, and
r the consummation of a change in control, Dr. Gano is entitled to 1.5 times the amount of his annual base salaryrr
12 months, an acceleration of unvested shares that would have vested over the 12 continuous months afteff
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 construcr
tive termination. In the event of such termination
within six months afteff
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-afteff
r-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, aff
icable taxes, the finff al payments would be larger than if the change in control payments were not reduced and therefor
subju ect to an excise tax. In the event of termination dued
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 fulff
unvested shares that would have vested over the 12 continuous months afteff
to continue then-current coverage for a period of 12 months following termination. In the event of a termination dued
death, his beneficff
months afteff
which is the number of fulff
and unpaid compensation on the date of termination.
r the date of termination, a lump sum amount equal to his target annual bonus multiplied by a fraction the numerator of
l months of employment by Dr. Gano in the fisff cal year and the denominator of which is 12, an acceleration of
l months of employment by Dr. Gano in the fisff cal year and the denominator of which is 12 and any accruerr d
iaries or estate, would be entitled to an acceleration of unvested shares that would have vested over the 12 continuous
to disabia lity, Dr. Gano is entitled to 12 months of base salary paid semi-
r the date of termination, and payment of COBRA benefits
to Dr. Gano’s
fter all appl
a
Dr. Orr
nyia is entitled to 1.0 times the amount of his annual base salary arr
nd target annual bonus to be paid equally over 12
r-tax provision provides that if the change in control payment due to Dr. Onyia would be subject to the
r the date of termination, and
months, an acceleration of unvested shares that would have vested over the 12 continuous months afteff
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 construcr
tive termination. In the event of such termination
within six months afteff
r the consummation of a change in control, Dr. Onyia 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. Onyia after a change in control is subject to a “best-after-
tax” provision. The best-afteff
excise tax provisions of Section 280G of the Internal Revenue Code, the Company may reduce the change in control payments to Dr.
Onyia if, afteff
thereforff
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 fulff
unvested shares that would have vested over the 12 continuous months afteff
to continue then-current coverage for a period of 12 months following termination. In the event of a termination dued
death, his beneficff
months afteff
which is the number of fulff
and unpaid compensation on the date of termination.
r all applicable taxes, the finff al payments would be larger than if the change in control payments were not reduced and
to disabia lity, Dr. Onyia is entitled to 12 months of base salary paid
r the date of termination, a lump sum amount equal to his target annual bonus multiplied by a fraction the numerator of
l months of employment by Dr. Onyia in the fiscal year and the denominator of which is 12, an acceleration of
iaries or estate, would be entitled to an acceleration of unvested shares that would have vested over the 12 continuous
l months of employment by Dr. Onyia in the fiscal year and the denominator of which is 12 and any accruer d
r the date of termination, and payment of COBRA benefits
subju ect to an excise tax. In the event of termination dued
to Dr. Onyia’s
Dr. Rrr
obertstt
is entitled to 1.0 times the amount of her annual base salary arr
nd target annual bonus to be paid equally over
r the date of termination, and
r-tax” provision. The best-afteff
tive termination. In the event of such termination
r the consummation of a change in control, Dr. Roberts is entitled to 1.5 times the amount of her annual base
12 months, an acceleration of unvested shares that would have vested over the 12 continuous months afteff
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 construcr
within six months afteff
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-
afteff
the excise tax provisions of Section 280G of the Internal Revenue Code, the Company may reduce the change in control payments to
r all applicable taxes, the finff al payments would be larger than if the change in control payments were not reduced
Dr. Roberts if, afteff
and therefor subject to an excise tax. In the event of termination dued
to disabia lity, 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 fulff
acceleration of unvested shares that would have vested over the 12 continuous months afteff
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 beneficff
iaries or estate, would be entitled to an acceleration of unvested shares that would have vested over
the 12 continuous months afteff
the numerator of which is the number of fulff
12 and any accruerr d and unpaid compensation on the date of termination.
r the date of termination, a lump sum amount equal to her target annual bonus multiplied by a fraction
l months of employment by Dr. Roberts in the fiscal year and the denominator of which is 12, an
l months of employment by Dr. Roberts in the fiscal year and the denominator of which is
r-tax provision provides that if the change in control payment due to Dr. Roberts would be subju ect to
r the date of termination, and payment of
63
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. (the “CEO Pay Ratio”). To identify off
ur median employee, we used the folff
lowing methodology:
CEO PAY RATIO
•
•
•
To determine our total population of employees, we included all full-time and part-time employees as of December 31,
2023.
To identify our median employee froff m our employee population, we calculated the aggregate amount of each
employee’s 2023 base salary (using a reasonabla e estimate of the hours worked and overtime actuat
for hourly employees and actuat
and the grant date faiff
the value of the equity awards granted to our named executive officers and reported in our Summary Compensation
Tabla e.
r value of equity awards granted in fisff cal 2023 using the same methodology we use forff
our remaining employees) and bonuses attributable to 2023 performance
lly paid durd ing 2023
estimating
l salary prr
aid forff
In making this determination, we annualized the base salary arr
employed by us forff
less than the entire fisff cal year.
nd target bonus compensation of employees who were
Afteff
r identifyiff ng our median employee, we then calculated compensation forff
such median employee using the same
methodology used to calculate compensation forff
median of the annual total compensation of our employees (other than our CEO) was $269,081 and the annual total compensation of
our CEO, as reported in the Summary Crr
information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees
a
was appr
ompensation Table included in this Proxy Statement, was $15,750,812. Based on this
our NEOs as reported in the 2023 Summary Compensation Table. For 2023, the
oximately 58 to 1.
The CEO Pay Ratio above represents our reasonabla e estimate calculated in a manner consistent with SEC rulr es and appl
icable
he median employee, and each company
guidance. SEC rulr es and guidance provide significant fleff xibility in how companies identify t
may use a diffeff
rent assumptions particular to that company. As a result, and as explained by the SEC
when it adopted these rulr es, 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,rr
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.
rent methodology and make diffeff
but rather to allow
a
ff
In addition to the information above
a
, in order to reflect our employee compensation practices, we have also calculated the
f our median employee while taking only annual base salary i
annual base salary orr
our CEO as compared to the annual base salary orr
employee, we used the appl
a
(other than our CEO) was $161,926, and the annual base salary orr
included in this Proxy Statement, was $946,000. Based on this inforff mation, the ratio of the annual base salary orr
median of the annual base salary of all employees (other than the CEO) was approximately 6 to 1. Neither the Compensation
Committee nor our management used this ratio to make compensation decisions.
f such median employee. In calculating the annual base salary orr
. For fiscal 2023, the median of the annual base salary orr
f our CEO, as reported in the Summary Compensation Table
icable methodology listed above
f our median
a
nto account, as well as the ratio of the base salary orr
f our CEO to the
f our employees
rr
f
64
ITEM 402(v) PAY VERSUS PERFORMANCE
The disclosure included in this section is prescribed by SEC rulr es and does not necessarily align with how the Company or the
Compensation Committee view the link between the Company’s performance and NEO pay and the Compensation Committee does
not utilize CAP (as defined below) as the basis forff making compensation decisions. For additional inforff mation about our pay-for-
performance philosophy and how we align executive compensation with Company performance, refer to the Compensation Discussion
and Analysis.
Required Tabular Disclosure of Pay Versus Perforff mance
The folff
lowing tabla e reports the compensation of our Principal Executive Officer ("PEO") or CEO and the average
compensation of the other non-PEO named executive officff ers ("Non-PEO NEOs") as reported in the Summary Compensation Tabla e
for the past four fiscal years, as well as Compensation Actuat
lly Paid ("CAP") as calculated under new SEC Pay-Versus-Performance
("PVP") disclosure requirements and certain performance measures required by the rules. The disclosure covers our four most-recent
fiscal years, which will expand incrementally over the next year to a rolling fivff e years.
Value of Initial Fixed $100
Investment Based On:
Summary
Compensation
Table Total for
PEO ($)(1)
Compensation
Actually Paid
to PEO ($)(2)
(b)
(c)
$15,750,812
$11,902,527
$14,081,412
$13,880,632
$12,335,515
$21,886,517
$4,496,176
$8,176,596
Average
Summary
Compensation
Table Total for
Non-PEO
NEOs ($)(3)
(d)
$6,286,290
$5,200,614
$6,429,791
$6,522,476
Average
Compensation
Actually Paid
to Non-PEO
NEOs ($)(4)
(e)
$5,262,182
$11,398,982
$3,012,565
$4,030,852
Total
Shareholder
Return ($)(5)
Peer Group
Total
Shareholder
Return ($)(5)
GAAP Net
Income
(millions) ($)(6)
Net Product
Sales
(millions) ($)(7)
(f)
$122.58
$111.46
$79.48
$89.45
(g)
$118.87
$111.66
$125.33
$126.13
(h)
$249.7
$154.5
$89.6
$407.3
(i)
$1,860.6
$1,440.9
$1,090.1
$994.1
The dollar amounts reported in column (b) are the amounts of total compensation reported forff Kevin C. Gorman, Ph.D. (PEO) for each corresponding year in
the “Total” column of the Summary Compensation Table.
The dollar amounts reported in column (c) represent the amount of CAP forff Dr. Gorman, as computed in accordance with Item 402(v) of Regulation S-K. The
dollar amounts do not reflect the actuat
requirements of Item 402(v) of Regulation S-K, the following adjud stments were made to Dr. Gorman’s total reported compensation forff
CAP:
l amount of compensation earned by or paid to Dr. Gorman during the applicable year. In accordance with the
2023 to determine the
2023
Total Compensation forff Covered Fiscal Year ("FY") from Summary Compensation Table
$ 15,750,812
Deduct: Amounts Reported in "Stock Awards" & "Option Awards" Columns
13,700,176
Add: Year End Fair Value of Equity Awards Granted During the Covered FY that Remain
Outstanding and Unvested as of Last Day of the Covered FY
Add: Change in Fair Value froff m the end of the Prior FY to the end of the Covered FY
9,092,870
(101,013)
Add: Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Covered FY
1,334,539
Add: Change in Fair Value as of the Vesting Date of Equity Awards Granted in Prior FY that
Vested in the Covered FY
Add: Fair Value at the End of the Prior FY of Equity Awards that Failed to Meet Vesting
Conditions in the Covered FY
Add: Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise
Reflected in Fair Value or Total Compensation
Compensation Actuat
lly Paid (as definff ed by SEC rulrr e)
(41,517)
—
—
$ 12,335,515
The dollar amounts reported in column (d) represent the average of the amounts reported forff
of the Summary Compensation Table in each applicable year. The names of each of the Non-PEO NEOs included forff
amounts in each applicable year are as folff
. Roberts, M.D.; (ii)
for 2022, Matthew C. Abernethy, Kyle W. Gano, Ph.D., Darin M. Lippoldt, and Eiry W. Roberts, M.D.; (iii) for 2021, Matthew C. Abernethy, Eric Benevich,
Jude Onyia, Ph.D., and Eiry Wrr
lows: (i) for 2023, Matthew C. Abernethy, Kyle W. Gano, Ph.D., Jude Onyia, Ph.D., and Eiry Wrr
2020, Matthew C. Abernethy, Eric Benevich, KylKK e W. Gano, Ph.D., and Eiry Wrr
the Company’s Non-PEO NEOs as a group in the “Total” column
es of calculating the average
. Roberts, M.D.; (iv) forff
. Roberts, M.D.
rr
purpos
Year
(a)
2023
2022
2021
2020
(1)
(2)
(3)
65
(4)
(5)
(6)
(7)
The dollar amounts reported in column (e) represent the average amount of CAP to the Non-PEO NEOs, as computed in accordance with Item 402(v) of
Regulation S-K. The dollar amounts do not reflect the actuat
l average amount of compensation earned by or paid to the NEOs as a group (excluding Dr.
Gorman) durd ing the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjud stments were made to average
total reported compensation forff
each year to determine the CAP, using the same methodology described above
the Non-PEO NEOs forff
in Note 2:
a
Total Compensation forff Covered FY froff m Summary Compensation Table
Deduct: Amounts Reported in "Stock Awards" & "Option Awards" Columns
Add: Year End Fair Value of Equity Awards Granted During the Covered FY that Remain
Outstanding and Unvested as of Last Day of the Covered FY
Add: Change in Fair Value froff m the end of the Prior FY to the end of the Covered FY
Add: Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Covered FY
Add: Change in Fair Value as of the Vesting Date of Equity Awards Granted in Prior FY that
Vested in the Covered FY
Add: Fair Value at the End of the Prior FY of Equity Awards that Failed to Meet Vesting
Conditions in the Covered FY
Add: Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise
Reflected in Fair Value or Total Compensation
Compensation Actuat
lly Paid (as definff ed by SEC rulrr e)
2023
$ 6,286,290
5,187,621
4,212,074
(68,838)
618,180
(597,903)
—
—
$ 5,262,182
rr
The dollar amounts refleff ct the cumulative Total Shareholder Returt n (TSR) of our common stock (column (f)) and the Peer Group (column (g)) forff
the
measurement periods beginning on December 31, 2019 and ending on December 31 of each of 2023, 2022, 2021 and 2020, respectively, calculated in
accordance with Item 201(e) of Regulation S-K. “Peer Group” represents the NASDAQ Biotechnology Index, which the Company has identifieff d as its peer
group for purpos
rr
The dollar amounts reported in column (h) represent net income reflected in the Company’s audited finff ancial statements for the applicable fiscal year.
As required by Item 402(v) of Regulation S-K, we have determined that Net Product Sales is the Company-Selected Measure. Dollar amounts reported forff
INGREZZA net product sales, which represent nearly all of the Company's total net product sales, are reflected in the Company's audited finff ancial statements
for the applicable fiscal year.
es of Item 402(v) and which is used by the Company for purpos
es of compliance with Item 201(e) of Regulation S-K.
The assumptions used in calculating the fair value of the equity awards did not differ in any material respect from the
r value of the awards as reported in the Summary Compensation Table, except that the
assumptions used to calculate the grant date faiff
fair value calculations of (i) the options granted on or between Februarr
3, 2023 used an estimated term
between 1.37 years and 7.04 years in FY 2023, as compared to an estimated term of 6.0 to 6.5 years used to calculate the grant date
fair value of such awards, and (ii) the PRSUs assumed payout multipliers at current expectations, which range from 0% to 158%
r value calculations which assumed a payout at
across diffeff
target.
rent grant years and metrics, in each case as compared to the grant date faiff
ry 7, 2019 and February 1rr
Required Tabular Disclosure of Most Important Perforff mance Measures
The most important financial performance measures used by the company to link CAP to the company’s NEOs forff
the most
recently completed fisff cal year to the company’s performance are set forth below. For further inforff mation regarding these performance
metrics and their func
tion in our executive compensation program, please see “Compensation Discussion and Analysis”.
ff
•
•
•
•
•
•
Net Product Sales
Non-GAAP Operating Expense
Non-GAAP Operating Income
Pipeline Progression
Regulatory Arr
dvancement
Total Prescriptions (TRx)
Required Disclosure of the Relationship Between Compensation Actually Paid and Financial Perforff mance Measures
As required by Item 402(v) of Regulation S-K, we are providing the folff
a
pay and performance figures that are included in the pay versus performance tabul
below furff
for purpos
represent the actual final amount of compensation earned by or actuat
rr
ther illustrates the relationship between Company total shareholder returt n and that of the Peer Group. As noted above, CAP
es of the tabular disclosure and the following graphs were calculated in accordance with SEC rulrr es and do not fully
lowing graphs to illustrate the relationship between the
ar disclosure above. In addition, the firff st graph
lly paid to our NEOs during the applicable fiscal years.
66
PEO and Average Non-PEO NEOs
Compensation Actually Paid versus TSR Performance
$25,000
$20,000
)
0
0
0
$
(
P
A
C
$15,000
$10,000
$5,000
$—
$200
$160
$120
$80
$40
$—
T
S
R
V
a
l
u
e
$126
$125
$89
$8,177
$79
$4,031
$4,496
$3,013
$21,887
$111
$112
$123
$119
$11,399
$12,336
$5,262
2020
2021
2022
2023
PEO Compensation Actually Paid
Average Non-PEO NEOs Compensation Actually Paid
Total Shareholder Return
Peer Group Total Shareholder Return
PEO and Average Non-PEO NEOs
Compensation Actually Paid versus Net Income
$25,000
$407,300
$20,000
$15,000
$10,000
)
0
0
0
$
(
P
A
C
$5,000
$—
$21,887
$450,000
$360,000
$249,700
$270,000
$11,399
$12,336
$180,000
N
e
t
I
n
c
o
m
e
(
$
0
0
0
)
$8,177
$89,600
$154,500
$4,031
$4,496
$3,013
$90,000
$5,262
$—
2020
2021
2022
2023
PEO Compensation Actually Paid
Average Non-PEO NEOs Compensation Actually Paid
Net Income
67
PEO and Average Non-PEO NEOs
Compensation Actually Paid versus Net Product Sales
)
0
0
0
$
(
P
A
C
$25,000
$20,000
$15,000
$10,000
$5,000
$—
$2,500,000
$21,887
$1,860,600
$2,000,000
$1,440,900
$11,399
$12,336
$1,500,000
$1,000,000
$500,000
$5,262
$—
N
e
t
P
r
o
d
u
c
t
S
a
l
e
s
(
$
0
0
0
)
$994,100
$1,090,100
$8,177
$4,031
$4,496
$3,013
2020
2021
2022
2023
PEO Compensation Actually Paid
Average Non-PEO NEOs Compensation Actually Paid
Net Product Sales
All inforff mation provided above under thett
refee rence into any filing of to hett Company under thett
amended, whethett
except to thett
r made befoe re or afteff r thett
“IteII m 402(v)(( Pay Va
erVV surr
s Perfor rmance” heading will not be deemed to be incorporated by
Securities Act of 1o
933, as amended, or the SecuSS
date hereof ao
nd irrespective of ao
rities ExchEE
934, as
ation language in any such filing,
ange Act of 1o
ny general incorpor
eferff ence.
r
extent thett Company specifici ally incorporates such infon rmation by rb
68
Non-Employee Director Compensation Philosophy
DIRECTORS COMPENSATION SUMMARY
Our non-employee director compensation philosophy is based on the following guiding principles:
•
•
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 Board and the Company’s stockholders have approved certain annual limits on compensation to be paid to the Company’s
non-employee directors. Our 2020 Plan provides that the aggregate value of all compensation granted or paid by us to any individual
for service as a non-employee director with respect to any period commencing on the date of the annual stockholders meeting forff
particular year and ending on the date of the annual stockholders meeting forff
period”), including awards granted under our 2020 Plan and cash fees
in total value. In addition, the aggregate value of any equity award(s) granted by us to any individual forff
service as a non-employee
director upon or in connection with his or her initial election or appoi
ntment to the Board of Directors will not exceed $2,000,000 in
service as a non-employee director with
total value (such that the aggregate compensation granted or paid by us to any individual forff
respect to an annual period in which such individual is firff st appointed or elected to the Board of Directors will not exceed $3,250,000
es of these limitations, the value of any equity awards is calculated based on the grant date fair value of such
in total value). For purpos
awards for finff ancial reporting purpos
a
contains the same annual limits on non-employee director compensation as the 2020 Plan.
the next subsequent year (such period, the “annual
paid to such non-employee director, will not exceed $1,250,000
oval in Proposal Three of this Proxy Statement
es. The Amended 2020 Plan proposed for appr
a
a
r
rr
ff
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 recent developments,
prevailing market practices, and recommends any changes to the program to our Board, who ultimately approves non-employee
director compensation.
The fisff cal 2023 compensation for the Company’s non-employee directors was recommended by the Compensation Committee
to the Board following the review of a report froff m FW Cook, its independent compensation consultant, 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 fisff cal
2023, the Compensation Committee also received a presentation froff m FW Cook about recent developments and best practices related
to non-employee directors to inforff m its analysis of, aff nd recommendations regarding, non-employee director compensation.
In formulating its recommendations to the Board for fisff cal 2023, the Compensation Committee did not engage in
benchmarking or targeting compensation to a specific level of the peer group data provided by FW Cook, but rather used the peer data
as a referff ence point in making non-employee director compensation recommendations. For 2023, the Compensation Committee
determined that each non-employee director may elect to receive the full value of his or her annual award in the forff m of (i) restricted
stock units, (ii) nonstatutory stock options, or (iii) 50% restricted stock units and 50% nonstatutory stock options. It is the
Compensation Committee’s view that offeff
enables us to retain and attract highly skilled and qualifieff d non-employee directors. Ultimately, the Board set fiscal 2023 non-
employee director compensation in the forff ms and amounts it determined to be appropriate using its profesff
judgment, afteff
compensation forff
review of the FW Cook analysis and the Compensation Committee’s recommendations. Our director
ring both stock options and restricted stock units provides a total compensation package that
fiscal 2023 is described below.
sional experience and
r carefulff
Non-Employee Director Compensation for 2023
For fisff cal 2023, directors who are not employees of the Company earned a $60,000 annual cash retainer. The Company
provided the Chair of the Board, William H. Rastetter, an additional $35,000, making his total annual cash retainer $95,000. 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 $15,000 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 $7,500, respectively, for each Committee on which she or he served. Non-
employee directors are also reimbursed forff
expenses incurred in connection with performing their duties as directors of the Company.
a
69
For fisff cal 2023, on the date of the 2023 Annual Meeting of Stockholders, each continuing non-employee director received an
annual equity award with an approximate grant date value of $400,000. Each non-employee director had the ability to elect to receive
l value of his or her annual award in the forff m of (i) restricted stock units, (ii) nonstatutory stock options, or (iii) 50% restricted
the fulff
stock units and 50% nonstatutory stock options. The restricted stock units granted to non-employee directors vest in fulff
l on the one-
year anniversary orr
the Company’s common stock on the date of the grant, are subject to a ten-year term, and vest in full on the one-year anniversary orr
the date of grant. Additionally, newly-appointed members of our Board of Directors received an initial equity award with an
approximate grant value of $800,000 on their date of appoi
options, vests monthly over three years, and has a ten-year term.
f the date of grant. The options granted to non-employee directors have exercise prices equal to the closing price of
ntment. This initial equity award is comprised 100% of nonstatutory stock
a
f
The folff
Company named below:
lowing tabla e sets forff
th the compensation earned forff
the fisff cal year ended December 31, 2023 by the directors of the
Director Compensation Table
Name
Kevin C. Gorman, Ph.D. (4)
William H. Rastetter, Ph.D. (5)
Gary A. Lyons (6)
Johanna Mercier (7)
George J. Morrow (8)
Leslie V. Norwalk (9)
Christine A. Poon (10)
Richard F. Pops (11)
Shalini Sharp (12)
Stephen A. Sherwin, M.D. (13)
.................................................................................
.................................................................
.................................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................................
.................................................................
Fees Earned
or Paid in
Cash (1)
—
$95,000
$60,000
$67,500
$79,500
$75,000
$13,370
$92,000
$97,000
$79,500
Option
Awards (2)
—
$400,039
$200,043
$200,043
—
$200,043
$800,083
—
$200,043
—
Stock
Awards (3)
—
—
$200,067
$200,067
$400,039
$200,067
—
$400,039
$200,067
$400,039
Total
—
$495,039
$460,110
$467,610
$479,539
$475,110
$813,453
$492,039
$497,110
$479,539
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
l grant date fair value of RSU awards granted in 2023 as determined pursuant to ASC 718.
l grant date fair value of option awards granted in 2023 as determined pursuant to ASC 718. The assumptions used to
the year ended December 31, 2023. All option awards were granted on the date of our 2023 annual meeting of stockholders; thett
Amounts in this column refleff ct compensation earned in 2023.
The amounts shown represent the fulff
calculate the value of such awards are set forth under Note 9 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report
on Form 10-K forff
grant date
fair values of all option awards are based on a per share Black-Scholes value of $46.63 (other than Ms. Poon's initial equity award of nonstaturory stock
options, which was granted on July 11, 2023 and forff which the Black-Scholes value was $48.86).
The amounts shown represent the fulff
During 2023, Dr. Gorman was an employee of the Company, and as such, did not receive any compensation forff
December 31, 2023, Dr. Gorman had outstanding options to purchase 1,401,274 shares of common stock, and 128,891 outstanding RSUs and PRSUs.
As of December 31, 2023, Dr. Rastetter had outstanding options to purchase 147,154 shares of common stock.
As of December 31, 2023, Mr. Lyons had outstanding options to purchase 106,365 shares of common stock and 2,100 outstanding RSUs.
As of December 31, 2023, Ms. Mercier had outstanding options to purchase 40,027 shares of common stock and 2,100 outstanding RSUs.
As of December 31, 2023, Mr. Morrow had outstanding options to purchase 117,075 shares of common stock and 4,199 outstanding RSUs.
As of December 31, 2023, Ms. Norwalk had outstanding options to purchase 43,865 shares of common stock and 2,100 outstanding RSUs.
As of December 31, 2023, Ms. Poon had outstanding options to purchase 16,375 shares of common stock.
As of December 31, 2023, Mr. Pops had outstanding options to purchase 117,075 shares of common stock and 4,199 outstanding RSUs.
As of December 31, 2023, Ms. Sharp hrr
ad outstanding options to purchase 37,847 shares of common stock and 2,100 outstanding RSUs.
As of December 31, 2023, Dr. Sherwin had outstanding options to purchase 102,075 shares of common stock and 4,199 outstanding RSUs.
service on the Board of Directors. As of
Non-Employee Director Compensation for 2024
In 2024, on the recommendation of the Compensation Committee and based on a review of our peer group companies and
the Chair of the Nominating / Corporate Governance
other members of the Nominating / Corporate
analysis performed by FW Cook, the Board increased the annual retainer forff
Committee by $3,000 to a total of $18,000 annually and the annual retainer forff
Governance Committee by $1,500 to a total of $9,000 annually. Additionally, in connection with the forff mation of the Science and
Medical Technology Committee in January 2024, the Board approved annual retainers for the Chair and non-chair members of
$20,000 and $10,000, respectively. The Board maintained all equity compensation and all other annual cash retainers for non-
employee directors at the 2023 levels.
70
Non-Employee Director Equity Ownership Guidelines
The Board of Directors has adopted equity ownership guidelines forff
our non-employee directors, which are designed to furff
align the interests of the non-employee directors with those of our stockholders by ensuring that our non-employee directors have a
significant finff ancial stake in the Company’s long-term success. The equity ownership guidelines establa ish 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 exercisabla e 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 durd ing this fivff e-year period. When a
non-employee director does not meet the equity ownership requirements set forth in the guidelines, he/she is restricted fromff
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 fulfilff l such transaction related tax obligations, until full compliance with the equity
ownership guidelines is attained.
selling
ther
Annual compliance with the equity ownership guidelines is assessed durd ing the first quarter of each year. As of March 25,
2024, each of our non-employee directors was 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
oving the terms and conditions of all related person transactions. In connection with its review, appr
and appr
a
a
related person transactions, the Company’s Audit Committee takes into account all relevant availabla e fact
determining whether such transaction is in the best interests of the Company and its stockholders. Any transaction that would
disqualify aff
director from meeting the “independent director” standard as defined under the Nasdaq Stock Market rulrr es 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 appl
icable filings with the SEC as required under SEC rules.
s and circumstances in
oval or ratificff ation of
a
ff
There were no related person transactions during fisff cal 2023.
OTHER MATTERS
As of the date of this Proxy Statement, the Company knows of no other matters to be submu
itted to the stockholders at the
Annual Meeting. If any other matters properly come beforff e 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.
ADDITIONAL INFORMATION
rr
equirements forff
“HouHH seholdindd g” of Proxy Materials.ll The SEC has adopted rules that permit companies and intermediaries such as brokers to
proxy statements with respect to two or more stockholders sharing the same address by delivering a
satisfy delivery r
single set of proxy materials addressed to those stockholders. This process, which is commonly referff
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 froff m the affeff cted stockholders. Once you have received
notice froff m your broker or us that they or we will be householding materials to your address, householding will continue until you are
notifieff d otherwise or until you revoke your consent. If, aff
preferff
hold registered shares. If you hold registered shares, you may direct your written request to the Company’s Corpor
12780 El Camino Real, San Diego, Califorff nia 92130 or contact the Company’s Corpor
t any time, you no longer wish to participate in householding and would
our broker if your shares are held in a brokerage account or us if you
to receive a separate set of proxy materials, please notify yff
r
t 858-617-7600.
red to as “householding,”
t
ate Secretary arr
ate Secretary arr
rr
71
Advadd nce NotNN ictt e ProPP cedures. To be considered for inclusion in next year’s proxy materials, a stockholder must submit his, her
or its proposal or director nomination in writing by December 11, 2024 which is the date that is 120 days prior to the first anniversaryrr
r
of the mailing date of this Proxy Statement, to the Company’s Corpor
92130. Any proposal must comply with the requirements as to forff m and subsu tance established by the SEC forff
included in our Proxy Statement. Stockholders are also advised to review our bylaws, which contain additional requirements forff
advance notice of stockholder proposals and director nominations.
t 12780 El Camino Real, San Diego, Califorff nia
such proposal to be
ate Secretary arr
In addition, our bylaws contain “proxy access” provisions that permit a stockholder or group of stockholders to include
director candidates that they intend to nominate in our annual meeting proxy statement and on our proxy card, provided that the
stockholder ownership, notice and other requirements set forth in our bylaws are satisfied. To be timely for our 2025 Annual Meeting
rate
of Stockholders, the required notice under the proxy access provisions of our bylaws must be received by the Company’s Corporr
Secretary arr
t 12780 El Camino Real, San Diego, Califorff nia 92130 not earlier than November 11, 2024 and not later than the close of
business on December 11, 2024. However, if our 2025 Annual Meeting of Stockholders is held more than 30 days prior to or more
than 60 days afteff
f the Annual Meeting, then notice under the proxy access provisions must be received no earlier
than the close of business on the 150th day prior to the 2025 Annual Meeting of Stockholders and not later than the close of business
on the later of the 120th day prior to such annual meeting or the 10th day following the day on which public announcement of the date
of such annual meeting is firff st made.
r the anniversary orr
On or around April 7, 2024, the Company intends to relocate its principal executive offices to 6027 Edgewood Bend Ct., San
Diego, Califorff nia, 92130. However, the Company's mailing address will remain 12780 El Camino Real, San Diego, California 92130,
through March 2025. Accordingly, written requests, notices and proposals should be sent to the Company's Corpor
12780 El Camino Real, San Diego, Califorff nia 92130.
t
ate Secretary arr
r
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement and other materials we are sending you or that are availabla e on our website in connection with the
eral securities laws. Many of these statements can be
Annual Meeting contain “forward-looking statements” as definff ed under fedff
identifieff d 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 Summary,” “Compensation Discussion
and Analysis,” and other sections of this Proxy Statement. These forff ward-looking statements are based on our current expectations and
assumptions, and are subject to risks and uncertainties that could cause our actuat
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 forff
Februar
and elsewhere in the Annual Report. You should carefulff
ry 9, 2024 under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
the year ended December 31, 2023, as filed with the SEC on
l results or experience and the timing of events to
ly consider that information beforff e voting.
ff
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 forff ward-looking statements that we may make in
the futff urt e. We do not undertake any obligation to release publicly any revisions to these forff ward-looking statements to reflect later
events or circumstances or to refleff ct the occurrence of unanticipated events.
72
Appendix A
NEUROCRINE BIOSCIENCES, INC.
2020 EQUITY INCENTIVE PLAN
ADOPTED BY THE COMPENSATION COMMITTEE: MARCH 16, 2020
APPROVED BY THE STOCKHOLDERS: MAY 19, 2020
AMENDED AND RESTATED BY THE COMPENSATION COMMITTEE: MARCH 14, 2022
APPROVED BY THE STOCKHOLDERS: MAY 18, 2022
AMENDED AND RESTATED BY THE COMPENSATION COMMITTEE: MARCH 24, 2023
APPROVED BY THE STOCKHOLDERS: MAY 17, 2023
AMENDED AND RESTATED BY THE COMPENSATION COMMITTEE: MARCH 18, 2024
APPROVED BY THE STOCKHOLDERS:
, 2024
TERMINATION DATE: MARCH 15, 2030
A-73
1. GENERALRR .
(a) Successor to and Continuation of Prior Plan. The Plan is the successor to and continuation of the Prior Plan. As of the
lowing the Effective Date: (i) no additional awards may be granted under the Prior Plan; (ii) the Prior Plan’s
day immediately folff
Availabla e Reserve, plus any Prior Plan’s Returt ning Shares (as such shares become availabla e froff m time to time), will become availabla e
for issuance pursuant to Awards granted under this Plan; and (iii) all Prior Plan Awards will remain subju ect to the terms of the Prior
Plan (except that any Prior Plan’s Returt ning Shares will become availabla e forff
issuance pursuant to Awards granted under this Plan).
All Awards granted under this Plan will be subju ect to the terms of this Plan.
(b) Plan Purpose. The Company, by means of the Plan, seeks to secure and retain the services of Employees, Directors and
Consultants, to provide incentives for such persons to exert maximum efforts forff
the success of the Company and any Affiliate, and to
provide a means by which such persons may be given an opportunity to benefit froff m increases in value of the Common Stock through
the granting of Awards.
the grant of the folff
Stock Options; (iii) SARs; (iv) Restricted Stock Awards; (v) RSU Awards; (vi) Performance Awards; and (vii) Other Awards.
lowing Awards: (i) Incentive Stock Options; (ii) Nonstatutory
(c) Available Awards. The Plan provides forff
(d) Adoption Date. The Plan will come into existence on the Adoption Date. No Award may be granted under the Plan prior
oval to the
to the Adoption Date. Any Award granted prior to the Effective Date is contingent upon timely receipt of stockholder appr
ulr es, and satisfaction of any other compliance requirements.
rr
extent required under appl
icable tax, securities and regulatory r
a
a
2. SHARES SUBJECT TO THE PLAN.
(a) Share Reserve.
(i) Subju ect to Section 2(a)(iii), any adjud stment in accordance with Section 2(b), and any adjud stment as necessary to
implement any Capitalization Adjustment, the aggregate number of shares of Common Stock that may be issued pursuant to Awards
will not exceed the sum of: (i) the Prior Plan’s Availabla e Reserve; (ii) an additional 3,300,000 shares that were approved at the Annual
Meeting in 2020; (iii) an additional 5,900,000 shares that were approved at the Annual Meeting in 2022; (iv) an additional 6,600,000
shares that were approved at the Annual Meeting in 2023; (v) an additional 3,635,000 shares that were approved at the Annual
Meeting in 2024; and (vi) the number of Prior Plan’s Returning Shares, if any, as such shares become availabla e froff m time to time.
(ii) Subju ect to Section 2(b), the number of shares of Common Stock availabla e forff
issuance under the Plan will be
reduced by: (A) one share forff
share forff
2.13 shares for each share of Common Stock issued pursuant to a Full Value Award granted under the Plan on or afteff
each share of Common Stock issued pursuant to a Full Value Award granted under the Plan prior to May 18, 2022; and (C)
r May 18, 2022.
each share of Common Stock issued pursuant to an Appreciation Award granted under the Plan; (B) one
(iii) Subju ect to Section 2(b), the number of shares of Common Stock availabla e forff
issuance under the Plan will be
increased by: (A) one share forff
subju ect to an Appreciation Award; (B) one share forff
Value Award that returns to the Plan prior to May 18, 2022; and (C) 2.13 shares for each Prior Plan’s Returt ning Share or 2020 Plan
Returning Share subju ect to a Full Value Award that returns to the Plan on or afteff
each Prior Plan’s Returt ning Share or 2020 Plan Returning Share (as definff ed in Section 2(b)(iii)(1))
each Prior Plan’s Returning Share or 2020 Plan Returning Share subju ect to a Full
r May 18, 2022.
(b) Share Reserve Operation.
(i) Limit Applies to Shares Issued Pursuant to Awards. For clarity, the Share Reserve is a limit on the number of
shares of Common Stock that may be issued pursuant to Awards and does not limit the granting of Awards, except that the Company
will keep availabla e at all times the number of shares of Common Stock reasonabla y required to satisfy its obligations to issue shares
pursuant to such Awards. Shares may be issued in connection with a merger or acquisition as permitted by, as applicable, Nasdaq
Listing RulRR e 5635(c), NYSE Listed Company Manual Section 303A.08, NYSE American Company Guide Section 711 or other
applicable rule, and such issuance will not reduce the number of shares availabla e forff
issuance under the Plan.
(ii) Actions that Will Not Constitute Issuance of Shares and Will Not Reduce Share Reserve. The folff
lowing
actions will not result in an issuance of shares of Common Stock under the Plan and accordingly will not reduce the number of shares
of Common Stock subju ect to the Share Reserve and availabla e forff
portion of an Award without the shares covered by such portion of the Award having been issued; and (2) the settlement of any
portion of an Award in cash (i.e., the Participant receives cash rather than shares of Common Stock).
issuance under the Plan: (1) the expiration or termination of any
(iii) Reversion of Shares to the Share Reserve.
Subsequent Issuance. If any shares of Common Stock issued pursuant to an
Award are forff
the
vesting of such shares, then such shares will revert to the Share Reserve and become availabla e again for issuance under the Plan (such
shares, the “2020 Planll Returning ShaSS res”).
feited back to or repurchased by the Company because of the faiff
lure to meet a contingency or condition required forff
(1) Shares Available forff
A-74
(2) Shares Not Available forff
lowing shares of Common Stock will not
become availabla e again for issuance under the Plan: (i) any shares that are reacquired or withheld (or not issued) by the Company to
satisfy the exercise, strike or purchase price of an Award or a Prior Plan Award (including any shares subject to such award that are
not delivered because such award is exercised through a reducd tion of shares subju ect to such award (i.e., “net exercised”)); (ii) any
shares that are reacquired or withheld (or not issued) by the Company to satisfy a tax withholding obligation in connection with an
Award or a Prior Plan Award; (iii) any shares repurchased by the Company on the open market with the proceeds of the exercise,
strike or purchase price of an Award or a Prior Plan Award; and (iv) in the event that a Stock Appreciation Right granted under the
Plan or a stock appreciation right granted under the Prior Plan is settled in shares of Common Stock, the gross number of shares of
Common Stock subju ect to such award.
Subsequent Issuance. The folff
3. ELIGIBILITY AND LIMITATIONS.
(a) Eligible Award Recipients. Subju ect to the terms of the Plan, Employees, Directors and Consultants are eligible to receive
Awards.
(b) Specific Award Limitations.
(i) Limitations on Incentive Stock Option Recipients. Incentive Stock Options may be granted only to Employees of
the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and (f) of the
Code).
(ii) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at
the time of grant) with respect to which Incentive Stock Options are exercisable for the first time by any Participant durd ing any
calendar year (under all plans of the Company and any Affiliates) exceeds $100,000 (or such other limit establa ished in the Code) or
otherwise does not comply with the rulr es governing Incentive Stock Options, the Options or portions thereof that exceed such limit
(according to the order in which they were granted) or otherwise do not comply with such rules will be treated as Nonstatutory Stock
Options, notwithstanding any contrary provision of the appl
icable Option Agreement(s).
a
(iii) Limitations on Incentive Stock Options Granted to Ten Percent Stockholders. A Ten Percent Stockholder
may not be granted an Incentive Stock Option unless (1) the exercise price of such Option is at least 110% of the Fair Market Value on
the date of grant of such Option and (2) such Option is not exercisabla e after the expiration of fivff e years froff m the date of grant of such
Option.
(iv) Limitations on Nonstatutory Stock Options and SARs. Nonstatutory Stock Options and SARs may not be
granted to Employees, Directors and Consultants who are providing Continuous Service only to any “parent” of the Company (as such
term is defined in RulRR e 405) unless the stock underlying such Awards is treated as “service recipient stock” under Section 409A
because such Awards are granted pursuant to a corporate transaction (such as a spin off transaction) or unless such Awards otherwise
comply with the distribution requirements of Section 409A.
(c) Aggregate Incentive Stock Option Limit. Notwithstanding anything to the contrary in Section 2(a) and subju ect to any
adjud stment as necessary to implement any Capia talization Adjustment, the aggregate maximum number of shares of Common Stock
that may be issued pursuant to the exercise of Incentive Stock Options is 34,135,000 shares.
(d) Non-Employee Director Compensation Limit. The aggregate value of all compensation granted or paid, as appl
a
icable, by
a particular year and ending on the date of the Annual Meeting forff
service as a Non-Employee Director with respect to any period commencing on the date of the
service as a Non-Employee Director upon or in connection with his or her initial election or appoi
the Company to any individual forff
Annual Meeting forff
Period”)dd , including Awards granted and cash fees
in total value. In addition, the aggregate value of any equity award(s) granted under the Plan or otherwise by the Company to any
individual forff
will not exceed $2,000,000 in total value; forff
Company to any individual forff
appointed or elected to the Board will not exceed the sum of the two preceding limitations in this Section 3(d). The value of any equity
awards, forff
equity awards for finff ancial reporting purpos
which the Annual Meeting in 2020 occurs.
es of the limitations described in this Section 3(d), will be calculated based on the grant date fair value of such
es. The limitations in this Section 3(d) will apply beginning with the Annual Period in
the avoidance of doubt, the aggregate compensation granted or paid, as appl
service as a Non-Employee Director with respect to an Annual Period in which such individual is firff st
paid by the Company to such Non-Employee Director, will not exceed $1,250,000
the next subsequent year (the “An“
ntment to the Board
icable, by the
rr
purpos
nual
a
a
r
ff
A-75
4. OPTIONS AND STOCK APPRECIATION RIGHTS.
Each Option and SAR will have such terms and conditions as determined by the Board. Each Option will be designated in
writing as an Incentive Stock Option or Nonstatutory Stock Option at the time of grant; provideddd , hdd
owever, that if an Option is not so
designated, then such Option will be a Nonstatutory Stock Option, and the shares purchased upon exercise of each type of Option will
be separately accounted for. Each SAR will be denominated in shares of Common Stock equivalents. The terms and conditions of
separate Options and SARs need not be identical; provideddd , hdd
(through incorporation of the provisions hereof by reference in the Award Agreement or otherwise) to the subsu tance of each of the
following provisions:
owever, that each Option Agreement and SAR Agreement will conforff m
(a) Term. Subju ect to Section 3(b) regarding Ten Percent Stockholders, no Option or SAR will be exercisabla e after the
expiration of ten years froff m the date of grant of such Award or such shorter period specified in the Award Agreement.
(b) Exercise or Strike Price. Subju ect to Section 3(b) regarding Ten Percent Stockholders, the exercise or strike price of each
Option or SAR will not be less than 100% of the Fair Market Value on the date of grant of such Award. Notwithstanding the
foregoing, an Option or SAR may be granted with an exercise or strike price lower than 100% of the Fair Market Value on the date of
grant of such Award if such Award is granted pursuant to an assumption of or substitution forff
right pursuant to a Transaction and in a manner consistent with the provisions of Sections 409A and, if applicable, 424(a) of the Code.
another option or stock appreciation
(c) Exercise Procedure and Payment of Exercise Price for Options. In order to exercise an Option, the Participant must
provide notice of exercise to the Plan Administrator in accordance with the procedurd es specified in the Option Agreement or otherwise
provided by the Company. The Board has the authority to grant Options that do not permit all of the following methods of payment (or
otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular
method of payment. The exercise price of an Option may be paid, to the extent permitted by Applicable Law and as determined by the
Board, by one or more of the folff
lowing methods of payment to the extent set forff
th in the Option Agreement:
(i) by cash or check, bank draft or money order payabla e to the Company;
(ii) pursuant to a “cashless exercise” program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of the Common Stock subju ect to the Option, results in either the receipt of cash (or check) by the
Company or the receipt of irrevocable instructions to pay the exercise price to the Company froff m the sales proceeds;
(iii) by delivery to the Company (either by actuat
r attestation) of shares of Common Stock that are already
owned by the Participant freff e and clear of any liens, claims, encumbrances or security interests, with a Fair Market Value on the date
of exercise that does not exceed the exercise price, provided that (1) the Common Stock is publicly traded at the time of exercise,
(2) any remaining balance of the exercise price not satisfieff d by such delivery i
of payment, (3) such delivery wrr
(4) any certificff ated shares are endorsed or accompanied by an executed assignment separate froff m certificff ate, and (5) such shares have
been held by the Participant for any minimum period necessary to avoid adverse accounting treatment as a result of such delivery;rr
ould not violate any Applicable Law or agreement restricting the redemption of the Common Stock,
s paid by the Participant in cash or other permitted form
l delivery orr
rr
(iv) if the Option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will
reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value
on the date of exercise that does not exceed the exercise price, provided that (1) such shares used to pay the exercise price will not be
exercisabla e thereafteff
cash or other permitted forff m of payment; or
r and (2) any remaining balance of the exercise price not satisfied by such net exercise is paid by the Participant in
(v) in any other form of consideration that may be acceptabla e to the Board and permissible under Applicable Law.
(d) Exercise Procedure and Payment of Appreciation Distribution forff
SARs. In order to exercise a SAR, the Participant
must provide notice of exercise to the Plan Administrator in accordance with the procedurd es specified in the SAR Agreement or
the exercise of a SAR will not be
otherwise provided by the Company. The appr
greater than an amount equal to the excess of (i) the aggregate Fair Market Value on the date of exercise of a number of shares of
Common Stock equal to the number of Common Stock equivalents that are vested and being exercised under such SAR, over (ii) the
strike price of such SAR. Such appr
eciation distribution may be paid to the Participant in the form of Common Stock or cash (or any
combination of Common Stock and cash) or in any other form of payment, as determined by the Board and specified in the SAR
Agreement.
eciation distribution payable to a Participant upon
u
a
a
(e) Transferability. Options and SARs may not be transferff
red to third party finff ancial institutions for value. The Board may
impose such additional limitations on the transferabia lity of an Option or SAR as it determines. In the absence of any such
determination by the Board, the folff
explicitly provided herein, neither an Option nor a SAR may be transferred forff
:
an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transferff
lowing restrictions on the transferabia lity of Options and SARs will apply, provided that except as
consideration and provideddd , fdd urff
ther, that if an Option is
A-76
(i) Restrictions on Transfer. An Option or SAR will not be transferff able, except by will or by the laws of descent and
distribution, and will be exercisabla e durd ing the lifetff
ime of the Participant only by the Participant; provideddd , hdd
a
may permit transferff
request, including to a trust if the Participant is considered to be the sole beneficff
Section 671 of the Code and appl
trusrr
tee enter into a transfer and other agreements required by the Company.
icable state law) while such Option or SAR is held in such trusr
of an Option or SAR in a manner that is not prohibited by appl
ial owner of such trusr
a
icable tax and securities laws upon
the Participant’s
u
t (as determined under
t, provided that the Participant and the
owever, that the Board
a forff mat acceptabla e to the Company and subju ect to the appr
red pursuant to a domestic relations order.
transferff
a
(ii) Domestic Relations Orders. Notwithstanding the forff egoing, subju ect to the execution of transferff
documentation in
oval of the Board or a duly authorized Offiff cer, an Option or SAR may be
(f) Vesting. The Board may impose such restrictions on or conditions to the vesting and/or exercisabia lity of an Option or SAR
as determined by the Board. Except as otherwise provided in the Award Agreement or other written agreement between a Participant
and the Company or an Affiliate, vesting of Options and SARs will cease upon
termination of the Participant’s Continuous Service.
u
(g) Termination of Continuous Service forff Cause. Except as explicitly otherwise provided in the Award Agreement or other
written agreement between a Participant and the Company or an Affiliate, if a Participant’s Continuous Service is terminated forff
Cause, the Participant’s Options and SARs will terminate and be forfeited immediately upon
the Participant will be prohibited froff m exercising any portion (including any vested portion) of such Awards on and afteff
such termination of Continuous Service, and the Participant will have no furff
shares of Common Stock subju ect to the forff
ther right, title or interest in the forff
feited Award.
feited Award, or any consideration in respect of the forff
feited Award, the
such termination of Continuous Service,
r the date of
u
(h) Post-Termination Exercise Period Following Termination of Continuous Service forff Reasons Other than for Cause.
Except as otherwise provided in the Award Agreement or other written agreement between a Participant and the Company or an
Affiff liate, subject to Section 4(i), if a Participant’s Continuous Service terminates for any reason other than forff Cause, the Participant
may exercise his or her Option or SAR to the extent vested, but only within the folff
icable, such other
period of time provided in the Award Agreement or other written agreement between a Participant and the Company or an Affiff liate;
provideddd , hdd owever, that in no event may such Award be exercised after the expiration of its maximum term (as set forth in
Section 4(a)):
lowing period of time or, if appl
a
any termination dued
to the Participant’s Disabia lity or death);
(i) three months following the date of such termination if such termination is a termination without Cause (other than
(ii) 12 months following the date of such termination if such termination is dued
to the Participant’s Disability;
(iii) 18 months following the date of such termination if such termination is due to the Participant’s death; or
but during the period such Award is otherwise exercisable (as provided in (i) or (ii) above).
(iv) 18 months following the date of the Participant’s death if such death occurs following the date of such termination
Following the date of such termination or death, as applicable, to the extent the Participant does not exercise such Award
a
icable Post-Termination Exercise Period (or, if earlier, prior to the expiration of the maximum term of such Award),
within the appl
such unexercised portion of the Award will terminate, and the Participant will have no further right, title or interest in the terminated
Award, the shares of Common Stock subject to the terminated Award, or any consideration in respect of the terminated Award.
(i) Restrictions on Exercise; Extension of Exercisability. A Participant may not exercise an Option or SAR at any time that
u
such exercise would violate Applicable Law. Except as otherwise provided in the
the issuance of shares of Common Stock upon
Award Agreement or other written agreement between a Participant and the Company or an Affiliate, if a Participant’s Continuous
Service terminates for any reason other than forff Cause and, at any time during the applicable Post-Termination Exercise Period: (i) the
exercise of the Participant’s Option or SAR would be prohibited solely because the issuance of shares of Common Stock upon such
exercise would violate Applicable Law; or (ii) the immediate sale of any shares of Common Stock issued upon such exercise would
violate the Company’s Trading Policy, then the appl
icable Post-Termination Exercise Period will be extended to the last day of the
calendar month that commences following the date the Award would otherwise expire, with an additional extension of the exercise
y if any of the forff egoing restrictions apply at any time during such extended
period to the last day of the next calendar month to appl
exercise period, generally without limitation as to the maximum permitted number of extensions; provideddd , hdd
owever, that in no event
may such Award be exercised after the expiration of its maximum term (as set forff
th in Section 4(a)).
a
a
(j) Non-Exempt Employees. No Option or SAR, whether or not vested, granted to an Employee who is a non-exempt
r
purpos
es of the Fair Labor Standards Act of 1938, as amended, will be first exercisable for any shares of Common Stock
employee forff
until at least six months following the date of grant of such Award. Notwithstanding the forff egoing, in accordance with the provisions
of the Worker Economic Opportunity Act, any vested portion of such Award may be exercised earlier than six months following the
date of grant of such Award in the event of (i) such Participant’s death or Disability, (ii) a Transaction in which such Award is not
assumed, continued or substituted, (iii) a Change in Control, or (iv) such Participant’s retirement (as such term may be definff ed in the
Award Agreement or another appl
ition, in accordance with the Company’s then
current employment policies and guidelines). This Section 4(j) is intended to operate so that any income derived by a non-exempt
employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay.
icable agreement or, in the absa
ence of any such definff
a
A-77
(k) Whole Shares. Options and SARs may be exercised only with respect to whole shares of Common Stock or their
equivalents.
5. AWARDS OTHER THAN OPTIONS AND STOCK APPRECIATION RIGHTS.
(a) Restricted Stock Awards and RSU Awards. Each Restricted Stock Award and RSU Award will have such terms and
conditions as determined by the Board. The terms and conditions of separate Restricted Stock Awards and RSU Awards need not be
identical; provideddd , hdd
incorporation of the provisions hereof by reference in the Award Agreement or otherwise) to the subsu tance of each of the folff
provisions:
owever, that each Restricted Stock Award Agreement and RSU Award Agreement will conforff m (through
lowing
(i) Form of Award.
(1) Restricted Stock Awards. To the extent consistent with the Company’s Bylaws, at the Board’s
orff m subject to the Company’s
election, shares of Common Stock subject to a Restricted Stock Award may be (i) held in book entry f
instructions until such shares become vested or any other restrictions lapsa
e, or (ii) evidenced by a certificff ate, which certificate will be
held in such form and manner as determined by the Board. Unless otherwise determined by the Board, a Participant will have voting
and other rights as a stockholder of the Company with respect to any shares subject to a Restricted Stock Award.
rr
(2) RSU Awards. A RSU Award represents a Participant’s right to be issued on a futff urt e date the
number of shares of Common Stock that is equal to the number of restricted stock units subju ect to the RSU Award. As a holder of a
RSU Award, a Participant is an unsecured creditor of the Company with respect to the Company’s unfunde
issue shares of Common Stock in settlement of such Award and nothing contained in the Plan or any RSU Award Agreement, and no
action taken pursuant to its provisions, will create or be construer d to create a trust of any kind or a fiduciary relationship between a
Participant and the Company or an Affiff liate or any other person. A Participant will not have voting or any other rights as a stockholder
of the Company with respect to a RSU Award (unless and until shares are actuat
lly issued in settlement of a vested RSU Award).
d obligation, if any, to
ff
(ii) Consideration.
(A) cash
or check, bank draft or money order payabla e to the Company, (B) past services to the Company or an Affiff liate, or (C) any other form
of consideration (including future services) as the Board may determine and permissible under Applicable Law.
(1) Restricted Stock Awards. A Restricted Stock Award may be granted in consideration forff
(2) RSU Awards. Unless otherwise determined by the Board at the time of grant, a RSU Award will be
granted in consideration forff
the Participant’s services to the Company or an Affiff liate, such that the Participant will not be required to
make any payment to the Company (other than such services) with respect to the grant or vesting of the RSU Award, or the issuance
of any shares of Common Stock pursuant to the RSU Award. If, at the time of grant, the Board determines that any consideration must
be paid by the Participant (in a forff m other than the Participant’s services to the Company or an Affiff liate) upon
shares of Common Stock in settlement of the RSU Award, such consideration may be paid in any forff m of consideration as the Board
may determine and permissible under Applicable Law.
the issuance of any
u
(iii) Vesting. The Board may impose such restrictions on or conditions to the vesting of a Restricted Stock Award or
RSU Award as determined by the Board. Except as otherwise provided in the Award Agreement or other written agreement between a
Participant and the Company or an Affiff liate, vesting of Restricted Stock Awards and RSU Awards will cease upon
termination of the
Participant’s Continuous Service.
u
(iv) Termination of Continuous Service. Except as otherwise provided in the Award Agreement or other written
agreement between a Participant and the Company or an Affiliate, if a Participant’s Continuous Service terminates for any reason,
(1) the Company may receive through a forff
the Participant under his or her Restricted Stock Award that have not vested as of the date of such termination as set forth in the
Restricted Stock Award Agreement, and (2) any portion of the Participant’s RSU Award that has not vested will be forfeiff
such termination and the Participant will have no further right, title or interest in the RSU Award, the shares of Common Stock
issuable pursuant to the RSU Award, or any consideration in respect of the RSU Award.
feiture condition or a repurchase right any or all of the shares of Common Stock held by
ted uponu
(v) Settlement of RSU Awards. A RSU Award may be settled by the issuance of shares of Common Stock or cash (or
any combination thereof) off
At the time of grant, the Board may determine to impose such restrictions or conditions that delay such delivery t
vesting of the RSU Award.
r in any other forff m of payment, as determined by the Board and specified in the RSU Award Agreement.
o a date following the
rr
(b) Perforff mance Awards. With respect to any Perforff mance Award, the length of any Perforff mance Period, the Performance
Goals to be achieved durd ing the Performance Period, the other terms and conditions of such Award, and the measure of whether and to
what degree such Perforff mance Goals have been attained will be determined by the Board. In addition, to the extent permitted by
Applicable Law and set forff
icable Award Agreement, the Board may determine that cash or other property may be used in
payment of Performance Awards. Performance Awards that are settled in cash or other property are not required to be valued in whole
or in part by referff ence to, or otherwise based on, the Common Stock.
th in the appl
a
A-78
(c) Other Awards. Other forff ms of Awards valued in whole or in part by referff ence to, or otherwise based on, Common Stock
may be granted either alone or in addition to Awards provided forff
Subju ect to the provisions of the Plan, the Board will have sole and complete discretion to determine the persons to whom and the time
or times at which such Other Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be
granted pursuant to such Other Awards, and all other terms and conditions of such Other Awards.
under Section 4 and the preceding provisions of this Section 5.
6. ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.
(a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board will appropriately and proportionately
adjud st: (i) the class(es) and maximum number of shares of Common Stock subju ect to the Plan pursuant to Section 2(a); (ii) the
class(es) and maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options
pursuant to Section 3(c); and (iii) the class(es) and number of shares of Common Stock and the exercise, strike or purchase price of
Common Stock subju ect to outstanding Awards. The Board will make such adjud stments, and its determination will be final, binding and
conclusive. Notwithstanding the forff egoing, no fractional shares or rights forff
order to implement any Capitalization Adjustment. The Board will determine an appr
fractional shares or rights to fraff ctional shares that may be created by the adjud stments referff
Section 6(a).
fractional shares of Common Stock will be created in
opriate equivalent benefit, if any, for any
red to in the preceding provisions of this
a
(b) Dissolution or Liquidation. Except as otherwise provided in the Award Agreement or other written agreement between a
Participant and the Company or an Affiff liate, in the event of a dissolution or liquidation of the Company, all outstanding Awards (other
than Awards consisting of vested and outstanding shares of Common Stock not subju ect to a forff
right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common
Stock subject to a forfeiturt e condition or the Company’s right of repurchase may be reacquired or repurchased by the Company
notwithstanding the fact
that the holder of such Award is providing Continuous Service.
feiture condition or the Company’s
ff
(c) Transaction. In the event of a Transaction, the provisions of this Section 6(c) will apply to each outstanding Award unless
otherwise provided in the instrument evidencing the Award, in any other written agreement between a Participant and the Company or
an Affiff liate, or in any director compensation policy of the Company.
(i) Awards May Be Assumed. In the event of a Transaction, the Acquiring Entity may assume or continue any or all
outstanding Awards or may subsu titute similar awards forff
any or all outstanding Awards (including but not limited to, awards to
acquire the same consideration paid to the stockholders of the Company pursuant to the Transaction), and any reacquisition or
repurchase rights held by the Company in respect of Common Stock issued pursuant to outstanding Awards may be assigned by the
Company to the Acquiring Entity. For clarity, in the event of a Transaction, the Acquiring Entity may choose to assume or continue
only a portion of an outstanding Award, to substitute a similar award forff
continue, or substitute similar awards for, the outstanding Awards held by some, but not all, Participants. The terms of any
assumption, continuation or substitution will be set by the Board.
only a portion of an outstanding Award, or to assume or
(ii) Awards Held by Current Employee and Director Participants. In the event of a Transaction in which the
ee and Director ParPP ticipants”), the vesting (and exercisability, if applicable) of such Awards will be
Acquiring Entity does not assume or continue outstanding Awards or substitute similar awards forff
respect to any such Awards that have not been assumed, continued or substituted and that are held by Participants who are Employees
or Directors and, in each case, whose Continuous Service has not terminated prior to the effeff ctive time of the Transaction (referred to
as the “Current Emplm oyll
accelerated in full (and with respect to any such Awards that are subju ect to performance-based vesting conditions or requirements,
vesting will be deemed to be satisfieff d at the greater of (x) the target level of performance or (y) the actuat
measured in accordance with the appl
such Transaction (contingent upon the effectiveness of the Transaction) as the Board determines (or, if the Board does not determine
such a date, to the date that is 15 days prior to the effective time of the Transaction), and such Awards will terminate if not exercised
(if appl
a
respect to such Awards will lapse (contingent upon the effectiveness of the Transaction). With respect to the vesting of Awards that
will accelerate upon
such cash payment will be made no later than 30 days folff
icable) at or prior to the effective time of the Transaction, and any reacquisition or repurchase rights held by the Company with
the occurrence of a Transaction pursuant to this Section 6(c)(ii) and are settled in the form of a cash payment,
icable performance goals as of the date of the Transaction) to a date prior to the effective time of
lowing the occurrence of the Transaction.
outstanding Awards, then with
l level of performance
u
a
(iii) Awards Held by Persons other than Current Participants. In the event of a Transaction in which the Acquiring
Entity does not assume or continue outstanding Awards or substitute similar awards forff
Awards that have not been assumed, continued or substitutt ed and that are held by persons other than Current Employee and Director
Participants, such Awards will terminate if not exercised (if applicable) at or prior to the effective time of the Transaction; provideddd ,dd
however, that any reacquisition or repurchase rights held by the Company with respect to such Awards will not terminate and may
continue to be exercised notwithstanding the Transaction.
outstanding Awards, then with respect to
(iv) Payment forff Awards in Lieu of Exercise. Notwithstanding the forff egoing, in the event an Award will terminate if
not exercised at or prior to the effective time of a Transaction, the Board may provide that the holder of such Award may not exercise
such Award but will receive a payment, in such forff m as may be determined by the Board, equal in value, at the effeff ctive time, to the
excess, if any, of (1) the value of the property the Participant would have received upon
exercise price payable by such holder in connection with such exercise.
the exercise of the Award, over (2) any
u
A-79
(d) Involuntary Termination Upon or Following a Transaction. Except as otherwise provided in the Award Agreement, in
to such Employee or Director’s death or Disability) upon
any other written agreement between a Participant and the Company or an Affiff liate, or in any director compensation policy of the
Company, in the event that an Employee or Director’s Continuous Service is involuntarily terminated without Cause (including any
such termination dued
or within 12 months following the effective time of a
Transaction, the vesting (and exercisability, if appl
icable) of any Assumed Awards (as defined in this Section 6(d)) held by such
Employee or Director as of the date of such termination will be accelerated in full (and with respect to any such Awards that are
subju ect to performance-based vesting conditions or requirements, vesting will be deemed to be satisfied at the greater of (x) the target
l level of performance measured in accordance with the appl
level of performance or (y) the actuat
date of such termination), effective as of the date of such termination. For purpos
any outstanding Award that was assumed or continued, or any outstanding similar award that was granted in subsu titution forff
Award, in each case by the Acquiring Entity in connection with the applicable Transaction.
icable performance goals as of the
es of this Section 6(d), an “As“
sumed Award” mdd
eans
an
u
a
a
r
(e) Appointment of Stockholder Representative. As a condition to the receipt of an Award, a Participant will be deemed to
have agreed that the Award will be subju ect to the terms of any agreement governing a Transaction involving the Company, including,
without limitation, a provision for the appointment of a stockholder representative that is authorized to act on the Participant’s behalf
with respect to any escrow, indemnities and any contingent consideration.
(f) No Restriction on Right to Undertake Transactions. The grant of any Award and the issuance of shares of Common
Stock pursuant to any Award does not affeff ct or restrict in any way the right or power of the Company or the stockholders of the
Company to make or authorize any adjud stment, recapitalization, reorganization or other change in the Company’s capital strucr
its business, any merger or consolidation of the Company, any issue of stock or of options, rights or options to purchase stock or of
bonds, debentures, preferff
or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or
transferff
of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
red or prior preferff ence stocks whose rights are supeu rior to or affeff ct the Common Stock or the rights thereof
ture or
7. ADMINISTRATRR ION.
(a) Administration by Board. The Board will administer the Plan unless and until the Board delegates administration of the
Plan to a Committee or Committees, as provided in Section 7(c).
(b) Powers of Board. The Board will have the power, subject to, and within the limitations of, tff he express provisions of the
Plan:
(i) To determine froff m time to time: (1) which of the persons eligible under the Plan will be granted Awards; (2) when
and how each Award will be granted; (3) what type or combination of types of Award will be granted; (4) the provisions of each
Award (which need not be identical), including the time or times when a person will be permitted to receive an issuance of Common
Stock or other payment pursuant to an Award; (5) the number of shares of Common Stock or cash equivalent with respect to which an
Award will be granted to each such person; and (6) the Fair Market Value applicable to an Award.
(ii) To construerr
and interprrr et the Plan and Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of this power, may correct any defect
Plan or in any Award Agreement, in a manner and to the extent it deems necessary or expedient to make the Plan or Awards fully
effeff ctive.
, omission or inconsistency in the
ff
(iii) To settle all controversies regarding the Plan and Awards granted under it.
(iv) To accelerate the time at which an Award may first be exercised or the time during which an Award or any part
thereof will vest, notwithstanding the provisions in the Award Agreement stating the time at which it may first be exercised or the time
during which it will vest.
(v) To prohibit the exercise of any Option, SAR or other exercisabla e Award during a period of up to 30 days prior to
the consummation of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other
distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affeff cting the shares of
Common Stock or the share price of the Common Stock, including any Transaction, for reasons of administrative convenience.
(vi) To suspend or terminate the Plan at any time. Suspension or termination of the Plan will not Materially Impair a
Participant’s rights under any Award granted while the Plan is in effect unless (1) the Company requests the consent of the affeff cted
Participant, and (2) such Participant consents in writing.
(vii) To amend the Plan in any respect the Board deems necessary or advisabla e; provideddd , hdd
owever,r that stockholder
approval will be required forff
rights under any Award granted beforff e any amendment of the Plan will not be Materially Impaired by any such amendment unless
(1) the Company requests the consent of the affeff cted Participant, and (2) such Participant consents in writing.
any such amendment to the extent required by Applicable Law. Except as provided above
, a Participant’s
a
(viii) To submu
it any amendment to the Plan for stockholder appr
a
oval.
A-80
(ix) To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more
Awards, including, but not limited to, amendments to provide terms more favff orable to the Participant than previously provided in the
Award Agreement, subju ect to any specified limits in the Plan that are not subju ect to Board discretion; provideddd , hdd
Participant’s rights under any Award will not be Materially Impaired by any such amendment unless (1) the Company requests the
consent of the affeff cted Participant, and (2) such Participant consents in writing.
owever, that a
the best interests of the Company and that are not in conflicff
t with the provisions of the Plan or Awards.
(x) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote
(xi) To adopt such procedurd es and sub-plans as are necessary or appropriate to permit and faci
ff
litate participation in the
Plan by, or take advantage of specific tax treatment for Awards granted to, Employees, Directors or Consultants who are forff eign
nationals or employed outside the United States (provided that Board approval will not be necessary for immaterial modifications to
the Plan or any Award Agreement to ensure or faci
litate compliance with the laws of the relevant foreign jurisdiction).
ff
(c) Delegation to Committee.
(i) General. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If
administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to another
Committee or a subcu ommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board will thereafteff
resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. Each Committee may
retain the authority to concurrently administer the Plan with any Committee or subcommittee to which it has delegated its authority
hereunder and may, at any time, revest in such Committee some or all of the powers previously delegated. The Board may retain the
authority to concurrently administer the Plan with any Committee and may, at any time, revest in the Board some or all of the powers
previously delegated.
r be to the Committee or subcommittee, as applicable), subju ect, however, to such
(ii) Rule 16b-3 Compliance. To the extent an Award is intended to qualify f
orff
ff
the exemption froff m Section 16(b) of the
Exchange Act that is availabla e under RulRR e 16b-3 of the Exchange Act, the Award will be granted by the Board or a Committee that
consists solely of two or more Non-Employee Directors, as determined under RulRR e 16b-3(b)(3) of the Exchange Act, and thereafteff
r
any action establishing or modifying the terms of the Award will be approved by the Board or a Committee meeting such requirements
to the extent necessary for such exemption to remain available.
(d) Effect of Board’s Decision. All determinations, interprr etations and construcrr
tions made by the Board or any Committee in
good faith will not be subju ect to review by any person and will be final, binding and conclusive on all persons.
(e) Cancellation and Re-Grant of Awards. Except in connection with a Transaction, as provided in Section 6(a) relating to
Capia talization Adjustments, or unless the stockholders of the Company have approved such an action within 12 months prior to such
an event, neither the Board nor any Committee will have the authority to: (i) reduce the exercise or strike price of any outstanding
Option or SAR; or (ii) cancel any outstanding Option or SAR that has an exercise or strike price greater than the then-current Fair
Market Value in exchange for cash or other Awards under the Plan.
(f) Delegation to an Officer. The Board or any Committee may delegate to one or more Offiff cers the authority to do one or
both of the following: (i) designate Employees who are not Offiff cers to be recipients of Options and SARs (and, to the extent permitted
by Applicable Law, other types of Awards) and, to the extent permitted by Applicable Law, the terms thereof; and (ii) determine the
number of shares of Common Stock to be subju ect to such Awards granted to such Employees; provideddd , hdd
owever, that the resolutions
or charter adopted by the Board or any Committee evidencing such delegation will specify the total number of shares of Common
Stock that may be subju ect to the Awards granted by such Offiff cer and that such Offiff cer may not grant an Award to himself or herself.ff
Any such Awards will be granted on the appl
Committee, unless otherwise provided in the resolutions approving the delegation authority. Notwithstanding anything to the contrary
herein, neither the Board nor any Committee may delegate to an Offiff cer who is acting solely in the capacity of an Offiff cer (and not also
as a Director) the authority to determine the Fair Market Value.
icable form of Award Agreement most recently approved forff
use by the Board or the
a
8. TAX WITHHOLDING.
(a) Withholding Authorization. As a condition to acceptance of any Award, a Participant authorizes withholding from
payroll and any other amounts payable to such Participant, and otherwise agrees to make adequate provision for, any sums required to
satisfy any U.S. fedff
eral, state, local and/or foreign tax or social insurance contribution withholding obligations of the Company or an
Affiff liate, if any, which arise in connection with the exercise, vesting or settlement of such Award, as appl
Participant may not be able to exercise an Award even though the Award is vested, and the Company will have no obligation to issue
shares of Common Stock subju ect to an Award, unless and until such withholding obligations are satisfied.
icable. Accordingly, a
a
A-81
(b) Satisfaction of Withholding Obligations. To the extent permitted by the terms of an Award Agreement, the Company
ny U.S. federal, state, local and/or foreign tax or social insurance contribution withholding
may, in its sole discretion, satisfy aff
obligations relating to an Award by any of the following means or by a combination of such means: (i) causing the Participant to
tender a cash payment; (ii) withholding shares of Common Stock froff m the shares of Common Stock issued or otherwise issuable to the
Participant in connection with the Award; (iii) withholding cash froff m an Award settled in cash; (iv) withholding payment froff m any
amounts otherwise payabla e to the Participant; (v) by allowing a Participant to effectuat
te a “cashless exercise” pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board; or (vi) by such other method as may be set forth in the
Award Agreement.
(c) No Obligation to Notify off
r Minimize Taxes; No Liability to Claims. Except as required by Applicable Law, the
Company has no duty or obligation to any Participant to advise such Participant as to the time or manner of exercising an Award.
Furthermore, the Company has no dutd y or obligation to warn or otherwise advise such Participant of a pending termination or
expiration of an Award or a possible period in which the Award may not be exercised. The Company has no dutd y or obligation to
minimize the tax consequences of an Award to any Participant and will not be liabla e to any Participant forff
consequences to such Participant in connection with an Award. As a condition to accepting an Award, each Participant (i) agrees to
not make any claim against the Company, or any of its Offiff cers, Directors, Employees or Affiff liates related to tax liabia lities arising
from such Award or other Company compensation and (ii) acknowledges that such Participant was advised to consult with his or her
own personal tax, finff ancial and other legal advisors regarding the tax consequences of the Award and has either done so or knowingly
and voluntarily declined to do so. Additionally, each Participant acknowledges that any Option or SAR is exempt from Section 409A
only if the exercise or strike price of such Option or SAR is at least equal to the “faiff
r market value” of the Common Stock on the date
of grant of such Option or SAR as determined by the Internal Revenue Service and there is no other impermissible deferff
compensation associated with the Award. Additionally, as a condition to accepting an Option or SAR, each Participant agrees to not
make any claim against the Company, or any of its Offiff cers, Directors, Employees or Affiff liates in the event that the Internal Revenue
Service asserts that the exercise or strike price of such Option or SAR is less than the “fair market value” of the Common Stock on the
date of grant of such Option or SAR as subsu equently determined by the Internal Revenue Service.
any adverse tax
ral of
(d) Withholding Indemnificff ation. As a condition to accepting an Award, in the event that the amount of the Company’s and/
or its Affiff liate’s withholding obligations in connection with such Award was greater than the amount actuat
Company and/or its Affiff liates, each Participant agrees to indemnify aff
failure by the Company and/or its Affiliates to withhold the proper amount.
nd hold the Company and/or its Affiff liates harmless from any
lly withheld by the
9. MISCELLANEOUS.
(a) Dividends and Dividend Equivalents. Dividends or dividend equivalents may not be paid or credited to any Awards.
(b) Source of Shares. The stock issuable under the Plan will be shares of authorized but unissued or reacquired Common
Stock, including shares repurchased by the Company on the open market or otherwise.
(c) Use of Proceeds from Sales of Common Stock. Proceeds froff m the sale of shares of Common Stock pursuant to Awards
will constitutt e general funds of the Company.
(d) Corporate Action Constituting Grant of Awards. Corporate action constitutt
ing a grant by the Company of an Award to
any Participant will be deemed completed as of the date of such corpor
regardless of when the instrumrr
the Participant. In the event that the corpor
approving the grant contain terms (e.g., exercise price, vesting scheduld e or number of shares) that are inconsistent with those in the
Award Agreement or related grant documents as a result of a clerical error in the Award Agreement or related grant documents, the
corporate records will control and the Participant will have no legally binding right to the incorrect term in the Award Agreement or
related grant documents.
ate records (e.g., Board consents, resolutions or minutes) documenting the corpor
ent, certificff ate, or letter evidencing the Award is communicated to, or actuat
ate action, unless otherwise determined by the Board,
lly received or accepted by,
ate action
r
r
r
(e) Stockholder Rights. No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect
exercise of
to, any shares of Common Stock subject to an Award unless and until (i) such Participant has satisfied all requirements forff
the Award pursuant to its terms, if applicable, and (ii) the issuance of the Common Stock subju ect to such Award is reflected in the
records of the Company.
(f) No Employment or Other Service Rights. Nothing in the Plan, any Award Agreement or any other instrumrr
thereunder or in connection with any Award granted pursuant thereto will conferff
the Company or an Affiff liate in the capacity in effeff ct at the time the Award was granted or affeff ct the right of the Company or an
Affiff liate to terminate at will and without regard to any futff urt e vesting opportunity that a Participant may have with respect to any
Award (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant
to the terms of such Consultant’s agreement with the Company or an Affiff liate, or (iii) the service of a Director pursuant to the Bylaws
of the Company or an Affiff liate, and any applicable provisions of the corpor
Company or the Affiff liate is incorporated, as the case may be. Further, nothing in the Plan, any Award Agreement or any other
instrument executed thereunder or in connection with any Award will constitute any promise or commitment by the Company or an
Affiff liate regarding the fact or nature of future positions, futff urt e work assignments, futff urt e compensation or any other term or condition
of employment or service or conferff
accruer d under the terms of the Award Agreement and/or Plan.
any right or benefit under the Award or the Plan unless such right or benefit has specificff ally
ate law of the state or foreign jurisdiction in which the
r
ent executed
upon any Participant any right to continue to serve
A-82
(g) Change in Time Commitment. In the event a Participant’s regular level of time commitment in the performance of his or
her services for the Company or any Affiff liate is reduced (forff
from a full-time Employee to a part-time Employee or takes an extended leave of absa
has a change in statust
of any Award to the Participant, the Board may determine, to the extent permitted by Applicable Law, to (i) make a corresponding
reduction in the number of shares or cash amount subju ect to any portion of such Award that is scheduled to vest or become payabla e
afteff
r the date of such change in time commitment, and (ii) in lieu of or in combination with such a reducd tion, extend the vesting or
payment scheduld e appl
portion of the Award that is so reduced or extended.
icable to such Award. In the event of any such reduction, the Participant will have no right with respect to any
example, and without limitation, if the Participant is an Employee and
ence) afteff
r the date of grant
a
(h) Execution of Additional Documents. As a condition to accepting an Award, the Participant agrees to execute any
additional documents or instruments necessary or desirabla e, as determined in the Plan Administrator’s sole discretion, to carry out the
purpos
equirements, in each case at the Plan
rr
Administrator’s request.
litate compliance with securities and/or other regulatory r
es or intent of the Award, or faci
ff
rr
(i) Electronic Delivery and Participation. Any referff ence herein or in an Award Agreement to a “written” agreement or
document will include any agreement or document delivered electronically, fileff d publicly at www.sec.gov (or any successor website
thereto) or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant
has access). By accepting any Award, the Participant consents to receive documents by electronic delivery arr
Plan through any on-line electronic system established and maintained by the Plan Administrator or another third party selected by the
Plan Administrator. The form of delivery orr
will be determined by the Company.
f any Common Stock (e.g., a stock certificate or electronic entry evidencing such shares)
nd to participate in the
(j) Clawback/Rkk ecovery. All Awards granted under the Plan will be subju ect to recoupment in accordance with the folff
as applicable: (i) the Neurocrine Biosciences, Inc. Policy forff Recoupment of Incentive Compensation; (ii) the Neurocrine Biosciences,
Inc. Incentive Compensation Recoupment Policy; (iii) any clawback policy that the Company is required to adopt pursuant to the
listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise
required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other Applicable Law; and (iv) any other clawback
policy that the Company adopts. In addition, the Board may impose such other clawback, recovery or recoupment provisions in an
Award Agreement as the Board determines necessary or appropriate, including but not limited to a reacquisition right in respect of
previously acquired shares of Common Stock or other cash or property upon
under such a clawback policy will be an event giving rise to a Participant’s right to voluntary t
“resignation forff
Company.
tive termination” or any similar term under any plan of or agreement with the
the occurrence of Cause. No recovery of compensation
good reason,” or for a “construcr
erminate employment uponu
lowing,
u
a
rr
(k) Securities Law Compliance. A Participant will not be issued any shares in respect of an Award unless either (i) the shares
are registered under the Securities Act or (ii) the Company has determined that such issuance would be exempt froff m the registration
requirements of the Securities Act. Each Award also must comply with other Applicable Law governing the Award, and a Participant
will not receive such shares if the Company determines that such receipt would not be in material compliance with Applicable Law.
(l) Transfer or Assignment of Awards; Issued Shares. Except as expressly provided in the Plan or an Award Agreement,
Awards may not be transferff
case of Restricted Stock and similar awards, afteff
hypothecate, donate, encumber or otherwise dispose of any interest in such shares provided that any such actions are in compliance
with the provisions herein, the terms of the Trading Policy and Applicable Law.
r the issued shares have vested, the holder of such shares is freff e to assign,
r the vested shares subju ect to an Award have been issued, or in the
red or assigned by the Participant. Afteff
(m) Effeff ct on Other Employee Benefitff Plans. The value of any Award, as determined upon
u
not be included as compensation, earnings, salaries, or other similar terms used when calculating any Participant’s benefitsff
employee benefitff plan sponsored by the Company or any Affiliate, except as such plan otherwise expressly provides. The Company
expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiff liate’s employee benefitff plans.
grant, vesting or settlement, will
under any
ff
(n) Deferra
Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferff
may also establish programs and procedurd es for deferff
with the requirements of Section 409A.
ls. To the extent permitted by Applicable Law, the Board, in its sole discretion, may determine that the delivery of
red and
rals by will be made in accordance
ral elections to be made by Participants. Deferff
(o) Section 409A. Unless otherwise expressly provided forff
in an Award Agreement, the Plan and each Award Agreement will
be interpreted to the greatest extent possible in a manner that makes the Plan and the Awards granted hereunder exempt fromff
Section 409A, and, to the extent not so exempt, in compliance with the requirements of Section 409A. If the Board determines that any
Award granted hereunder is not exempt from and is thereforff e subject to Section 409A, the Award Agreement evidencing such Award
will incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code, and to the
extent an Award Agreement is silent on terms necessary for compliance, such terms are hereby incorporated by reference into the
Award Agreement. Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement specifically provides
otherwise), if the shares of Common Stock are publicly traded, and if a Participant holding an Award that constitutes “deferred
compensation” under Section 409A is a “specified employee” for purpos
that is due because of a “separation from service” (as definff ed in Section 409A without regard to alternative definff
be issued or paid before the date that is six months and one day folff
earlier, the date of the Participant’s death, unless such distribution or payment may be made in a manner that complies with
es of Section 409A, no distribution or payment of any amount
itions thereunder) will
lowing the date of such Participant’s “separation froff m service” or, if
rr
A-83
Section 409A, and any amounts so deferff
balance paid thereafteff
r on the original schedule.
red will be paid in a lump sum on the day afteff
r such six month period elapsa
es, with the
(p) Choice of Law. This Plan and any controversy arising out of or relating to this Plan will be governed by, and construerr d in
accordance with, the internal laws of the State of California, without regard to conflicff
application of any law other than the law of the State of Califorff nia.
t of law principles that would result in any
10. COVENANTS OF THE COMPANY.
(a) Compliance with Law. The Company will seek to obtain froff m each regulatory crr
ommission or agency, as may be deemed
to be necessary, having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of
Common Stock upon exercise or vesting of the Awards; provideddd , hdd
owever, that this undertaking will not require the Company to
register under the Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, aff
reasonabla e efforff
ommission or agency the
authority that counsel for the Company deems necessary or advisabla e forff
Plan, the Company will be relieved froff m any liabia lity for faiff
Awards unless and until such authority is obtained. A Participant is not eligible for the grant of an Award or the subsequent issuance
of Common Stock pursuant to the Award if such grant or issuance would be in violation of any Applicable Law.
the lawful issuance and sale of Common Stock under the
lure to issue and sell Common Stock upon exercise or vesting of such
ts and at a reasonabla e cost, the Company is unabla e to obtain froff m any such regulatory crr
fter
11. ADDITIONAL RULES FOR AWARDS SUBJECT TO SECTION 409A.
(a) Application. Unless the provisions of this Section 11 are expressly superseded by the provisions in an Award Agreement,
a Non-
the provisions of this Section 11 will apply and will supeu rsede anything to the contrary set forff
Exempt Award.
th in the Award Agreement forff
(b) Non-Exempt Awards Subject to Non-Exempt Severance Arrangements. To the extent a Non-Exempt Award is subju ect
to Section 409A due to application of a Non-Exempt Severance Arrangement, the following provisions of this Section 11(b) will
apply.
(i) If the Non-Exempt Award vests in the ordinary course during the Participant’s Continuous Service in accordance
with the vesting scheduld e set forth in the Award Agreement, and does not accelerate vesting under the terms of a Non-Exempt
Severance Arrangement, in no event will the shares be issued in respect of such Non-Exempt Award any later than the later of:ff
(i) December 31st of the calendar year that includes the applicable vesting date; (ii) the 60th day that folff
date; or (iii) any date that is permitted without incurring adverse tax consequences under Section 409A.
lows the appl
icable vesting
a
(ii) If vesting of the Non-Exempt Award accelerates under the terms of a Non-Exempt Severance Arrangement in
connection with the Participant’s Separation froff m Service, and such vesting acceleration provisions were in effeff ct as of the date of
grant of the Non-Exempt Award and, thereforff e, are part of the terms of such Non-Exempt Award as of the date of grant, then the
shares will be earlier issued in settlement of such Non-Exempt Award upon the Participant’s Separation froff m Service in accordance
with the terms of the Non-Exempt Severance Arrangement, but in no event later than the 60th day that folff
Participant’s Separation froff m Service. However, if at the time the shares would otherwise be issued the Participant is subject to the
distribution limitations contained in Section 409A applicable to “specified employees,” as defined in Section 409A(a)(2)(B)(i) of the
Code, such shares will not be issued before the date that is six months following the date of such Participant’s Separation fromff
Service, or, if earlier, the date of the Participant’s death that occurs within such six month period.
lows the date of the
(iii) If vesting of a Non-Exempt Award accelerates under the terms of a Non-Exempt Severance Arrangement in
connection with a Participant’s Separation froff m Service, and such vesting acceleration provisions were not in effeff ct as of the date of
grant of the Non-Exempt Award and, thereforff e, are not a part of the terms of such Non-Exempt Award on the date of grant, then such
acceleration of vesting of the Non-Exempt Award will not accelerate the issuance date of the shares, but the shares will instead be
issued on the same scheduld e as set forth in the Grant Notice as if they had vested in the ordinary crr
Continuous Service, notwithstanding the vesting acceleration of the Non-Exempt Award. Such issuance schedule is intended to satisfy
the requirements of payment on a specified date or pursuant to a fixed scheduld e, as provided under Treasury Rrr
Section 1.409A-3(a)(4).
ourse during the Participant’s
egulations
(c) Treatment of Non-Exempt Awards Upon a Transaction forff Employees and Consultants. The provisions of this
Section 11(c) will apply and will supeu rsede anything to the contrary set forff
Non-Exempt Award in connection with a Transaction if the Participant was either an Employee or Consultant upon the appl
of grant of the Non-Exempt Award.
th in the Plan with respect to the permitted treatment of any
icable date
a
connection with a Transaction:
(i) Vested Non-Exempt Awards. The folff
lowing provisions will apply to any Vested Non-Exempt Award in
assume, continue or subsu titute the Vested Non-Exempt Award. Upon the Section 409A Change in Control, the settlement of the
Vested Non-Exempt Award will automatically be accelerated and the shares will be immediately issued in respect of the Vested Non-
(1) If the Transaction is also a Section 409A Change in Control, then the Acquiring Entity may not
A-84
Exempt Award. Alternatively, the Company may instead provide that the Participant will receive a cash settlement equal to the Fair
Market Value of the shares that would otherwise be issued to the Participant upon
the Section 409A Change in Control.
u
(2) If the Transaction is not also a Section 409A Change in Control, then the Acquiring Entity must
either assume, continue or subsu titute each Vested Non-Exempt Award. The shares to be issued in respect of the Vested Non-Exempt
Award will be issued to the Participant by the Acquiring Entity on the same schedule that the shares would have been issued to the
Participant if the Transaction had not occurred. In the Acquiring Entity’s discretion, in lieu of an issuance of shares, the Acquiring
Entity may instead subsu titute a cash payment on each applicable issuance date, equal to the Fair Market Value of the shares that would
otherwise be issued to the Participant on such issuance dates, with the determination of the Fair Market Value of the shares made on
the date of the Transaction.
(ii) Unvested Non-Exempt Awards. The folff
otherwise determined by the Board pursuant to Section 11(e).
lowing provisions will apply to any Unvested Non-Exempt Award unless
(1) In the event of a Transaction, the Acquiring Entity will assume, continue or subsu titute any Unvested
Non-Exempt Award. Unless otherwise determined by the Board, any Unvested Non-Exempt Award will remain subju ect to the same
vesting and forfeiture restrictions that were applicable to the Award prior to the Transaction. The shares to be issued in respect of any
Unvested Non-Exempt Award will be issued to the Participant by the Acquiring Entity on the same scheduld e that the shares would
have been issued to the Participant if the Transaction had not occurred. In the Acquiring Entity’s discretion, in lieu of an issuance of
shares, the Acquiring Entity may instead subsu titute a cash payment on each applicable issuance date, equal to the Fair Market Value of
the shares that would otherwise be issued to the Participant on such issuance dates, with the determination of Fair Market Value of the
shares made on the date of the Transaction.
(2) If the Acquiring Entity will not assume, substitute or continue any Unvested Non-Exempt Award in
connection with a Transaction, then such Award will automatically terminate and be forfeited upon
consideration payable to any Participant in respect of such forfeiff
the extent permitted and in compliance with the requirements of Section 409A, the Board may in its discretion determine to elect to
accelerate the vesting and settlement of the Unvested Non-Exempt Award upon the Transaction, or instead subsu titute a cash payment
equal to the Fair Market Value of such shares that would otherwise be issued to the Participant, as further provided in
Section 11(e)(ii). In the absence of such discretionary election by the Board, any Unvested Non-Exempt Award will be forfeiff
without payment of any consideration to the affeff cted Participants if the Acquiring Entity will not assume, substitute or continue the
Unvested Non-Exempt Awards in connection with the Transaction.
ted Unvested Non-Exempt Award. Notwithstanding the forff egoing, to
the Transaction with no
ted
u
Transaction, and regardless of whether or not such Transaction is also a Section 409A Change in Control.
(3) The forff egoing treatment will apply with respect to all Unvested Non-Exempt Awards upon any
(d) Treatment of Non-Exempt Awards Upon a Transaction forff Non-Employee Directors. The folff
lowing provisions of this
Section 11(d) will apply and will supeu rsede anything to the contrary that may be set forth in the Plan with respect to the permitted
treatment of a Non-Exempt Director Award in connection with a Transaction.
(i) If the Transaction is also a Section 409A Change in Control, then the Acquiring Entity may not assume, continue or
subsu titute the Non-Exempt Director Award. Upon the Section 409A Change in Control, the vesting and settlement of any Non-Exempt
Director Award will automatically be accelerated and the shares will be immediately issued to the Participant in respect of the Non-
Exempt Director Award. Alternatively, the Company may provide that the Participant will instead receive a cash settlement equal to
the Fair Market Value of the shares that would otherwise be issued to the Participant upon
pursuant to the preceding provision.
the Section 409A Change in Control
u
(ii) If the Transaction is not also a Section 409A Change in Control, then the Acquiring Entity must either assume,
continue or subsu titute the Non-Exempt Director Award. Unless otherwise determined by the Board, the Non-Exempt Director Award
will remain subju ect to the same vesting and forfeiture restrictions that were applicable to the Award prior to the Transaction. The
shares to be issued in respect of the Non-Exempt Director Award will be issued to the Participant by the Acquiring Entity on the same
schedule that the shares would have been issued to the Participant if the Transaction had not occurred. In the Acquiring Entity’s
discretion, in lieu of an issuance of shares, the Acquiring Entity may instead subsu titute a cash payment on each applicable issuance
date, equal to the Fair Market Value of the shares that would otherwise be issued to the Participant on such issuance dates, with the
determination of Fair Market Value made on the date of the Transaction.
(e) If the RSU Award is a Non-Exempt Award, then the provisions in this Section 11(e) will apply and supeu rsede anything to
the contrary that may be set forth in the Plan or the Award Agreement with respect to the permitted treatment of such Non-Exempt
Award:
(i) Any exercise by the Board of discretion to accelerate the vesting of a Non-Exempt Award will not result in any
acceleration of the scheduled issuance dates forff
upon the appl
a
icable vesting dates would be in compliance with the requirements of Section 409A.
the shares in respect of the Non-Exempt Award unless earlier issuance of the shares
A-85
(ii) The Company explicitly reserves the right to earlier settle any Non-Exempt Award to the extent permitted and in
compliance with the requirements of Section 409A, including pursuant to any of the exemptions availabla e in Treasury Rrr
Section 1.409A-3(j)(4)(ix).
egulations
(iii) To the extent the terms of any Non-Exempt Award provide that it will be settled upon
a Transaction, to the extent
compliance with the requirements of Section 409A, the Transaction event triggering settlement must also constitute a
a termination of
compliance with the requirements of Section 409A,
it is required forff
Section 409A Change in Control. To the extent the terms of a Non-Exempt Award provide that it will be settled upon
employment or termination of Continuous Service, to the extent it is required forff
the termination event triggering settlement must also constitutt e a Separation froff m Service. However, if at the time the shares would
otherwise be issued to a Participant in connection with a “separation froff m service” such Participant is subject to the distribution
limitations contained in Section 409A applicable to “specified employees,” as defined in Section 409A(a)(2)(B)(i) of the Code, such
shares will not be issued before the date that is six months following the date of the Participant’s Separation froff m Service, or, if
earlier, the date of the Participant’s death that occurs within such six month period.
u
u
(iv) The provisions in this Section 11(e) for delivery orr
f the shares in respect of the settlement of a RSU Award that is a
Non-Exempt Award are intended to comply with the requirements of Section 409A so that the delivery orr
f the shares to the Participant
in respect of such Non-Exempt Award will not trigger the additional tax imposed under Section 409A, and any ambiguities herein will
be so interpreted.
12. SEVERABRR ILITY.
If all or any part of the Plan or any Award Agreement is declared by any court or governmental authority to be unlawful or
invalid, such unlawfulness or invalidity will not invalidate any portion of the Plan or such Award Agreement not declared to be
unlawful or invalid. Any Section of the Plan or any Award Agreement (or part of such a Section) so declared to be unlawful or invalid
will, if possible, be construer d in a manner which will give effeff ct to the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.
13. TERMINATION OF THE PLAN.
The Board may suspend or terminate the Plan at any time. Unless terminated sooner by the Board, the Plan will automatically
f the earlier of: (i) the Adoption Date; or (ii) the Effective Date. No Awards may be
terminate on the day beforff e the tenth anniversary orr
granted under the Plan while the Plan is suspended or after it is terminated.
14. DEFINITIONS.
As used in the Plan, the folff
lowing definitions apply to the capia talized terms indicated below:
(a) “Ac“
quiring EntEE ittt ytt ” means the surviving or acquiring corporation (or the surviving or acquiring corporation’s parent
company) in connection with a Transaction.
dd
(b) “Ad“
opt
iott n Datett ” means the date the Plan is first appr
a
oved by the Compensation Committee.
fiff liaii
(c) “Af“
te” means, at the time of determination, any “parent” or “subsu idiary” of the Company as such terms are definff ed in
Rule 405 promulgated under the Securities Act. The Board may determine the time or times at which “parent” or “subsidiary” statust
determined within the forff egoing definition.
is
(d) “An“
nual MeeMM tingii
” means the firff st meeting of the Company’s stockholders held each calendar year at which Directors are
selected.
plpp icll able Lll
aw” means any appl
(e) “Ap“
eral, state, forff eign, material local or municipal or other law, statutt e,
ion, principle of common law, resolution, ordinance, code, edict, decree, rule, listing rulr e, regulation, judicial decision, ruling
constitutt
or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effeff ct by or under the authority of any
Governmental Body (including under the authority of any appl
New York Stock Exchange, or the Financial Industry Rrr
gulating organization such as the Nasdaq Stock Market,
icable self-reff
uthority).
icable securities, fedff
egulatory Arr
a
a
(f)ff “Ap“
prpp eciation Award” mdd
eans (i) a stock option or stock appreciation right granted under the Prior Plan or (ii) an Option or
SAR, in each case with respect to which the exercise or strike price is at least 100% of the Fair Market Value of the Common Stock
subju ect to the stock option or stock appreciation right, or Option or SAR, as appl
icable, on the date of grant.
a
“
(g) “Awa
rd” mdd
eans any right to receive Common Stock, cash or other property granted under the Plan (including an Incentive
Stock Option, a Nonstatutory Stock Option, a SAR, a Restricted Stock Award, a RSU Award, a Performance Award or any Other
Award).
“
(h) “Awa
rd Agreement” mt
eans a written agreement between the Company and a Participant evidencing the terms and
conditions of an Award. The Award Agreement generally consists of the Grant Notice and the agreement containing the written
A-86
summary of the general terms and conditions applicable to the Award and which is provided to a Participant along with the Grant
Notice.
(i) “Board” mdd
eans the Board of Directors of the Company (or its designee). Any decision or determination made by the Board
will be a decision or determination that is made in the sole discretion of the Board (or its designee), and such decision or determination
will be final and binding on all Participants.
(j) “Capia taii
lizatiott n Adjustment” mt
eans any change that is made in, or other events that occur with respect to, the Common
Stock subject to the Plan or subju ect to any Award afteff
through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash,
large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares,
change in corporate strucrr
Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the forff egoing, the
conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
r the Adoption Date without the receipt of consideration by the Company
ing transaction, as that term is used in Statement of Financial Accounting
ture or any similar equity restructurt
r participation in, a fraff ud or act of dishonesty against the Company or an Affiff liate that results
utd y such Participant owes to the Company or an Affiff liate; or (iv) such Participant’s conduct that constitutes gross
dination, incompetence or habia tual neglect of duties and that results in (or might have reasonabla y resulted in) material harm to
(k) “Cause” has the meaning ascribed to such term in any written agreement between the Participant and the Company or an
ence of such agreement, such term means, with respect to a Participant, the occurrence of
Affiff liate defining such term and, in the absa
any of the following events: (i) such Participant’s commission of any crime involving fraud, dishonesty or moral turpitude; (ii) such
Participant’s attempted commission of, off
in (or might have reasonabla y resulted in) material harm to the business of the Company or an Affiliate; (iii) such Participant’s
intentional, material violation of any contract or agreement between such Participant and the Company or an Affiff liate, or of any
statutt ory drr
insubor
u
the business of the Company or an Affiliate; provideddd , hdd owever, that the action or conduct described in clauses (iii) and (iv) above will
constitutt e “Cause” only if such action or conduct continues after the Company has provided such Participant with written notice
thereof and not less than five business days to cure the same. The determination that a termination of the Participant’s Continuous
Service is either for Cause or without Cause will be made by the Board with respect to Participants who are Offiff cers and by the Chief
Executive Officer of the Company with respect to Participants who are not Offiff cers. Any determination by the Company that the
Continuous Service of a Participant was terminated with or without Cause forff
Participant will have no effeff ct upon any determination of the rights or obligations of the Company or such Participant forff
rr
purpos
es of outstanding Awards held by such
the purpos
any other
e.
rr
(l) “Change in Contrott
l” oll
r “Change of Contrott
l” mll
eans the occurrence, in a single transaction or in a series of related
transactions, of any one or more of the folff
owever, to the extent necessary to avoid adverse personal income
tax consequences to the Participant in connection with an Award, such transaction also constitutes a Section 409A Change in Control:
lowing events; provideddd , hdd
(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing
more than 50% of the combined voting power of the Company’s then outstanding securities other than by virtuet
consolidation or similar transaction. Notwithstanding the forff egoing, a Change in Control will not be deemed to occur (A) on account
of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the
Company by an investor, any affiff liate thereof or any other Exchange Act Person that acquires the Company’s securities in a
transaction or series of related transactions the primary purpos
of equity securities, or (C) solely because the level of Ownership held by any Exchange Act Person (the “Subjeb ct Person”) exceeds
the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting
securities by the Company reducd ing the number of shares outstanding, provided that if a Change in Control would occur (but forff
operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the
Subju ect Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not
occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated
percentage threshold, then a Change in Control will be deemed to occur;
e of which is to obtain finff ancing for the Company through the issuance
of a merger,
the
r
(ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company
and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company
immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than 50% of
the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than
50% of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar
transaction, in each case in subsu tantially the same proportions as their Ownership of the outstanding voting securities of the Company
immediately prior to such transaction;
(iii) the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of
the Company, or a complete dissolution or liquidation of the Company shall otherwise occur, except forff
corporation;
a liquidation into a parent
(iv) there is consummated a sale, lease, exclusive license or other disposition of all or subsu tantially all of the
consolidated assets of the Company and its Subsu idiaries, other than a sale, lease, license or other disposition of all or subsu tantially all
of the consolidated assets of the Company and its Subsu idiaries to an Entity, more than 50% of the combined voting power of the
voting securities of which are Owned by stockholders of the Company in subsu tantially the same proportions as their Ownership of the
outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or
A-87
(v) individuals who, on the date the Plan is adopted by the Compensation Committee, are members of the Board (the
cumbent Board”)dd
cease for any reason to constitute at least a majoa rity of the members of the Board; provideddd , hdd
“In“
appointment or election (or nomination forff
the members of the Incumbent Board then still in offiff ce, such new member will, for purpos
of the Incumbent Board.
owever, that if the
election) of any new Board member was approved or recommended by a majoa rity vote of
es of this Plan, be considered as a member
r
Notwithstanding the forff egoing or any other provision of this Plan, (A) the term Change in Control will not include a sale of
assets, merger or other transaction effected exclusively forff
definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and
the Participant will supeu rsede the foregoing definition with respect to Awards subject to such agreement; provideddd , hdd
owever, that (1) if
no definition of Change in Control (or any analogous term) is set forth in such an individual written agreement, the forff egoing
definition will apply; and (2) no Change in Control (or any analogous term) will be deemed to occur with respect to Awards subject to
such an individual written agreement without a requirement that the Change in Control (or any analogous term) actuat
e of changing the domicile of the Company, and (B) the
the purpos
lly occur.
rr
(m) “Code” means the Internal Revenue Code of 1986, as amended, including any appl
a
icable regulations and guidance
thereunder.
(n) “Committett e” means the Compensation Committee and any other committee of Directors to whom authority has been
delegated by the Board or Compensation Committee in accordance with the Plan.
(o) “Common StoSS ck” means the common stock of the Company.
(p) “Companyn ” means Neurocrine Biosciences, Inc., a Delaware corpor
ration.
(q) “Compensation ComCC mittii eett ” means the Compensation Committee of the Board.
(r) “Consultall nt” mt
eans any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render
consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an
Affiff liate and is compensated for such services. However, service solely as a Director, or payment of a feeff
cause a Director to be considered a “Consultant” forff
Consultant under this Plan only if a Form S-8 Registration Statement under the Securities Act is availabla e to register either the offer or
the sale of the Company’s securities to such person.
es of the Plan. Notwithstanding the forff egoing, a person is treated as a
for such service, will not
rr
purpos
(s) “Contintt uous Service” means that the Participant’s service with the Company or an Affiff liate, whether as an Employee,
owever, that if the Entity for which a Participant is rendering services ceases
s an Affiliate, as determined by the Board, such Participant’s Continuous Service will be considered to have terminated on
Director or Consultant, is not interruptu ed or terminated. A change in the capacity in which the Participant renders service to the
Company or an Affiliate as an Employee, Director or Consultant or a change in the Entity for which the Participant renders such
service, provided that there is no interruptu ion or termination of the Participant’s service with the Company or an Affiff liate, will not
terminate a Participant’s Continuous Service; provideddd , hdd
to qualify aff
the date such Entity ceases to qualify aff
Consultant of an Affiff liate or to a Director will not constitute an interruptu ion of Continuous Service. To the extent permitted by law, the
Board or the Chief Executive Officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will
be considered interruptu ed in the case of (i) any leave of absa ence approved by the Board or Chief Executive Officer, including sick
leave, military l
Notwithstanding the forff egoing, a leave of absa
such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absa
policy appl
compliance with Section 409A, the determination of whether there has been a termination of Continuous Service will be made, and
such term will be construer d, in a manner that is consistent with the definff
Regulation Section 1.409A-1(h) (without regard to any alternative definff
eave or any other personal leave, or (ii) transferff s between the Company, an Affiff liate, or their successors.
ence will be treated as Continuous Service forff
ition of “separation froff m service” as defined under Treasuryrr
ition thereunder).
es of vesting in an Award only to
ence agreement or
or
icable to the Participant, or as otherwise required by law. In addition, to the extent required forff
s an Affiliate. For example, a change in statust
from an Employee of the Company to a
exemption fromff
r
purpos
a
rr
(t) “Corporate Ttt
raTT nsaction” means the consummation, in a single transaction or in a series of related transactions, of any one
or more of the folff
lowing events:
Company and its Subsu idiaries;
(i) a sale or other disposition of all or subsu tantially all, as determined by the Board, of the consolidated assets of the
(ii) a sale or other disposition of at least 90% of the outstanding securities of the Company;
(iii) a merger, consolidation or similar transaction folff
lowing which the Company is not the surviving corporation; or
(iv) a merger, consolidation or similar transaction folff
lowing which the Company is the surviving corpor
r
ation but the
shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or
exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or
otherwise.
A-88
(u) “determine” or “determined” mdd
eans as determined by the Board or the Committee (or its designee) in its sole discretion.
(v) “Di“
reii ctortt
” means a member of the Board of Directors of the Company.
(w) “Di“
saii bilityii
” means, with respect to a Participant, such Participant is unabla e to engage in any substantial gainfulff
activity by
reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than 12 months, as provided in Section 22(e)(3) of the Code, and will be
determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.
(x) “Ef“
feff ctivtt e Datett ” means the date of the Annual Meeting in 2020, provided this Plan is appr
a
oved by the Company’s
stockholders at such meeting.
plm oyll
payment of a fee forff
(y) “Em“
ee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or
such services, will not cause a Director to be considered an “Employee” for purpos
es of the Plan.
r
(z) “Em“
plm oyll
er” means the Company or the Affilff iate of the Company that employs the Participant.
(aa) “En“
tity” means a corpor
r
ation, partnership, limited liabia lity company or other entity.
(bb) “Ex“
change Act” mt
eans the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
(cc) “Ex“
change Act PerPP sorr n” means any naturt al person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the
Exchange Act), except that “Exchange Act Person” will not include (i) the Company or any Subsu idiary, (ii) any employee benefitff plan
of the Company or any Subsidiary or any trustee or other fidff ucd iary holding securities under an employee benefitff plan of the Company
ring of such securities, (iv) an
or any Subsidiary, (iii) an underwriter temporarily holding securities pursuant to a registered public offeff
Entity Owned, directly or indirectly, by the stockholders of the Company in subsu tantially the same proportions as their Ownership of
stock of the Company, or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act)
that, as of the Effeff ctive Date, is the Owner, directly or indirectly, of securities of the Company representing more than 50% of the
combined voting power of the Company’s then outstanding securities.
(as determined on a per share or aggregate basis, as appl
(dd) “Fair Market Value” means, as of any date, unless otherwise determined by the Board, the value of the Common Stock
icable) determined as follows:
a
(i) If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair
Market Value will be the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in the Common Stock) on the date of determination, as reported in a source the Board deems reliabla e.
will be the closing sales price on the last preceding date forff which such quotation exists.
(ii) If there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value
ence of such exchange or market for the Common Stock, or if otherwise determined by the Board, the
Fair Market Value will be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the
Code.
(iii) In the absa
(ee) “Full Value Award” mdd
eans (i) a stock award granted under the Prior Plan or (ii) an Award, in each case that is not an
Appreciation Award.
(ff) “Governmental Body” means any: (i) nation, state, commonwealth, province, territory,rr
county, municipality, district or
other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign or other government; (iii) governmental or regulatory brr
or quasi-governmental body of any naturt e (including any governmental division, department, administrative agency or bureau,
commission, authority, instrumrr
other tribunal, and forff
regulatory orr
Authority).
the avoidance of doubt, any tax authority) or other body exercising similar powers or authority; or (iv) self-
rganization (including the Nasdaq Stock Market, New York Stock Exchange, and the Financial Industry Rrr
fund, foundation, center, organization, unit, body or Entity and any court or
entality, official, ministry,rr
egulatoryrr
ody,
(gg) “Grant NotNN ictt e” means the notice provided to a Participant that he or she has been granted an Award and which includes
the name of the Participant, the type of Award, the date of grant of the Award, number of shares of Common Stock subju ect to the
Award or potential cash payment right, (if any), the vesting scheduld e forff
the Award (if any) and other key terms applicable to the
Award.
(hh) “In“
centive StoSS ck Option” means an option granted pursuant to Section 4 that is intended to be, and qualifieff s as, an
“incentive stock option” within the meaning of Section 422 of the Code.
A-89
(ii) “Ma“
teriallyll
Impaim rii ” means that a Participant’s rights under an Award will be materially adversely affected by a suspension
or termination of the Plan, an amendment of the Plan, or an amendment to the terms of the Award, as appl
Plan, a Participant’s rights under an Award will not be deemed to have been Materially Impaired by any of the foregoing actions if the
Board, in its sole discretion, determines that such action, taken as a whole, does not materially impair the Participant’s rights under the
Award. For example, an amendment to the terms of an Award in order to do any of the folff
following, will not be deemed to Materially Impair the Participant’s rights under the Award: (i) an imposition of reasonabla e
restrictions on the minimum number of shares subject to an Option that may be exercised; (ii) to maintain the qualifieff d status of the
Award as an Incentive Stock Option under Section 422 of the Code; (iii) a change in the terms of an Incentive Stock Option in a
manner that disqualifieff s, impairs or otherwise affeff cts the qualified statust
of the Code; (iv) to clarify the manner of exemption froff m, or to bring the Award into compliance with or qualify i
from, Section 409A; or (v) to comply with other Applicable Laws.
of the Award as an Incentive Stock Option under Section 422
lowing, or that results in any of the
icable. For purpos
an exemption
es of the
t forff
a
ff
rr
n-Em-
plm oyll
(jj) “No“
ee Direii ctortt
” means a Director who either (i) is not a current employee or officff er of the Company or an
Affiff liate, does not receive compensation, either directly or indirectly, froff m the Company or an Affiliate for services rendered as a
consultant or in any capacity other than as a Director (except forff
404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Re“
transaction forff which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship
for which disclosure would be required pursuant to Item 404(b) of Regulation S-K, or (ii) is otherwise considered a “non-employee
director” forff
an amount as to which disclosure would not be required under Item
lation S-KSS ”)KK ), does not possess an interest in any other
es of Rule 16b-3.
r
purpos
gue
(kk) “No“
n-Ex-
emptm Award” mdd
eans any Award that is subju ect to, and not exempt from, Section 409A, including as the result of
(i) a deferral of the issuance of the shares subject to the Award which is elected by the Participant or imposed by the Company, or
(ii) the terms of any Non-Exempt Severance Agreement.
(ll) “No“
n-Ex-
emptm Direii ctortt Award” mdd
eans a Non-Exempt Award granted to a Participant who was a Director but not an
Employee on the applicable grant date.
(mm) “No“
n-Ex-
emptm Severance Arrangement” mt
and the Company or an Affiliate that provides forff
Award upon the Participant’s termination of employment or separation froff m service (as such term is definff ed in
Section 409A(a)(2)(A)(i) of the Code (and without regard to any alternative definff
a
such severance benefitff does not satisfy the requirements forff
Regulations Section 1.409A-1(b)(4), 1.409A-1(b)(9) or otherwise.
ition thereunder) (“Separ
an exemption froff m appl
ee
ication of Section 409A provided under Treasuryrr
atiott n froff m SerSS vice”) and
eans a severance arrangement or other agreement between the Participant
acceleration of vesting of an Award and issuance of the shares in respect of such
(nn) “No“
nstatutory Stoctt k OptOO iott n” means any option granted pursuant to Section 4 that does not qualify aff
s an Incentive Stock
Option.
(oo) “Offiff cer” means a person who is an offiff cer of the Company within the meaning of Section 16 of the Exchange Act.
(pp) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock which is
granted pursuant to the terms and conditions of Section 4.
(qq) “Option Agreement” mt
conditions of an Option grant. The Option Agreement includes the Grant Notice forff
written summary of the general terms and conditions applicable to the Option and which is provided to a Participant along with the
Grant Notice. Each Option Agreement will be subju ect to the terms and conditions of the Plan.
eans a written agreement between the Company and a Participant evidencing the terms and
the Option and the agreement containing the
(rr) “Othett
r Award” mdd
eans an award based in whole or in part by referff ence to the Common Stock which is granted pursuant to
the terms and conditions of Section 5(c).
(ss) “Othett
r Award Agreement” mt
eans a written agreement between the Company and a Participant evidencing the terms and
conditions of an Other Award grant. Each Other Award Agreement will be subju ect to the terms and conditions of the Plan.
(tt) “Own,” “Owned,” “Owner,” or “Ownership” means that a person or Entity will be deemed to “Own,” to have “Owned,” to
be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the
voting, with respect to such securities.
(uu) “Pa“
rtictt
ipant” mt
eans an Employee, Director or Consultant to whom an Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Award.
(vv) “Pe“
rforff marr
nce Award” mdd
eans an Award that may vest or may be exercised, or that may become earned and paid,
contingent upon the attainment during a Performance Period of certain Performance Goals and which is granted pursuant to the terms
and conditions of Section 5(b) and such terms as appr
oved by the Board.
a
A-90
r
rforff marr
es of establa ishing the
nce CriCC teii ria” means the one or more criteria that the Board will select for purpos
a Performance Period. The Performance Criteria that will be used to establa ish such Performance Goals may be
lowing, as determined by the Board: (1) earnings (including earnings per share and net
r combination of, the folff
(ww) “Pe“
Performance Goals forff
based on any one of, off
earnings, in either case beforff e or after any or all of: iff nterest, taxes, depreciation and amortization, legal settlements or other income
(expense), or stock-based compensation, other non-cash expenses and changes in deferff
(3) returt n on equity or average stockholder’s equity; (4) return on assets, investment, or capital employed; (5) stock price; (6) margin
(including gross margin); (7) income (beforff e or after taxes); (8) operating income; (9) operating income after taxes; (10) pre-tax profit;
(11) operating cash floff w; (12) sales, prescriptions, or revenue targets; (13) increases in revenue or product revenue; (14) expenses and
cost reduction goals; (15) improvement in or attainment of working capital levels; (16) economic value added (or an equivalent
metric); (17) market share; (18) cash floff w; (19) cash floff w per share; (20) cash burn; (21) share price performance; (22) debt reduction;
(23) implementation or completion of projeo cts or processes (including, without limitation, discovery of a pre-clinical drugr
recommendation of a drugr
results, regulatory f
approvals, presentation of studies and launch of commercial plans, compliance programs or education campaigns); (24) customer
satisfaction; (25) stockholders’ equity; (26) capital expenditures; (27) debt levels; (28) financings; (29) operating profit or net
operating profit; (30) workforce diversity; (31) growth of net income or operating income; (32) billings; (33) employee hiring;
(34) funds from operations; (35) budget management; (36) strategic partnerships or transactions (including acquisitions, joint venturt es
l property
or licensing transactions); (37) engagement of thought leaders and patient advocacy groups; (38) enhancement of intellectuat
portfolff
ications and granting of patents; (39) litigation preparation and management; and (40) any other measure
of performance selected by the Board.
candidate to enter a clinical trial, clinical trial initiation, clinical trial enrollment and dates, clinical trial
r advisory committee interactions, regulatoryrr
red revenue); (2) total stockholder returt n;
g acceptances, regulatory orr
g submissions, regulatory f
g of patent appl
candidate,
io, filinff
ilinff
ilinff
a
rr
rr
u
the
rforff marr
(xx) “Pe“
nce GoalG sll ” means, forff
a Performance Period as follows: (1) to exclude restructurt
a Performance Period, the one or more goals establa ished by the Board forff
the Performance Criteria. Perforff mance Goals may be based on a Company-wide basis, with respect to
non-U.S. dollar denominated Performance Goals; (3) to exclude the effects of changes
Performance Period based upon
one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to the performance of
one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise by the Board (i) in
the Award Agreement at the time the Award is granted or (ii) in such other document setting forff
th the Performance Goals at the time
the Performance Goals are establa ished, the Board will appropriately make adjud stments in the method of calculating the attainment of
the Performance Goals forff
exclude exchange rate effeff cts, as applicable, forff
to generally accepted accounting principles; (4) to exclude the effects of any statutt ory arr
exclude the effects of items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting
principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by the
Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture;
(8) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or
split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other
similar corpor
stock based compensation and the award of bonuses under the Company’s bonus plans; (10) to exclude costs incurred in connection
with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; (11) to
exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting
principles; and (12) to exclude the effects of the timing of acceptance forff
Drugr Administration or any other regulatory brr
Performance Criteria it selects to use for a Performance Period and to reducd e or eliminate the compensation or economic benefit dued
upon the attainment of any Performance Goal. Partial attainment of any Performance Goal may result in payment or vesting
corresponding to the degree of attainment as specified in the appl
a
Award.
review and/or approval of submissions to the U.S. Food and
ody. In addition, the Board retains the discretion to definff e the manner of calculating the
ate change, or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of
icable Award Agreement or the written terms of a Performance
ing and/or other nonrecurring charges; (2) to
djustments to corpor
ate tax rates; (5) to
r
r
(yy) “Pe“
rforff marr
Performance Goals will be measured forff
under, an Award. Performance Periods may be of varyirr ng and overlapping duration, at the sole discretion of the Board.
eans the period of time selected by the Board over which the attainment of one or more
e of determining a Participant’s right to vesting or exercise of, or any payment
nce PerPP iod” mdd
the purpos
rr
(zz) “Pl“ anll
” means this Neurocrine Biosciences, Inc. 2020 Equity Incentive Plan.
(aaa) “Pl“ anll Admindd
istratortt
” means the person, persons, and/or third-party administrator designated by the Company to
administer the day to day operations of the Plan and the Company’s other equity incentive programs.
(bbb) “Po“
st-Ttt
erTT minrr
atiott n ExeEE rcise PerPP iod” mdd
eans the period folff
lowing termination of a Participant’s Continuous Service
within which an Option or SAR is exercisabla e, as specifieff d in Section 4(h).
(ccc) “Pr“
ior PlaPP n” means the Neurocrine Biosciences, Inc. 2011 Equity Incentive Plan.
(ddd) “Pr“
ior PlaPP n Award” mdd
eans an award granted under the Prior Plan that is outstanding as of the Effective Date.
as of immediately folff
(eee) “Pr“
ior PlaPP n’s A’
vailable Rll
lowing the Effective Date.
eserve” means the number of shares availabla e forff
the grant of new awards under the Prior Plan
A-91
(fff) “Pr“
ior PlaPP n’s R’
eturningii
Shares” means shares of Common Stock subju ect to a Prior Plan Award that following the
Effeff ctive Date: (i) are not issued because such Prior Plan Award or any portion thereof expires or otherwise terminates without all of
the shares covered by such Prior Plan Award having been issued; (ii) are not issued because such Prior Plan Award or any portion
thereof is settled in cash; or (iii) are forfeited back to or repurchased by the Company because of the faiff
condition required forff
lure to meet a contingency or
the vesting of such shares.
(ggg) “Pr“ ospes
ctus” means the document containing the Plan inforff mation specified in Section 10(a) of the Securities Act.
stritt ctedtt
(hhh) “Re“
conditions of Section 5(a).
Stoctt k Award” mdd
eans an Award of shares of Common Stock which is granted pursuant to the terms and
(iii) “Re“
stritt ctedtt
Stoctt k Award Agreement” mt
eans a written agreement between the Company and a Participant evidencing the
terms and conditions of a Restricted Stock Award grant. The Restricted Stock Award Agreement includes the Grant Notice forff
Restricted Stock Award and the agreement containing the written summary of the general terms and conditions applicable to the
Restricted Stock Award and which is provided to a Participant along with the Grant Notice. Each Restricted Stock Award Agreement
will be subju ect to the terms and conditions of the Plan.
the
(jjj) “RS“ U Award” mdd
eans an Award of restricted stock units representing the right to receive an issuance of shares of
Common Stock which is granted pursuant to the terms and conditions of Section 5(a).
(kkk) “RS“ U Award Agreement” mt
eans a written agreement between the Company and a Participant evidencing the terms and
conditions of a RSU Award grant. The RSU Award Agreement includes the Grant Notice forff
containing the written summary of the general terms and conditions applicable to the RSU Award and which is provided to a
Participant along with the Grant Notice. Each RSU Award Agreement will be subju ect to the terms and conditions of the Plan.
the RSU Award and the agreement
(lll) “Ru“
le 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to RulRR e 16b-3, as in effeff ct from
time to time.
(mmm) “Ru“
le 405” means Rule 405 promulgated under the Securities Act.
(nnn) “Sectiott n 409A” means Section 409A of the Code and the regulations and other guidance thereunder.
(ooo) “Sectiott n 409A Change in Contrott
l” mll
eans a change in the ownership or effeff ctive control of the Company, or in the
ownership of a subsu tantial portion of the Company’s assets, as provided in Section 409A(a)(2)(A)(v) of the Code and Treasuryrr
Regulations Section 1.409A-3(i)(5) (without regard to any alternative definff
ition thereunder).
(ppp) “Securitiii es Act” mt
eans the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(qqq) “Share Reserve” means the number of shares of Common Stock availabla e forff
Section 2(a)(i).
issuance under the Plan as set fort
ff
h in
eciation Righi
pursuant to the terms and conditions of Section 4.
(rrr) “SAR” or “Stoctt k ApprA
t” mt
eans a right to receive the appr
a
eciation on Common Stock which is granted
(sss) “SAR Agreement” mt
eans a written agreement between the Company and a Participant evidencing the terms and
conditions of a SAR grant. The SAR Agreement includes the Grant Notice forff
summary of the general terms and conditions applicable to the SAR and which is provided to a Participant along with the Grant
Notice. Each SAR Agreement will be subju ect to the terms and conditions of the Plan.
the SAR and the agreement containing the written
(ttt) “Subsidiaryr ” means, with respect to the Company, (i) any corporation of which more than 50% of the outstanding capia tal
oting power to elect a majority of the board of directors of such corpor
stock having ordinary vrr
time, stock of any other class or classes of such corpor
ation will have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liabia lity company or other
entity in which the Company has a direct or indirect interest (whether in the forff m of voting or participation in profits or capia tal
contribution) of more than 50%.
ation (irrespective of whether, at the
r
rr
(uuu) “Ten PerPP cent Stoctt kholdell
r” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code)
stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate.
(vvv) “Tradingii
Policyc ” means the Company’s policy permitting certain individuals to sell Company shares only durd ing certain
“window” periods and/or otherwise restricts the abia lity of certain individuals to transferff
from time to time.
or encumber Company shares, as in effeff ct
(www) “Transactiott n” means a Corpor
rr
ate Transaction or a Change in Control.
A-92
u
terms upon
(xxx) “Unvested NonNN -ExeEE mpt Award” mdd
or prior to the date of any Transaction.
eans the portion of any Non-Exempt Award that had not vested in accordance with its
(yyy) “Vestedtt Non-Ex-
emptm Award” mdd
eans the portion of any Non-Exempt Award that had vested in accordance with its terms
upon or prior to the date of a Transaction.
A-93
[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, 2023
TRANS
RR
ITION 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
Identificff ation 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 definff ed in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to fileff
reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant: (1) has fileff
preceding 12 months (or forff
90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every I
(§ 232.405 of this chapter) during the preceding 12 months (or forff
such shorter period that the registrant was required to fileff
d all reports required to be fileff
rr
d by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
the past
such reports), and (2) has been subju ect to such filing requirements forff
nteractive Data File required to be submitted pursuant to RulRR e 405 of Regulation S-T
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
☐
d a report on and attestation to its management’s assessment of the effeff ctiveness of its internal control over finff ancial
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forff
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has fileff
reporting under Section 404(b) of the Sarbar nes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firff m that prepared or issued its audit report.
Yes ☑ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing refleff ct the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in RulRR e 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of registrant’s common stock held by non-affiff liates 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, 2023, was $7.9 billion.
complying with any new or revised
As of Februarr
ry 5, 2024, 99,507,490 shares of the registrant’s common stock were outstanding.
DOCUMENTS INCORPORATR ED BY REFERENCE
Portions of the registrant’s definff
following the end of the registrant’s fisff cal year ended December 31, 2023 are incorpor
rr
itive proxy statement relating to the registrant’s annual meeting of stockholders to be filed pursuant to Regulation 14A within 120 days
ated 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 1C. Cybersecurity
Item 2.
Properties
Item 3.
Item 4.
Legal Proceedings
Mine Safety Disclosures
PART II
Item 5.
Item 7.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Management’s Discussion and Analysis of Financial Condition and Results of Operations
em 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
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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
4
21
49
49
50
51
51
52
53
61
62
92
92
95
95
96
96
96
96
96
97
NEUROCRINE, the Neurocrine logo, INGREZZA, the INGREZZA logo, and other Neurocrine Biosciences
trademarks are the property of Neurocrine Biosciences, Inc. ALKINDI, EFMODY, and other Diurnal trademarks are
the property of Diurnal Limited, a Neurocrine Biosciences company. 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 inforff mation incorpor
ated herein by reference contain forff ward-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 subju ect to risks and uncertainties, and actuat
l
results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.
r
Forward-looking statements can be identifieff d by the use of forff ward-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 finff ancial 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 appl
wherever they may appe
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 availabla e in the future.
a
ar in this report. We urge you not to place undue reliance on these forward-looking
icable to all related forward-looking statements
a
3
Item 1. Business
Overview
Neurocrine Biosciences is a neuroscience-focused, biopharmaceutical company with a simple purpose: to relieve
ied our unique insight into
suffeff
neuroscience and the interconnections between brain and body systems to advance medicines for the treatment of
under-addressed neurological, neuroendocrine and neuropsychiatric disorders and we will continue to relentlessly
pursue medicines to ease the burden of debilitating diseases and disorders.
ring for people with great needs, but few options. For three decades, we have appl
a
We launched INGREZZA in the U.S. in May 2017 as the firff st U.S. Food and Drugr Administration (FDA)-approved
drug for the treatment of tardive dyskinesia and in August 2023 for the treatment of chorea associated with
Huntington's disease. INGREZZA provides a once-daily dosing treatment option with a recommended dose of 40
mg taken for the first seven days of treatment forff
chorea associated with
, depending on the patient’s dosing
Huntington’s disease, and an option to take 40 mg, 60 mg, or 80 mg thereafter
needs.
tardive dyskinesia and fourteen days forff
ff
In 2023, INGREZZA helped more people affected by tardive dyskinesia than ever beforeff
prescription demand driven by increased commercial activities, including the continued investment in our branded
direct-to-consumer INGREZZA advertising campaign and benefit froff m the expansion of our sales force completed
in April 2022. Going forff ward, key elements of our commercial strategy include maximizing the opportunt
INGREZZA through consistent and effeff ctive commercial execution, continued development of valbenazine as the
new patient populations and to lead the evolving understanding of VMAT2 biology and
best-in-class treatment forff
its role in disease. INGREZZA net product sales totaled $1.8 billion forff
2022 and $1.1 billion
for 2021 and accounted for approxi
mately 99% of our total net product sales for 2023.
2023, $1.4 billion forff
, refleff cting higher
ity in
a
rts are focused on innovative therapies with clear and defined clinical
Our internal research and development effoff
and regulatory paths to appa
s
ement our internal research and development effort
by in-licensing the rights to certain clinical development programs or by acquiring businesses that synergize with
and allow us to capia talize on our existing development and commercial capabilities.
roval. From time to time, we supplu
ff
Commercial Products
Product
Indication
Tardive Dyskinesia
Chorea Associated with Huntington’s Disease
Adrenal Insufficff
iency
Classic Congenital Adrenal Hyperplrr asia
Endometriosis
Uterine Fibroids
Majora Markets
U.S., Japaa n, Select
Asian Markets (1)
U.S., United
Kingdom, EU4 (2) (3)
United Kingdom,
EU4 (3)
U.S. (4)
U.S. (4)
(1) INGREZZA is marketed as DYSVAL® (valbenazine) in Japaa n and REMLEAS® (valbenazine) in other select
Asian markets, where Mitsubiu shi Tanabea
(2) ALKINDI is marketed as ALKINDI SPRINKLE® (hydrocortisone) in the U.S., where Eton Pharmaceuticals,
Inc. retains commercialization rights.
Pharma Corporation retains commercialization rights.
(3) The EU4 market is made up of the folff
lowing countries: Germany, France, Italy and Spain.
(4) AbbVie Inc. retains global commercialization rights to elagolix.
4
Marketing and Distribution
Our specialty sales forff ce consists of approximately 400 experienced sales professionals located in the U.S. and is
divided into three dedicated sales teams focff used on psychiatry, neurology and long-term care.
For INGREZZA, our customers in the U.S. consist of a limited network of specialty pharmacy providers that deliver
INGREZZA to patients by mail, wholesale distributors that distribute INGREZZA primarily to certain specialty
pharmacies, and specialty distributors that distribute INGREZZA primarily to closed-door pharmacies and
government facilities. We rely on third-party service providers to perform a variety of functions related to the
packaging, storage and distribution of INGREZZA.
turing and Supply
iers in quantities adequate to meet our needs. Continuing adequate suppl
Manufacff
We currently rely on, and intend to continue to rely on, third-party manufact
and our product candidates. Raw materials, active pharmaceutical ingredients (API) and other suppl
the production of INGREZZA and our product candidates are sourced froff m various third-party manufact
suppl
u
assured through our long-term commercial supply and manufact
our continued focff us on the expansion and diversificff ation of our third-party manufact
ing strategy enabla es us to direct our financial resources to the maximization
We believe our outsourced manufacturt
of our opportunity with INGREZZA, investment in our internal research and development programs and expansion
of our clinical pipeline through business development opportunities.
the production of INGREZZA
ies required forff
urt ers and
ff
ing agreements with multiple manufact
urt
y of such raw materials and API is
ing relationships.
urt ers and
urt ers forff
urt
u
u
ff
ff
ff
ff
ff
urt
turers, suppliers and service providers may be subject to routine current Good
ing Practice (cGMP) inspections by the FDA or comparable agencies in other jurisdictions. We depend
Our third-party manufacff
Manufact
on our third-party partners and our quality system oversight of them for continued compliance with cGMP
requirements and applicable foreign standards.
5
Clinical Development Programs
The folff
such programs.
lowing table highlights our current clinical development programs and the current phase of development forff
_________________________
* Mitsubiu shi Tanabea
Pharma Corporation retains commercialization rights in Japan and other select Asian markets.
† Heptares Therapeutics Limited retains commercialization rights in Japan, where Neurocrine Biosciences retains
u
the right to opt in to a 50:50 profit sharing arrangement upon
certain development events.
(1) This program was in-licensed froff m Heptares Therapeutics Limited.
(2) This program was in-licensed froff m Idorsia Pharmaceuticals Ltd.
(3) This program was in-licensed froff m Xenon Pharmaceuticals Inc.
(4) This program was in-licensed froff m Sanofi S.A.
(5) This program was in-licensed froff m Takeda Pharmaceutical Company Limited
Neurocrine Biosciences retains global rights unless otherwise noted.
6
ll gy
Neurology
Program
Valbenazine. Valbenazine is a highly selective VMAT2
inhibitor. VMAT2 is a protein concentrated in the
human brain that is essential forff
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 arr
the transmission of
nd involuntary mrr
otor control.
NBI-BB 921352. 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. We acquired the global rights to
NBI-921352 in December 2019.
ovements are compromised, resulting in
nd abnormal movements. It affeff cts
Indication
Dyskinetictt Cerebral Palsy.s Dyskinetic cerebral palsy is
a non-progressive, permanent disorder marked by
ovement and is a result of damage to the
involuntary mrr
fetal or infanff
t brain’s basal ganglia. The basal ganglia
are responsible for submitting messages to the body to
help coordinate and control movements. When damaged,
voluntary mrr
involuntary arr
development and movement and has long term effeff cts on
patients’ quality of life.ff The long-term outlook for
patients with dyskinetic cerebral palsy will depend upon
the severity of the brain damage and how well the
o
treatment works. Dyskinetic cerebral palsy affects up tu
15% of the estimated 500,000 to 1 million people
affeff cted by cerebral palsy in the U.S.
SCN8CC A D88
Syndrodd me, oe
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. 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
featurt es similar to autism. As SCN8a mutations were
discovered only recently, prevalence estimates will be
determined in the futff urt e as awareness of and access to
genetic surveillance increases. NBI-921352 has been
granted orphan drug and rare pediatric disease
designations for the treatment of SCN8A-DEE in the
U.S.
ll
alopat
r SCN8ANN -DEEDD .EE SCN8A-DEE is a rare,
ental and Epilepll
tic Encephee
evelopmll
hytt
edPP iadd trics and Adultsll withii Dyskinetictt Cerebral Palsy.s We have an ongoing Phase 3 randomized,
Valbenazine in Pii
double-blind, placebo-controlled clinical studt y to evaluate the effiff cacy, safetff y and tolerabia lity of valbenazine for the
treatment of dyskinetic cerebral palsy in pediatrics and adults (aged 6 to 70 years).
NBI-BB 921352 in Pediatritt cs and Adolesll cents withii SCN8CC A-88 DE-
randomized, double-blind, placebo-controlled clinical studyt
NBI-921352 as adjud nctive therapya
2022, the study protocol was amended to include pediatrics (aged 2 to 11 years) with SCN8A-DEE.
E.EE We have ongoing the KAYAK
KK
to evaluate the efficacy, safetff y and pharmacokinetics of
for seizures in adolescents (aged 12 to 21 years) with SCN8A-DEE. In January
a Phase 2
TM study,
t
7
Neuroendocdd rinoii
logyogy
Program
Crinecerfor nt.tt Crinecerfont is an investigational, oral,
selective corticotropin-releasing facff
tor type 1 (CRF1)
receptor antagonist being developed to reducd e and
control excess adrenal androgens through a steroid-
independent mechanism forff
the treatment of classic
congenital adrenal hyperplasia (CAH) due to 21-
hydroxylase deficff
iency (21-OHD).
Crinecerfont has received orphan drug designation in the
U.S. from the FDA and in the European Union (EU)
from the European Medicines Agency (EMA).
Crinecerfont has also received Breakthrough Therapy
designation in the U.S. from the FDA forff
of CAH dued
EFMODYMM
of hydrocortisone that mimics the physiological
circadian rhythm of cortisol and has been specifically
designed forff
such as CAH and adrenal insuffiff ciency.
.YY EFMODY is a modified-release preparation
patients with diseases of cortisol deficff
to 21-OHD in aduld ts and pediatrics.
the treatment
iency,
sic ConCC genitaii
l Adrenal Hypeyy
rplasia. CAH is a
Indication
Clasll
genetic disorder that causes little to no cortisol
production and increased secretion of
adrenocorticotropic hormone (ACTH) and androgens. In
approximately 75% of cases, the adrenal glands cannot
produce aldosterone, which can result in salt wasting
adrenal crisis, causing extreme weakness, low blood
pressure, shock, and even death. There are currently no
non-steroidal FDA-approved treatments forff CAH. CAH
affeff cts up tu
o an estimated 30,000 people in the U.S. and
50,000 people in Europe.
rplasia.
sic ConCC genitaii
Clasll
l Adrenal Hypeyy
Adredd nal InsII uffiff ciency.yy Adrenal insuffiff ciency is a rare
condition caused by inadequate production of steroid
hormones in the cortex of the adrenal glands. Adrenal
insufficiency can result in severe fatff
untreated, adrenal crisis that may be life t
igue and, if left
ff hreatening.
of crinecerfont in aduld ts with CAH dued
Crinecerfor nt in Adultsll withii CAH. In September 2023, we announced positive top-line data from the Phase 3
CAHtalyst™ clinical studyt
primary endpoint at Week 24, demonstrating that treatment with crinecerfont resulted in a statistically significant
percent reducd tion in daily glucocorticoid (GC) dose versus placebo while maintaining androgen control (p-value
<0.0001). The studyt
androstenedione at Week 4 versus placebo (p-value <0.0001). At Week 24, approximately 63% of patients on
crinecerfont achieved a reducd tion to a physiologic GC dose versus appr
<0.0001). The data from the Phase 3 aduld t study, including data from the open-labea
New Drug Application (NDA) submu
also met important key secondary endpoints, with a statistically significant decrease in
ission to the FDA in the second quarter of 2024.
to 21-OHD. The Phase 3 adult study met its
oximately 18% on placebo (p-value
l treatment period, will suppor
u
a
t
androstenedione from baseline at Week 4 versus placebo folff
of crinecerfont in pediatrics (aged 2 to 17 years) with CAH dued
ndpoint, demonstrating that treatment with crinecerfont resulted in a statistically
Crinecerfor nt in Pediatritt cs withii CAH.HH In October 2023, we announced positive top-line data from the Phase 3
CAHtalyst™ clinical studyt
pediatric study met its primary err
significant decrease in serumrr
(p = 0.0002). Consistent with the results from the Phase 3 aduld t study, crinecerfont treatment led to a statistically
significant percent reduction from baseline in daily GC dose while maintaining androgen control at Week 28 versus
placebo (p < 0.0001). Approximately 30% of participants receiving crinecerfont achieved a reduction to a
physiologic GC dose while maintaining androgen control compared to 0% of participants receiving placebo. The
studyt
17-
also met the other key secondary endpoint demonstrating a statistically significant decrease in serumr
hydroxyprogesterone from baseline at Week 4 versus placebo (p < 0.0001). The data from the Phase 3 pediatric
study,
l treatment period, will suppor
t
quarter of 2024.
including data from the open-labea
ission to the FDA in the second
lowing a GC stabla e period
to 21-OHD. The Phase 3
t NDA submu
u
in Adoldd esll cents att
EFMODYMM
controlled clinical study to evaluate the efficacy, safety and tolerability of twice-daily EFMODY compared with
twice-daily Cortef®ff
with CAH. We anticipate having top-line data forff
(immediate-release hydrocortisone tabla ets) in adolescents and adults (aged 16 years and older)
nd Adultsll withii CAH. We have an ongoing Phase 2 randomized, double-blind, active-
in the firff st half of 2024.
this clinical studyt
in Adultsll withii Adredd nal InsII uffiff ciency.yy We have ongoing the CHAMPAIN study,
EFMODYMM
double-blind, double-dummy, two-way crossover clinical studyt
twice-daily EFMODY compared with once-daily Plenadren® (modified-release hydrocortisone tabla ets) in aduld ts with
primary adrenal insuffiff ciency. We anticipate having top-line data forff
t
to evaluate the efficacy, safetff y and tolerabia lity of
in the firff st half of 2024.
a Phase 2 randomized,
this clinical studyt
8
Neuropsychs
p y
y
iatryr
otor control.
nd involuntary mrr
the transmission of
Program
Valbenazine. Valbenazine is a highly selective VMAT2
inhibitor. VMAT2 is a protein concentrated in the
human brain that is essential forff
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 arr
NBI-BB 1117568. NBI-1117568 is a potential first-in-class
muscarinic M4 receptor agonist with the potential to be
developed forff
selective M4 orthosteric agonist, NBI-1117568 offeff
the potential forff
need for combination therapy to ameliorate off-target
effeff cts or forff
cooperativity with acetylcholine.
Muscarinic receptors are central to brain func
validated as drugrr
disorders. We acquired the global rights to NBI-1117568
in December 2021.
Luvadaxistii attt
D-Amino Acid Oxidase (DAAO) inhibitor with the
the treatment of cognitive
potential to be developed forff
impairment associated with schizophrenia. We acquired
the global rights to luvadaxistat in June 2020.
.tt Luvadaxistat is a potential firff st-in-class
an improved safetff y profile without the
the treatment of schizophrenia. As a
targets in psychosis and cognitive
tion and
rs
ff
NBI-BB 1065845. NBI-1065845 is a potential first-in-class
Alpha-Amino-3-Hydroxy-5-Methyl-4-Isoxazole
Propionic Acid (AMPA) potentiator with the potential to
be developed forff
the treatment of inadequate response to
treatment in majoa r depressive disorder. We acquired the
global rights to NBI-1065845 in June 2020.
NBI-1065845 is currently designated as a 50:50 profitff -
share product with Takeda Pharmaceutical Company
Limited, which retains a one-time opt-out right to
convert the designation to a royalty-bearing product.
mally. Schizophrenia may result in some
renia. Schizophrenia is a spectrum of serious
Indication
Schizoii pho
neuropsychiatric brain diseases in which people interprr et
a
reality abnor
combination of hallucinations, delusions and extremely
disordered thinking and behavior that impairs daily life.ff
People with schizophrenia typically require lifelong
treatment. Early treatment may help improve long-term
prognosis and get symptoms under control beforff e
serious complications develop. Schizophrenia affeff cts an
estimated 3.5 million people in the U.S. All currently
approved antipsychotic medications are believed to work
through direct action on monoaminergic receptors, with
approximately 40% of patients reporting negative side
effeff cts and approximately 30% not benefiting adequately
from these medications.
ff
airmii
oved to
itivtt e ImpII
nd ability to func
ent Associated with Stt
chSS izophrenia,a
Cogno
.SS CIAS, which may include deficits in attention,
or CIASII
nd executive function, has a negative
working memory arr
impact on patients’ quality of life aff
tion.
Although cognitive symptoms in schizophrenia are well
characterized, no forff mal diagnostic criteria exist.
a
Furthermore, no pharmacological agents are appr
tested to
treat the condition, and no marketed therapya
date has established clear, meaningfulff
effiff cacy, which
underscores the difficulty of drug development in this
arena and accentuates the unmet need for proven
treatment options. Approximately 80% of the estimated
3.5 million people affected by schizophrenia in the U.S.
experience clinically relevant cognitive impairment.
Majoa r Depressive Disorder. Majoa r depressive disorder
is one of the leading causes of disability and is
characterized by a persistently depressed mood or loss of
interest in daily activities that is present most of the day
in addition to other symptoms that can impact normal
daily func
tioning, relationships and overall quality of
ff
life. Treatments range from selective serotonin reuptu ake
inhibitors, serotonin norepinephrine reuptu ake inhibitors,
atypical antipsychotics, tricyclic antidepressants and
psychotherapia es, among others. Approximately 30% of
the more than 16 million people affect
ed by the disorder
in the U.S. do not adequately respond to treatment.
ff
dolesll cents att
Valbenazine in Aii
blind, placebo-controlled clinical studyt
administered orally once daily as adjud nctive treatment in adolescents and aduld ts (aged 13 years and older) with
schizophrenia who have had an inadequate response to antipsychotics.
to evaluate the efficff acy, safety and tolerability of valbenazine when
renia. We have an ongoing Phase 3 randomized, double-
nd Adultsll withii Schizoii pho
NBI-BB 1117568 in Adultsll withii Schizoii pho
placebo-controlled, multi-arm, multi-stage clinical studyt
NBI-1117568 in adults with schizophrenia who are experiencing an acute exacerbar
anticipate having top-line data for this clinical studyt
in the second half of 2024.
renia. We have an ongoing Phase 2 multi-center, randomized, double-blind,
to evaluate the efficacy, safetff y and tolerabia lity of
tion or relapse of symptoms. We
9
in Adultsll withii CIASII
Luvadaxistii attt
parallel, placebo-controlled clinical studyt
luvadaxistat when administered orally once daily as adjud nctive treatment in aduld ts with CIAS. We anticipate having
top-line data forff
.SS We have ongoing the ERUDITE™ study, a Phase 2 randomized, double-blind,
to evaluate the efficff acy, safetff y, tolerabia lity and pharmacokinetics of
in the second half of 2024.
this clinical studyt
NBI-BB 1065845 in Adultsll withii
the SAVITRI™ study,
and safetff y of NBI-1065845 as adjud nctive treatment in aduld ts with inadequate response to treatment in majoa r
depressive disorder. We anticipate having top-line data for this clinical studyt
essive Disoii
a Phase 2 randomized, double-blind, placebo-controlled clinical studyt
in the firff st half of 2024.
se to Treatment in Mii
Inadequate Rtt
ajMM or Depree
espons
t
rderdd .rr We have ongoing
to evaluate the efficacy
Intellectual Property
We actively seek to protect our products, product candidates, and related inventions and improvements that we
consider important to our business. We own a portfolff
io of U.S. and ex-U.S. patents and patent applications, and have
also licensed rights to a number of U.S. and ex-U.S. patents and patent applications. Our owned and licensed patents
and patent appl
to treat particular conditions, methods of administration, drugrr
methods of manufacff
ications cover or relate to our products and product candidates, including certain formulations, uses
echnologies and delivery prr
rofiles, and
delivery t
turing.
a
rr
Below is a description of the U.S. and ex-U.S. patents to INGREZZA and crinecerfont:
•
•
a
oval delay of 552 days has been received forff U.S. Patent No. 8,039,627,
INGREZZA, our highly selective VMAT2 inhibitor appr
oved in the U.S. for the treatment of tardive
dyskinesia and of chorea associated with Huntington’s disease, is covered by 22 issued, FDA Orange
Book-listed U.S. patents which are set to expire between 2027 and 2040. Patent term extension
a
corresponding to regulatory arr
ppr
which now expires in 2031 and covers valbenazine, the active pharmaceutical ingredient contained in
INGREZZA. In Japan and in certain other East Asian markets, we are actively pursuing most of the patents
corresponding to those listed in the FDA’s Orange Book entry f
settlement agreements resolving all patent litigation brought by us against the companies that fileff d ANDAs
seeking appr
oval to market generic versions of INGREZZA, and all cases have been dismissed. Pursuant to
the terms of the respective settlement agreements, such companies have the right to sell generic versions of
INGREZZA in the U.S. beginning March 1, 2038, or earlier under certain circumstances. Referff
to Note 13
to the consolidated financial statements forff
a more detailed description of these matters.
INGREZZA. In 2023, we entered into
orff
AA
a
rr
Crinecerfont, a CRF1 receptor antagonist under clinical development forff
and children, is covered by U.S. Patent Nos. 10,905,690, 11,311,544, and 11,730,739, among other patents
and pending patent applications, set to expire between 2035 and 2044 (not including any potential patent
term extensions).
the treatment of CAH in adults
We also own, or have licensed rights to, patents covering our other products and earlier stage product candidates. In
addition to the potential patent term extensions referff enced above, the products and product candidates in our
pipeline may be subju ect to additional terms of exclusivity that we may obtain by futff urt e patent issuances.
Separately, the U.S., the EU, and Japaa n each provide data and marketing exclusivity for new medicinal compounds.
If this protection is availabla e, no competitor may use the original applicant’s data as the basis of a generic marketing
application durd ing the period of data and marketing exclusivity, which is measured from the date of marketing
approval by the FDA or corresponding foreign regulatory arr
in the U.S., six years in Japaa n and 10 years in the EU, except that forff
is 12 years under the Biologics Price Competition and Innovation Act. In addition, if granted orphan drug
designation, certain of our product candidates, including, for example, crinecerfont, may also be eligible for
seven years and EU for 10 years.
marketing exclusivity in the U.S. forff
uthority. This period of exclusivity is generally five years
biologics, the period of exclusivity in the U.S.
a discussion of the challenges we may face in obtaining or maintaining
Refer to Part I, Item 1A. Risk Factors forff
patent and/or trade secret protection and Note 13 to the consolidated financial statements for da descriip ition of our
lleggall pro
ll propertyy matters.
dceediinggs rellatedd t
io int lelllectuat
10
Competition
The biotechnology and pharmaceutical industries are subju ect to rapia d and intense technological change. We face,
will continue to face, competition in the development and marketing of our products and product candidates fromff
academic institutions, government agencies, research institutt
Many of our competitors have significantly greater financial resources and expertise in research and development,
manufact
oval and marketing than we
do.
a
ing, preclinical testing, conducting clinical trials, obtaining regulatory arr
ppr
ions and biotechnology and pharmaceutical companies.
urt
ff
ff
and
Competition may also arise froff m, among other things, other drugrr
or reducing the incidence of disease, including vaccines, and new small molecule or other classes of therapea utic
agents. Such developments by others (including the development of generic equivalents) may render our product
candidates or technologies obsolete or noncompetitive.
development technologies, methods of preventing
•
•
•
•
•
•
INGREZZA competes with AUSTEDO® (deutetrabenazine), marketed by Teva Pharmaceuticals Indusd tries,
for the treatment of tardive dyskinesia in adults and chorea associated with Huntington's disease. A once-
daily dosing of AUSTEDO (AUSTEDO XR) was introduced in Februar
ry 2023. Additionally, there are a
number of commercially availabla e medicines used to treat tardive dyskinesia off-label, such as
XENAZINE® (tetrabea nazine) and generic equivalents, and various antipsychotic medications (e.g.,
clozapine), anticholinergics, benzodiazepines (off-lff abel), and botult
programs in clinical development by other companies targeting Huntington's disease.
inum toxin. In addition, there are several
ORILISSA and ORIAHNN each compete with several FDA-approved products for the treatment of
endometriosis, uterine fibroids, inferff
tility and central precocious puberty. Additionally, there is also
competition froff m surgical intervention, including hysterectomies and ablations. Separate froff m these
options, there are many programs in clinical development which serve as potential futff urt e 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.
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
turing steroid-based products. In addition, there are several programs in clinical
dozen companies manufacff
a
development by other companies targeting CAH with a variety of appr
oaches including gene therapy.
potential use in epilepsy may in the futff urt e compete with numerous
Our investigational treatments forff
approved anti-seizure medications and development-stage programs being pursued by several other
companies. Commonly used anti-seizure medications include phenytoin, levetiracetam, brivaracetam,
cenobamate, carbar mazepine, clobazam, lamotrigine, valproate, oxcarbar
perampanel and cannabia diol, among others. There are currently no FDA-approved treatments specifically
indicated forff
anti-seizure medications are currently used in these patient populations.
Our investigational treatments forff
future compete with several development-stage programs being pursued by other companies. Currently,
there are no FDA-approved treatments specifically indicated for anhedonia or CIAS; however, there are a
rent anti-psychotic medications currently used in these patient populations.
number of diffeff
the early infantile epileptic encephalopathy SCN8A-DEE; however, a number of diffeff
potential use in schizophrenia, anhedonia and depression may in the
zepine, topiramate, lacosamide,
rent
potential use in neurology, neuroendocrinology and neuropsychiatry may
Our investigational treatments forff
in the futff urt e compete with numerous approved products and development-stage programs being pursued by
several other companies.
Collaboration and License Agreements
Refer to Note 2 to the consolidated financial statements forff more information on our significant collabor
license agreements.
a
ation and
11
Government Regulation
Our business activities are subju ect to extensive regulation by the U.S. and other countries. Regulation by government
authorities in the U.S. and forff eign countries is a significant facff
tracking, marketing and sale of our proposed products and in our ongoing research and product development
a
activities. All of our products in development will require regulatory arr
ppr
commercialization. The process of obtaining these appr
federal and state statutes and regulations require the expenditure of subsu tantial time and finff ancial resources.
ovals and the subsu equent compliance with appropriate
oval by government agencies prior to
tor in the development, manufact
urt e, distribution,
a
ff
In addition, federal and state healthcare laws, and equivalent supru anational and foreign laws, restrict business
practices in the pharmaceutical industry.rr These laws include, without limitation, federal, state and foreign fraff ud and
abuse laws, false claims laws, data privacy and security laws, as well as transparency laws and industry crr
odes of
conduct 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.
eral Anti-Kickbak ck Statutt e and equivalent foreign laws makes it illegal forff
The U.S. fedff
knowingly and willfulff
induce the referral of business, including the purchase, order, lease of any good, facility, item or service for which
payment may be made under programs such as a federal healthcare program, such as Medicare or Medicaid in the
U.S.
ly, directly or indirectly, solicit, receive, offer, or pay any remuneration that is intended to
any person or entity to
Federal and equivalent foreign civil and criminal falff se claims laws and the federal civil monetary penalties law and
equivalent foreign laws, which prohibit among other things, any person or entity from knowingly presenting, or
causing to be presented, for payment to, or appr
for items or services, including drugs
or causing to be made, a false record or to avoid or decrease an obligation to pay money to the federal government.
oval by, federal programs, including Medicare and Medicaid, claims
, that are false or fraff udulent or not provided as claimed and knowingly making,
a
rr
The Health Insurance Portabia lity and Accountability Act of 1996 (HIPAA) created additional fedff
statutt es that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to
ly falsifyiff ng,
defraud any healthcare benefitff program, including private third-party payors and knowingly and willfulff
concealing or covering up a material fact
connection with the delivery of or payment forff
or making any materially false, fictitious or fraudulent statement in
, items or services and equivalent foreign laws.
healthcare benefitsff
eral criminal
ff
We may be subject to HIPAA, as amended by the Health Information Technology for Economic and Clinical Health
Act of 2009 (HITECH) and their privacy and security regulations, which impose certain obligations, including the
adoption of administrative, physical and technical safegff uards to protect individually identifiaff bla e health information
on covered entities subject to HIPAA (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 identifiaff bla e health information as well as their covered subcontractors.
eral Physician Payments Sunshine Act requires certain manufact
ies to report annually to the Centers for Medicare & Medicaid Services (CMS) inforff mation related to
The fedff
medical supplu
payments or other transfers of value made to physicians (definff ed to include doctors, dentists, optometrists,
podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners)
and teaching hospitals, as well as inforff mation regarding ownership and investment interests held by physicians and
their immediate famff
urt ers of drugs, devices, biologics and
ily members.
ff
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 subju ect to
similar forff eign laws.
12
The U.S. Foreign Corruptu Practices Act (FCPA) prohibits corporations and individuals from engaging in certain
activities to obtain or retain business or to influff ence a person working in an offiff cial capacity. It is illegal to pay, offerff
to pay or authorize the payment of anything of value to any foreign government offiff cial, government staff mff
political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person
working in an official capacity. The FCPA also imposes accounting standards and requirements on publicly traded
U.S. corporations and their foreign affiliates, which are intended to prevent the diversion of corporate funds
to the
payment of bribes and other improper payments. Similar laws exist in other countries, such as the United Kingdom
(UK) or in EU member states, that restrict improper payments to public and private parties. Many countries have
laws prohibiting these types of payments within the respective country. In addition to these anti-corruptu ion laws, we
are subject to import and export control laws, tariffs,ff
on our ability to operate in certain foreign markets.
trade barriers, economic sanctions, and regulatory l
imitations
ember,
ff
rr
Failure to comply with these laws, where appl
significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, imprisonment,
possible exclusion from participation in Medicare, Medicaid and other federal and equivalent foreign healthcare
programs, and additional reporting requirements and regulatory orr
ability to operate our business and our results of operations.
icable, can result in significant penalties, including the imposition of
versight, any of which could adversely affect our
a
ent and Marketintt g ApprA
oval for ProPP ducts.tt Preclinical studies generally are conducted in laboratoryrr
Developmll
animals to evaluate the potential safetff y and effiff cacy of a product. Drugr
studi
t
before clinical trials can begin in humans. Typically, clinical evaluation involves a time consuming and costly multi-
phase process.
it the results of preclinical
application (IND) and to equivalent foreign authorities
es to the FDA as a part of an investigational new drugrr
developers submu
Phase 1 Clinical trials are conducted with a small number of subjects to determine the early safety profileff
,
maximum tolerated dose and pharmacokinetic properties of the product in human volunteers or in
patients with the target disease.
Phase 2 Clinical trials are conducted with groups of patients afflff icted with a specific disease in order to determine
preliminary err
fficacy, optimal dosages and expanded evidence of safetff y.
Phase 3 Larger, multi-center, comparative clinical trials are conducted with patients afflicted with a specific
disease in order to determine safetff y and effiff cacy as primary srr
oval by the FDA,
the European Commission, or equivalent foreign authorities, to market a product candidate for a specific
disease.
a
regulatory arr
ppr
upport forff
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/bkk enefitff
Ethics Committees and Data Safetff y 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 forff eign
countries are also subject to oversight by regulatory arr
ratio to the patient. Institutional Review Boards, Institutional
uthorities in those countries.
Once Phase 3 trials are completed, drug developers submu
FDA in the form of a new drugrr
submu
(PDUFA), the FDA has a goal of 10 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.
es and clinical trials to the
oval to commence commercial sales. In most cases, the
ission of an NDA is subju ect to a subsu tantial appl
ff Under the Prescription Drug User Fee Act
it the results of preclinical studi
application (NDA) for appr
ication user fee.
a
a
t
In addition, under the Pediatric Research Equity Act of 2003 as amended and reauthorized, certain applications or
suppl
ements to an application must contain data that are adequate to assess the safetff y and effeff ctiveness of the drugr
u
for the claimed indications in all relevant pediatric subpopul
each pediatric subpopulation forff which the product is safe aff
the request of the appl
icant, grant deferff
product forff
ations, and to suppor
nd effeff ctive. The FDA may, on its own initiative or at
oval of the
use in adults or full or partial waivers from the pediatric data requirements.
rals for submission of some or all pediatric data until afteff
t dosing and administration forff
a
r appr
u
u
a
The FDA also may require submu
drugr
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.
ission of a risk evaluation and mitigation strategy to ensure that the benefits of the
13
r submission, before accepting
The FDA conducts a preliminary review of all NDAs within the firff st 60 days afteff
them for filiff ng, to determine whether they are suffiff ciently complete to permit subsu tantive review. The FDA may
request additional inforff mation rather than accept an appl
filing. Once the submission is accepted forff
the FDA begins an in-depth subsu tantive review. The FDA reviews an NDA to determine, among other things,
urt ed,
whether the drugr
processed, packaged or held meets standards designed to assure the product’s continued safetff y, quality and purity.
its intended use and whether the faci
lity in which it is manufact
is safe and effective forff
ication forff
a
ff
ff
filing,
The FDA may referff
an application forff
independent experts, including clinicians and other scientificff
ication should be appr
recommendation as to whether the appl
bound by the recommendations of an advisory committee, but it considers such recommendations carefulff
making decisions.
experts, that reviews, evaluates and provides a
oved and under what conditions. The FDA is not
a novel drug to an advisory committee. An advisory committee is a panel of
ly when
a
a
ff
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is
urt ed. The FDA will not approve an application unless it determines that the manufact
manufact
facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product
within required specifications. Additionally, beforff e appr
trial sites to assure compliance with Good Clinical Practice (GCP) requirements.
oving an NDA, the FDA may inspect one or more clinical
ing processes and
urt
a
ff
ff
urt
ff
ing faci
After evaluating the NDA and all related inforff mation, including the advisory committee recommendation, if any,
and inspection reports regarding the manufact
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 appr
oval of the application and may require additional
ission of this additional
a
clinical or preclinical testing in order for FDA to reconsider the appl
approval.
information, the FDA ultimately may decide that the appl
riteria forff
a
If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an appr
oval
letter. An approval letter authorizes commercial marketing of the drugr with specific prescribing information forff
specific indications.
lities and clinical trial sites, the FDA may issue an appa
ication does not satisfy the regulatory crr
ication. Even with submu
roval
a
a
Even if the FDA approves a producd t, 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 4 clinical trials, be conducted to furff
ther assess a drug’s safetff y 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 affeff ct the potential market and profitaff bia lity of the product. The FDA may prevent or
ther marketing of a producd t based on the results of post-marketing studies or surveillance programs. Afteff
limit furff
r
approval, some types of changes to the approved product, such as adding new indications, manufact
ing changes
and additional labeling claims, are subju ect to further testing requirements and FDA review and approval.
urt
ff
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 forff
roff m country to
country and may involve additional testing. Foreign appr
a
addition, regulatory arr
ppr
number of drugs sold to certain Medicare beneficff
to generate an acceptabla e returt n to us or our corporate collabor
oval of prices is required in most countries other than the U.S., except forff
iaries beginning in 2023. The resulting prices may not be sufficff
ovals may not be granted on a timely basis, or at all. In
a certain limited
approval vary f
ators.
a
a
rr
ient
rr
an Drug Designi
atiott n. Under the Orpha
Orphrr
intended to treat a rare disease or condition, which is a disease or condition that affects fewff
individuals in the U.S., or if it affeff cts more than 200,000, there is no reasonabla e expectation that sales of the drug in
the U.S. will be sufficient to offset the costs of developing and making the drugrr
designation must be requested before submu
in or shorten the duration of the regulatory r
n Drug Act, the FDA may grant orphan drug designation to a drug
itting an NDA. Orpha
eview and approval process.
n drug designation does not convey any advantage
availabla e in the U.S. Orpha
er than 200,000
n drug
rr
rr
r
14
a
a
ication forff
use in the rare disease or
a designated orphan drug forff
a drug with the same active
the same use or indication as the approved orphan drug, except in limited circumstances,
If the FDA approves a sponsor’s marketing appl
condition forff 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 appl
moiety and intended forff
such as if a subsequent sponsor demonstrates its product is clinically supeu rior. During a sponsor’s orpha
exclusivity period, competitors, however, may receive approval forff
indication as the approved orphan drug, or for drugs with the same active moiety as the approved orphan drug, but
oval of one of our products for seven years if
for diffeff
a competitor obtains approval forff
the same indication beforff e we do,
unless we are able to demonstrate that grounds for withdrawal of the orphan drug exclusivity exist, or that our
product is clinically supeu rior. Further, if a designated orphan drug receives marketing appr
an indication
broader than the rare disease or condition forff which it received orphan drug designation, it may not be entitled to
exclusivity.
rent indications. Orphan drug exclusivity could block the appr
a drug with the same active moiety intended forff
with different active moieties forff
ication forff
oval forff
n drug
rr
drugs
the same
a
a
rr
rr
manufacff
oval Requirements. Drugs
tured or distributed pursuant to FDA approvals are subject to
Post-Att pprA
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. Afteff
oval, 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 forff
applications with clinical data.
any marketed products, as well as new application fees
for supplemental
a
r appr
ff
The FDA may impose a number of post-approval requirements as a condition of appr
the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to furff
monitor the product’s safetff y and effeff ctiveness after commercialization.
oval of an NDA. For example,
ther assess and
a
In addition, drugr manufacff
urt e and distribution of appr
turers and other entities involved in the manufact
are required to register their establa ishments with the FDA and state agencies and are subju ect to periodic
unannounced inspections by the FDA and these state agencies forff
the manufact
ing process are strictly regulated and often require prior FDA approval beforff e being implemented.
FDA regulations also require investigation and correction of any deviations from cGMP requirements and impose
reporting and documentation requirements upon
decide to use. Accordingly, manufact
and quality control to maintain cGMP compliance.
the sponsor and any third-party manufact
urt ers must continue to expend time, money and effoff
urt ers that the sponsor may
rt in the area of production
compliance with cGMP requirements. Changes to
oved drugs
urt
u
a
ff
ff
ff
ff
Once an approval is granted, the FDA may withdraw the appr
standards is not maintained or if problems occur afteff
unknown problems with a product, including adverse events of unanticipated severity or frequency, or with
equirements, may result in mandatory revisions to
manufact
the appr
es or clinical trials to assess
a
new safetff y risks; or imposition of distribution or other restrictions. Other potential consequences include, among
other things:
urt
oved labeling to add new safetff y inforff mation; imposition of post-market studi
ing processes, or failure to comply with regulatory r
r the product reaches the market. Later discovery of previously
oval if compliance with regulatory r
equirements and
a
ff
rr
rr
t
•
•
•
•
•
restrictions on the marketing or manufact
market or product recalls;
ff
urt
ing of the product, complete withdrawal of the product fromff
the
finff es, warning letters or holds on post-approval clinical trials;
refusff
revocation of product appr
al of the FDA to approve pending NDAs or suppl
ovals;
u
a
ements to approved NDAs, or suspension or
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
15
a
the appr
may be promoted only forff
oved indication(s) and in accordance with the provisions of the appr
ling, advertising and promotion of products that are placed on the market.
The FDA strictly regulates marketing, labea
Drugs
r
labea
l. However, companies may share truthful and not misleading inforff mation that is otherwise consistent with a
product’s FDA approved labeling. The FDA and other agencies actively enforff ce the laws and regulations prohibiting
pre-approval promotion of investigational drugs, as well as the promotion of off-label uses of approved drugs, and a
company may be subju ect to significant liabia lity. Physicians may prescribe legally availabla e products for uses that are
not described in the product’s labeling and that differ froff m 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
ff
manufact
urt er’s communications on the subject of off-l
abel use of their products.
oved
a
ff
Reimbursement
Significant uncertainty exists as to the coverage and reimbursement statust
obtain regulatory arr
a
ppr
approval will depend, in part, on the extent to which third-party payors provide coverage and establish adequate
reimbursement levels for such drug products.
of any product candidates forff which we
oval. In the U.S. and other countries, sales of any products for which we receive regulatory
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 forff
coverage and
reimbursement exists in the U.S., and coverage and reimbursement can diffeff
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 appr
a result, the coverage determination process is often a time-consuming and costly process that will require us to
provide scientificff
that coverage and adequate reimbursement will be obtained in the first instance or appl
r significantly from payor to payor.
products to each payor separately, with no assurance
and clinical suppor
the use of our drugrr
oval process apaa
ied consistently.
rt from Medicare determinations. As
t forff
u
a
a
Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-
effeff ctiveness of drug products and medical services, in addition to questioning their safetff y, effiff cacy and clinical
appropriateness. Such payors may limit coverage to specific drug products on an approved list, also known as a
formulary,rr which might not include all of the FDA-approved drugs for a particular indication. We may need to
conduct expensive pharmaco-economic studi
of our products, in addition to the costs required to obtain the FDA appr
candidates, including INGREZZA, may not be considered medically necessary or cost-effective.
es in order to demonstrate the medical necessity and cost-effeff ctiveness
ovals. Nonetheless, our products or product
a
t
setting the price of a drugrr
product may be
Moreover, the process for determining whether a third-party payor will provide coverage for a drugrr
establa ishing the reimbursement rate that such
separate from the process forff
a payor will pay forff
product does not imply that
an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drugrr
product does not assure that other payors will also provide coverage for the drugr
payor reimbursement may not be availabla e to enabla e us to maintain price levels sufficient to realize an appr
return on our investment in product development.
the drug product. A payor’s decision to provide coverage for a drugr
product. Adequate third-party
product or forff
opriate
a
commercial sale may suffeff
The marketabia lity of any product or product candidates forff which we or our collabor
approval forff
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 statust
a
regulatory arr
ppr
oval, less favorable coverage policies and reimbursement rates may be implemented in the futff urt e.
is attained for one or more products for which we receive
l to provide coverage and adequate reimbursement.
r if third-party payors faiff
ators receive regulatoryrr
a
Healthcare Reform Measures
roposals to change the
The U.S. and some foreign jurisdictions have enacted a number of legislative and regulatory prr
healthcare system in ways that could affect our ability to sell our products profitaff bla y. In the U.S., the pharmaceutical
industry arr
affeff cted by majoa r legislative initiatives.
nd the cost of prescription drugs has been a continuous focus of these effoff
rts and has been significantly
16
rr
ff
tion Reducd tion Act of 2022 (IRA)RR , which,
urt er liabia lity and (3) requires drug manufact
tion. The IRA also extends enhanced subsu idies forff
f the U.S. Department of Health and Human Services (HHS) to
and biologics covered under Medicare, (2)
Most recently, in August 2022, President Biden signed into law the Inflaff
among other things, (1) directs the Secretary orr
negotiate the price of certain high-expenditure, single-source drugs
redesigns the Medicare Part D prescription drug benefitff
manufact
the rate of inflaff
in the ACA marketplt aces through plan year 2025 and eliminates the “donut hole” under the Medicare Part D
iary maximum out-of-pocket cost to $2,000 through
program beginning in 2025 by significantly lowering the beneficff
a newly establa ished manufacff
turer discount program. These provisions take effeff ct progressively starting in 2023. On
August 29, 2023, HHS announced the list of the first 10 drugs that will be subju ect to price negotiations, although the
Medicare drugr
price negotiation program is currently subju ect to legal challenges. It is currently unclear how the IRA
will be implemented; however, it is likely to have a significant impact on the pharmaceutical industry arr
prescription drug pricing.
urt ers to pay rebates on drugs whose prices increase greater than
individuals purchasing health insurance coverage
to lower patient out-of-pocket costs and increase
nd
ff
While the IRA targets high-expenditure drugs
biosimilar competition, we expect to qualify f
2029. However, the qualificff ation forff
we will continue to qualify f
of this exemption, including as a result of a potential acquisition or strategic transaction, could have an adverse
impact on our business.
that have been on the market forff
the small biotech manufact
this exemption in the future. Further, the loss of this exemption or the potential loss
this exemption is subject to various requirements and there is no assurance that
urt er exemption that is set to expire in
several years without generic or
r
ff
orff
orff
ff
ff
The most significant prior revisions to federal law governing the pharmaceutical industry arr
pricing were enacted through the March 2010 Patient Protection and Affoff
Care and Educd ation Reconciliation Act (collectively, the ACA). This law was intended to broaden access to health
insurance by reducd ing the number of uninsured persons, reducd ing or constraining the growth of healthcare spending,
enhancing remedies against fraud and abus
ff
insurance indusd tries, imposing taxes and fees
nd imposing additional health policy reforff ms.
rdable Care Act, as amended by the Health
e, adding transparency requirements forff
the healthcare and health
on the health industry arr
nd prescription drug
a
We expect that these health reforff m measures may result in more rigorous coverage criteria and lower reimbursement
for prescription drugs, as well as result in additional downward pressure on any price that we receive for any
approved product. Any reducd tion in reimbursement from Medicare or other government-funded programs may result
in a similar reduction in payments froff m private third-party payors.
Other significant legislative changes impacting the pharmaceutical industry arr
adopted since the ACA was enacted. These changes include, among others, aggregate reducd tions to Medicare
payments to providers of up to 2% per fisff cal year pursuant to the Budget Control Act of 2011, which began in 2013
and, due to subsu equent legislative amendments, including the Investment and Jobs Act, will remain in effeff ct through
2032.
nd prescription drug pricing have been
At the state level, legislaturt es have increasingly passed legislation and implemented regulations designed to examine
and/or 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. For example, on January
5, 2024, the FDA approved Florida’s Section 804 Importation Program (SIP) proposal to import certain drugs
from
Canada for specific state healthcare programs. It is unclear how this program will be implemented, including which
drugs
will be chosen, and whether it will be subju ect to legal challenges in the United States or Canada. Other states
r
have also submu
implemented, may result in lower drug prices for products covered by those programs. Further, certain states
through legislation have created a state prescription drugr
for that state. The functions of the PDABs vary by state, and may include among others, negotiating the price the
state pays forff
reviews, and advising state lawmakers on additional ways to reducd e the state’s drug spending. It is possible that the
actions taken by the PDABs may result in lower prices for certain drugrr
itted SIP proposals that are pending review by the FDA. Any such appr
certain drugs, recommending or setting upper limits on drugr
rdability board (PDAB) to help control costs of drugs
prices, performing drug affordability
oved importation plans, when
products sold in their states.
affoff
a
r
r
17
Proposed Healthcare Reform Measures
The U.S. and some foreign jurisdictions are considering a number of legislative and regulatory prr
roposals to change
the healthcare system in ways that could affect our ability to sell our products profitaff bla y. 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 hrr
as been a particular focff us of these efforts and may be significantly affeff cted by majoa r legislative initiatives.
We are currently unabla e to predict what other additional legislation or regulation, if any, relating to the healthcare
industry mrr
legislation or regulation would have on our business.
t recently enacted federal legislation or any such additional
ay be enacted in the futff urt e or what effecff
Regulation and Procedures Governing Approval of Medicinal Products in the EU
To market any product outside of the U.S., a company must also comply with numerous and varyirr ng regulatoryrr
requirements of other countries and jurisdictions regarding quality, safetff y and effiff cacy and governing, among other
things, clinical trials, marketing authorization, commercial sales and distribution of products. Whether or not it
obtains FDA appr
a product, an applicant will need to obtain the necessary approvals by the comparabla e
foreign regulatory arr
uthorities beforff e it can initiate clinical trials or marketing of the product in those countries or
jurisdictions. Specifically, the process governing appr
requirements in the U.S. It entails satisfactory crr
adequate and well-controlled clinical trials to establa ish the safety and efficacy of the medicinal product forff
proposed indication.
ompletion of pharmaceutical development, nonclinical studi
oval of medicinal products in the EU generally aligns with the
es and
each
oval forff
a
a
t
rr
The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement
may vary f
roff m country to country. In all cases, the clinical trials must be conducted in accordance with GCP and the
applicable regulatory r
Medicines used in clinical trials must be manufact
which can be subju ect to GMP inspections.
equirements and the ethical principles that have their origin in the Declaration of Helsinki.
lity,
urt ed in accordance with cGMP and in a GMP licensed faci
rr
ff
ff
Clinll
ical Trials in the EU. In the EU, the Clinical Trials Regulation (EU) No 536/2014 (CTR) entered into
application on January 31, 2022 repealing and replacing the former Clinical Trials Directive 2001/20 (CTD). The
regulation introduces a streamlined appl
Trials Information System (CTIS); a single set of documents to be prepared and submitted forff
as simplifieff d reporting procedurd es for clinical trial sponsors. A harmonized procedurd e forff
applications for clinical trials has been introduced and is divided into two parts.
ication procedurd e via a single entry point, the “EU portal”, the Clinical
a
the appl
the assessment of
a
ication as well
a
ication forff
The extent to which on-going clinical trials will be governed by the CTR will depend on the durd ation of the
approval was made on the basis of
individual clinical trial. For clinical trials in relation to which an appl
the CTD before January 31, 2023, the CTD will continue to apply on a transitional basis until January 31, 2025. By
that date, all ongoing trials will become subju ect to the provisions of the CTR. The CTR will apply to clinical trials
from an earlier date if the related clinical trial appl
ication was made on the basis of the CTR or if the clinical trial
has already transitioned to the CTR fraff mework before January 31, 2025.
Marketintt g Authott
authorization (MA) has been granted. To obtain an MA forff
marketing authorization appl
the procedurd es administered by the competent authorities of EU Member States (decentralized procedurd e, national
procedurd e or mutuat
a product in the EU, an appl
ication (MAA) either under a centralized procedurd e administered by the EMA or one of
tions. In the EU, medicinal products can only be commercialized after a related marketing
l recognition procedurd e). An MA may be granted only to an appl
icant established in the EU.
icant must submit a
rizaii
a
a
a
a
the grant of a single MA by the European Commission that is valid
The centralized procedurd e provides forff
throughout the European Economic Area (which is comprised of the 27 EU Member States plus Norway, Iceland
and Liechtenstein). Pursuant to Regulation (EC) No 726/2004, the centralized procedurd e is compulsory for specific
products, including for (i) medicinal products derived froff m biotechnological processes, (ii) products designated as
n medicinal products, (iii) advanced therapy medicinal products (ATMPs), and (iv) products with a new active
orpha
r
subsu tance indicated for the treatment of HIV/AIDS, cancer, neurodegenerative diseases, diabea
tes, auto-immune and
other immune dysfunctions and viral diseases. For products with a new active substance indicated for the treatment
of other diseases and products that are highly innovative or forff which a centralized process is in the interest of
patients, authorization through the centralized procedurd e is optional on related approval.
18
Accelerated assessment may be granted by the EMA’s Committee forff Medicinal Products for Human Use (CHMP)
in exceptional cases, when a medicinal product targeting an unmet medical need is expected to be of majoa r interest
from the point of view of public health and, in particular, froff m the viewpoint of therapeutic innovation. If the CHMP
accepts a request for accelerated assessment, the time limit of 210 days will be reduced to 150 days (excluding clock
stops). The CHMP can, however, revert to the standard time limit for the centralized procedurd e if it considers that it
is no longer appropriate to conduct an accelerated assessment.
An MA has, in principle, an initial validity of five years. The MA may be renewed after five years on the basis of a
re-evaluation of the risk-benefitff balance by the EMA or by the competent authority of the EU Member State in
which the original MA was granted. The European Commission or the competent authorities of the EU Member
States may decide on justifieff d grounds relating to pharmacovigilance, to proceed with one further fivff e-year renewal
period for the MA. Once subsequently definitively renewed, the MA shall be valid for an unlimited period. Any
authorization which is not followed by the actuat
centralized MA) or on the market of the authorizing EU Member State within three years after authorization ceases
to be valid (the so-called sunset clause).
l placing of the medicinal product on the EU market (for a
Upon receiving an MA, innovative medicinal products are generally entitled to receive eight years of data
exclusivity and 10 years of market exclusivity. Data exclusivity, if granted, prevents regulatory arr
ication forff
from referff encing the innovator’s data to assess a generic application or biosimilar appl
the date of authorization of the innovative product, afteff
the innovator’s data may be referff enced. The market exclusivity period prevents a successfulff
applicant froff m commercializing its product in the EU until 10 years have elapsa
referff ence produd ct in the EU. The overall ten-year period may, occasionally, be extended forff
maximum of 11 years if, dff
one or more new therapea utic indications which, during the scientificff
to bring a significant clinical benefit in comparison with existing therapia es.
r which a generic or biosimilar MAA can be submu
a furff
ed from the initial MA of the
urd ing the first eight years of those ten years, the MA holder obtains an authorization forff
uthorities in the EU
eight years fromff
itted, and
evaluation prior to their authorization, are held
generic or biosimilar
ther year to a
a
an Designi
atiott n and related ExcEE lusivityii
in the EU.UU In the EU, Regulation (EC) No. 141 provides that a
Orphrr
medicinal product can be designated as an orphan medicinal product by the European Commission if its sponsor can
establa ish that: (i) the product is intended forff
threatening or chronically
debilitating conditions; (ii) either (a) such conditions affeff ct not more than five in 10,000 persons in the EU when the
application is made, or (b) the product without the benefitsff
ient
return in the EU to justify t
satisfactory arr
EU, or even if such method exists, the product will be of significant benefit to those affected by that condition.
derived froff m orphan status, would not generate sufficff
he necessary investment in developing the medicinal product; and (iii) there exists no
uthorized method of diagnosis, prevention, or treatment of the condition that has been authorized in the
the diagnosis, prevention or treatment of life-ff
ff
r
a
n medicinal products are entitled to a ten-year period of market
Upon grant of a marketing authorization, orpha
exclusivity for the approved therapea utic indication, which means that the EMA cannot accept another marketing
a similar product and the European Commission
authorization appl
cannot grant a marketing authorization forff
a period of ten years. The period of market
exclusivity is extended by two years forff
rr
orpha
period of market exclusivity may, however, be reducd ed to six years if, at the end of the fifff thff
that the product no longer meets the criteria on the basis of which it received orphan medicinal product destination.
n medicinal products that have also complied with an agreed PIP. The
ication or accept an application to extend forff
the same indication forff
year, it is established
i
rizaii
tion Obligat
iott ns in the EU. Where an MA is granted in relation to a medicinal product in the EU,
Post-Att uthott
the holder of the MA is required to comply with a range of regulatory r
marketing, promotion and sale of medicinal products. Similar to the U.S., both MA holders and manufact
medicinal products are subject to comprehensive regulatory orr
or the competent regulatory arr
and maintain a pharmacovigilance system and appoint an individual qualifieff d person forff
responsible for oversight of that system. Key obligations include expedited reporting of suspected serious adverse
reactions and submission of periodic safetff y upda
uthorities of the individual EU Member States. The holder of an MA must establish
versight by the EMA, the European Commission and/
pharmacovigilance who is
icable to the manufacff
te reports (PSURs).
equirements appl
urt ers of
u
a
rr
ff
turing,
19
In the EU, the advertising and promotion of medicinal products are subject to both EU and EU Member States’ laws
governing promotion of medicinal products, interactions with physicians and other healthcare professionals,
misleading and comparative advertising and unfaiff
promotion of medicinal products, such as direct-to-consumer advertising of prescription medicinal products are
establa ished in EU law. However, the details are governed by regulations in individual EU Member States and can
differ froff m one country to another.
r commercial practices. General requirements forff
advertising and
y Fr
red to as Brexit, has changed the regulatory r
raFF mework in the UK.UU The UK’s withdrawal from the EU on January 31, 2020,
Brexiee t aii nd the Regulatll ortt
commonly referff
and Healthcare products Regulatory Arr
and medical devices. Great Britain (England, Scotland and Wales) is now a third country to the EU. Northern
Ireland continues to folff
gency (MHRA) is now the UK’s standalone regulator for medicinal products
elationship between the UK and the EU. The Medicines
low the EU regulatory r
ulr es.
rr
rr
rr
raff mework in relation to clinical trials is governed by the Medicines for Human Use (Clinical
The UK regulatory f
Trials) Regulations 2004, as amended, which is derived from the CTD, as implemented into UK national law
through secondary legislation. In October 2023, the MHRA aRR
which enabla es a more streamlined and risk-proportionate approach to initial clinical trial appl
and low-risk Phase 3 clinical trial appl
nnounced a new Notificff ation Scheme forff
ications for Phase 4
ications.
a
a
clinical trials
Marketing authorizations in the UK are governed by the Human Medicines Regulations (SI 2012/1916), as
amended. This legislation includes procedurd es to prioritize access to new medicines that will benefit patients,
including a 150-day assessment route, a rolling review procedure and the International Recognition Procedured
s
(IRP) which entered into application on January 1, 2024. Since January 1, 2024, the MHRA mRR
when reviewing certain types of marketing authorization appl
orpha
r
designation in parallel to the corresponding marketing authorization appl
as those in the EU but have been tailored forff
n designation forff medicinal products in the UK. Instead, the MHRA rRR eviews applications for orphan
ications. There is no pre-marketing authorization
the market.
ay rely on the IRP
ication. The criteria are essentially the same
a
a
s. We have grown to a team of more than 1,400 employees as of December 31, 2023, primarily
Human Capital
Our EmpEE loyeeo
employed in the U.S. Our highly qualified and experienced team, which includes scientists, physicians and
profesff
our success. We also leverage temporary wrr
added appr
orkers to provide flexibility for our business needs. During 2023, we
oximately 200 new employees to our team.
sionals across sales, marketing, manufacff
finance and other essential func
turing, regulatory,rr
a
ff
tions are critical to
We expect to add additional employees in 2024 with a focff us on expanding our research and development
organization. We continually evaluate our business needs and opportunities and balance in-house with external
expertise and capacity. Currently, we rely on third-party contract manufact
urt ers.
ff
re.ee The success of our human capital management investments is evidenced by our low employee
Our CulCC tull
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 effoff
BiopharmaTM.
rts, in 2023, we were ranked #8 in Fortune Best Workplk aces in
alTT enll
t Developmll
ent & Benefie tsii
ee Engagement, Ttt
Emplm oyll
our continued abia lity to attract and retain highly skilled employees. We provide our employees with competitive
salaries and bonuses, opportunities for equity ownership, development programs that enabla e continued learning and
growth and a robust employment package that promotes well-being across all aspects of their lives, including
healthcare, retirement planning and paid time off.ff As part of our promotion and retention efforts, we also invest in
ongoing leadership development programs as well as offerff
employee surveys to gauge employee engagement and identify aff
. We believe that our future success largely depends upon
tuition reimbursement. In addition, we regularly conduct
reas of focus.
lusion. Much of our success is rooted in the diversity of our teams and our commitment to inclusion.
Diversirr tyii & IncII
We value diversity at all levels and continue to focus on extending our diversity and inclusion initiatives across our
entire workforff ce. We believe that our business benefitff s froff m 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.
20
Corporate Inforff mation
We were originally incorporated in Califorff nia in January 1992 and reincorpor
principal executive offices are located at 12780 El Camino Real, San Diego, California 92130. Our telephone
number is (858) 617-7600.
ated in Delaware in May 1996. Our
rr
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 reasonabla y practicable afteff
r
such reports are availabla e on the Securities and Exchange Commission (SEC) website at www.sec.gov. Additionally,
copies of our Annual Report will be made availabla e, free of charge, upon
accessible through, our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K.
written request. Inforff mation found
on, or
u
ff
lowing information sets forff
srr
Item 1A. Riskii Factortt
th risk factors that could cause our actuat
The folff
contained in forff ward-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 actuat
financial condition could be harmed. Additional risks not presently known to us, or that we currently deem
immaterial, may also affeff ct our business operations.
lly occur, our business, operating results, prospects or
l results to differ materially from those
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 continue to successfulff
ly commercialize INGREZZA or any of our other products, 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 any of our other products,
or our sales and marketing efforts are not effeff ctive, we may not generate sufficient revenue.
Enacted healthcare reforff m, drugr
Inflation Reducd tion Act of 2022, could adversely affect our business.
pricing measures and other recent legislative initiatives, including the
Our business could be adversely affected by the effects of health pandemics or epidemics, which could also
cause significant disrupt
(CROs), or other third parties upon whom we rely.
ion in the operations of third-party manufact
urt ers, contract research organizations
r
ff
• We facff e intense competition, and if we are unabla e to compete effeff ctively, the demand forff
our products may
be reduced.
•
•
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.
l to demonstrate the safety and efficacy
Our clinical trials may be delayed for safetff y or other reasons, or faiff
a
ppr
of our product candidates, which could prevent or significantly delay their regulatory arr
oval.
• We depend on our current collaborators forff
the development and commercialization of several of our
products and product candidates and may need to enter into futff urt e collabor
commercialize certain of our product candidates.
a
ations to develop and
•
Use of our approved products or those of our collabor
events.
a
ators could be associated with side effeff cts or adverse
• We have 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.
•
If we are unabla e to retain and recruir
executives discontinues his or her employment with us, it may delay our development efforts or impact our
commercialization of INGREZZA or any of our other products, or any product candidate approved by the
FDA in the future.
t qualified scientists and other employees or if any of our key senior
21
• We currently have no manufact
urt ers of INGREZZA or any of our
other products, or any of our producd t candidates faiff
l to devote suffiff cient time and resources to our concerns,
or if their performance is subsu tandard, our clinical trials and product introductions may be delayed, and our
costs may rise.
ing capabilities. If third-party manufact
urt
ff
ff
• We currently depend on a limited number of third-party suppl
iers. The loss of these suppliers, or delays or
y of INGREZZA or any of our other products, could materially and adversely affect
u
problems in the suppl
our ability to successfulff
u
ly commercialize INGREZZA or any of our other products.
• We license some of our core technologies and drug candidates froff m 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 forff ced to pay damages.
•
•
•
If we are unabla e to protect our intellectuat
based on our discoveries, which may reducd e demand forff
our products.
l property, our competitors could develop and market products
Government and third-party payors may impose sales and pharmaceutical pricing controls on our products,
or limit coverage and/or reimbursement for our products or impose policies and/or make decisions that
regarding the statust
of our products that could limit our product revenues and delay sustained profitaff bia lity.
Our indebtedness could 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 profitabia lity.
•
Our customers are concentrated and therefore the loss of a significant customer may harm our business.
• We may need additional capital in the futff urt e. If we cannot raise additional fundi
ff
ng, we may be unabla e to
fund our business plan and our future research, development, commercial and manufact
ff
urt
ing efforts.
Risks Related to Our Company
We may na
ll o ctt
our product candiddd atdd estt
ot be able t
ontinue to successfulff
a
if they are appr
oved in the futff ure.
lyll
commercializll e INGR
EZR ZAZZ
II
or any on
f oo ur othett
fo
r products,tt or any on
ly commercialize INGREZZA and secure adequate third-party reimbursement. Our experience
Our abia lity to produce INGREZZA revenues consistent with expectations ultimately depends on our ability to
continue to successfulff
in marketing and selling pharmaceutical products began with INGREZZA’s approval in 2017, when we hired our
sales forff ce and established our distribution and reimbursement capabilities, all of which are necessary to
successfulff
ly commercialize our current and futff urt e products. We have continued to invest in our commercial
infrastructurt e and distribution capabilities, including the expansion of our specialty sales forff ce, which we announced
in the third quarter of 2021 and completed in April 2022. 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 infrastructurt e, and there can be no guarantee that we will be able to maintain the personnel, systems,
ly commercialize INGREZZA or any of our other
arrangements and capaa bia lities necessary to continue to successfulff
products, or any product candidate approved by the FDA, or equivalent foreign authorities, in the futff urt e.
In addition, our business has been and may continue to be adversely affected by the effects of health pandemics or
epidemics. In parts of the country, some hospitals, community mental health facilities, and other healthcare facff
continue to have policies that limit access of our sales representatives, medical affaff
facilities. In addition, many healthcare practitioners have adopted telehealth for patient interactions, which may
impact the abia lity of the healthcare practitioner to screen forff
with Huntington's disease.
ilities
irs personnel and patients to such
and diagnose tardive dyskinesia or chorea associated
22
If phff
our salesll
ysh icians and patiett nts dtt
and markerr
tingii
effoff
o ndd
ot contintt ue to accept INGII
REGG ZZEE A oZZ
r do ndd
ot accept any of our other products,tt or
rts att
re not effee
ctivtt e, we may na
ot generate suffiu cient revenue.ee
The commercial success of INGREZZA or any of our other products will depend upon the acceptance of those
products as safe and effective by the medical community and patients.
The market acceptance of INGREZZA or any of our other products could be affected by a number of fact
including:
ff
ors,
•
•
•
•
•
•
•
the timing of receipt of marketing appr
a
ovals for additional indications;
the safety and efficacy of the products;
the pricing of our products;
the availabia lity 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
supeu rior products; and
the cost-effectiveness of the products.
If the medical community, patients and payors do not continue to accept our products as being safe,ff
supeu rior and/or cost-effective, we may not generate sufficff
ient revenue.
effeff ctive,
Government and third-par
limit cii overage and/or//
stattt us of our products t
tt hatt
-
ty payors mrr
reimbursement forff
ay impose salesll
and pharmaceutical pricing controls oll
r impii
t could limit our product revenues and delay sa ustained profitff abi
our products ott
ose policll
tt
ies and/odd r make decisiii ons regardingii
.yy
liii tyii
n our products ott
r
the
Our abia lity to continue to commercialize INGREZZA successfulff
on the extent to which coverage and adequate reimbursement for these products and related treatments will be
availabla e. The continuing effoff
and the price of prescription drugs through various means may impact our revenues. These payors’ effoff
decrease the price that we receive for any products we may develop and sell in the future.
rts of government and third-party payors to contain or reducd e the costs of healthcare
ly or any of our other products will depend in part
rts could
Assuming we obtain coverage for a given product by a third-party payor, the resulting reimbursement rates may not
be adequate or may require co-payments that patients finff d unacceptabla y 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 out-
of-pff ocket cost of our products. Coverage decisions may depend upon
clinical and economic standards that disfavor
new drug products when more establa ished or lower cost therapeutic alternatives are already availabla e or
subsu equently become availabla e regardless of whether they are appr
Coverage decisions by payors forff
our competitors' products may also impact coverage for our products.
oved by the FDA forff
that particular use.
u
a
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. Thereforff e, 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
the use of our products to each payor
costly process that will require us to provide scientificff
separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in
the firff st instance. In addition, communications from government offiff cials, media outlets, and others regarding
healthcare 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.
and clinical suppor
t forff
u
23
r
es for which the drug is appr
uthorities. Moreover, eligibility forff
There may also be significant delays in obtaining coverage and reimbursement for newly approved drugs or
indications, and coverage may be more limited than the purpos
comparable foreign regulatory arr
a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufact
sale and distribution. In addition, we could also be subject to amendments in our rebate agreements with
pharmaceutical benefit managers that require us to pay larger rebate amounts or modify our formulary prr
which could have a material adverse effect on our business. Even if favorable coverage and reimbursement statust
attained for one or more products for which we receive regulatory arr
oval, less favorable coverage policies and
a
ppr
reimbursement rates may be implemented in the future. For example, government authorities could make a decision
that adversely impacts the statust
government reimbursement for that product.
of one of our products, which could impact the eligibility and/or the amount of
coverage and reimbursement does not imply that
oved by the FDA or
osition,
urt e,
is
a
ff
turer, we are subjeb ct to various federal statutes and regulations requiring the reporting
As a pharmaceutical manufacff
of price data and the subsequent provision of concessions to certain purchasers/pa/ yors, including state Medicaid
programs. Federal agencies issue guidance to manufacff
this guidance has changed and may change or be updated over time. In interpreting these laws, regulations and
guidance, manufacff
to be updated uponu
turers may make reasonabla e assumptions to fill gapsa
issuance of additional agency guidance.
turers related to the interpretation of laws and regulations, and
, and these reasonabla e assumptions may need
ly commercialize INGREZZA or any of our other products, or any other product candidate for
If coverage and reimbursement are not availabla e or reimbursement is availabla e only to limited levels, we may be
unabla e to successfulff
which we obtain marketing approval in the future. Our inability to promptly obtain coverage and profitabla e
reimbursement rates froff m both government-funded and private payors forff
could have a material adverse effect
products and our overall financial condition. Further, a majority of our current revenue is derived froff m fedff
healthcare program payors, including Medicare and Medicaid. Thus, changes in government reimbursement policies,
government negotiation of the price of any of products, reducd tions in payments and/or our suspension or exclusion
from participation in fedff
oved products that we develop
on our operating results, our ability to raise capital needed to commercialize
eral healthcare programs could have a material adverse effect on our business.
a
any appr
eral
ff
Further, during the COVID-19 pandemic, the use of physician telehealth services rapia dly increased, fueff
unprecedented expansion of coverage and reimbursement for telehealth services across public and private insurers.
The limitations that telehealth places on the abia lity to conduct a thorough physical examination may impact the
er patients being diagnosed and/or treated.
ability of providers to screen for movement disorders, leading to fewff
led by an
Outside the United States, reimbursement and healthcare payment systems vary srr
ignificantly by country, and many
countries have instituted price ceilings on specificff products and therapia es. The EU provides options for EU Member
States to restrict the range of medicinal products for which their national health insurance systems provide
reimbursement and to control the prices of medicinal products for human use. An EU Member State may approve a
specific price for the medicinal product, it may refusff
urt er or
it may instead adopt a system of direct or indirect controls on the profitabia lity of the company placing the medicinal
product on the market.
e to reimburse a product at the price set by the manufact
ff
24
granted to these medicinal products by the competent authorities of individual EU
To obtain reimbursement for our products in some European countries, including some EU Member States, we may
be required to compile additional data comparing the cost-effeff ctiveness of our products to other availabla e therapia es.
The Health Technology Assessment (HTA) of medicinal products is becoming an increasingly common part of the
pricing and reimbursement procedurd es in some EU Member States, including those representing the larger markets.
The HTA process is the procedurd e to assess therapeutic, economic and societal impact of a given medicinal product
in the national healthcare systems of the individual country. The outcome of an HTA will ofteff n influff ence the pricing
and reimbursement statust
Member States. The extent to which pricing and reimbursement decisions are influff enced by the HTA of the specific
medicinal product currently varies between EU Member States. In December 2021, Regulation No 2021/2282 on
HTA, amending Directive 2011/24/EU, was adopted in the EU. This regulation, which entered into force in January
2022 will apply as of January 2025. The regulation will permit EU Member States to use common HTA tools,
methodologies, and procedurd es across the EU to identify pff
cooperation in other areas. Individual EU Member States will continue to be responsible for assessing non-clinical
(e.g., economic, social, ethical) aspects of health technologies, and making decisions on pricing and reimbursement.
If we are unabla e to maintain favff orable pricing and reimbursement statust
candidates that we may successfulff
revenue from and growth prospects forff
in EU Member States for product
a
ly develop and for which we may obtain regulatory arr
ppr
those products in the EU could be negatively affected.
romising technologies early, and continuing voluntaryrr
oval, any anticipated
t that the UK has left tff he EU, Regulation No 2021/2282 on HTA will not apply in the UK.
In light of the facff
However, the MHRA iRR s working with UK HTA bodies and other national organizations, such as the Scottish
Medicines Consortium, the National Institute for Health and Care Excellence, and the All-Wales Medicines Strategy
Group, to introduce new pathways suppor
timely and efficient development of
medicinal products.
ting innovative approaches to the safe,ff
u
Legislators, policymakers and healthcare insurance funds in the EU and the UK may continue to propose and
implement cost-containing measures to keep healthcare costs down, particularly due to the finff ancial strain that the
COVID-19 pandemic has placed on national healthcare systems of European countries. These measures could
ly
include limitations on the prices we would be abla e to charge forff
develop and for which we may obtain regulatory arr
a
ppr
from governmental authorities or third-party payors. Further, an increasing number of EU and other forff eign
countries use prices for medicinal products establa ished in other countries as “referff ence prices” to help determine the
price of the product in their own territory. Consequently, a downward trend in prices of medicinal products in some
countries could contribute to similar downward trends elsewhere.
oval or the level of reimbursement availabla e forff
product candidates that we may successfulff
these products
We face intense compem titiii on, and if we are unable t
reduced.dd
ll o ctt
ompem te effeff ctivtt ely,ll
the demdd
and forff
our products mtt
ay be
The biotechnology and pharmaceutical industries are subju ect to rapia d and intense technological change. We face,
will continue to face, competition in the development and marketing of our products and product candidates fromff
academic institutions, government agencies, research institutt
ions and biotechnology and pharmaceutical companies.
ff
and
Competition may also arise froff m, among other things:
•
other drugrr
development technologies;
• methods of preventing or reducd ing the incidence of disease, including vaccines; and
•
new small molecule or other classes of therapea utic agents.
Developments by others (including the development of generic equivalents) 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
roids, classic
including endometriosis, tardive dyskinesia, chorea associated with Huntington's disease, uterine fibff
congenital adrenal hyperplasia, pain, Parkinson’s disease and other neurology, neuroendocrinology and
neuropsychiatry-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 successfulff
(including the development of
generic equivalents), the market for our products may be reducd ed or eliminated.
25
•
•
•
•
•
•
INGREZZA competes with AUSTEDO® (deutetrabenazine), marketed by Teva Pharmaceuticals Industries,
for the treatment of tardive dyskinesia in adults and chorea associated with Huntington's disease. A once-
ry 2023. Additionally, there are a
daily dosing of AUSTEDO (AUSTEDO XR) was introduced in Februar
number of commercially availabla e medicines used to treat tardive dyskinesia off-l
abel, such as
XENAZINE® (tetrabea nazine) and generic equivalents, and various antipsychotic medications (e.g.,
clozapine), anticholinergics, benzodiazepines (off-lff abel), and botult
programs in clinical development by other companies targeting Huntington's disease.
inum toxin. In addition, there are several
ff
ORILISSA and ORIAHNN each compete with several FDA-approved products for the treatment of
tility and central precocious puberty. Additionally, there is also
endometriosis, uterine fibroids, inferff
competition froff m surgical intervention, including hysterectomies and ablations. Separate froff m these
options, there are many programs in clinical development which serve as potential futff urt e 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.
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
turing steroid-based products. In addition, there are several programs in clinical
dozen companies manufacff
development by other companies targeting CAH.
potential use in epilepsy may in the futff urt e compete with numerous
Our investigational treatments forff
approved anti-seizure medications and development-stage programs being pursued by several other
companies. Commonly used anti-seizure medications include phenytoin, levetiracetam, brivaracetam,
cenobamate, carbar mazepine, clobazam, lamotrigine, valproate, oxcarbar
perampanel and cannabia diol, among others. There are currently no FDA-approved treatments specifically
indicated forff
anti-seizure medications are currently used in these patient populations.
the early infantile epileptic encephalopathy SCN8A-DEE; however, a number of diffeff
zepine, topiramate, lacosamide,
rent
Our investigational treatments forff
future compete with several development-stage programs being pursued by other companies. Currently,
there are no FDA-approved treatments specifically indicated for anhedonia or CIAS; however, there are a
rent anti-psychotic medications currently used in these patient populations.
number of diffeff
potential use in schizophrenia, anhedonia and depression may in the
Our investigational treatments forff
potential use in neurology, neuroendocrinology and neuropsychiatry may
in the futff urt e 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:
•
•
•
•
•
capital resources;
sales and marketing experience;
research and development resources, including personnel and technology;
regulatory err
xperience;
preclinical studyt
and clinical testing experience;
• manufacff
turing, marketing and distribution experience; and
•
production facff
ilities.
Moreover, increased competition in certain disorders or therapia es may make it more diffiff cult for us to recruir
enroll patients in our clinical trials for similar disorders or therapies.
t or
26
Because thett
uncertainty, wyy
developmll
ent of oo ur product candiddd atdd estt
any on
e may not succeed in developi
ngii
is subject to a s
.
f oo ur product candiddd atdd estt
ubstantt
ll
tt
tial degdd ree of to echtt
nologio cal
Only a small number of research and development programs ultimately result in commercially successfulff
r
drugs
.
Potential products that appear to be promising at early stages of development may not reach the market forff
of reasons. These reasons include the possibilities that the potential products may:
a number
•
•
•
•
•
ff
be found
ineffeff ctive or cause harmful side effects durd ing preclinical studi
t
es or clinical trials;
faiff
a
l to receive necessary regulatory arr
ppr
ovals on a timely basis or at all;
be precluded froff m commercialization by proprietary rights of third parties;
be diffiff cult to manufacff
ture 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 successfulff
product candidate.
ly market that
Our clinical trials may ba
product candiddd atdd estt
e deldd ayll
hich could pll
ed for safetff y ott
r other reasons or faiff
revent or signigg fii cantlytt delay ta hett
, ws
l tii o dtt
ir regue
latory approval.ll
emdd
onstratt
te the safetff y att
nd effiff cacy of our
a
Before obtaining regulatory arr
ppr
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.
the sale of any of our potential products, we must subject these product
oval forff
In connection with the clinical trials of our product candidates, we face the risks that:
•
•
•
•
•
•
•
•
•
•
•
•
the FDA or similar forff eign regulatory arr
to initiate human clinical studi
authorities may require additional preclinical studi
t
studi
NDA appr
es, or additional clinical studi
a
es for our drugrr
oval;
t
t
uthority may not allow an IND or foreign equivalent filings required
candidates or the FDA or similar forff eign regulatoryrr
t
es as a condition of the initiation of Phase 1 clinical
es for progression from Phase 1 to Phase 2, or Phase 2 to Phase 3, or for
the product candidate may not prove to be effeff ctive 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 or similar foreign regulatory arr
uthorities;
clinical trial results may not replicate the results of previous trials;
the FDA or similar forff eign regulatory arr
may prove insensitive to treatment effeff cts;
uthorities may require use of new or experimental endpoints that
we or the FDA or similar foreign regulatory arr
uthorities may suspend or vary the trials;
the results may not be statistically significant;
clinical site initiation or patient recruir
tment and enrollment may be slower or more difficult than expected;
the FDA or similar forff eign regulatory arr
of the U.S.;
uthorities may not accept the data from any trial or trial site outside
patients may drop out of the trials;
unforff eseen disruptu ions or delays may occur, caused by man-made or naturt al disasters or public health
pandemics or epidemics or other business interruptu ions, including, for example, the conflicff
and Ukraine and the confliff ct in the Middle East; and
t between Russia
regulatory r
rr
equirements may change.
a
These risks and uncertainties impact all of our clinical programs and any of the clinical, regulatory orr
events described above
could change our planned clinical and regulatory arr
between Russia and Ukraine, together with sanctions imposed on Russia, caused us to suspend all planned clinical
trial activities in RusRR sia and Ukraine. As a result, our planned clinical development timelines for valbenazine and
luvadaxistat were significantly delayed while we identifieff d and operationalized alternative clinical trial sites, which
we have now done. Additionally, any of these events described above
a
obviate any filings for necessary regulatory arr
ppr
could result in suspension of a program and/or
ctivities. For example, the confliff ct
r operational
ovals.
a
27
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 suffeff
reasons that may not
be related to the pharmaceutical agent being tested but which can nevertheless adversely affect clinical trial conduct,
completion and results. Any faiff
lure or subsu tantial delay in completing clinical trials for our product candidates may
severely harm our business.
r other adverse medical effeff cts forff
Even if the clinical trials are successfulff
ly completed, we cannot guarantee that the FDA or foreign regulatoryrr
authorities will interprr et the results as we do, and more trials could be required beforff e we submit our product
candidates forff
regulatory arr
significantly delayed, or we may be required to expend significant additional resources, which may not be availabla e
to us, to conduct additional trials in support of potential approval of our product candidates.
approval. To the extent that the results of the trials are not satisfactory t
a
ication, approval of our product candidates may be
o the FDA or forff eign
t of a marketing appl
uthorities forff
u
suppor
rr
We depeee nd on our current collabor
and product candiddd atdd estt
.
our product candiddd atdd estt
the devedd
atortt
and may need to enter intii o f
s frr orff
ll
lopmo
ent and commercializatiott n of so everal of our productstt
tt utff ure collall boratiott ns to developll
and commercialize certain of
the development and commercialization of several of our products and
We depend on our current collaborators forff
product candidates and may need to enter into future collabor
urt e and commercialization of ORILISSA
product candidates. For example, we depend on AbbVie for the manufact
and ORIAHNN and forff
a
commercialization of DYSVAL in Japaa n and for the continued development and commercialization of valbenazine
for movement disorders in other select Asian markets. Our additional collabor
ators include Xenon Pharmaceuticals,
Inc., Idorsia Pharmaceuticals Ltd., Takeda Pharmaceutical Company Limited, Heptares Therapeutics Limited and
Voyager Therapea utics, Inc.
the continued development of elagolix. We collabor
ations to develop and commercialize certain of our
ate with MTPC for the
a
a
ff
Our current and futff urt e collabor
a
ations and licenses could subject us to a number of risks, including:
•
•
•
•
•
•
•
•
•
•
•
strategic collabor
producd t candidates;
a
ators may sell, transferff
or divest assets or programs related to our partnered product or
we may be required to undertake the expenditure of subsu tantial operational, financial and management
resources;
we may be required to assume subsu tantial actuat
l or contingent liabilities;
we may not be able to control the amount and timing of resources that our strategic collabor
the development or commercialization of our products or product candidates;
a
ators devote to
we may not be able to influence our strategic collabor
a
ation of our partnered product and product candidates, and as a result, our collabor
a
collabor
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;
ator’s decisions regarding the development and
a
ation partners
strategic collabor
a
than if we were doing so;
ators may select indications or design clinical trials in a way that may be less successfulff
a
ators may not conduct collabor
strategic collabor
funding, terminate a clinical trial or abaa ndon a product candidate, repeat or conduct new clinical trials or
require a new version of a product candidate for clinical testing;
ative activities in a timely manner, provide insufficient
a
strategic collabor
a
from the strategic collabor
programs;
a
ators may not pursue furff
ther development and commercialization of products resulting
ation arrangement or may elect to discontinue research and development
disagreements or disputes may arise between us and our strategic collabor
costly litigation or arbitration that diverts management’s attention and consumes resources;
ators that result in delays or in
a
a
a
ators may experience financial diffiff culties;
ators may not properly maintain, enforce or defenff d our intellectuat
strategic collabor
strategic collabor
l 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;
28
•
•
ators could terminate the arrangement (in whole or in part) or allow it to expire,
we or strategic collabor
which would delay the development and commercialization, result in disagreements or disputes or may
increase the cost of developing and commercializing our products or product candidates; and
a
strategic collabor
compete with ours.
a
ators could develop, either alone or with others, products or product candidates that may
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.
Use of oo ur approved products ott
r thott
se of our collall boratortt
s crr
ould be associatedtt withii
side effeff cts ott
r adverserr
events.
a
a
ators could be
a
ators’ ability to maintain regulatory arr
ppr
ators may be observed at any time, including afteff
a
As with most pharmaceutical products, use of our approved products or those of our collabor
associated with side effeff cts or adverse events which can vary i
n severity (from minor adverse reactions to death) and
rr
frequency (infrequent or prevalent). Side effects or adverse events associated with the use of our products or those of
our collabor
side effeff cts or adverse events may negatively impact demand for our or our collabor
our collabor
associated with the use of our approved products or those of our collabor
ators
to modify or halt commercialization of these products or expose us to product liabia lity lawsuits which will harm our
business. We or our collabor
gencies to conduct additional studies regarding the
safety and efficff acy of our products which we have not planned or anticipated. Furthermore, there can be no
assurance that we or our collabor
satisfaction of the FDA or any regulatory arr
prospects and financial condition.
r a product is commercialized, and reports of any such
ators’ products or affeff ct our or
such products. Side effects or other safety issues
ators could require us or our collabor
ators will resolve any issues related to any product related adverse events to the
gency in a timely manner or ever, which could harm our business,
ators may be required by regulatory arr
oval forff
a
a
a
a
a
We license some of our core techtt
obligll atiott ns underdd
technologio es and drudd g cu
andidatestt
nologio es and drudd g cu
tt hett
or be forced to pay damages.
those licll enses, or violatll e t
terms of to hett
se licenses, we could l
osll
ll
e our righi
ts to those
andidatestt
from third parties. If we defae ult oll n any of our
l to comply with these obligations, we
some of our key technologies. These licenses typically subju ect
ation and license agreements allow our licensors to terminate such agreements if we challenge the validity or
We are dependent on licenses from third parties forff
us to various commercialization, reporting and other obligations. If we faiff
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. In addition, several of our
collabor
a
enforceability of certain intellectuat
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 subju ect to damages. Likewise, if we were to lose our rights under a
license to use proprietary research tools, it could adversely affect our existing collabor
ability to forff m new collaborations. We also faceff
patent protection or lose their rights to the technologies we have licensed, thereby impairing or extinguishing our
rights under our licenses with them.
l property rights or if we commit a material breach in whole or in part of the
the risk that our licensors could, for a number of reasons, lose
ations or adversely affect our
a
29
We have increased thett
i
diffi
We may ea
ncountertt
sizeii
culties withii managia ngii
of our organizatiott n and willii need to contintt ue to increase the size of oo ur organr
izatiott n.
ly affeff ct our resultsll of operations.
our growth,tt which could adverserr
r
u
t our
recruir
t, maintain and integrate additional
ng other aspects of our business, including development and commercialization of our product
As of December 31, 2023, we had approximately 1,400 full-time employees. Although we have subsu tantially
increased the size of our organization, we may need to add additional qualifieff d personnel and resources, especially
with the recent increase in the size of our sales forff ce. Our current infraff structurt e may be inadequate to suppor
development and commercialization efforts and expected growth. Futurt e growth will impose significant added
responsibilities on our organization, including the need to identify,ff
employees and implement and expand managerial, operational and financial systems and may be costly and take
time away from runni
candidates. For example, we are in the process of implementing a new company-wide enterprise resource planning
(ERP) system to streamline certain existing business, operational, and finff ancial processes. This project has required
and may continue to require investment of capital and human resources, the re-engineering of processes of our
business, and the attention of many employees who would otherwise be focused on other aspects of our business.
Any disruptu ions, delays, or deficiencies in the implementation or design of the ERP system could adversely affect
the effectiveness of our internal control over finff ancial reporting or our ability to accurately maintain our books and
records, provide accurate, timely and reliabla e reports on our financial and operating results, or otherwise operate our
business. Any of these consequences could have an adverse effect on our results of operations and finff ancial
condition.
Our futff urt e finff ancial performance and our ability to commercialize INGREZZA and any of our other products, or any
of our product candidates that receive regulatory arr
a
ppr
manage any futff urt e growth effectively. In particular, as we commercialize INGREZZA, we will need to support
training and ongoing activities of our sales forff ce 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 successfulff
oval in the future, will partially depend on our ability to
the
ly:
u
• manage our development efforts effectively;
•
•
•
•
integrate additional management, administrative and manufact
ff
urt
ing personnel;
furff
ther develop our marketing and sales organization;
compensate our employees on adequate terms in an increasingly competitive, inflationary market;
attract and retain personnel; and
• maintain suffiff cient administrative, accounting and management information systems and controls.
We may not be able to accomplish these tasks or successfulff
achieve our research, development and commercialization goals. Our failure to accomplish any of these goals could
harm our financial results and prospects.
ly manage our operations and, accordingly, may not
ll o rtt
etaitt n aii
If we are unable t
executives discii ontinues his or her employmo
commercializaii
or any on
in the futff ure.
tion of INGRNN EZRR ZAZZ
nd recruit qii ualifieff d scientistii s att
ent with utt
f oo ur othett
nd othett
o
r employees
rts ott
dd
s, it may da
our devel
a
ppr
roduct candiddd atdd e att
r products,tt or any pn
or if any on
ent effoe
enior
f oo ur key se
r impii
act our
oved by the FDAFF
eldd ayll
opmll
We are highly dependent on the principal members of our management, commercial and scientificff
any of these people could impede the achievement of our objectives, including the successfulff
INGREZZA or any of our other products, or any product candidate approved by the FDA in the future. Furthermore,
recruirr
ting and retaining qualifieff d scientificff 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
unabla e to attract and retain personnel on acceptabla e terms given the competition among biotechnology,
pharmaceutical and healthcare companies, universities and non-profitff
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 infrastructurt e and the perceived impact of those
changes uponu
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 availabia lity to us.
our corporate culture. In addition, we rely on a significant number of consultants to assist us in
staff.ff The loss of
commercialization of
research institutions for experienced scientists
30
r products,tt or any on
We currentlytt have no manufau cturing capabilitii
othett
their pii
.ee
riseii
f oo ur product candidatestt
erfor
rmance is substandardd d, our clinical trials and product introductiott ns may ba
iett s. If third-par
-
fail to devote suffiu cient time
turers of INGRNN EZR ZAZZ
ty manufacff
tt
or any on
f oo ur
and resources to our concerns, os
r ifi
ed, add nd our costs maya
e deldd ayll
ff
ff
urt
urt
urt ers to produce the drugr
ing products for commercial purpos
es and do not currently have any manufact
the commercialization of our products. We have limited experience
We have in the past utilized, and intend to continue to utilize, third-party manufact
compounds we use in our clinical trials and forff
r
in manufact
ff
Establa ishing internal commercial manufact
ing capabilities would require significant time and resources, and we
ly establa ish such capabilities. Consequently, we depend on, and will continue
may not be able to timely or successfulff
to depend on, several contract manufact
all production of products for development and commercial
urt ers forff
purposes, including INGREZZA. If we are unabla e to obtain or retain third-party manufact
to develop or commercialize our products, including INGREZZA. The manufact
and commercial purpos
Manufact
foreign regulations relating to manufact
regulatory r
rr
following risks:
ing Practice regulations. Our third-party manufacff
ff
turers might not comply with FDA or equivalent
es or other
es is subju ect to specific FDA and equivalent foreign regulations, including current Good
equirements now or in the futff urt e. Our reliance on contract manufact
ing our products for clinical trials and commercial purpos
urt e of our products for clinical trials
urt ers also exposes us to the
urt ers, we will not be able
ff
ing faci
lities.
urt
urt
urt
ff
r
ff
ff
ff
rr
ff
ff
•
•
•
•
turers may encounter difficulties in achieving volume production, quality control or
contract manufacff
quality assurance, and also may experience shortages in qualified personnel or materials and ingredients
necessary to conduct their operations. As a result, our contract manufact
clinical schedules or adequately manufact
urt e our products in commercial quantities when required;
urt ers might not be able to meet our
ff
ff
switching manufact
be difficult or impossible forff
ff
our contract manufacff
business forff
urt ers may be difficult because the number of potential manufact
ff
urt ers is limited. It may
turer quickly on acceptabla e terms, or at all;
us to find a replacement manufacff
t
turers may not perform as agreed or may not remain in the contract manufact
uri
ff
ng
the time required to successfulff
ly produce, store or distribute our products; and
turers are subject to ongoing periodic unannounced inspection by the FDA, the U.S. Drug
drug manufacff
Enforcement Administration, equivalent foreign regulatory arr
compliance with cGMP and other government regulations and corresponding foreign standards. We do not
have control over third-party manufacff
turers’ compliance with these regulations and standards.
uthorities, and other agencies to ensure strict
Our current dependence upon
ture of our products may reducd e our profitff margin, if any,
on the sale of INGREZZA or any of our other products, or our future products and our ability to develop and deliver
products on a timely and competitive basis.
third parties forff
the manufacff
u
We currentlytt depeee nd on a limi
problemll
abilityii
ll
suppu ly of INGRNN EZR ZAZZ
II
ii hett
to successfulff
teii d number of to hitt
or any on
commercializll e INGR
s in t
lyll
EZR ZAZZ
-pdd arty supplu
rdii
f oo ur othett
iell rs. The losll
r products,tt could mll
f oo ur othett
r products.tt
s of to hett
atertt
or any on
iell rs, or delaysa
se supplu
ially and adverserr
ly affeff ct our
or
ff
turers of pharmaceutical products may encounter difficulties in production, such as
product and packaging in suffiff cient quantities while meeting detailed product specifications on a
urt e of pharmaceutical products requires significant expertise and capital investment, including the
The manufact
development of process controls required to consistently produce the active pharmaceutical ingredients (API), the
finished drugr
repeated basis. Manufacff
difficulties with production costs and yields, process controls, quality control and quality assurance, including
testing of stabia lity, 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 disrupt
made or natural disasters, pandemics or epidemics, or other business interruptu ions. We depend on a limited number
u
of suppl
INGREZZA encounter these or any other manufact
meet commercial demand forff
commercialize INGREZZA.
ing, quality or compliance diffiff culties, we may be unabla e to
ly
INGREZZA, which could materially and adversely affect our ability to successfulff
iers for the production and packaging of INGREZZA and its API. If our third-party suppliers for
ions or delays caused by man-
urt
ff
r
31
a
u
ove manufact
iers fail or refuse to supplu
y us with INGREZZA or its API forff
In addition, if our suppl
significant amount of time and expense to qualify aff
authorities must appr
materials used in pharmaceutical products. The loss of a supplier could require us to obtain regulatory crr
to incur validation and other costs associated with the transfer of the API or product manufact
there are delays in qualifyiff ng new suppliers or facilities or if a new suppl
foreign regulatory arr
materially and adversely affect our ability to successfulff
ier is unabla e to meet FDA or a similar
approval, there could be a shortage of INGREZZA, which could
urt ers of the active and inactive pharmaceutical ingredients and certain packaging
learance and
new supplier. The FDA and similar forff eign regulatoryrr
ly commercialize INGREZZA.
uthority’s requirements forff
any reason, it would take a
ing processes. If
urt
u
ff
ff
The indii
clinll
epdd endent clinll
ical investigtt atortt
s arr
ical trials may na
ot be diliii gei nt, ctt arefulff
nd contratt
or timeii
ct research organr
ly, oyy
r may make mistakes in t
ii hett
conduct of oo ur trials.
izatiott ns that we rely upon to conduct our
We depend on independent clinical investigators and 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
l to devote suffiff cient time and resources to our drugrr
devote to our programs. If our independent investigators faiff
development programs, or if their performance is subsu tandard, or not in compliance with GCPs, it may delay or
prevent the approval of our regulatory applications and our introducd tion of new treatments. The CROs we contract
with for execution of our clinical trials play a significant role in the conduct of the trials and the subsu equent
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 are subjeb ct to ongoing obligll atiott ns and continued regulatll ortt
product candiddd atdd estt
restritt ctiott ns.
oved, cdd ould be subject to labeling and othett
a
, is f ai
y rr
ppr
eview for INGR
EZR ZAZZ
II
r
. Additioii nally, oyy ur othett
r post-marketintt g requireii ments att
nd
ovals for any of our product candidates may be subju ect to limitations on the appr
Regulatory arr
a
ppr
for which the product may be marketed or to the conditions of approval, or contain requirements forff
costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of
the product candidate. In addition, with respect to INGREZZA, and any product candidate that the FDA or a
comparable foreign regulatory arr
adverse event reporting, storage, advertising, promotion and recordkeeping forff
extensive and ongoing regulatory r
issions of safety and other post-
marketing inforff mation and reports, registration, as well as continued compliance with GCPs for any clinical trials
that we conduct post-approval. Failure to comply with these ongoing regulatory r
previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or
with our third-party manufacff
ing processes, may result in, among other things:
equirements. These requirements include submu
oved indicated uses
potentially
equirements, or later discovery of
uthority approves, the manufact
the product will be subju ect to
ling, packaging, distribution,
ing processes, labea
turers or manufact
urt
urt
a
ff
rr
ff
rr
•
•
•
•
•
•
restrictions on the marketing or manufact
urt
the product froff m the market, or voluntary orr
ff
ing of the product, changes in the product’s label, withdrawal of
r mandatory product recalls;
finff es, warning or untitled letters or holds on clinical trials;
refusff
to approved appl
a
al by the FDA or similar forff eign regulatory arr
uthorities to appr
a
ove pending applications or suppl
u
ements
ications filed by us, or suspension or revocation of product license approvals;
adverse inspection finff dings or other activities that temporarily delay manufact
products;
ff
urt e and distribution of our
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
profitaff bia lity on a sustained basis.
32
If the markerr
expexx ctedtt
t oppor
o
tunitiii es for our products att
nd product candiddd atdd estt
are smaller thatt n we beliell ve they are, our
revenues may be adverserr
ly affeff ctedtt
, add nd our business may suffeu r.
Certain of the diseases that INGREZZA, crinecerfont, 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, crinecerfont, and our other product
candidates may be smaller than we believe they are, our prospects forff
affeff cted and our business may suffer.
generating expected revenue may be adversely
Because our operatingii
results may va
ary sr
ignigg fii cantlytt
in future periods, os ur stoctt k price may da
ecldd
inll e.
te
to
te, forff
among other reasons, dued
tions in our effeff ctive tax rate, and disrupt
tion Reducd tion Act, our achievement of product development objectives and milestones, clinical trial enrollment
Our quarterly revenues, expenses and operating results have fluctuated in the past and are likely to fluff ctuat
significantly in the futff urt e. Our finff ancial results are unpredictabla e and may fluff ctuat
seasonality and timing of customer purchases and commercial sales of INGREZZA, royalties froff m out-licensed
products, the impact of Medicare Part D coverage, including redesign of the Part D benefit enacted as part of the
Inflaff
and expenses, research and development expenses and the timing and nature of contract manufact
research payments, fluff ctuat
public health pandemics or epidemics or other business interruptu ions, including, for example, the conflicff
t between
Russia and Ukraine, or in the Middle East. Because a majority of our costs are predetermined on an annual basis,
due in part to our significant research and development costs, small declines in revenue could disproportionately
affeff ct financial results in a quarter. Thus, our future operating results and profitabia lity may fluff ctuat
period, and even if we become profitaff bla e on a quarterly or annual basis, we may not be able to sustain or increase
our profitff ability. Moreover, as our company and our market capia talization have grown, our financial performance
has become increasingly subject to quarterly and annual comparisons with the expectations of securities analysts or
lure of our financial results to meet these expectations, either in a single quarterly or annual period
investors. The faiff
over a sustained period time, could cause our stock price to decline.
ions caused by man-made or naturt al disasters or
te from period to
ing, contract
urt
rr
ff
ebdd tedness could expos
xx
Our indii
of operations.
e us to rtt
isks that could all
dverserr
ly affeff ct our business, finaii ncial conditioii n and resultstt
In May 2017, we sold $517.5 million aggregate principal amount of the 2024 Notes. In 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 forff
we entered into separate, privately negotiated transactions with certain holders of the 2024 Notes to repurchase
an aggregate repurchase price of $279.0 million in
$210.8 million aggregate principal amount of the 2024 Notes forff
cash. As of December 31, 2023, $170.4 million aggregate principal amount of the 2024 Notes remained outstanding.
We may also incur additional indebtedness to meet future financing needs.
an aggregate repurchase price of $186.9 million in cash. In 2022,
ff
Our business may not generate sufficient funds
reserves, to pay amounts dued
any futff urt e indebtedness that we may incur may contain finff ancial 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 defauff
indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full.
under the 2024 Notes and any additional indebtedness that we may incur. In addition,
, and we may otherwise be unabla e to maintain suffiff cient cash
lt under that
We have a history of losses and expexx ct to increase our expe
able t
ustain profitff abi
ll o stt
litii y.tt
ee
tt
nses for thett
foreseeable f
ll utff ure, and we may not be
Since our inception, we have incurred significant net losses and negative cash floff w froff m operations. As of
December 31, 2023, we had an accumulated deficit of $157.1 million as a result of historical operating losses.
33
INGREZZA for tardive dyskinesia in April 2017 and forff
We received FDA approval forff
Huntington's disease in August 2023. Our partner AbbVie received FDA appr
in July 2018 and forff ORIAHNN for uterine fibroids in May 2020. Additionally, our partner MTPC received
Japaa nese Ministry of Health, Labour and Welfare approval forff DYSVAL for the treatment of tardive dyskinesia in
ovals for any other product candidates. Even if we
a
March 2022. However, we have not yet obtained regulatory arr
ppr
continue to succeed in commercializing INGREZZA, or are successfulff
our other product candidates, we may not be able to sustain profitabia lity. We also expect to continue to incur
significant operating and capital expenditures as we:
in developing and commercializing any of
oval forff ORILISSA for endometriosis
chorea associated with
a
•
•
•
•
•
•
commercialize INGREZZA for tardive dyskinesia and chorea associated with Huntington's disease;
a
seek regulatory arr
ppr
ovals for our product candidates or forff
additional indications for our current products;
develop, formulate, manufacff
ture and commercialize our product candidates;
in-license or acquire new product development opportunities;
implement additional internal systems and infraff structurt e; and
hire additional clinical, scientificff
, sales and marketing personnel.
We expect to increase our expenses and other investments in the coming years as we fund
expenditures. Thus, our future operating results and profitabia lity may fluff ctuat
factors described above, and we will need to generate significant revenues to achieve and maintain profitabia lity and
positive cash floff w on a sustained basis. We may not be able to generate these revenues, and we may never achieve
profitaff bia lity on a sustained basis in the futff urt e. Our faiff
lure to maintain or increase profitabia lity on a sustained basis
could negatively impact the market price of our common stock.
te from period to period dued
our operations and capital
to the
ff
Changes in t
effeff ct on our business, cash flowll
laws or regue
axtt
ii
s, finaii ncial conditioii n or resultsll of operations.
lations that are appl
a
iell d adverserr
ly to us or our customers may ha
ave a material adverserr
Effeff ctive January 1, 2022, legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act of 2017
eliminated the option to deducd t research and development expenses for tax purpos
requires taxpayers to capia talize and subsu equently amortize such expenses over fivff e years forff
conducted in the U.S. and over 15 years for research activities conducted outside the U.S. Unless the U.S.
Department of the Treasury i
research and development expenses or the provision is deferred, modified, or repealed by Congress, we expect a
material decrease in our cash flows froff m operations and an offseff
red tax
assets over these amortization periods. The actual impact of this provision will depend on multiple factors, including
the amount of research and development expenses we will incur and whether we conduct our research and
development activities inside or outside the U.S.
ssues regulations that narrow the application of this provision to a smaller subset of our
tting similarly sized increase in our net deferff
es in the year incurred and
research activities
rr
r
In addition, new income, sales, use, excise 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,
statutt es, rulr es, regulations or ordinances could be interprr eted, modified or applied adversely to us. For example, the
Tax Cuts and Jobs Act of 2017, the Coronavirus Aid, Relief, and Economic Security Act and the Inflaff
Act enacted many significant changes to the U.S. tax laws. Future guidance froff m the Internal Revenue Service and
other tax authorities with respect to such legislation may affeff ct us, and certain aspects of such legislation could be
repealed or modified in future legislation. Furthermore, it is uncertain if and to what extent various states will
conforff m to fedff
tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.
eral tax laws. Future tax reforff m legislation could have a material impact on the value of our deferred
tion Reducd tion
Our abilityii
to use taxtt
attrtt
ibutestt may ba
ll
e limit
.dd
edtt
r
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corpor
“ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over
a three-year period, the corpor
development tax credits to offset its post-change income or taxes may be limited. Based on completed Section 382
analysis done annually, 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 shiftsff
control.
ation’s abia lity to use certain pre-change federal tax attributes such as research and
in our stock ownership, some of which may be outside of our
ation undergoes an
r
34
Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes, including net
operating loss (NOL) carryforwards. In addition, at the state level, there may be periods during which the use of
NOLs or credits is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
As a result, we may be unabla e to use all or a material portion of our NOLs, research and development credits, and
other tax attributes, which could adversely affect our future cash flows.
ctivtt e taxtt
Our effee
amounts.tt
rate may fa
luff ctuate, ae nd we may ia ncii ur obligll atiott ns in tax jaa urisdictiott ns in excess of ao
ccrued
ff
ive tax rate is derived froff m a combination of appl
icable tax rates in the various places that we operate. In
Our effect
a
preparing our financial statements, we estimate the amount of tax that will become payabla e in each such place.
Nevertheless, our effeff ctive tax rate may be diffeff
to numerous factors, including
the impact of stock-based compensation, changes in the mix of our profitaff bia lity from jurisdiction to jurisdiction, the
results of examinations and audits of our tax filff ings, our inability to secure or sustain acceptabla e agreements with tax
authorities, changes in accounting forff
experience an effective tax rate significantly different from previous periods or our current expectations and may
result in tax obligations in excess of amounts accrued in our financial statements.
The price of our common stock is volatile.ee
income taxes and changes in tax laws. Any of these fact
rent than experienced in the past dued
ors could cause us to
ff
securities of biotechnology and pharmaceutical companies historically have been highly
these securities has from time to time experienced significant price and volume
The market prices forff
volatile, and the market forff
fluctuations that are unrelated to the operating performance of particular companies. The COVID-19 pandemic, for
example, negatively affected the stock market and investor sentiment and resulted in significant volatility, as has the
applicability of the Medicare drug price negotiation provisions in the Inflaff
especially as we and our market capitalization have grown, the price of our common stock has been increasingly
affeff cted by quarterly and annual comparisons with the valuations and recommendations of the analysts who cover
our business. If our results do not meet these analysts’ forecasts, the expectations of our investors or the financial
guidance we provide to investors in any period, which is based on assumptions that may be incorrect or that may
change from quarter to quarter, the market price of our common stock could decline. Over the course of the last 12
months, the price of our common stock has ranged froff m appr
a
share.
oximately $89 per share to approximately $143 per
tion Reducd tion Act. Furthermore,
The market price of our common stock may fluff ctuat
te in response to many fact
ff
ors, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
sales of INGREZZA and our other products;
the results of our clinical trials;
reports of safety issues related to INGREZZA, ORILISSA, ORIAHNN, DYSVAL, or any of our other
products;
developments concerning new and existing collabor
a
ation agreements;
announcements of technological innovations or new therapea utic products by us or others, including our
competitors;
general economic and market conditions, including economic and market conditions affeff cting the
biotechnology industry;rr
developments in patent or other proprietary rights;
developments related to the FDA, CMS and foreign regulatory arr
gencies;
government regulation, including the Inflaff
tion Reducd tion Act;
futff urt e sales of our common stock by us or our stockholders;
comments by securities analysts;
additions or departurt es of key personnel;
tions in our operating results;
fluff ctuat
potential litigation matters;
government and third-party payor coverage and reimbursement;
faiff
lure of any of our product candidates, if approved, to achieve commercial success;
35
•
•
disruptu ions caused by man-made or natural disasters, pandemics or epidemics or other business
interruptu ions, including, for example, the COVID-19 pandemic and the conflicff
Ukraine; and
t between Russia and
public concern as to the safety of our drugs
r
.
In addition, we are a member of the S&P MidCap 400 index. If we cease to be represented in the S&P MidCap 400
index, or other indexes or indexed products, as a result of our market capitalization falff
inclusion in the index, certain institutional shareholders may, due to their internal policies and investment guidelines,
be required to sell their shareholdings. Such sales may result in furff
when combined with reduced trading volume and liquidity, could adversely affect the value of your investment and
your ability to sell your shares.
ther negative pressure on our stock price and,
ling below the threshold forff
Our customers are concentratt
ted and thereforff
e thett
loss of a signigg fii cant customtt
er may ha
rr
arm o
ur busineii
ss.
the distribution of INGREZZA with a limited number of specialty pharmacy
We have entered into agreements forff
providers and distributors, and all of our product sales of INGREZZA are to these customers. Four of these
customers represented approximately 91% of our total product sales for 2023 and appr
oximately 98% of our
accounts receivabla e balance as of December 31, 2023. If any of these significant customers becomes subject to
cy, is unabla e to pay us for our products or is acquired by a company that wants to terminate the relationship
r
bankrupt
with us, or if we otherwise lose any of these significant customers, our revenue, results of operations and cash floff ws
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 floff ws.
a
We may na
our business plan and our futff ure research, developmo
eed additioii nal capitaii
future. Iee
ii hett
l in t
f wII
e cannot raiseii
additioii nal fund
ff
ent, commercial and manufacff
indd g, we may ba
effoff
turingii
e unable t
rts.tt
ff
ll o f
tt und
Our futff urt e fundi
our business plan and our future research, development, commercial and manufact
ng requirements will depend on many factors and we may need to raise additional capital to fund
ing efforts.
urt
ff
ff
ff
Our futff urt e capital requirements will depend on many factors, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the commercial success of INGREZZA, ORILISSA, ORIAHNN, DYSVAL, and/or any of our other
products;
debt services 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;
a
the time and costs involved in obtaining regulatory arr
ppr
ovals;
the cost involved in filff ing and pursuing patent appl
interference proceedings or other patent litigation;
a
ications, enforff cing patent claims, or engaging in
costs associated with securing adequate coverage and reimbursement for our products;
competing technological and market developments;
developments related to any future litigation;
the cost of commercialization activities and arrangements, including advertising campaigns;
the cost of manufacff
turing our product candidates;
the impact of the COVID-19 pandemic or a futff urt e pandemic or epidemic on our business; and
the cost of any strategic alliances, collabor
a
ations, product in-licensing, or acquisitions.
ding through strategic alliances and may seek additional fundi
We intend to seek additional funff
ng 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 finff ancing in the futff urt e. In 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. In 2022, we entered into separate, privately negotiated
transactions with certain holders of the 2024 Notes to repurchase $210.8 million aggregate principal amount of the
ff
36
an aggregate repurchase price of $279.0 million in cash. As of December 31, 2023, $170.4 million
2024 Notes forff
aggregate principal amount of the 2024 Notes remained outstanding. Additional equity or debt financing might not
be availabla e on reasonabla e terms, if at all. Any additional equity financings will be dilutive to our stockholders and
any additional debt finff ancings may involve operating covenants that restrict our business.
Compliance with ctt
expexx nses.
hanging regulatll
iott n of co
rr
orpor
ate gtt
overnance and publicll discii
losure may ra
esult ill n aii
dditioii nal
r
ate governance and public disclosure, including the
Changing laws, regulations and standards relating to corpor
Dodd-Frank Wall Street Reforff m and Consumer Protection Act, new SEC regulations and Nasdaq rulr es, are creating
uncertainty for companies such as ours. These laws, regulations and standards are subju ect to varying interprr etations
in some cases due to their lack of specificity, and as a result, their appl
new guidance is provided by regulatory arr
regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance
ate governance and public disclosure. As a
practices. We are committed to maintaining high standards of corpor
result, our effoff
rts 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 subju ect to sanctions or investigation by regulatory arr
could adversely affect our financial results and the market price of our common stock.
nd governing bodies, which could result in continuing uncertainty
uthorities, such as the SEC. Any such action
ication in practice may evolve over time as
a
r
Increasingii
use of so ocial mediadd
could gll
ive rise to l
tt
iall bilitii y att
nd result in harm to our business.
a
our products or business, or any inadvertent disclosure of material, nonpublic
rts to monitor social media communications, there is risk that the unauthorized use of social media by our
Our employees are increasingly utilizing social media tools and our website as a means of communication. Despite
our effoff
employees to communicate about
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 inappr
opriate disclosure of sensitive
information, which could result in significant legal and finff ancial 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
reputation, brand image and goodwill.
us or our products on social media could seriously damage our
a
a
We may ba
their fii orff merr
r employeo rs.
e subjeb ct to claill msii
that we or our employeeo
s have wrongfugg lly used or discii
fo
losed allegee d tratt de secrets ott
As is commonplace in the biotechnology industry,rr 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 successfulff
could result in substantial costs and be a distraction to management.
in defending against these claims, litigation
37
Our business could be adverserr
signi
ificff ant disdd ruptu iott n in t
rely.yy
ii hett
ly affeff ctedtt
by the effee
operations of third-pa-
ealth ptt
cts ott
rty mtt
f ho
anufacff
andemics or epiee demics, which could alsoll
r thitt
turers, CROs, or othett
parties uponu
cause
whom we
rdii
ff
rr
u
ions that could severely impact our suppl
urt ers, CROs and other third parties upon
all employees except certain key essential members involved
Our business could be adversely affected by the effects of health pandemics or epidemics, which could also cause
whom we
significant disruptu ion in the operations of third-party manufact
u
rely. As a result, we may experience disrupt
y chain, ongoing and futff urt e
clinical trials and commercialization of INGREZZA or any of our other products. In response to the COVID-19
pandemic, we implemented a remote work model forff
in business-critical activities. Our employees have resumed in-person interactions and have returt ned to the officff e
under fleff xible work guidelines. However, a remote work model may nevertheless need to be reinstated at some point
in the futff urt e. The effects of a remote and fleff xible work model may negatively impact productivity, disruptu
business and delay our clinical programs and timelines, the magnitude
of which will depend on our ability to
conduct our business in the ordinary course. Remote work may also create increased risks to our information
technology systems and data, as more of our employees utilize network connections, computers and devices outside
our premises or network, including working at home, while in transit and in public locations. In addition, we may
face several challenges or disruptu ions upon a returt n back to the workplk ace, including re-integration challenges by
our employees and distractions to management related to such transition. These and similar, and perhapsa more
severe, disruptu ions in our operations could negatively impact our business, operating results and finff ancial condition.
In addition, clinical site initiation and patient enrollment may be delayed due to concerns for patient safety. Some
patients may not be able to comply with clinical trial protocols and our ability to recruirr
investigators and site staff mff
ay be hindered, which would adversely impact our clinical trial operations.
t and retain patients, principal
our
t
The ultimate effeff cts of health pandemics or epidemics is highly uncertain and subject to change and these effeff cts
could have a material impact on our operations, or the operations of third parties on whom we rely.
Risks Related to Our Industry
If we are unable t
our disdd coveries, which may reduce demand for our products.tt
rotect our intii eltt
dd
lell ctual propeo rty,tt our compem titors could dll
ll o ptt
evel
opll
and markerr
t products btt
ased on
Our success will depend on our ability to, among other things:
•
•
•
•
obtain patent protection forff
our products;
preserve our trade secrets;
prevent third parties from infriff nging upon our proprietary rights; and
operate without infringing upon the proprietary rights of others, both in the U.S. and internationally.
oval processes in order to reach the marketplace, the pharmaceutical industry prr
Because of the subsu tantial length of time and expense associated with bringing new products through the
development and regulatory arr
a
ppr
considerable importance on obtaining patent and trade secret protection forff
processes. Accordingly, we intend to seek patent protection forff
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. Additionally, if our
employees, commercial collabor
ators or consultants use generative artificff
develop our proprietary technology and compounds, it may impact our ability to obtain or successfulff
certain intellectuat
new technologies, products and
our proprietary technology and compounds.
ial intelligence (AI) technologies to
ly defend
l property rights.
a
laces
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
confidff entiality agreements with our commercial collabor
or patent assignment agreements with our employees and some, but not all, of our commercial collabor
consultants. However, if our employees, commercial collabor
not have adequate remedies for any such breach, and our trade secrets may otherwise become known or
independently discovered by our competitors.
ators, employees and consultants. We also have invention
ators or consultants breach these agreements, we may
ators and
a
a
a
38
a
eviated new drugrr
ly challenge our patents or that
application (ANDA) with the FDA seeking appr
ly avoid them through design innovation. In addition, potential competitors have in the past and may in
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 enforff ceability of our patents. We cannot assure you
how much protection, if any, will be given to our patents if we attempt to enforff ce them and they are challenged in
court or in other proceedings. It is possible that a competitor may successfulff
challenges will result in limitations of their coverage. Moreover, competitors may infriff nge our patents or
successfulff
the futff urt e filff e an abbr
version of our products, or our competitors’ products, beforff e the expiration of the patents covering our products or
our competitors’ products, as appl
icable. To prevent infringement or unauthorized use, we have in the past and may
in the futff urt e need to filff e infriff ngement claims, which are expensive and time-consuming. Refer to Note 13 to the
consolidated financial statements for da descriip ition of our lleggall proce dediinggs rellatedd t
ll propertyy matters.
In addition, in an infringement proceeding a court may decide that a patent of ours or a patent of a competitor is not
valid or is unenforff ceable or may refusff
e to stop the other party from using the technology at issue on the grounds that
our patents do not cover its technology. Derivation 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) or a patent of a competitor. Litigation or derivation proceedings may faiff
, may
result in subsu tantial costs and be a distraction to management. Litigation or derivation proceedings, including
proceedings of a competitor, may also result in a competitor entering the marketplt ace faster than expected. We
cannot assure you that we will be able to prevent misappropriation of our proprietary rights, particularly in countries
ly as in the U.S.
where the laws may not protect such rights as fulff
oval to market a generic
l and, even if successfulff
io int lelllectuat
a
a
Enacted healthctt are reforff m,rr
our business.
drug pricing measures and othett
r recent legll
islative iniii
tiaii
tives could all
dverserr
ly affeff ct
The business and financial condition of pharmaceutical and biotechnology companies are affeff cted by the efforts of
government and third-party payors to contain or reducd e the costs of healthcare and to lower drug prices. In the U.S.,
comprehensive drug pricing legislation enacted by the Federal government implements, for the first time,
government control over the pricing of certain prescription pharmaceuticals. Moreover, in some foreign
jurisdictions, pricing of prescription pharmaceuticals is also subject to government control. Additionally, other
federal and state laws impose obligations on manufact
disclosure of new drug products introduced to the market and increases in drugrr
urt ers of pharmaceutical products, among others, related to
prices above a specified threshold.
ff
ff
r
r
tion Reducd tion Act of 2022, or the IRA,
whose prices increase greater than the rate of inflaff
f the HHS to negotiate the price of certain high-expenditure,
individuals purchasing health insurance coverage in the ACA marketplt aces through plan year 2025 and
and biologics covered under Medicare; (2) redesigns the Medicare Part D prescription drug
urt er liabia lity; and (3) requires drug manufact
tion. The IRA also extends enhanced
For example, in August 2022, President Biden signed into law the Inflaff
which, among other things: (1) directs the Secretary orr
single-source drugs
benefit to lower patient out-of-pocket costs and increase manufact
to pay rebates on drugs
subsu idies forff
beginning in 2025, eliminates the “donut hole” under the Medicare Part D program and creates a new, permanent
n beneficff
cap oa
urt er discount program. The
ermits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial
IRA pRR
years. HHS has issued and upda
implemented. These provisions take effeff ct progressively starting in 2023. On August 29, 2023, HHS announced the
list of the firff st 10 drugs
program is currently subju ect to legal challenges. It is currently uncertain how the IRA will be implemented over
time; however, it is likely to have a significant impact on the pharmaceutical industry arr
that will be subju ect to price negotiations, although the Medicare drug price negotiation
ted and will continue to issue and update guidance as these programs are
iary out-of-pocket spending, in addition to a newly establa ished manufact
nd prescription drug pricing.
urt ers
u
r
ff
ff
price negotiation program targets high-expenditure drugs
While the IRA drugrr
several years without generic or biosimilar competition, we believe we will qualify f
from negotiation that is set to expire in 2029. However, the qualificff ation forff
requirements and there is no assurance that we will continue to qualify f
loss of this exception or the potential loss of this exception, including as a result of a potential acquisition or
strategic transaction, could have an adverse impact on our business.
this exception is subject to various
this exemption in the future. Further, the
that have been on the market forff
the small biotech exception
orff
orff
ff
ff
r
39
eral legislation impacting the pharmaceutical industryrr
Prior to the IRA’RR s enactment, the most significant recent fedff
occurred in March 2010, when the ACA was signed into law. The ACA was intended to broaden access to health
insurance and reduce the number of uninsured individuals, reducd e or constrain the growth of healthcare spending,
enhance remedies against fraud and abus
the healthcare and health insurance
industries, impose taxes and feeff
nd impose additional health policy reforff ms.
e, add transparency requirements forff
s on the health industry arr
a
Other legislative changes have been adopted since the ACA was enacted. These changes include aggregate
reductions to Medicare payments to providers of up to 2% per fisff cal year pursuant to the Budget Control Act of
2011, which began in 2013 and, due to subsu equent legislative amendments to the statute, including the Infraff structure
Investment and Jobs Act and Consolidated Appropriations Act of 2023, will remain in effeff ct until 2032. The
American Taxpayer Relief Act of 2012, among other things, furff
providers, including hospitals and cancer treatment centers, increased the statute of limitations period for the
government to recover overpayments to providers from three to fivff e years.
ther reduced Medicare payments to several
At the state level, legislaturt es have increasingly passed legislation and implemented regulations designed to control
pharmaceutical and biological product pricing, 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 froff m other countries and bulk purchasing. For example, on January 5, 2024, the FDA
approved Florida’s SIP proposal to import certain drugs
unclear how this program will be implemented, including which drugs will be chosen, and whether it will be subju ect
to legal challenges in the United States or Canada. Other states have also submu
itted SIP proposals that are pending
review by the FDA. Any such approved importation plans, when implemented, may result in lower drug prices for
products covered by those programs. Further, certain states through legislation have created a state PDAB to help
control costs of drugs
recommending or setting uppe
reviews, and advising state lawmakers on additional ways to reducd e the state’s drug spending. It is possible that the
actions taken by the PDABs may result in lower prices for certain drugrr
from Canada for specific state healthcare programs. It is
r limits on the price the state pays for certain drugs
for that state. The functions of the PDABs vary brr
y state, and may include among other things,
, performing drug affordability
products sold in their in states.
u
r
r
r
The implementation of these cost containment measures may prevent us froff m being able to generate revenue, attain
sustained profitff ability or commercialize our drugs
, particularly since the majoa rity of our current revenue is derived
from fedff
eral healthcare programs, including Medicare and Medicaid.
r
Proposed healthll care refoe rm, drudd g pu
affeff ct our business.
ricingii measures and other prospes
ctivtt e legll
islative iniii
tiaii
tives could all
dverserr
ly
We expect that there will continue to be a number of fedff
controls over the pricing of prescription pharmaceuticals. In addition, increasing emphasis on reducd ing the cost of
healthcare in the U.S. will continue to put pressure on the pricing and reimbursement of prescription
pharmaceuticals. For example, in response to the Biden administration’s October 2022 executive order, on February
14, 2023, HHS released a report outlining three new models for testing by the Center for Medicare and Medicaid
Innovation which will be evaluated on their ability to lower the cost of drugs
, promote accessibility, and improve
quality of care. It is unclear whether the models will be utilized in any health reform measures in the futff urt e.
eral and state proposals to implement additional government
rr
In addition, certain jurisdictions outside of the U.S., including the EU, have instituted price ceilings on specific
products and therapia es, as described further in the risk factor titled “Government and third-party payors may impose
sales and pharmaceutical pricing controls on our products or limit coverage and/or reimbursement for our products
of our products that could limit our product revenues
or impose policies and/or make decisions regarding the statust
and delay sustained profitabia lity.”
ay be enacted in the futff urt e or what effecff
We are currently unabla e to predict what other additional legislation or regulation, if any, relating to the healthcare
industry mrr
such additional legislation or regulation would have on our business. The pendency or appr
reforms could result in a decrease in our stock price or limit our ability to raise capital or to enter into collabor
agreements for the further development and commercialization of our programs and products.
t recently enacted federal or equivalent foreign legislation or any
oval of such proposals or
ation
a
a
40
rdii
tial) and thitt
iott nshipsii withii healthll care profesff
Any rn elatll
potentt
contintt ue to be subject, direii ctlytt or indireii ctlytt
have not fulff
such laws, ws
complied, withii
ished profio tsii and futff ure earningii
diminii
-pdd arty payors irr n cii
s agg
lyll
sionals,ll principal
investigtt atortt
onnectiott n with our current and futff ure business activtt
consultall nts,tt
s,rr
customtt
ii
edff
erdd al and state healthll care laws. If wII
, tyy o f
tt
e could face penaltiett s, contratt
ages, repuee
ctual damdd
cturing of oo ur operations.
ii
nd curtaitt
lme
nt or restrutt
ers (rr ac((
tual and
ities are and will
ll o ctt
tational harm,rr
e are unable t
omplm y,ll or
Our business operations and activities may be directly, or indirectly, subject to various federal and state healthcare
laws, including without limitation, fraud and abus
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, manufact
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 subju ects, as well as current and futff urt e sales, marketing, patient co-payment assistance and
educd ation programs.
e laws, false claims laws, data privacy and security laws, as well as
ing,
urt
a
ff
Such laws include:
•
•
•
•
•
the federal Anti-Kickbak ck Statutt e which prohibits, among other things, persons and entities froff m
knowingly and willfulff
cash or in kind, to induce or reward, or in return for, either the referff
order or recommendation of, any good or service, for which payment may be made under a federal
healthcare program such as Medicare and Medicaid;
ring, receiving or providing remuneration, directly or indirectly, in
ral of an individual forff
ly soliciting, offeff
, or the purchase,
the federal civil and criminal false claims laws, including the fedff
eral civil False Claims Act, and Civil
Monetary Penalties Laws, which impose criminal and civil penalties against individuals or entities forff
among other things, knowingly presenting, or causing to be presented, to the fedff
eral government, claims forff
payment that are false or fraff udulent 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 HITECH and its implementing regulations, which also imposes obligations,
including mandatory contractuat
l 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 identifiaff bla e health
information;
u
ies forff which payment is availabla e under Medicare, Medicaid or the Children’s
the federal Physician Payments Sunshine Act, which requires certain manufact
biologics and medical suppl
Health Insurance Program, with specific exceptions, to report annually to CMS inforff mation related to
payments or other transfers of value made to physicians (definff ed to include doctors, dentists, optometrists,
podiatrists and chiropractors), other healthcare profesff
practitioners) and teaching hospitals, and applicable manufact
organizations to report annually to CMS ownership and investment interests held by physicians and their
immediate famff
sionals (such as physician assistants and nurse
urt ers and applicable group purchasing
urt ers of drugs, devices,
ily members; and
ff
ff
41
•
turers to report inforff mation related to payments and other transfers of value to physicians and other
analogous state, local and forff eign laws and regulations, such as state anti-kickbakk ck and falff se 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’rr
and the relevant compliance guidance promulgated by the fedff
manufacff
healthcare providers or marketing expenditures or drug pricing; state laws that require disclosure of price
increases above
that create Prescription Drug Price Affoff
spending; state
and local laws that require the registration of pharmaceutical sales representatives; state and local “drug
take back” laws and regulations; and state and foreign laws governing the privacy and security of health
information in some circumstances, many of which differ froff m each other in significant ways and ofteff n are
not preempted by HIPAA, thus complicating compliance efforff
ompliance guidelines
eral government; state laws that require drugr
certain identified thresholds as well as of new commercial launches in the state; state laws
rdability Boards to review or attempt to cap drugr
s voluntary crr
ts.
a
sionals, including our speaker programs and other
tured to comply with these laws and related guidance, it is possible that governmental
rts to ensure that our business arrangements will comply with applicable healthcare laws may involve
Effoff
subsu tantial costs. While our interactions with healthcare profesff
arrangements have been strucr
and enforff cement authorities will conclude that our business practices, or a rogue employee’s activities, may not
comply with current or future statutt es, regulations or case law interpreting appl
healthcare laws. For example, we maintain a patient assistance program to help eligible patients afford our products.
These and other types of programs have become the subject of governmental scrutiny, and numerous organizations,
including pharmaceutical manufact
urt ers, have been subju ect to litigation, enforcement actions and settlements related
to their patient assistance programs. If our operations or activities are found
described above
significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion
eral healthcare programs, additional reporting requirements
from participation in Medicare, Medicaid and other fedff
ate integrity agreement or similar agreement to resolve allegations of
rr
and oversight if we become subju ect to a corpor
non-compliance with these laws, contractuat
l damages, reputational harm, diminished profits and futff urt e earnings and
curtailment or restructurt
or any other governmental regulations that apply to us, we may be subject to, without limitation,
ing of our operations, any of which could adversely affect our ability to operate.
to be in violation of any of the laws
icable fraud and abus
e or other
a
a
a
ff
ff
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 forff eign laws.
a
ll
We could f
product candiddd atdd estt
acff
e liall biliii tyii
if a regulatll ortt
y ar
that receives regulatll ortt
uthott
y ar
rityii determines that we are promoting INGR
ppra
ll
“off-l
ff abe
oval, fll orff
l” uses.
II
EZR ZAZZ
or any on
f oo ur
a
its drugr
oved by the applicable regulatory arr
products. An off-label use is the use of a product forff
abel” uses forff
A company may not promote “off-lff
indication that is not described in the product’s FDA-approved label in the U.S. or forff
differ froff m those appr
gencies do not regulate a physician’s choice of
products for off-label uses. Although the FDA and other regulatory arr
treatment made in the physician’s independent medical judgment, they do restrict promotional communications
drugr
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 trutrr hfulff
with a product’s FDA approved labeling. A company that is found to have promoted off-l
be subju ect to significant liabia lity, including civil and criminal sanctions.
and not misleading inforff mation that is otherwise consistent
gencies. Physicians, on the other hand, may prescribe
uses in other jurisdictions that
abel use of its product may
an
ff
If the FDA or any other governmental agency, including equivalent foreign authorities, initiates an enforff cement
action against us, or if we are the subject of a qui tam suit brought by a private plaintiff off
and it is determined that we violated prohibitions relating to the promotion of products for unappr
could be subject to subsu tantial civil or criminal fines or damage awards and other sanctions such as consent decrees
and corpor
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.
ate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and
n behalf of the government,
oved uses, we
a
r
42
tion technologyo
systemtt
s, those thitt
rdii
parties upon which we rely,ll or our datdd a i
tt
s oii
r were
e could expexx rience adverserr
ruptu iott ns to our opeo rations such as our clinll
impacts resultingii
ical trials, cs
from such compromise, includindd g, but not limitedtt
laims that we breached our datdd a ptt
ur repuee
tation, regue
latory investigat
iott ns or actions, ls itigll
i
atiott n, fineii
rotectiott n
s and penalties, and a losll
s
If our infii orff marr
compromised, wdd
to, intii ertt
obligll atiott ns, hs
ers orr
of customtt
arm t
o ott
rr
r sales.
a
s fakff
are or hardware faiff
lures, loss of data or other
ourse of our business, we and the third parties upon
y-chain attacks, software bugs, server malfunctions, softwff
We are increasingly dependent on information technology systems and infrastructurt e, including mobile
technologies, to operate our business. In the ordinary crr
which we
u
rely, collect, receive, store, process, generate, disclose, make accessible, protect, dispose of, transmit, use, safeguard,
, or collectively, process, confidff ential and sensitive electronic inforff mation on our networks and in
share and transferff
our data centers. This inforff mation includes, among other things, de-identifieff d or pseudonymous sensitive personal
data (including health data), our intellectuat
l property and proprietary information, the confidff ential inforff mation of
our collabor
ators and licensees, and the personal data of our employees. It is important to our operations and
business strategy that this electronic inforff mation remains secure and is perceived to be secure. The size and
complexity of our information technology systems, and those of third-party vendors with whom we contract, and the
volume of data we retain, make such systems potentially vulnerabla e to a variety of evolving threats, including but
not limited to social-engineering attacks (including through deep fakes, which may be increasingly more diffiff cult to
identify aff
e, and phishing attacks), malicious code, malware (such as malicious code, adware, and command and
control (C2)), denial-of-service attacks, credential harvesting, personnel misconduct or error, ransomware attacks,
suppl
u
information technology assets, attacks enhanced or facilitated by AI, telecommunications failures, and other similar
threats. Cyber-attacks, malicious internet-based activity, online and offlff ine fraff ud, and other similar activities threaten
the confidff entiality, integrity, and availabia lity of our sensitive inforff mation and information technology systems, and
those of the third parties upon which we rely. Such threats continue to rise, are increasingly diffiff cult to detect, and
come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized
criminal threat actors, personnel (such as through theft off
r misuse), sophisticated nation states, and nation-state-
ted actors (also referred to as APTs). Some actors now engage and are expected to continue to engage in
u
suppor
cyber-attacks, including without limitation nation-state actors forff
military confliff cts and defense activities. During times of war and other majoa r conflicff
which we rely may be vulnerabla e to a heightened risk of these attacks, including retaliatory cyber-attacks, which
our systems and operations, as well as our ability to conduct clinical trials. Ransomware
could materially disruptu
attacks are also becoming increasingly prevalent and severe, and can lead to significant interruptions in our
operations (including our ability to conduct clinical trials), loss of sensitive data (including related to our clinical
trials) and income, reputational harm, and diversion of funds. To alleviate the finff ancial, operational and reputational
impact of a ransomware attack, it may be preferabla e to make extortion payments, but we may be unwilling or unabla e
u
to do so (including, for example, if appl
y chain
attacks have increased in frequency and severity, and we cannot guarantee that third parties in our suppl
y chain have
not been compromised or that they do not contain exploitabla e defect
breach of or disrupt
systems and infrastructurt e of third parties that support our operations. Remote work has become more common and
has increased risks to our information technology systems and data, as more of our employees work from home,
utilizing network connections, computers and devices outside our premises, including at home, while in transit or in
public locations.
ff
ion to our information technology systems and infrastructurt e or the information technology
icable laws or regulations prohibit such payments). Similarly, suppl
s, vulnerabia lities, or bugs that could result in a
geopolitical reasons and in conjunction with
ts, we and the third parties uponu
u
a
rr
Additionally, naturt al disasters, public health pandemics or epidemics, terrorism, war and geopolitical conflicff
ts, and
telecommunication and electrical failures may result in damage to or the interruptu ion or impairment of key business
processes, or the loss or corruptu ion of confidff ential information, including intellectuat
l property, proprietary business
information and personal data.
Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity
risks and vulnerabia lities, as our systems could be negatively affected by vulnerabia lities present in acquired or
integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found
during dued
information technology environment and security program.
diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our
43
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 vulnerabia lities
or modify our business activities (including our clinical trial activities) to try t
o protect against security incidents.
rr
We take steps designed to detect, mitigate, and remediate vulnerabia lities in our information security systems (such as
which we rely). We may not, however, detect and
our hardware and/or software, including that of third parties upon
remediate all such vulnerabia lities including on a timely basis. Further, we may experience delays in developing and
deploying remedial measures and patches designed to address identifieff d vulnerabia lities. Vulnerabilities could be
exploited and result in a security incident.
u
We rely on third-party service providers and technologies to operate critical business systems to process sensitive
information in a variety of contexts, including, without limitation, cloud-based infraff structurt e, data center facff
ilities,
encrypt
ion and authentication technology, employee email and other functions. We also rely on third-party service
rr
providers to provide other products, services, parts, or otherwise to operate our business, including clinical trial sites
and investigators, contractors, manufact
information security practices is limited, and these third parties may not have adequate information security
measures in place. If our third-party service providers or CROs experience a security incident or other interruptu ion,
we could experience adverse consequences. In addition, suppl
u
severity, and we cannot guarantee that third parties’ infraff structurt e in our suppl
suppl
u
damages if our third-party service providers fail to satisfy t
award may be insufficient to cover our damages, or we may be unabla e to recover such award.
y chain or our third-party partners’
y chains have not been compromised or otherwise subject to a security incident. While we may be entitled to
iers and consultants. Our abia lity to monitor these third parties’
heir privacy or security-related obligations to us, any
y-chain attacks have increased in frequency and
urt ers, suppl
u
u
ff
ff
u
Although to our knowledge we, or the third parties upon
disrupt
ion to date that is material to us, we and our vendors have been, either directly or indirectly, the target of
r
cybersecurity incidents and expect them to continue. While we have implemented security measures designed to
protect our data security and inforff mation technology systems, such measures may not prevent such events.
Furthermore, while we have implemented and are planning to implement redunda
interruptu ions to our operations, not all potential events can be anticipated and interruptu ions to our operations could
lead to decreased productivity.
who we rely, have not experienced a security incident or
ncies designed to avoid
d
If we (or a third party upon whom we rely) experience a security incident, ransomware attack or are perceived to
have experienced a security incident, we may experience adverse consequences. Such consequences may include:
government enforcement actions (for example, investigations, finff es, penalties, audits and inspections); additional
reporting requirements and/or oversight; restrictions on processing sensitive inforff mation (including personal data);
litigation (including class claims); indemnificff ation obligations; negative publicity; reputational harm (including but
not limited to ddamagge to our pa itient, partner, or em lpl yoyee r lelatiionshihips);) monetary fund diversions; diversion of
management’s attention; interruptu ions in our operations (including availabia lity of data, loss of connectivity to our
network or internet); finff ancial loss (including decreased productivity resulting froff m interruptu ions in our operations);
and other similar harms. Similarly, the loss of clinical trial data froff m completed or ongoing or planned clinical trials
could result in delays in our regulatory approval efforff
ts and significantly increase our costs to recover or reproduce
l property or proprietary business inforff mation could require subsu tantial
the data. In addition, theft off
expenditures to remedy. Applicable data privacy and security obligations may also require us to notify r
stakeholders, including affeff cted individuals, customers, regulators, and investors, of security incidents. Such
disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse
consequences.
f our intellectuat
elevant
ff
Our contracts, with for example third parties or CROs, may not contain limitations of liabia lity, and even where they
do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabia lities,
damages, or claims related to our data privacy and security obligations. We also cannot be sure that our insurance
coverage will be adequate or sufficient to protect us from or to mitigate liabia lities arising out of our privacy and
security practices, that such coverage will continue to be availabla e on commercially reasonabla e terms or at all, or
that such coverage will pay futff urt e claims.
44
In addition to experiencing a security incident, third parties may gather, collect, or inferff
us from public sources, data brokers, or other means that reveals competitively sensitive details about our
organization and could be used to undermine our competitive advantage or market position. Additionally, our
sensitive information could be leaked, disclosed, or revealed as a result of or in connection with our employees’,
personnel’s, or vendors’ potential use of generative AI technologies.
sensitive inforff mation about
a
If we fail to obtaitt n oii
candiddd atdd estt
, os ur competittt ivtt e positiott n would be harmed.dd
r maintii aitt n oii
rphan drudd g du
esdd ignagg
tion or other regue
latory exclusivity for some of oo ur product
rr
rocess as well as potential commercial benefitff s folff
In addition to any patent protection, we rely on forms of regulatory err
xclusivity to protect our products such as
n drug designation. A product candidate that receives orpha
r
orpha
n drug designation can benefit froff m a streamlined
regulatory prr
lowing approval. Currently, this designation provides
market exclusivity in the U.S. for seven years and EU for 10 years if a product is the first such product appr
oved forff
n indication. This market exclusivity does not, however, pertain to indications other than those forff which
such orpha
n
the drug was specifically designated in the approval, nor does it prevent other types of drugs from receiving orpha
designations or approvals in these same indications. Further, even after an orpha
oved, the FDA can
subsu equently approve the same drug forff
supeu rior to the orphan product or a market shortage occurs.
r
the same condition if the FDA concludes that the new drug is clinically
n drug is appr
a
a
r
r
rr
n exclusivity may be reducd ed to six years if the drug no longer satisfies the original designation
In the EU, orpha
criteria or can be lost altogether if the marketing authorization holder consents to a second orpha
or cannot suppl
original orpha
or when a second applicant demonstrates its drugrr
is “clinically supeu rior” to the
y enough drug,
n drug appl
n drug.
u
a
r
r
r
ication
If we do not have adequate patent protection forff
exclusivity is even greater. We may not be successfulff
even if we succeed, such product candidates with such orphan drug designations may faiff
Even if a product candidate with orpha
to result in or maintain orpha
n drug designation may receive marketing appr
a
rr
r
our products, then the relative importance of obtaining regulatoryrr
n drug designations for any indications and,
obtaining orpha
r
n drug exclusivity upon approval, which would harm our competitive position.
l to achieve FDA appa
roval.
l
oval froff m the FDA, it may faiff
nologio es we use in oii
The techtt
the propro ietary righi
ts of third parties.
ur research as well as the drudd g tu artt ger
ts we select may ia nfii
riff ngii
e thett
patentt
ts or violatll ett
ff
a
urt
ators, we or our collaboa
l property infriff ngement claims
ing or selling potential products that are claimed to infriff nge a third party’s intellectuat
We cannot assure you that third parties will not assert patent or other intellectuat
against us or our collaborators with respect to technologies used in potential products. If a patent infringement suit
rators could be forff ced to stop or delay developing,
were brought against us or our collabor
manufact
l property unless
that party grants us or our collaborators rights to use its intellectuat
obtain licenses to patents or proprietary r
However, we may not be able to obtain any licenses required under any patents or proprietary rights of third parties
on acceptabla e terms, or at all. Even if our collaborators or we were abla e to obtain rights to the third party’s
l property, these rights may be non-exclusive, thereby giving our competitors access to the same
intellectuat
l property. Ultimately, we may be unabla e to commercialize some of our potential products or may have to
intellectuat
cease some of our business operations as a result of patent infriff ngement claims, which could severely harm our
business.
ights of others in order to continue to commercialize our products.
l property. In such cases, we could be required to
rr
Our business opeo rations may subject us to dispii utestt
atertt
consuming and could mll
laims and lawll
-
e costly and time
ly impacm t our finaii ncial position and results of operations.
hich may ba
nd adverserr
suw its, ws
ially all
, cs
tt
insurance coverage and acquisition or divestiture-related matters. Any dispute, claim or lawsuit may
From time to time, we may become involved in disputes, claims and lawsuits relating to our business operations. In
particular, we may face claims related to the safety of our products, intellectuat
l property matters, employment
matters, tax matters, commercial disputes, competition, sales and marketing practices, environmental matters,
personal injury,rr
divert management’s attention away froff m our business, we may incur significant expenses in addressing or
defending any dispute, claim or lawsuit, and we may be required to pay damage awards or settlements or become
subju ect to equitabla e remedies that could adversely affect our operations and finff ancial results. For example, we
recently settled various intellectuat
Refer to Note 13 to the consolidated financial statements for a mor de det iailled dd descriip ition of hthese matters.
l property litigation matters against potential competitors related to INGREZZA.
45
Litigation related to these disputes may be costly and time-consuming and could materially and adversely impact our
financial position and results of operations if resolved against us. In addition, the uncertainty associated with
litigation could lead to increased volatility in our stock price.
epdd endent contratt
ngage in miscii onduct or othett
Our employeo es, is ndii
may ea
requirements.
ctortt
r impii
s,rr principal
ropeo r activtt
ii
i
investigat
consultall nts,tt
itiett s, includindd g non-complm iall nce with regue
commercial partners arr
ortt
s,rr
latory stantt
dards and
nd vendorsrr
turing standards we have established, to comply with federal and state healthcare
We are exposed to the risk of employee fraff ud 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 manufacff
frff aud and abuse laws, to report finff ancial information or data accurately, to maintain the confidff entiality 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 arr
prevent fraff ud, kickbak cks, self-dff ealing and other abus
could also involve the improper use of individually identifiaff bla e inforff mation, including, without limitation,
information obtained in the course of clinical trials, which could result in regulatory srr
our reputation. Any action against our employees, independent contractors, principal investigators, consultants,
commercial partners or vendors forff
administrative penalties, fines and imprisonment.
re subju ect to extensive laws intended to
ive practices. Employee and independent contractor misconduct
violations of these laws could result in significant civil, criminal and
anctions and serious harm to
a
We face potentt
tial product liabiliii tyii
xx
expos
ure farff
in excess of oo ur insurance coverage.ee
The use of any of our potential products in clinical trials, and the sale of any approved products, including
INGREZZA, may expose us to liabia lity claims. These claims might be made directly by consumers, healthcare
providers, pharmaceutical companies or others selling our products. We have product liabia lity insurance coverage
for both our clinical trials as well as related to the sale of INGREZZA in amounts consistent with customaryrr
ractices. However, our insurance may not reimburse us or may not be sufficient to reimburse us for any
industry prr
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 reasonabla e cost or in suffiff cient amounts to protect us against losses
due to liabia lity from any current or future clinical trials or approved products. A successfulff
series of claims, brought against us would decrease our cash reserves and could cause our stock price to fall.
Furthermore, regardless of the eventuat
may decrease demand forff
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.
l outcome of a product liabia lity claim, any product liabia lity claim against us
our approved products, including INGREZZA, damage our reputation, result in regulatoryrr
product liabia lity claim, or
Our activtt
ities invii olvell
hazardoudd
s matertt
ials, as nd we may ba
e liall ble f
orff
ll
any rn esultinll
g contaminatiott n or injii uries.
Our research activities involve the controlled use of hazardous materials. We cannot eliminate the risk of accidental
contamination or injury f
damages, which may harm our results of operations and cause us to use a substantial portion of our cash reserves,
which would forff ce us to seek additional finff ancing.
roff m these materials. If an accident occurs, a court may hold us liabla e forff
any resulting
rr
We are subjeb ct to stritt ngii
or perceived failure to comply withii
busineii
ss, finaii ncial conditiii on or results ott
ent and changingii
such obligll atiott ns could hll
peo rations.
f oo
obligll atiott ns related to dtt
atdd a ptt
rivacy and infii orff marr
ave a material adverserr
tion securityii
. Oyy
effeff ct on our reputattt
iott n,
ur actual
ourse of our business, we process confidff ential and sensitive inforff mation, including personal data,
In the ordinary crr
proprietary and confidff ential business data, trade secrets, intellectuat
participants in connection with clinical trials, and sensitive third-party data, on our networks and in our data centers.
We are subject to numerous federal, state, local and forff eign laws, orders, codes, regulations and regulatory grr
uidance
regarding privacy, data protection, information security and the processing of personal inforff mation (including
clinical trial data), the number and scope of which are expanding, changing, subju ect to differing applications and
interpretations, and may be inconsistent among jurisdictions. Our data processing activities may also subju ect us to
other data privacy and security obligations, such as industry srr
tandards, external and internal privacy and security
policies, contracts and other obligations that govern the processing of data by us and by third parties on our behalf.ff
l property, data we collect about clinical trial
46
hh
ve enacted comprehensive privacy
Laws regarding privacy, data protection, information security and the processing of personal data are becoming
increasingly common in the U.S. at both the federal and state level. Additionally, in the past few years, numerous
U.S. states—including California, Virginia, Colorado, Connecticut, and Utah—ha
laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy
notices and affording residents with certain rights concerning their personal data. As applicable, such rights may
include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing
activities, such as targeted advertising, profilff ing, and automated decision-making. The exercise of these rights may
impact our business and ability to provide our products and services. Certain states also impose stricter requirements
for processing certain personal data, including sensitive inforff mation, such as conducting data privacy impact
assessments. These state laws allow forff
Privacy Act, as amended by the Califorff nia Privacy Rights Act of 2020 (CPRA)RR (collectively, CCPA), requires
businesses to provide specificff disclosures in privacy notices, and honor requests of Califorff nia residents to exercise
certain privacy rights. The CCPA allows for finff es for noncompliance (up to $7,500 per intentional violation).
Although some U.S. comprehensive privacy laws and the CCPA exempt some data processed in the context of
clinical trials, these laws may increase compliance costs and potential liabia lity with respect to other personal data we
may maintain about
jurisdictions to pass similar laws in the future. These developments may furff
may increase legal risk and compliance costs for us and the third parties upon
Additionally, HIPAA, as amended by HITECH, imposes specific requirements relating to the privacy, security, and
transmission of individually identifiaff bla e health information.
Califorff nia residents. Other states have also enacted data privacy laws and we expect more
inff es for noncompliance. For example, the Califorff nia Consumer
ther complicate compliance efforts, and
whom we rely.
statutt ory f
u
a
rr
enhanced data protection obligations for processors and controllers of personal data,
Laws in Europe regarding privacy, data protection, information security and the processing of personal data have
also been significantly reformed and continue to undergo reforff m. For example, the EU’s General Data Protection
Regulation (EU GDPR) and the UK’s GDPR (UK GDPR) (collectively, GDPR) impose strict requirements forff
processing the personal data of individuals located, respectively, within the European Economic Area (EEA) and the
UK. The GDPR provides forff
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 subju ect requests;
taking certain measures when engaging third-party processors; notifyiff ng data subju ects and regulators of data
breaches; and implementing safegff uards to protect the security and confidff entiality of personal data. The GDPR
impose substantial finff es for breaches of data protection requirements. For example, under the GDPR, such fines can
be up to four percent of global revenue or 20 million euros under the EU GDPR / 17.5 million pounds sterling under
the UK GDPR, whichever is greater in either case, and also allow for private litigation related to processing of
personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent
their interests. 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.
a
We may be subject to additional forff eign data laws. For example, in Canada, the Personal Inforff mation Protection and
Electronic Documents Act (PIPEDA) and various related provincial laws, as well as Canada’s Anti-Spam
Legislation (CASL), may appl
de Proteção de Dados Pessoais (LGPD) (Law No. 13,709/2018), may apply to our operations. The LGPD broadly
regulates processing personal data of individuals in Brazil and imposes compliance obligations and penalties
comparable to those of the EU GDPR. We also target customers in Asia and may be subject to new and emerging
data privacy regimes in Asia, including Japaa n’s Act on the Protection of Personal Inforff mation and Singapor
Personal Data Protection Act.
y to our operations. As another example, the General Data Protection Law, Lei Geral
e’s
a
47
ompliance and participate in the Framework), these mechanisms are
personal data to the U.S. If we cannot implement a valid compliance mechanism forff
ourse of business, we may transfer personal data froff m Europe and other jurisdictions to the U.S. or
In the ordinary crr
other countries. Certain jurisdictions have enacted data localization laws and cross-border personal data transfers
laws. For example, countries in the EEA and the UK have significantly restricted the transfer of personal data to the
U.S. and other countries, whose privacy laws it generally believes are inadequate. Although there are currently
various mechanisms that may be used to transfer personal data froff m the EEA and UK to the U.S. in compliance with
law, such as the EEA standard contractuat
l clauses, the UK’s International Data Transfer Agreement / Addendum,
and the EU-U.S. Data Privacy Framework and the UK extension thereto (which allows for transfers for to relevant
U.S.-based organizations who self-certify cff
subju ect to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfulff
transferff
data transferff s or if the requirements forff
to regulatory arr
ring personal data froff m Europe
or elsewhere. The inabia lity to import personal data to the U.S. may significantly and negatively impact our business
operations, including by limiting our ability to conduct clinical trial activities in Europe and elsewhere; limiting our
ability to collabor
ate with parties subju ect to European and other data protection laws or requiring us to increase our
personal data processing capabilities in Europe and/or elsewhere at significant expense. Other jurisdictions may
adopt similarly stringent interpretations of their data localization and cross-border data transfer laws. Additionally,
companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States,
are subject to increased scrutr
iny froff m regulators, individual litigants, and activist groups. Some European regulators
have ordered certain companies to suspend or permanently cease certain transferff s out of Europe for allegedly
violating the GDPR’s cross-border data transfer limitations.
ctions, substantial finff es and injunctions against processing or transferff
are too onerous, we may face increased exposure
a legally-compliant transferff
cross-border personal
ly
a
Our employees and personnel may use generative AI technologies to perform some of their work, and the disclosure
and use of personal inforff mation data in generative AI technologies is subju ect to various privacy laws and other
privacy obligations. Governments have passed and are likely to pass additional laws regulating generative AI. Our
use of this technology could result in additional compliance costs, regulatory i
consumer lawsuits. Furthermore, any use of generative AI to develop our proprietary technology and compounds
may also impact our ability to obtain or successfulff
use generative AI, it could make our business less efficient and result in competitive disadvantages.
l property rights. If we are unabla e to
nvestigations and actions, and
ly defend certain intellectuat
rr
roups and, we are, or may become subju ect to such obligations in the futff urt e. We are also bound by
l obligations related to data privacy and security, and our effoff
In addition to data privacy and security laws, we may contractuat
industry grr
contractuat
be successfulff
security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive,
unfaiff
or other adverse consequences.
. We publish privacy policies, marketing materials and other statements regarding data privacy and
r, or misrepresentative of our practices, we may be subju ect to investigation, enforcement actions by regulators
rts to comply with such obligations may not
lly be subju ect to industry srr
tandards adopted by
Our obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing
in an increasingly stringent fashion and creating uncertainty. These obligations may be subject to differing
applications and interprrr etations, which may be inconsistent among jurisdictions or in conflicff
complying with these obligations requires us to devote significant resources (including, without limitation, financial
and time-related resources). These obligations may necessitate changes to our information technologies, systems and
practices and those of any third parties that process personal data on our behalf. Iff n addition, these obligations may
even require us to change our business model.
t. Preparing forff
and
48
a
rts, our personnel or third-parties upon
led) to do so. Moreover, despite our effoff
icable data privacy and security obligations, we may at times faiff
l to comply such obligations that impacts our compliance posture. If we faiff
Although we endeavor to comply with all appl
be perceived to have faiff
rely may faiff
failed, to address or comply with data privacy and security obligations, we could faceff
These consequences may include, but are not limited to, government enforcement actions, litigation(including class
claims), additional reporting requirements and/or oversight, bans on processing personal data, imprisonment of
company officials, and orders to destroy or not use personal data. In particular, plaintiffsff have become increasingly
more active in bringing privacy-related claims against companies, including class claims and mass arbitration
demands. Some of these claims allow forff
the recovery of statutt ory drr
carry the potential for monumental statutory damages, depending on the volume of data and the number of
violations. Any of these events could have a material adverse effecff
or results of operations.
whom we
l, or are perceived to have
significant consequences.
t on our reputation, business, financial condition
amages on a per violation basis, and, if viable,
l (or
u
Item 1B. Unresolved Staftt
None.
f Cff
omCC mentstt
y.gg We rely on information technology and data to operate our business and develop,
Item 1C. Cybersecurityii
Riskii Managea ment and StrSS ategtt
market, and deliver our therapies to our customers. We have implemented and maintain various information security
processes designed to identify,ff
networks, third party hosted services, communications systems, hardware, lab equipment, software, and our critical
data includes confidff ential, personal, proprietary, and sensitive data (collectively “Information Assets”). Accordingly,
we maintain certain risk assessment processes intended to identify cff
of occurring, and assess potential material impact to our business. Based on our assessment, we implement and
maintain risk management processes designed to protect the confidff entiality, integrity, and availabia lity of our
Information Assets and mitigate harm to our business.
assess and manage material risks from cybersecurity threats to critical computer
ybersecurity threats, determine their likelihood
The Company’s general risk management program is designed to manage identifieff d material risks, which would
include material cybersecurity risks.
We engage in processes designed to identify sff
using manual and automated tools, subsu cribing to reports and services that identify cff
reports of threats and actors, conducting scans of the threat environment, evaluating our and our industry’rr
profileff
assessments for internal and external threats, and conducting vulnerabia lity assessments to identify vff
, evaluating threats reported to us, coordinating with law enforff cement concerning threats, conducting threat
ulnerabia lities.
uch threats by, among other things, monitoring the threat environment
ybersecurity threats, analyzing
s risk
We rely on a multidisciplinary t
service providers, as described further below) to assess how identifieff d cybersecurity threats could impact our
business. These assessments may leverage, among other processes, industry t
the assessment of risks from such cybersecurity threats.
eam (including from our information security function, management, and third party
ools and metrics designed to assist in
rr
rr
Depending on the environment, we implement and maintain various technical, physical and organizational measures
designed to manage and mitigate material risks froff m cybersecurity threats to our Information Assets. The
cybersecurity risk management and mitigation measures we implement for certain of our Information Assets
include: policies and procedurd es designed to address cybersecurity threats, including an incident response plan,
vulnerabia lity management policy, and disaster recovery/business continuity plans; incident detection and response
tools; internal and/or external audits to assess our exposure to cybersecurity threats, environment, compliance with
risk mitigation procedures, and effeff ctiveness of relevant controls; documented risk assessments; implementation of
security standards/certifications; credit and background checks on our and/or third parties’ personnel; encrypt
ion of
data; network security controls; threat modeling; data segregation; physical and electronic access controls; physical
security; asset management, tracking and disposal; systems monitoring; vendor risk management program;
employee security training; penetration testing; red/bl/ ue team exercises; cyber insurance; dedicated cybersecurity
staff/ff offiff cer.
rr
We work with third parties from time to time that assist us from time to time to identify,ff
cybersecurity risks, including profesff
consultants, cybersecurity software providers, managed cybersecurity service providers, and penetration testing.
assess, and manage
sional services firff ms, threat intelligence service providers, cybersecurity
49
To operate our business, we utilize certain third-party service providers to perform a variety of functions, such as
outsourced business critical functions, clinical research, professional services, SaaS platforms, managed services,
property management, cloud-based infraff structurt e, data center faci
authentication technology, corporate productivity services, and other func
management processes designed to help to manage cybersecurity risks associated with our use of certain of these
providers. Depending on the naturt e of the services provided, the sensitivity and quantity of information processed,
and the identity of the service provider, our vendor management process may include reviewing the cybersecurity
practices of such provider, contractuat
lly imposing obligations on the provider related to the services they provide
and/or the inforff mation they process, conducting security assessments, conducting on-site inspections, requiring their
completion of written questionnaires regarding their services and data handling practices, and conducting periodic
re-assessments during their engagement.
ion and
tions. We have certain vendor
lities, content delivery,rr
rr
encrypt
ff
ff
For a description of the risks froff m cybersecurity threats that may materially affeff ct us and how they may do so, refer
to Part I, Item 1A. Risk Factors forff
additional inforff mation about cybersecurity-related risks.
Governance. Our cybersecurity risk assessment and management processes are implemented and maintained by
certain Company management, including a Chief Information Officer, who reports to the CFO. Management is also
hiring appropriate personnel, integrating cybersecurity considerations into the company’s overall risk
responsible forff
approving budgets, helping
management strategy, and forff
prepare forff
other security-related reports. Our cybersecurity incident response and vulnerabia lity management processes involve
management, who participates in our disclosure controls and procedures.
oving cybersecurity processes, and reviewing security assessments and
communicating key priorities to employees, as well as forff
cybersecurity incidents, appr
a
Our cybersecurity incident response and vulnerabia lity management processes are designed to escalate certain
cybersecurity incidents and vulnerabia lities to members of management depending on the circumstances, including
work with the company’s incident response team to help the company mitigate and remediate cybersecurity
incidents of which they are notifieff d. In addition, the company’s incident response processes include reporting to the
Audit committee of the board of directors forff
certain cybersecurity incidents.
Management is involved with the Company’s efforts to prevent, detect, and mitigate cybersecurity incidents by
overseeing preparation of cybersecurity policies and procedurd es, testing of incident response plans, engagement of
vendors to conduct penetration tests. Management participates in cybersecurity incident response efforts by being a
member of the incident response team and helping direct the company’s response to cybersecurity incidents.
Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight
function. The board of directors’ audit committee is responsible for overseeing the company’s cybersecurity risk
management processes, including oversight and mitigation of risks from cybersecurity threats. The audit committee
also has access to various reports, summaries or presentations related to cybersecurity threats, risk, and mitigation.
r
ate headquarters are located in San Diego, California. We believe that our property and equipment are
Item 2. Propertiett s
Our corpor
generally well maintained, in good operating condition and suitabla e forff
Details of our leased facilities, which include our corporate headquarters and consist of office space and research
and development laboratories, follow.
the conduct of our business.
Address
12780 El Camino Real, San Diego, Califorff nia
6027 Edgewood Bend Court, San Diego, Califorff nia
6029 Edgewood Bend Court, San Diego, Califorff nia
12790 El Camino Real, San Diego, Califorff nia
10420 Wateridge Circle, San Diego, Califorff nia
12777 High Bluff Dff
rive, San Diego, Califorff nia
12770 El Camino Real, San Diego, Califorff nia
Type
Office Space, Research and Development Laboratories
Office Space
Office Space
Office Space
Research and Development Laboratories
Office Space
Office Space
Square Feet
141,000
124,000
110,000
88,000
46,000
45,000
26,000
ry 8, 2022, we entered into a lease agreement forff
On Februarr
Diego, Califorff nia, including a six-year option forff
comprised of office space and research and development laboratories, will serve as our new corpor
r-building campus facility to be construcr
tion of a fifth building. This campus facility,
the construcr
a fouff
r
ate headquarters.
ted in San
50
tion of the campus facility is phased. The firff st phase of construcrr
The construcr
completed in December 2023. As we begin to occupyu
existing leased premises when we determine there is excess leased capacity.
our new campus facility, we will sublu ease certain of our
tion relating to office space was
e
Proceedindd gs
Item 3. Legal
For a description of our legal proceedings, referff
incorporated herein by reference.
Item 4. Mineii
None.
Safea ty Discii
losures
to Note 13 to the consolidated financial statements, which is
51
PART II
Item 5. Market for Registrant’s C’
Purchases of Eo
Our common stock is traded on the Nasdaq Global Select Market under the symbol “NBIX”.
omCC mon Equity, Ryy
s
quity Securitieii
Stoctt kholdell
elatll edtt
r MatMM tett rs and IssuII
er
ry 5, 2024, there were approximately 43 stockholders of record of our common stock. We have not paid
As of Februarr
any cash dividends on our common stock since inception and do not anticipate paying cash dividends in the
foreseeable future.
Recent Sales of Unregistered Securities and Issuer Purchases of Equity Securities
There were no unregistered sales of our equity securities and we did not repurchase any of our equity securities
during 2023.
Stock Perforff mance Graph and Cumulative Total Return*
lowing graph presents the cumulative total stockholder returt n assuming the investment of $100 on
The folff
December 31, 2018 (and the reinvestment of dividends thereafteff
common stock, (ii) the Nasdaq Composite Index and (iii) the Nasdaq Biotechnology Index. The comparisons in the
r intended to forff ecast, future performance of
graph below are based upon historical data and are not indicative of, off
our common stock or Indexes.
r) in each of (i) Neurocrine Biosciences, Inc.’s
$250
$225
$200
$175
$150
$125
$100
$75
12/2018
12/2019
12/2020
12/2021
12/2022
12/2023
Neurocrine Biosciences, Inc.
Nasdaq Composite
Nasdaq Biotechnology
ection is not “soliciting material”, i” s nii
ot deemed “fileff d” with the SecuSS
* The material in thitt s sii
Commissi
ii
date hereof ao
specifici ally incorporate thitt s sii
nd irrespective of any general incorpor
ection by rb
r
eferff ence.
on and is not to be incorporated by refee rence into any of our SEC filinff
gs whethett
ation language in any such SEC filinff
rities and Exchange
r made befoe re or afteff r thett
ee
g excep
extent we
t to thett
52
lowing Management’s Discii ussion and Analysll
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The folff
contains forward-looking statements ptt
expected continuation of oo
product candidates, thett
implm ications of clinical trials and other development activities, our plans
regul
e
our financial results of operations. Our actual results ctt
s akk
forward-looking statements att
Repor
e
this Annual Repor
ing capital resources will meet our funding requirements,tt and
ifferff materially from those anticipated in these
n thitt s Aii
ould dll
nd uncertainties, including those set forth i
is of Financial Condi
CC
r thitt ngs, thett
tion and Results of Operations section
heading “IteII m 1A. Riskii Factors.rr ” SeeSS
and timing with respect to seeking
ur collaborative agreements, thett
“ForFF ward-Ldd ooking StaS tements”tt
progress, timing, results or
t on ForFF m 10-K under thett
ertaining to, among othett
nnual
in Part I ofo
s a result of various riskii
commercialization of oo
the period of to ime that
t on ForFF m 10-K.
ur product and
our existii
a
atory ar
ovals,ll
ppr
e
tt
tt
l
io includes U.S. Food and Drug Administration (FDA) approved treatments forff
patients with under-addressed neurological, neuroendocrine and neuropsychiatric disorders. The
Overview
Neurocrine Biosciences is a neuroscience-focused, biopharmaceutical company with a simple purpos
suffering for people with great needs, but few options. We are dedicated to discovering and developing life-ff changing
treatments forff
Company’s diverse portfolff
dyskinesia, chorea associated with Huntington's disease, adrenal insuffiff ciency, and endometriosis and uterine
fibroids in collaboration with AbbVie Inc. (AbbVie), a European Medicines Agency (EMA) approved treatment for
classic congenital adrenal hyperplasia (CAH) and a diversifieff d portfolff
multiple therapea utic areas.
We launched INGREZZA® (valbenazine) in the U.S. as the firff st FDA-approved drug forff
dyskinesia in May 2017 and forff
2023. INGREZZA net product sales totaled $1.8 billion forff
net product sales for 2023.
the treatment of aduld ts with chorea associated with Huntington's disease in August
oximately 99% of our total
2023 and accounted for appr
io of advanced clinical-stage programs in
the treatment of tardive
e: to relieve
tardive
a
r
r
ation (MTPC) launched DYSVAL® (valbenazine) in Japan for the
Our partner Mitsubishi Tanabe Pharma Corpor
treatment of tardive dyskinesia in June 2022 and subsequently in other select Asian markets, where it is marketed as
REMLEAS® (valbenazine). We receive royalties at tiered percentage rates on MTPC net sales of valbenazine.
Our partner AbbVie launched ORILISSA® (elagolix tabla ets) in the U.S. forff
associated with endometriosis in August 2018 and ORIAHNN® (elagolix, estradiol and norethindrone acetate
capsules and elagolix capsules) in the U.S. forff
June 2020. We receive royalties at tiered percentage rates on AbbVie net sales of elagolix.
the treatment of heavy menstrual bleeding dued
the treatment of moderate to severe pain
to uterine fibff
roids in
Business Highlights
• INGREZZA net product sales for 2023 increased $0.4 billion, or 28.6%, to $1.8 billion, reflecting higher
prescription demand and increased commercial activities, including continued investment in our branded direct-to-
consumer INGREZZA advertising campaign and benefit froff m the expansion of our sales forff ce completed in April
2022.
• In the fourth quarter of 2023, we announced that all patent litigation brought by Neurocrine Biosciences against
oval to market
the companies that filed an Abbreviated New Drugr Application (ANDA) to the FDA seeking appr
generic versions of INGREZZA prior to the expiration of the Orange Book listed patents have been resolved.
Pursuant to the terms of the respective settlement agreements, such companies have the right to sell generic
versions of INGREZZA in the U.S. beginning March 1, 2038, or earlier under certain circumstances.
a
Pipeline Highlights
• Announced positive top-line data from the Phase 3 clinical studi
t
es of crinecerfont in aduld ts and pediatrics with
CAH. Crinecerfont subsu equently received Breakthrough Therapy designation froff m the FDA forff
CAH. Data from the Phase 3 studi
second quarter of 2024.
t a New Drug Application (NDA) submu
es will suppor
u
t
the treatment of
ission to the FDA in the
53
• Expanded strategic partnership with Voyager Therapea utics Inc. (Voyager) to advance multiple gene therapy
the treatment of neurological
programs, each enabled by Voyager's next-generation TRACERTM capsids, forff
diseases. Upfroff nt fee associated with the agreement totaled $175.0 million, including an equity investment valued
at $31.3 million on the transaction date, with the remaining $143.9 million of the purchase price, which includes
a
the appl
icable transaction costs, expensed as in-process research and development in 2023.
• In the third quarter of 2023, we announced the FDA accepted the NDA for INGREZZA oral granules, a new
sprinkle forff mulation of INGREZZA capsules forff
Act target action date of April 30, 2024.
oral administration. The agency set a Prescription Drug User Fee
• In the third quarter of 2023, the FDA approved INGREZZA for the treatment of aduld ts with chorea associated
with Huntington's disease.
• In the fourth quarter of 2023, we announced the Phase 2 clinical studi
es of NBI-921352 in focal onset seizures and
NBI-1065846 for anhedonia in major depressive disorder (MDD) did not meet their primary endpoints. No further
development of NBI-921352 in focal onset seizures or NBI-1065846 for anhedonia in MDD is planned at this
time.
t
Results of Operations
Revenues
Net ProPP duct Sales by Sb
alSS esll Product.tt
(in mii
illill ons)
INGREZZA
Other
Total net product sales
Year Ended December 31,
2023
2022
2021
$
$
1,836.0
24.6
1,860.6
$
$
1,427.8
13.1
1,440.9
$
$
1,081.9
8.2
1,090.1
The increases in total net product sales from 2021 to 2022 and froff m 2022 to 2023 were primarily driven by
increased INGREZZA net product sales on higher prescription demand and increased commercial activities,
including continued investment in our branded direct-to-consumer INGREZZA advertising campaign and benefit
from the expansion of our sales forff ce completed in April 2022.
Collaboratiott n Revenues by Cb
atCC egtt ory.r
(in mii
illill ons)
Royalties
Milestones
Collabor
ation and other
a
a
Total collabor
ation revenue
Year Ended December 31,
2023
2022
2021
$
$
21.2
—
5.3
26.5
$
$
22.3
20.0
5.5
47.8
$
$
22.3
15.0
6.1
43.4
Royalties refleff ct revenue earned on AbbVie net sales of elagolix for all periods presented and MTPC net sales of
valbenazine beginning in June 2022.
For 2022, total collabor
MTPC's first commercial sale of DYSVAL in Japaa n.
a
ation revenue also reflected the achievement of a $20.0 million milestone in connection with
For 2021, total collabor
a
MTPC's marketing authorization appl
Japaa n.
a
ation revenue also reflected the achievement of a $15.0 million milestone in connection with
ication submission for valbenazine for the treatment of tardive dyskinesia in
54
Operating Expenses
Cost of Revenues.
illill ons)
(in mii
Cost of revenues
Year Ended December 31,
2023
2022
2021
$
39.7
$
23.2
$
14.3
For 2023 compared to 2022, the increase in cost of revenues was primarily driven by increased INGREZZA and
other net product sales, increased amortization costs related to intangible assets, increased reserves for ONGENTYS
inventory orr
urt
ff
manufact
bsolescence in connection with the termination of our license agreement with BIAL, and increased
y of valbenazine drugr
ing costs in connection with our suppl
product under our collabor
ation with MTPC.
u
a
For 2022 compared to 2021, the increase in cost of revenues was primarily driven by increased INGREZZA net
product sales.
ent by Cb
atCC egtt ory.r
discovery and development efforff
Research and Developmll
We suppor
t our drugr
u
discovery, research and development programs, and business development opportunities. Costs are reflected in the
the program statust when incurred. Thereforff e, the same program could be
applicable development stage based upon
reflected in different development stages in the same reporting period. For several of our programs, the research and
development activities are part of our collabor
ts through the commitment of significant resources to
ative arrangements.
u
a
(in mii
illill ons)
Late stage
Early stage
Research and discovery
Milestones
Payroll and benefits
Facilities and other
Research and development
tt
Late Stage
activities.
.ee Consists of costs incurred forff
Year Ended December 31,
2023
2022
2021
$
106.1
$
107.4
96.5
0.8
206.7
47.5
$
68.7
81.1
63.7
42.7
163.8
43.8
$
565.0
$
463.8
$
55.7
43.9
50.5
5.4
129.1
43.5
328.1
product candidates in Phase 2 registrational studies and all subsu equent
The increases in late stage expenses from 2021 to 2022 and froff m 2022 to 2023 primarily reflected increased
investment in the Phase 3 programs forff
for EFMODY in CAH.
crinecerfont in CAH and valbenazine in schizophrenia and Phase 2 program
taSS gea . Consists of costs incurred forff
Early Sll
application by the applicable regulatory arr
product candidates after the appr
a
oval of an investigational new drug
gency through Phase 2 non-registrational studies.
For 2023 compared to 2022, the increase in early stage expenses primarily refleff cted increased investment in the
Phase 2 program for NBI-1117568 in schizophrenia and other advancing Phase 2 programs in psychiatry,rr
offsff et by decreased spend on early stage programs in epilepsy.
partially
For 2022 compared to 2021, the increase in early stage expenses primarily refleff cted increased investment in
advancing Phase 2 programs in epilepsy and psychiatry.
Research and Discovery.r Consists of expenses incurred prior to the approval of an investigational new drugr
application by the applicable regulatory arr
gency.
For 2023 compared to 2022, the increase in research and discovery expenses primarily refleff cted increased
investment in preclinical development programs including muscarinic agonists, gene therapies, and second
generation VMAT2 inhibitors.
For 2022 compared to 2021, the increase in research and discovery expenses reflected increased investment in
preclinical development programs including psychiatry, epilepsy, and gene therapia es .
55
Mileii stontt
arrangements.
es. Consist of development and regulatory milestone expenses incurred in connection with our collabor
a
ative
In 2022, we recognized milestone expenses of $30.0 million in connection with the FDA's acceptance of the
investigational new drugrr
acceptance of the amended KAYAK
clinical trial appl
application forff NBI-1117568 in schizophrenia, $7.3 million in connection with the FDA's
protocol, and $5.0 million in connection with the approval of the
ication forff NBI-1070770 in majoa r depressive disorder.
TM studyt
KK
a
In 2021, we recognized milestone expense of $5.4 million in connection with the regulatory arr
a
ppr
a
trial appl
ication in Europe for NBI-921352 in epilepsy.
oval of the clinical
. Consists of costs incurred forff
Payra oll all nd Benefie tsii
compensation associated with employees involved in research and development activities. Stock-based
compensation may fluctuate froff m period to period based on factors that are not within our control, such as our stock
price on the dates stock-based grants are issued.
salaries and wages, payroll taxes, benefits and stock-based
For 2023 compared to 2022, the increase in payroll and benefitff s expenses primarily refleff cted higher headcount and
an increase of $10.3 million in non-cash stock-based compensation expense primarily driven by an incremental
charge related to a change in equity grant agreement terms.
For 2022 compared to 2021, the increase in payroll and benefitff s expenses primarily refleff cted higher headcount,
including an increase of $9.3 million in non-cash stock-based compensation expense driven by an August 2021
equity grant of appr
offiff cers and performance-based restricted stock units to our executive officers forff which attainment of the
performance-based criteria was achieved in 2022.
oximately 0.5 million restricted stock units to our full-time employees other than our executive
a
s and Othett
Facilitie
r. Consists of indirect costs incurred forff
ii
information technology, and other facility-based expenses, such as rent expense.
the benefitff of multiple programs, including depreciation,
Acquired In-ProPP cess Research and Developmll
ent, or IPR&PP
D.
illill ons)
(in mii
Acquired in-process research and development
Year Ended December 31,
2023
2022
2021
$
143.9
$
— $
105.3
In 2023, we recognized $143.9 million of IPR&D expense in connection with our payment of the upfroff nt fee
pursuant to our expanded strategic partnership with Voyager.
In 2021, we recognized $105.3 million of IPR&D expense, of which $100.3 million was in connection with our
payment of the upfroff nt fee pursuant to our collabor
ation with Heptares Therapea utics Limited.
a
Selling, General and Admindd
istrativtt e, or SG&A.
illill ons)
(in mii
Selling, general and administrative
Year Ended December 31,
2023
2022
2021
$
887.6
$
752.7
$
583.3
For 2023 compared to 2022, the increase in SG&A expenses was primarily driven by increased investment in our
commercial initiatives, including our branded direct-to-consumer INGREZZA advertising campaign and
deployment of our expanded salesforce completed in April 2022, and increased payroll and benefits expenses on
higher headcount and an increase of $10.9 million in non-cash stock-based compensation expense primarily driven
by an incremental charge related to a change in equity grant agreement terms.
For 2022 compared to 2021, the increase in SG&A expenses was primarily driven by increased investment in our
commercial initiatives and increased payroll and benefits expenses on higher headcount and an increase of $29.6
million in non-cash stock-based compensation expense driven by an August 2021 equity grant of appr
million restricted stock units to our full-time employees other than our executive officers and performance-based
restricted stock units to our executive officers forff which attainment of the performance-based criteria was achieved
in 2022.
oximately 0.5
a
56
Othett
r IncII ome (Ex((
pexx nse), NetNN .tt
(in mii
illill ons)
Interest expense
Unrealized gain on equity securities
Loss on extinguishment of convertible senior notes
Investment income and other, net
Total other income (expense), net
Year Ended December 31,
2023
2022
2021
$
$
(4.6) $
(7.1) $
28.4
—
57.4
81.2
30.8
(70.0)
11.2
$
(35.1) $
(25.8)
20.9
—
3.8
(1.1)
The change in other income (expense), net from 2021 to 2022 and froff m 2022 to 2023 primarily reflected debt
extinguishment charges in connection with the repurchase of our convertible senior notes in 2022, periodic
fluctuations in the faiff
investments and decreased interest expense on lower total debt outstanding. The change in other expense, net froff m
2021 to 2022 also reflected decreased interest expense dued
r values of our equity security investments, increased interest income on our debt security
to the adoption of ASU 2020-06 on January 1, 2022.
Provision forff
Income Taxeaa s.
illill ons)
(in mii
Provision for income taxes
Year Ended December 31,
2023
2022
2021
$
82.4
$
59.4
$
11.8
For 2023, the effective tax rate varied from the federal and state statutory rates primarily due to credits generated for
research activities, certain nondeductible expenses, the impact of changes in the state effective rate, and losses
incurred in forff eign jurisdictions for which no tax benefitff was recorded as management cannot conclude that it is
more likely than not that the tax benefit of such losses will be realized in the futff urt e.
For 2022, the effective tax rate varied from the federal and state statutory rates primarily due to credits generated for
research activities and certain nondeductible expenses, including the premium paid on the repurchase of our
convertible senior notes in 2022.
For 2021, the effective tax rate varied from the federal and state statutory rates primarily due to excess tax benefits
research activities. In the firff st quarter of 2021,
associated with stock-based compensation and credits generated forff
we began recording a provision for income taxes using an effective tax rate that approximated fedff
statutt ory r
eral and state
ates.
rr
Net IncII
ome.
illill ons)
(in mii
Net income
Year Ended December 31,
2023
2022
2021
$
249.7
$
154.5
$
89.6
For 2023 compared to 2022, the increase in net income primarily reflected increased INGREZZA net product sales,
decreased debt extinguishment charges in connection with the repurchase of our convertible senior notes in 2022,
and decreased milestone expenses in connection with our collabor
payments in connection with our expanded strategic partnership with Voyager and increased investment in our
commercial initiatives and expanded clinical portfolff
ations, partially offsff et by increased upfroff nt
io.
a
For 2022 compared to 2021, the increase in net income primarily reflected increased INGREZZA net product sales
and lower upfroff nt payments for asset acquisitions, partially offsff et by increased debt extinguishment charges in
connection with the repurchase of our convertible senior notes in 2022 and increased investment in our commercial
initiatives and expanded clinical portfolff
io.
57
Liquidity and Capital Resources
ff
Sources of Liquidity
We believe that our existing capia tal resources, funds
at least the next 12
investment income will be sufficient to satisfy our current and projeo cted funding requirements forff
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.
We may seek to access the public or private equity markets whenever conditions are favff orable or pursue
opportunities to obtain additional debt finff ancing in the futff urt e. We may also seek additional fundi
alliances or other finff ancing mechanisms. However, we cannot provide assurance that adequate funding will be
availabla e on terms acceptable to us, if at all.
generated by anticipated INGREZZA net product sales and
ng through strategic
ff
Infon rmatiott n Regardingii Our FinFF ancial Conditiodd
n.
illions)s
(in mii
Total cash, cash equivalents and marketable securities
Working Capital:
Total current assets
Less total current liabilities
Total working capia tal
Infon rmatiott n Regardingii Our CasCC h FloFF ws.
(in mii
illill ons)
Cash flows froff m operating activities
Cash flows froff m investing activities
Cash flows froff m finff ancing activities
Effeff ct of exchange rate changes on cash and cash equivalents
Change in cash, cash equivalents and restricted cash
Cash Flowll
s fw roff m OpeOO ratingii Activities.
December 31,
2023
1,719.1
1,607.0
654.8
952.2
$
$
$
2022
1,288.7
1,453.5
537.7
915.8
$
$
$
Year Ended December 31,
2023
2022
2021
$
$
389.9
$
339.4
$
(467.1)
65.3
0.3
(177.1)
(234.3)
(1.3)
(11.6) $
(73.3) $
256.5
(130.2)
27.4
—
153.7
For 2023 compared to 2022, the change in cash flows froff m operating activities primarily reflected increased
INGREZZA net product sales and lower milestone payments in connection with our collabor
by higher upfu roff nt payments in connection with our expanded strategic partnership with Voyager and increased
investment in our commercial initiatives and expanded clinical portfolff
io.
ations, partially offsff et
a
For 2022 compared to 2021, the change in cash flows froff m operating activities primarily reflected increased
INGREZZA net product sales and lower upfroff nt payments for asset acquisitions, partially offsff et by increased
investment in our commercial initiatives and expanded clinical portfolff
accounts receivabla e driven by increased INGREZZA net product sales on extended customer payment terms
attributed to the expansion of our distribution network at the end of 2021 and an increase in accruer d liabia lities driven
discounts and allowances on higher INGREZZA net product sales and the
by increased revenue-related reserves forff
timing of payments.
io. In addition, we experienced an increase in
Cash Flowll
s fw roff m InvII
estingii Activitieii
s.
Periodic fluff ctuat
related to our purchases, sales, and maturities of debt security investments and changes in our portfolff
tions in cash floff ws from investing activities forff
all periods presented refleff cted timing diffeff
io-mix.
rences
For 2023, cash floff ws from investing activities also refleff cted a $31.3 million equity investment in Voyager.
For 2022, cash floff ws from investing activities also refleff cted the acquisition of Diurnal Group plc forff
cash, which is net of cash acquired, and a $7.7 million equity investment in Xenon Pharmaceuticals Inc.
$42.7 million in
58
Cash Flowll
s fw roff m FinFF ancingii Activities.
Cash flows froff m finff ancing activities forff
stock.
all periods presented refleff cted proceeds froff m issuances of our common
For 2022, cash floff ws from finff ancing activities also refleff cted the repurchase of $210.8 million aggregate principal
amount of our convertible senior notes for an aggregate repurchase price of $279.0 million in cash.
Material Cash Requirements
In the pharmaceutical industry,rr
complete all stages of research and development and commercialize a product candidate, which ultimate length of
time and spend required cannot be accurately estimated as it varies substantially according to the type, complexity,
novelty and intended use of a product candidate.
it can take a significant amount of time and capital resources to successfulff
ly
ng necessary to execute our business strategies is subject to numerous uncertainties and we may be
The fundi
ff
required to make substantial expenditures if unforff eseen diffiff culties arise in certain areas of our business. In
particular, our future capia tal requirements will depend on many fact
ors, including:
ff
•
•
•
•
•
•
•
•
•
•
the commercial success of INGREZZA, ORILISSA, ORIAHNN and/or DYSVAL;
continued scientific progress in our research and clinical development programs;
the magnitude and complexity of our research and development programs;
progress with preclinical testing and clinical trials;
a
the time and costs involved in obtaining regulatory arr
ppr
ovals;
the cost of commercialization activities and arrangements, including our advertising campaigns;
the cost of manufacff
turing of our product candidates;
the costs involved in filff ing and pursuing patent appl
interference proceedings or other patent litigation;
a
ications, enforff cing patent claims, or engaging in
competing technological and market developments; and
developments related to any future litigation.
In addition to the foregoing factors, we have significant futff urt e capital requirements, including:
ation and license agreements or acquire businesses froff m time-to-time to enhance our drugrr
rts to develop and market products, we may
a
ss Developmo
ents. In addition to our independent effoff
External Busineii
enter into collabor
development and commercial capabilities. With respect to our existing collabor
may be required to make potential future payments of up to $17.0 billion upon
based milestones.
u
a
ation and license agreements, we
the achievement of certain event-
Refer to Note 2 to the consolidated financial statements forff more information on our significant collabor
license agreements.
a
ation and
Leases. Our operating leases that have commenced have terms that expire beginning 2025 through 2036 and consist
of offiff ce space and research and development laboratories, including our corporate headquarters.
ry 8, 2022, we entered into a lease agreement forff
On Februarr
Diego, Califorff nia, including a six-year option forff
comprised of office space and research and development laboratories, will serve as our new corpor
r-building campus facility to be construcr
tion of a fifth building. This campus facility,
the construcr
a fouff
r
ate headquarters.
ted in San
tion of the campus facility is phased. The firff st phase of construcrr
The construcr
completed in December 2023. As we begin to occupyu
existing leased premises when we determine there is excess leased capacity.
our new campus facility, we will sublu ease certain of our
tion relating to office space was
Refer to Note 11 to the consolidated financial statements forff more information on our leases, including a
presentation of our approximate future minimum lease payments under non-cancelable operating leases.
59
Convertible Senior Notes. On May 2, 2017, we completed a private placement of $517.5 million in aggregate
principal amount of 2.25% fixed-rated convertible senior notes due May 15, 2024 (the 2024 Notes). In 2020, we
repurchased $136.2 million aggregate principal amount of the 2024 Notes forff
$186.9 million in cash. In 2022, we repurchased $210.8 million aggregate principal amount of the 2024 Notes forff
an
aggregate repurchase price of $279.0 million in cash. As of December 31, 2023, $170.4 million aggregate principal
amount of the 2024 Notes remained outstanding.
an aggregate repurchase price of
At our election, we may redeem all or any portion of the 2024 Notes under certain circumstances. In addition,
holders of the 2024 Notes may convert the 2024 Notes at any time until the close of business on the scheduled
trading day immediately preceding May 15, 2024. Upon conversion, holders will receive the principal amount of
their 2024 Notes and any conversion premium, calculated based on the per share volume-weighted average price for
each of the 30 consecutive trading days during the observation period (as more fulff
Indenturt e), in cash. Unless earlier converted, redeemed, or repurchased, we would be required to pay interest of $1.9
million in 2024 and pay the aggregate principal amount outstanding of $170.4 million upon
Notes.
ly described in the 2017
maturity of the 2024
u
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 err
default with respect to the 2024 Notes, including that upon
accruer d and unpaid interest on the 2024 Notes would become dued
certain events of default, 100% of the principal and
and payable.
vents of
u
Refer to Note 5 to the consolidated financial statements forff more information on the 2024 Notes.
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
(GAAP). The preparation of these financial statements requires management to make estimates and judgments that
affeff ct the reported amounts of assets, liabia lities and expenses, and related disclosures. On an on-going basis, we
evaluate these estimates, including those related to revenue recognition. Estimates are based on historical
experience, information received froff m third parties and on various other assumptions that are believed to be
reasonabla e under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabia lities that are not readily apparent from other sources. Actuat
estimates under diffeff
material change to the finff ancial statements.
rent assumptions or conditions. Historically, revisions to our estimates have not resulted in a
l results may diffeff
r froff m these
u
The items in our financial statements requiring significant estimates and judgments are as folff
lows:
ent Rebatestt
. We recognize revenues froff m product sales of INGREZZA net of reserves
applicable discounts and allowances that are offerff ed within contracts with our customers, payors, and
discounts
Reserves for GovGG ernmrr
establa ished forff
other third parties. Such reserves include estimates forff
including under the Medicaid Drugr Rebate Program and Medicare Part D. The liabia lity for such rebates consists of
claims from prior quarters that remain unpaid, or forff which an invoice has not been received,
invoices received forff
and estimated rebates for the current appl
l historical rebates by state, estimated payor
of our sales that will be subju ect to such rebates and are based on actuat
mix, state and fedff
l terms, as supplemented by management’s judgement.
There is a significant time-lag in our receiving rebate notices from each state (generally, several months or longer
afteff
icable reporting period. Such estimates require us to project the magnitude
l government rebates have not differed materially from our estimates.
government rebates that we are obligated to pay forff
eral regulations, and relevant contractuat
r a sale is recognized). To date, actuat
a
60
iffeff
rence between the tax basis of assets and liabia lities and their
rences are expected to reverse. A valuation allowance is establa ished forff
rences) at enacted tax rates in effeff ct for the years in which
deferred tax assets for which it is
Income Taxeaa s. Our income tax provision is computed under the asset and liabia lity method. Significant estimates are
required in determining our income tax provision. Some of these estimates are based on interprr etations of existing
tax laws or regulations. We recognize deferred tax assets and liabia lities forff
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
liabia lities are determined on the basis of the diffeff
respective finff ancial reporting amounts (temporary drr
the diffeff
more likely than not that some portion or all of the deferff
will not be realized. We periodically re-assess the need forff
based on various factors including our historical earnings experience by taxing jurisdiction, and forff ecasts 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 benefitff will be recognized against our income tax
provision in the period of such reversal.
Additional Information
Refer to Note 1 to the consolidated financial statements forff
information on accounting pronouncements that have
impacted or are expected to materially impact our consolidated financial condition, results of operations, or cash
flows.
red tax assets, including net operating losses and tax credits,
a valuation allowance against our deferred tax assets
Item 7A. Quantitative and Qualitall
tive Disclosll ures About MarMM kerr
t Risk
Interest Rate Risk
We maintain a diversified investment portfolff
maturities of up tu
entities and corpor
to preserve principal and maintain liquidity. If a 1% unfavff orable change in interest rates were to have occurred on
December 31, 2023, it would not have had a material effeff ct on the faiff
io as of that
date.
o three years, including investments in commercial paper, securities of government-sponsored
ate bonds that are subject to interest rate risk. The primary objective of our investment activities is
io consisting of low-risk, investment-grade debt securities with
r value of our investment portfolff
r
61
Item 8. Finaii ncial StaSS tements att
nd Supplpp emll
entary Data
NEUROCRINE BIOSCIENCES, INC.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
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
Pageg
63
65
66
67
68
69
62
Report of Independent Registered Public Accounting Firm
To the Stockholders 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, 2023 and 2022, the related consolidated statements of income and comprehensive income,
stockholders’ equity and cash floff ws for each of the three years in the period ended December 31, 2023, and the
red to as the “consolidated financial statements”). In our opinion, the consolidated
related notes (collectively referff
financial statements present fairly, in all material respects, the finff ancial position of the Company at December 31,
2023 and 2022, and the results of its operations and its cash floff ws for each of the three years in the period ended
December 31, 2023, in conforff mity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Publu ic Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over finff ancial reporting as of December 31, 2023, 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 Februar
opinion thereon.
ry 9, 2024 expressed an unqualified
Basis forff Opinion
These finff ancial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s finff ancial statements based on our audits. We are a public accounting firff m registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. fedff
securities laws and the appl
icable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
eral
a
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonabla e assurance about
misstatement, whether dued
to error or fraff ud, and performing procedurd es that
material misstatement of the financial statements, whether dued
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 reasonabla e basis for our opinion.
to error or fraff ud. Our audits included performing procedurd es to assess the risks of
whether the financial statements are free of material
a
Critical Audit Matter
The critical audit matter communicated below is a matter arising froff m 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,
subju ective 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
Descripti
the MatMM ter
ion ofo
Reserves for governmrr
ent rebatestt
related to ptt
roduct sales
The Company sells product to specialty pharmacies and specialty distributors in the US
(collectively, “customers”). As described in Note 1 to the consolidated financial statements, the
Company recognizes revenues forff
management’s estimates of reserves, including drugr
government rebate programs (“government rebates”). Estimated government rebates are
presented within accounts payable and accruer d liabia lities on the consolidated balance sheet.
sales of INGREZZA to its customers after deducting
coverage gap ra
ebates, it will provide under
Auditing the estimates of government rebates was complex and judgmental dued
uncertainty involved in management’s assumptions used in the measurement process. In
particular, management was required to estimate at December 31, 2023, the portion of product
that is expected to be subju ect to a government rebate, the applicable contractuat
rebate percentage by payor type underlying the revenue and the applicable rebate amount
applicable for the payor type.
to the level of
l government
How WeWW
Addrdd essed thett
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 subju ect to a government rebate at December 31, 2023.
This included controls over management’s review of significant assumptions and other inputs
into the estimation of government rebates including the accuracy of data used in the calculation.
To test management’s estimate of government rebate reserves our audit procedurd es 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. Specificff ally, we compared the significant assumptions to third-party reports used
by the Company to estimate government rebate reserves at December 31, 2023. 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, Califorff nia
Februar
ry 9, 2024
64
December 31,
2023
2022
$
$
$
251.1
780.5
439.3
38.3
97.8
1,607.0
362.6
687.5
276.5
161.9
70.8
35.5
49.6
3,251.4
448.8
170.1
35.9
654.8
258.3
106.3
1,019.4
262.9
726.4
350.0
35.1
79.1
1,453.5
305.9
299.4
87.0
102.1
58.6
37.2
25.0
2,368.7
347.6
169.4
20.7
537.7
93.5
29.7
660.9
—
—
0.1
2,382.0
7.0
(157.1)
2,232.0
3,251.4
$
0.1
2,122.4
(7.9)
(406.8)
1,707.8
2,368.7
$
$
$
$
NEUROCRINE BIOSCIENCES, INC.
CONSOLIDATED BALANCE SHEETS
ept per share datdd a)tt
illions, es xcee
(in mii
Assets
Current assets:
Cash and cash equivalents
Debt securities availabla e-for-sale
Accounts receivabla e, net
Inventory,r
net
Other current assets
Total current assets
Deferred tax assets
Debt securities availabla e-for-sale
Right-of-use assets
Equity securities
Property and equipment, net
Intangible assets, net
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabia lities:
Accounts payable and accruerr d liabia lities
Convertible senior notes
Other current liabia lities
Total current liabia lities
Noncurrent operating lease liabia lities
Other long-term liabia lities
Total liabia lities
Stockholders’ equity:
red stock, $0.001 par value; 5.0 shares authorized; no shares issued and outstanding
Preferff
Common stock, $0.001 par value; 220.0 shares authorized; 98.7 and 96.5 shares issued and
outstanding, respectively
Additional paid-in capital
Accumulated other comprehensive income (loss)
Accumulated deficff
it
Total stockholders’ equity
Total liabia lities and stockholders’ equity
See accompanying notes to consolidated financial statements.
65
NEUROCRINE BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS INCOME
AND COMPREHENSIVE INCOME
illill ons, except per share datdd a)tt
(in mii
Revenues:
ation revenue
Net product sales
a
Collabor
Total revenues
Operating expenses:
Cost of revenues
Research and development
Acquired in-process research and development
Selling, general and administrative
Total operating expenses
Operating income
Other income (expense):
Interest expense
Unrealized gain on equity securities
Loss on extinguishment of convertible senior notes
Investment income and other, net
Total other income (expense), net
Income before provision for income taxes
Provision for income taxes
Net income
Foreign currency translation adjustments, net of tax
Unrealized gain (loss) on debt securities availabla e-for-sale, net of tax
Comprehensive income
Earnings per share, basic
Earnings per share, diluted
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted
Year Ended December 31,
2023
2022
2021
$
$
$
$
1,860.6
26.5
1,887.1
39.7
565.0
143.9
887.6
1,636.2
250.9
(4.6)
28.4
—
57.4
81.2
332.1
82.4
249.7
2.4
12.5
264.6
2.56
2.47
97.7
101.0
$
$
$
$
1,440.9
47.8
1,488.7
23.2
463.8
—
752.7
1,239.7
249.0
(7.1)
30.8
(70.0)
11.2
(35.1)
213.9
59.4
154.5
2.9
(9.1)
148.3
1.61
1.56
95.8
98.9
1,090.1
43.4
1,133.5
14.3
328.1
105.3
583.3
1,031.0
102.5
(25.8)
20.9
—
3.8
(1.1)
101.4
11.8
89.6
—
(3.5)
86.1
0.95
0.92
94.6
97.9
$
$
$
$
See accompanying notes to consolidated financial statements.
66
NEUROCRINE BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
illill ons)
(in mii
Balances at December 31, 2020
Net income
Other comprehensive loss, net of tax
Stock-based compensation expense
Issuances of common stock under stock
plans
Balances at December 31, 2021
Net income
Other comprehensive loss, net of tax
Cumulative-effeff ct adjud stment due to
adoption of ASU 2020-06
Stock-based compensation expense
Issuances of common stock under stock
plans
Balances at December 31, 2022
Net income
Other comprehensive income, net of tax
Stock-based compensation expense
Issuances of common stock under stock
plans
Balances at December 31, 2023
Common Stock
$
$
Shares
93.5
—
—
—
1.4
94.9
—
—
—
—
1.6
96.5
—
—
—
2.2
98.7
$
$
$
0.1
—
—
—
—
0.1
—
—
—
—
—
0.1
—
—
—
—
0.1
$
$
$
Additional
Paid-In Capital
1,849.7
$
—
—
134.2
Accumulated
Other
Comprehensive
Income (Loss)
1.8
$
—
(3.5)
—
$
27.5
2,011.4
—
—
(106.8)
173.1
44.7
2,122.4
—
—
194.3
—
$
(1.7) $
—
(6.2)
—
—
—
$
(7.9) $
—
14.9
—
Accumulated
Deficit
Total
Stockholders’
Equity
(725.4) $
89.6
—
—
—
(635.8) $
154.5
—
74.5
—
—
(406.8) $
249.7
—
—
1,126.2
89.6
(3.5)
134.2
27.5
1,374.0
154.5
(6.2)
(32.3)
173.1
44.7
1,707.8
249.7
14.9
194.3
65.3
2,382.0
$
—
7.0
$
—
(157.1) $
65.3
2,232.0
See accompanying notes to consolidated financial statements.
67
NEUROCRINE BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
illill ons)
(in mii
Cash flows froff m operating activities:
Net income
Adjud stments to reconcile net income to net cash froff m operating activities:
Stock-based compensation expense
Depreciation
(Accretion) amortization of (discount) premium on investments, net
Amortization of debt discount
Amortization of debt issuance costs
Amortization of intangible assets
Changes in faiff
Deferred income taxes
Loss on extinguishment of convertible senior notes
Other
r value of equity securities
Changes in operating assets and liabia lities:
Accounts receivabla e
Inventoryr
Accounts payable and accruerr d liabia lities
Other assets and liabia lities, net
Cash flows froff m operating activities
Cash flows froff m investing activities:
Purchases of debt securities availabla e-for-sale
Sales and maturities of debt securities availabla e-for-sale
Acquisition of business, net of cash acquired
Purchases of equity securities
Capia tal expenditures
Cash flows froff m investing activities
Cash flows froff m finff ancing activities:
Issuances of common stock under benefitff plans
Repurchases of convertible senior notes
Cash flows froff m finff ancing activities
Effeff ct of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental Disclosure:
Non-cash capital expenditures
Right-of-use assets obtained in exchange for new operating lease liabia lities
Cash paid for interest
Cash paid for income taxes
Year Ended December 31,
2023
2022
2021
$
249.7
$
154.5
$
89.6
194.3
17.8
(18.3)
—
0.7
3.5
(28.4)
(56.7)
—
(0.9)
(89.3)
5.4
64.3
47.8
389.9
(1,379.9)
972.4
—
(31.3)
(28.3)
(467.1)
65.3
—
65.3
0.3
(11.6)
270.7
259.1
2.5
200.8
3.8
51.5
$
$
$
$
$
$
$
$
$
$
173.1
15.1
3.7
—
1.2
0.5
(30.8)
19.1
70.0
0.4
(162.2)
(2.6)
114.6
(17.2)
339.4
(621.2)
511.0
(42.7)
(7.7)
(16.5)
(177.1)
44.7
(279.0)
(234.3)
(1.3)
(73.3)
344.0
270.7
$
0.7
$
— $
$
6.6
$
14.4
134.2
10.9
7.4
16.2
1.1
—
(20.9)
4.3
—
(3.0)
(28.4)
(2.5)
56.8
(9.2)
256.5
(800.1)
697.9
—
(4.6)
(23.4)
(130.2)
27.5
(0.1)
27.4
—
153.7
190.3
344.0
1.9
23.4
8.6
5.1
See accompanying notes to consolidated financial statements.
68
NEUROCRINE BIOSCIENCES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significff ant Accounting Policies
Organr
Company, we, our or us) is a neuroscience-focused biopharmaceutical company focff used on discovering, developing
and delivering innovative therapies to help ease the burden of debilitating disorders and diseases.
ss. Neurocrine Biosciences, Inc. and its subsu idiaries (Neurocrine Biosciences, the
izatiott n and Busineii
We operate in a single business segment, which includes all activities related to the research, development and
the treatment of neurological, neuroendocrine and neuropsychiatric
commercialization of pharmaceuticals forff
disorders and reflects the way in which internally-reported finff ancial information is regularly reviewed by our chief
operating decision maker to analyze performance, make decisions and allocate resources.
of Consolidll atdd iott n. The consolidated financial statements include the accounts of Neurocrine Biosciences
Principlii esll
as well as our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in
consolidation.
tt
stEE ima
tes. The preparation of financial statements in conforff mity with accounting principles generally
Use of Eo
accepted in the United States of America (GAAP) requires management to make estimates and assumptions that
affeff ct the amounts reported in the financial statements and the accompanying notes. Actuat
those estimates.
l results could diffeff
r froff m
Cash Equivalents.tt We consider all highly liquid investments that are readily convertible into cash without penalty
and have an original maturt
ity of three months or less at the time of purchase to be cash equivalents.
eceivable.ll Accounts receivable are recorded net of customer allowances for prompt payment discounts,
credit losses. Our estimate for the allowance forff
credit losses, which has not
Accounts Rtt
chargebacks, and any allowance forff
been significant to date, is determined based on existing contractuat
customers, and individual customer circumstances.
l payment terms, actuat
l payment patterns of our
Our exposure to credit losses may increase if our customers are adversely affected by changes in healthcare laws,
coverage and reimbursement, economic pressures or uncertainty associated with local or global economic
recessions, or other customer-specific fact
ors.
ff
s valued at the lower of cost or net realizable value. We determine the cost of inventory urr
l cost based on the firff st-in, first-out method. We perform an
Inventory.yy Inventory i
rr
the standard-cost method, which appr
assessment of the recoverabia lity of our inventory orr
inventory t
commercialization is considered probabla e and the futff urt e economic benefit is expected to be realized, based on
management’s judgment, we capia talize pre-launch inventory crr
o its net realizabla e value in the period in which the impairment is firff st identifieff d. When future
n a quarterly basis and write down any excess and obsolete
a
osts prior to regulatory arr
ppr
oximates actuat
oval.
a
rr
sing
s. Debt securities consist of investments in certificates of deposit, corpor
Debt Securitieii
ate debt securities and
securities of government-sponsored entities. We classify debt securities as availabla e-for-sale. Debt securities
availabla e-for-sale are recorded at fair value, with unrealized gains and losses included in other comprehensive
income or loss, net of tax. We exclude accruer d interest froff m both the fair value and amortized cost basis of debt
securities. A debt security is placed on nonaccruar
days delinquent. Interest accrued but not received forff
interest income.
l status at the time any principal or interest payments become 90
a debt security placed on nonaccruar
l status is reversed against
r
Interest income includes amortization of purchase premium or discount. Premiums and discounts on debt securities
are amortized using the effeff ctive 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 identificff ation method.
69
r value through earnings. For debt securities availabla e-for-sale that do not meet the
Alloll wance forff Creditdd Losses. For debt securities availabla e-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 faiff
aforff ementioned criteria, we evaluate whether the decline in faiff
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 fact
assessment indicates that a credit loss exists, the present value of cash floff ws expected to be collected from the
security is compared to the amortized cost basis of the security. If the present value of cash floff ws expected to be
credit losses is recorded,
collected is less than the amortized cost basis, a credit loss exists and an allowance forff
limited by the amount that the faiff
r value is less than the amortized cost basis. Any impairment that has not been
recorded through an allowance forff
credit losses is recognized in other comprehensive income or loss, as applicable.
r value has resulted froff m credit losses or other factors.
ors. If this
ff
Accruer d interest receivabla es on debt securities availabla e-for-sale were $11.2 million and $4.7 million, respectively,
as of December 31, 2023 and 2022. We do not measure an allowance forff
receivabla es. For the purpos
es of identifyiff ng and measuring an impairment, accruer d interest is excluded froff m both the
fair value and amortized cost basis of the debt security. Uncollectible accruer d interest receivabla es associated with an
impaired debt security are reversed against interest income upon identificff ation of the impairment. No accrued
interest receivabla es were written off dff
urd ing 2023, 2022 or 2021.
credit losses forff
accruer d interest
rr
inFF ancial Instrutt ments.tt We record cash equivalents, debt securities availabla e-for-sale and equity
Fair Value of Fo
security investments at faiff
market data (observabla e inputs) and our own assumptions (unobservabla e inputs). The fair value hierarchy consists of
the folff
r value based on a fair value hierarchy that distinguishes between assumptions based on
lowing three levels:
Level 1 – Quoted prices (unadjusted) in active markets forff
identical assets or liabia lities.
Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets
subsu tantially
or liabia lities in markets that are not active or inputs that are observabla e, either directly or indirectly, forff
the fulff
l term of the asset or liabia lity.
Level 3 – Unobservabla e inputs that refleff ct our own assumptions about the assumptions that market participants
would use in pricing the asset or liabia lity when there is little, if any, market activity for the asset or liabia lity at the
measurement date.
Investments in debt securities availabla e-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, forff which all significant
inputs are observabla e, either directly or indirectly, to estimate fair value. Such inputs include market pricing based
on real-time trade data forff
ents, issuer credit spreads, benchmark yields, broker/dealer quotes and
other observabla e inputs. We validate valuations obtained froff m third-party pricing services by understanding the
models used, obtaining market values from other pricing sources and analyzing data in certain instances.
similar instrumr
We deem transferff s between levels of the faiff
during which the event or change in circumstances that caused the transferff
occurred.
r value hierarchy to have occurred at the end of the reporting period
Investmett
nts.tt We account for certain equity investments subject to the equity method of accounting, or
Equityii
through which we have the ability to exercise significant influence (but not control) over the operating and financial
policies of an investee, under the fair value option. In assessing whether we exercise significant influff ence, we
consider the naturt e and magnitude of such an investment, the voting and protective rights we hold, any participation
ative or other business
in the governance of the investee and other relevant fact
r value
relationship. Such investments in publicly traded companies are currently classified within Level 1 of the faiff
hierarchy and carried at faiff
r value, with any changes in the fair value of such investments recognized in earnings.
ors, such as the presence of a collabor
a
ff
nd Equipmii
ent. Property and equipment are stated at cost and depreciated over the estimated useful lives
Property att
of the assets using the straight-line method. Equipment is depreciated over an average estimated useful life off
f 3 to 7
years. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the remaining lease
term. Depreciation expense was $17.8 million forff
2022 and $10.9 million forff
2023, $15.1 million forff
2021.
70
ss Combinatiott ns. Under the acquisition method of accounting, we allocate the faiff
Busineii
consideration transferred to the tangible and identifiable intangible assets acquired and liabia lities assumed based on
their estimated faiff
especially with respect to intangible assets. We record the excess consideration over the aggregate faiff
tangible and intangible assets, net of liabia lities assumed, as goodwill. In addition, costs that we incur to complete the
business combination, such as legal and other professional fees
when incurred.
r values on the date of acquisition. These valuations require us to make estimates and assumptions,
, are expensed as selling, general and administrative
r value of the total
r value of
ff
Goodwill, Intangible Assets and Other Long-Lgg ived Assets. Assets acquired, including intangible assets and in-
process research and development (IPR&D) and liabia lities assumed are measured at fair value as of the acquisition
date. Goodwill, which has an indefinite usefulff
acquired. Intangible assets acquired in a business combination that are used forff
indefinite lived until the completion or abaa ndonment of the associated research and development efforts. Upon
reaching the end of the relevant research and development projeo ct (i.e., upon commercialization), the IPR&D asset is
amortized over its estimated useful life.ff
asset is expensed in the period of abaa ndonment.
If the relevant research and development projeo ct is abandoned, the IPR&D
r value of the net assets
IPR&D activities are considered
life, represents the excess of cost over faiff
Goodwill and IPR&D are not amortized; however, they are reviewed for impairment at least annually, as of October
1, and more freff quently if an event occurs indicating the potential forff
considered to be impaired if the carrying value of the reporting unit or IPR&D asset exceeds its respective faiff
impairment. Goodwill and IPR&D are
r value.
We perform our goodwill impairment analysis at the reporting unit level, which aligns with our reporting strucr
and availabia lity of discrete finff ancial information. During the goodwill impairment review, we assess qualitative
factors to determine whether it is more likely than not that the faiff
amount, including goodwill. The qualitative fact
industry and market considerations, and our overall financial performance. If, afteff
qualitative facff
the carrying amount, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the
estimated faiff
reporting unit exceed the faiff
the qualitative assessment in a period and proceed to perform the quantitative goodwill impairment test.
r value of the reporting unit with the carrying value, including goodwill. If the carrying amount of the
r value, we record an impairment loss based on the difference. We may elect to bypass
r assessing the totality of these
r value of the reporting unit is less than
tors, we determine that it is not more likely than not that the faiff
ors include, but are not limited to, macroeconomic conditions,
r value of the reporting unit is less than the carryirr ng
ture
ff
Our identifiaff bla e intangible assets with a finff
identifiaff bla e intangible assets with finite lives is generally amortized on a straight-line basis over the assets’
respective estimated useful lives.
re typically comprised of acquired product rights. The cost of
ite life aff
lives and other long-lived assets are potentially impaired. If indicators of impairment exist, an
We perform regular reviews to determine if any event has occurred that may indicate that intangible assets with
finite usefulff
impairment test is performed to assess the recoverabia lity of the affected assets by determining whether the carrying
amount of such assets exceeds the undiscounted expected future cash floff ws. If the affeff cted assets are not
recoverabla e, we estimate the faiff
r value of the assets and record an impairment loss if the carrying value of the assets
exceeds the fair value. Factors that may indicate potential impairment include a significant decline in our stock price
and market capitalization compared to the net book value, significant changes in the ability of a particular asset to
generate positive cash floff ws for our strategic business objectives, and the pattern of utilization of a particular asset.
la lease at contract iinceptiion.
)OU) assets represent our
hth le lease term a dnd opera iti gng lleas le liiabibia li ilities represent our blobligigatiion to m kake
LLeases. We ddetermiin ie if an arra gngement iis
irightght to use an u dnde lrlyiyi gng asset forff
llease p yayments a iri isi gng from thhe llease. ROU assets andd opera iting lg leas le liiabibia li ilities are recognigni dzed at hthe
commencement ddate bbasedd on thhe present v lalue of llease p yayments over thhe llease term.
term, w ie inclludde optiions to exte dnd or termiinate thhe llease whhe in i it is reasonablbla yy certaiin hthat su hch optiions
exer icisedd.
iRightght-of-use ((R
hWhen ddetermiiniingg thhe llease
iwillll bbe
As none of our opera iting lg leases pro ividde an iim lpliiciit rate, we use our iincremental bl borro iwi gng rate bbasedd on thhe
iinformatiion availilablbla e at commencemen dt dat
borborro iwi gng rate iis ddetermiin ded usiingg a secured bd borro iwi gng rate for thhe same currencyy a dnd term as hthe asso iciat ded llease.
iminiingg thhe present v lalue of llease p yayments. Ou ir increment lal
ie i dn deter
hTh le lease p yayments usedd t do deter
iincen itives receiiv ded a dnd are recogni
imine our ROU assets may iy inclludde prep iaidd or accruer d ld lease p yayments a dnd any ly lease
ogni dzed iin ROU assets iin our cons lolididat ded bballance shheets.
71
Ou lr lease aggreements m yay iin lcl dude bboth lh lease a dnd non-llease components, hwhiichh we account for as a isinglngl
component hwhen hthe p yayments are fifixedd. Va iri bablle payyments iin lcl duded id i
ln lease aggreements are expens ded as iincurredd.
le lease
Our opera iting lg leases are reflflected id in ROU assets, noncurrent opera iting lg leas le liiabibia li ilities, andd o hther current liliabibia lili ities iin
our cons lolididat ded bballance shheets. Lease expense forff
over thhe llease term.
is is recognigni dzed on a str iaightght l-liin be basiis
lm lease p yayment
imi inimu
urrency.c Assets and liabia lities are translated into the reporting currency using the exchange rates in effect
Foreign cgg
on the consolidated balance sheet dates. Equity accounts are translated at historical rates, except forff
the change in
retained earnings during the period, which is the result of the income statement translation process. Revenue and
expense accounts are translated using the weighted average exchange rate during the period. The cumulative
translation adjustments associated with the net assets of foreign subsidiaries are recorded in accumulated other
comprehensive income (loss) in the accompanying consolidated statements of stockholders’ equity.
itiott n. We recognize revenue when the customer obtains control of promised goods or services in an
Revenue Recogno
amount that reflects the consideration which we expect to receive in exchange for such goods or services. Revenue
is recognized using a fivff e-step model: (i) identify cff
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 probabla e that we will collect the consideration we are entitled to in
exchange for the goods or services we transferff
ontract(s) with a customer; (ii) identify t
to the customer.
he performance
ff
Net ProPP duct Sales. In the U.S., we sell INGREZZA® (valbenazine) primarily to specialty pharmacy providers and
distributors. We recognize net product sales when the customer obtains control of our product, which occurs at a
point in time, typically upon delivery orr
f our product to the customer.
a
icable discounts and allowances that
Revenues froff m product sales are recorded net of reserves established for appl
are offered within contracts with our customers, payors, and other third parties. Such estimates are based on
information received froff m external sources (such as written or oral information obtained froff m our customers with
respect to their period-end inventory l
evels and sales to end-users durd ing the reporting period), as supplemented by
management’s judgement. Our process forff
components does not differ materially from historical practices. The transaction price, which includes variabla e
consideration refleff cting the impact of discounts and allowances, may be subju ect to constraint and is included in the
net sales price only to the extent that it is probabla e that a significant reversal of the amount of the cumulative
revenue recognized will not occur in a future period. Actual amounts may ultimately differ froff m our estimates. If
l results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.
actuat
estimating reserves established forff
these variabla e consideration
rr
Our significant categories of sales discounts and allowances are as folff
lows:
Product Discounts.tt Product discounts are based on payment terms extended to our customers at the time of sale,
which include incentives offeff
prompt payment. We maintain a reserve for product discounts based on our
historical experience, including the timing of customer payments. To date, actuat
materially from our estimates.
l product discounts have not differed
red forff
Government Rebates. We are obligated to pay rebates for discounts including under the Medicaid Drug Rebate
Program and Medicare Part D. The liabia lity for such rebates consists of invoices received forff
claims from prior
quarters that remain unpaid, or forff which an invoice has not been received, and estimated rebates for the current
applicable reporting period. Such estimates are based on actuat
and fedff
accruar
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 reducd tion of revenue in the period the related sale is recognized. To
date, actuat
eral regulations, and relevant contractuat
l terms, as supplemented by management’s judgement. Our rebate
l calculations require us to project the magnitude of our sales that will be subju ect to these rebates. There is a
l government rebates have not differed materially froff m our estimates.
l historical rebates by state, estimated payor mix, state
rence between the list price, or the price at which we sell our products to our customers, and
Charger backs. The diffeff
the contracted price, or the price at which our customers sell our products to qualifieff d healthcare professionals, is
charged back to us by our customers. In addition to actuat
chargebacks based on estimated contractuat
channel. To date, actuat
l chargebacks have not differed materially from our estimates.
l chargebacks received, we maintain a reserve for
l discounts on product inventory l
evels on-hand in our distribution
rr
72
Payoa r and Pharmacy Rebates. We are obligated to pay rebates as a percentage of sales under payor and pharmacy
l rebate percentages, sales made
contracts. We estimate these rebates based on actuat
through the payor channel, and purchases made by pharmacies. To date, actuat
l payor and pharmacy rebates have not
differed materially from our estimates.
l historical rebates, contractuat
Patient Financial Assistii ance. To help patients afford our products, we offerff
with prescription drugr
the cost per claim we expect to receive in connection with inventory t
period end. To date, actuat
copay requirements. We accrue forff
rr
financial assistance to qualifieff d patients
patient financial assistance based on estimated claims and
hat remains in the distribution channel at
l patient financial assistance has not differed materially from our estimates.
r FeesFF
Distii rit butor and Othett
are generally recorded as a reducd tion of revenue, to certain customers that provide us with inventory mrr
data, and/or distribution services. Costs associated with such services are expensed as selling, general and
administrative to the extent we can demonstrate a separable benefit and fair value forff
distributor and other fees have not differed materially froff m our estimates.
. In connection with the sales of our products, we pay distributor and other fees, which
anagement,
l
such services. To date, actuat
Product Returns. We offeff
r our customers product returt n rights primarily limited to errors in shipment, damaged
product, and expiring product, provided it is within a specified period of the product expiration date, as set fort
the associated distribution agreement. Where actuat
based on benchmarking data forff
reduction of revenue in the period the related sale is recognized. Once product is returt ned, it is destroyed. To date,
actuat
rr
xperience. Such estimates are recorded as a
h in
s not availabla e, we estimate a returt ns allowance
l product returt ns have not differed materially from our estimates.
similar products and industry err
l returt ns history i
ff
Collaboratiott n Revenues. We have entered into collabor
certain rights to our product candidates to third parties. The terms of these arrangements typically include payment
to us for one or more of the folff
commercial milestone payments; and royalties on net sales of the out-licensed products.
lowing: non-refundabla e, up-front license fees; development, regulatory,rr
ation and license agreements under which we out-license
and/or
a
If the license to our intellectuat
Licenses of Io ntII ellectual Property.tt
performance obligations identified in the arrangement, we recognize revenue from non-refundabla e, up-front fees
allocated to the license when the license is transferff
red to the customer and the customer is able to use, and benefitff
from, the license. For licenses that are bundled with other promises, we assess the naturt e of the combined
performance obligation to determine whether it is satisfieff d over time or at a point in time and, if over time, the
appropriate method of measuring progress forff
s.
We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and
related revenue recognition.
es of recognizing revenue from non-refundabla e, up-front feeff
l property is determined to be distinct from the other
rr
purpos
Milestones. At the inception of each arrangement that includes development, regulatory,rr
milestones, we evaluate whether achieving the milestones is considered probabla e and estimate the amount to be
included in the transaction price using the most likely amount method. If it is probabla e that a significant revenue
reversal would not occur, the value of the associated milestone is included in the transaction price. Amounts forff
milestones that are not within our control, such as when achievement of a specified event is dependent on the
development activities of a third party or approvals from regulators, are not considered probabla e of being achieved
until such specifieff d event occurs. Revenue is recognized froff m the satisfaction of performance obligations in the
amount billabla e to the customer.
and/or commercial
Royao lties. For arrangements that include sales-based royalties, and under which 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. Diffeff
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.
l results and estimated amounts are adjud sted for in
rences between actuat
73
reCC dit Rii
isk. Financial instrumr
Concentratiott n of Co
primarily of cash and cash equivalents, accounts receivabla e and debt securities availabla e-for-sale. We have
establa ished guidelines to limit our exposure to credit risk by diversifying our investment portfolff
io with low-risk
investment-grade debt securities with maturities of up to three years and by placing our investments with high-
credit-quality finff ancial institutions to maintain liquidity. To date, we have not experienced any credit losses and do
not believe we are exposed to any significant credit risk in connection with these finff ancial instruments.
ents that potentially subju ect us to concentration of credit risk consist
We have entered into agreements forff
providers and distributors and all of our product sales of INGREZZA are to these customers. Four of these
customers represented approximately 91% of our total product sales for 2023 and appr
accounts receivabla e balance as of December 31, 2023.
the distribution of INGREZZA with a limited number of specialty pharmacy
oximately 98% of our
a
Cost of Revenues. Cost of revenues includes third-party manufact
overhead costs primarily for the manufact
in connection with our suppl
Corporation, royalty feeff
obsolete inventory t
future demand.
ff
y of valbenazine drugrr
rr
product under our collabor
u
s on net sales of elagolix, amortization of intangible assets, and adjud stments forff
ation with Mitsubishi Tanabe Pharma
excess and
a
o the extent management determines that the cost cannot be recovered based on estimates about
a
ff
urt e and distribution of INGREZZA drugrr
ing, transportation, freight, and indirect
urt
product sold, manufact
urt
ff
ing costs
ent, or R&D. R&D expenses primarily consist of preclinical and clinical trial costs, payroll
Research and Developmll
and benefitsff
certain facility-based costs, and costs associated with our collabor
milestones. All such costs are expensed as R&D when incurred.
costs, including stock-based compensation associated with employees involved in R&D activities,
a
ative arrangements, including event-based
tioii ns. We account for acquisitions of assets (or groups of assets) that do not meet the definff
Asset Acquisiii
business using the cost accumulation method, whereby the cost of the acquisition, including certain transaction
costs, is allocated to the assets (or group of assets) acquired on the basis of their relative faiff
r value(s) on the
measurement date. No goodwill is recognized in an asset acquisition. Intangible assets acquired in an asset
acquisition forff
date. Futurt e costs to develop these assets are expensed as R&D when incurred.
use in R&D activities which have no alternative futff urt e use are expensed as IPR&D on the acquisition
ition of a
tising ExpeEE
Adverdd
Advertising expense was $159.9 million forff
nse. Advertising costs are expensed as selling, general and administrative when incurred.
2023, $149.7 million for 2022 and $139.8 million for 2021.
sed ComCC pem nsatiott n. We grant stock options to purchase our common stock to eligible employees and
Stoctt k-Ba-
directors and also grant certain employees restricted stock units (RSUs) and performance-based restricted stock units
(PRSUs). Additionally, we allow employees to participate in an employee stock purchase plan (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. RSUs are valued based on the closing price of our common stock on the date of
grant. The faiff
r value of equity instruments expected to vest is 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 is recognized and amortized on a straight-line basis over the purchase period, which is
generally six months. PRSUs vest upon the achievement of certain predefinff ed company-specific performance-based
criteria. Expense related to PRSUs is generally recognized ratabla y over the expected performance period once the
vesting becomes probabla e.
predefinff ed performance-based criteria forff
ff
74
rences are expected to reverse. A valuation allowance is establa ished forff
Income Taxeaa s. Our income tax provision is computed under the asset and liabia lity method. Significant estimates are
required in determining our income tax provision. Some of these estimates are based on interprr etations of existing
tax laws or regulations. We recognize deferred tax assets and liabia lities forff
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
liabia lities are determined on the basis of the diffeff
respective finff ancial reporting amounts (temporary drr
the diffeff
more likely than not that some portion or all of the deferff
will not be realized. We periodically re-assess the need forff
based on various factors including our historical earnings experience by taxing jurisdiction, and forff ecasts 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 benefitff will be recognized against our income tax
provision in the period of such reversal.
rences) at enacted tax rates in effeff ct for the years in which
deferred tax assets for which it is
red tax assets, including net operating losses and tax credits,
a valuation allowance against our deferred tax assets
rence between the tax basis of assets and liabia lities and their
iffeff
We recognize tax benefitff s froff m uncertain tax positions only if it is more likely than not that the tax position will be
sustained upon
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.
examination by the tax authorities based on the technical merits of the position. An adverse
u
Earnings Per ShaSS re.ee Basic earnings per share are computed using the weighted average number of common shares
outstanding during the period. Diluted earnings per share are computed using the treasury srr
methods and refleff ct the weighted average number of common and potentially dilutive shares outstanding during the
period, excluding those which effeff ct would be anti-dilutive.
tock and if-converted
In 2021, we entered into the First Supplemental Indenture to the 2017 Indenturt e, pursuant to which we irrevocably
elected to settle the principal amount of the 2.25% fixed-rate convertible senior notes due May 15, 2024 in cash
upon conversion and to settle any conversion premium in either cash or shares of our common stock. As a result,
only the shares required to settle any conversion premium are considered dilutive under the if-cff onverted method.
Further, PRSUs forff which the performance condition has not been achieved are excluded froff m the calculation of
diluted earnings per share.
ff
ff
es. We entered into a collaboration and license agreement with Heptares,
urt e and commercialize worldwide, excluding in Japaa n, where Heptares retains the rights to develop,
urt e, and commercialize all compounds comprised of M1 receptor agonists, subju ect to certain exceptions.
2. Collaboration and License Agreements
Heptee artt
es Therapeutictt s Limiteii d, or Heptee artt
which became effeff ctive in December 2021, to develop and commercialize certain compounds containing sub-u type
selective muscarinic M1, M4, or duad l M1/M4 receptor agonists, for which we have the exclusive rights to develop,
manufact
manufact
With respect to such rights retained by Heptares, we retain the rights to opt in to profitff
pursuant to which we and Heptares will equally share in the operating profits and losses forff
Japaa n. Subju ect to specified conditions, we may elect to exercise such opt-in rights with respect to each such
compound either before initiation of the firff st proof of concept Phase 2 clinical trial forff
our receipt from Heptares of the top-line data froff m such clinical trial forff
development, manufacff
such compound or following
such compound. We are responsible for all
turing, and commercialization costs of any collabor
sharing arrangements,
such compounds in
ation product.
a
In connection with the agreement, we paid Heptares $100.0 million upfu roff nt, which, including certain transaction-
related costs, was expensed as IPR&D in 2021 as the license had no forff eseeable alternative futff urt e use. We
accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business.
In connection with the FDA's acceptance of our investigational new drugr
treatment of schizophrenia in June 2022, we paid Heptares a milestone of $30.0 million, which was expensed as
R&D in 2022.
application forff NBI-1117568 for the
Under the terms of the agreement, Heptares may be entitled to receive potential futff urt e payments of up tu
upon the achievement of certain event-based milestones and would be entitled to receive royalties on the futff urt e net
sales of any collaboa
ration product.
o $2.6 billion
75
Unless earlier terminated, the agreement will continue on a licensed product-by-licensed product and country-by-
country basis until the date on which the royalty term for such licensed product has expired in such country. On a
licensed product-by-licensed producd t and country-by-country basis, royalty payments would commence on the first
commercial sale of a licensed product and terminate on the later of (i) the expiration of the last patent covering such
licensed product in such country, (ii) a number of years froff m the first commercial sale of such licensed product in
such country and (iii) the expiration of regulatory err
xclusivity for such licensed product in such country.
a
a
ation term and upon 90 days’ written notice to Heptares folff
ation term. Following the expiration of the research collabor
We may terminate the agreement in its entirety or with respect to one or more targets upon
to Heptares during the research collabor
expiration of the research collabor
may terminate the agreement on a target-by-target basis in the event that we do not conduct any material
development activities outside of Japaa n with respect to a certain compound or licensed product within the appa
target class forff
days of receiving written notice. Either party may terminate the agreement, subju ect to specified conditions, (i) in the
event of material breach by the other party, subject to a cure period, (ii) if the other party challenges the validity or
enforceability of certain intellectuat
insolvent or takes certain actions related to insolvency.
a continuous period of not less than 365 days and do not commence any such activities within 120
180 days’ written notice
lowing the
ation term, Heptares
l property rights, subju ect to a cure period, or (iii) if the other party becomes
u
a
licable
ceutictt al Company Ln
imited, or Takeda. In 2020, we entered into an exclusive license agreement
Takeda Pharmarr
with Takeda, pursuant to which we acquired the exclusive rights to develop and commercialize certain early-to-mid
stage psychiatry crr
compounds. Luvadaxistat and the four non-clinical stage compounds have each been designated as a royalty-bearing
share product. We are responsible
product. NBI-1065845 and NBI-1065846 are currently each designated as a profit-ff
for all manufacff
turing, development, and commercialization costs of any royalty-bearing product.
ompounds, including luvadaxistat, NBI-1065845, NBI-1065846 and four
non-clinical stage
ff
With respect to NBI-1065845 and NBI-1065846, we and Takeda will equally share in the operating profits and
losses. Takeda retains the rights to opt-out of the profit-sharing arrangements, pursuant to which Takeda would be
entitled to receive potential futff urt e payments upon
such compounds and receive royalties on the future net sales of such compounds (in lieu of equally sharing in the
operating profits and losses). Takeda may elect to exercise such opt-out right for such compound immediately
following the completion of a second Phase 2 clinical trial forff
such compound, or, under certain circumstances
related to the development and commercialization activities to be performed by us, beforff e the initiation of a Phase 3
clinical trial forff
the achievement of certain event-based milestones with respect to
such compound.
u
In connection with the approval of our clinical trial appl
depressive disorder in 2022, we paid Takeda a milestone of $5.0 million, which was expensed as R&D in 2022.
ication forff NBI-1070770 for the treatment of majoa r
a
o $1.9 billion
Under the terms of the agreement, Takeda may be entitled to receive potential futff urt e payments of up tu
upon the achievement of certain event-based milestones and would be entitled to receive royalties on the future net
sales of any royalty-bearing product.
Unless earlier terminated, the 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-ff
such licensed product. On a licensed product-by-licensed product and country-by-country basis, royalty payments
wo luldd commence on thhe fifirst commerciiall s lale of a royyalltyy-bbeariingg prodduct a dnd termiinate on thhe llater of (f (i)i) hthe
ex ipira ition of thhe llast patent cove iri gng su hch royyalltyy-bbeariingg prodduc it in suchh count yry (, (ii)ii) a numbber o yf years froff m thhe
fifirst commerciiall s lale of suchh r yoyaltylty b-beariingg prodduc it in suchh count yry and (d (iii)iii) hthe e
ex lclusiivityity for suchh r yoyalltyy-bbeariingg prodduc it in suchh count yry.
share product, for so long as we continue to develop, manufact
ixpira ition of r geg lulatoryyrr
urt e, or commercialize
ff
76
We may terminate the agreement in its entirety or in one or more (but not all) of the U.S., Japaa n, the European
Union (EU) and the United Kingdom (UK) (collectively, the major markets) upon six months’ written notice to
Takeda (i) with respect to all licensed products prior to the first commercial sale of the first licensed product forff
which firff st 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 for which
first commercial sale occurs. We may terminate the agreement in its entirety or in one or more (but not all) of the
majoa r markets upon 12 months’ written notice to Takeda (i) with respect to all licensed products following the firff st
commercial sale of the first licensed product forff which firff st commercial sale occurs, or (ii) with respect to all
licensed products in one or more given target classes folff
lowing the firff st commercial sale of the first licensed product
in such target class forff which firff st commercial sale occurs. Takeda may terminate the agreement, subju ect to specifieff d
conditions, (i) if we challenge the validity or enforceability of certain Takeda intellectuat
l 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. Subju ect to a
cure period, either party may terminate the 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.
td.,dd or Idordd sirr a. In 2020, we entered into a collabor
Idordd sirr a PhaPP rmaceuticals Lll
Idorsia, pursuant to which we acquired the global rights to NBI-827104, a potent, selective, orally active and brain
penetrating T-type calcium channel blocker in clinical development forff
other potential indications, including essential tremor. We are responsible for all manufact
commercialization costs of any collabor
the treatment of a rare pediatric epilepsy and
ation and license agreement with
ing, development, and
ation product.
urt
a
a
ff
Under the terms of the agreement, Idorsia may be entitled to receive potential futff urt e payments of up tu
o $1.7 billion
upon the achievement of certain event-based milestones and would be entitled to receive royalties on the future net
sales of any collaboration product.
We may terminate the agreement, in its entirety or with respect to a particular compound or development candidate,
upon 90 days’ written notice to Idorsia. Further, in the event a party commits a material breach and faiff
ls to cure such
material breach within 90 days afteff
agreement in its entirety immediately upon
r receiving written notice thereof, tff he non-breaching party may terminate the
written notice to the breaching party.
u
Xenon PhaPP rmaceuticals Inc., or XenXX on. In 2019, we entered into a collaboration and license agreement with Xenon
to identify,ff
research and develop sodium channel inhibitors, including NBI-921352 and three preclinical candidates,
which compounds we have the exclusive rights to develop and commercialize. We are responsible for all
development and manufacff
turing costs of any collaboration product, subju ect to certain exceptions.
In connection with the agreement, we purchased approximately 1.4 million shares (at $14.196 per share) of Xenon
common stock in 2019. The purchased shares were recorded at a faiff
Xenon’s stock price and certain transferff
restrictions that were applicable to the shares on the measurement date.
r value of $14.1 million afteff
r considering
oval of our clinical trial appl
In connection with the regulatory arr
a
ppr
treatment of focal onset seizures in aduld ts in 2021, we paid Xenon a regulatory mrr
a purchase of appr
a
shares were recorded at a faiff
restrictions that were applicable to the shares on the measurement date. The remaining $5.4 million of the milestone
payment was expensed as R&D in 2021.
oximately 0.3 million shares (at $19.9755 per share) of Xenon common stock. The purchased
r considering Xenon’s stock price and certain transferff
ication in Europe for NBI-921352 for the
ilestone of $10.0 million, including
r value of $4.6 million afteff
a
In connection with the FDA's acceptance of our amended KAYAK
regulatory mrr
ilestone of $15.0 million, including a purchase of appr
share) of Xenon common stock. The purchased shares were recorded at a faiff
Xenon’s stock price on the measurement date. The remaining $7.3 million of the milestone payment was expensed
as R&D in 2022.
TM studyt
protocol in 2022, we paid Xenon a
oximately 0.3 million shares (at $31.855 per
r value of $7.7 million afteff
r considering
KK
a
77
o $1.7 billion
Under the terms of the agreement, Xenon may be entitled to receive potential futff urt e payments of up tu
upon the achievement of certain event-based milestones and would be entitled to receive royalties on the future net
sales of any collaboration product. Xenon retains the right to elect to co-develop one product in a majoa r indication,
pursuant to which Xenon would receive a mid-single digit percentage increase in royalties earned on the future net
sales of such product in the U.S. and we and Xenon would equally share in the development costs of such product in
the appl
a
product outside the U.S.
a
icable indication, except where such development costs relate solely to the regulatory arr
ppr
oval of such
Unless earlier terminated, the agreement will continue on a licensed product-by-licensed product and country-by-
such product in such country. Upon the expiration of the
country basis until the expiration of the royalty term forff
royalty term for a particular licensed product and country, the license obtained by us with respect to such product
and country will become fully paid, royalty free, perpetuat
90 days’ written notice to Xenon, provided that such unilateral termination will not be effeff ctive forff
until we have used commercially reasonabla e efforts to complete certain specified clinical studi
terminate the agreement in the event of a material breach in whole or in part, subju ect to specified conditions.
l and irrevocable. We may terminate the agreement upon
certain products
es. Either party may
u
t
Voyao gea r TheTT rapea utictt s, Inc., or VoyVV ager.
2019 Voyao ger Agreement. In 2019, we entered into a collaboration and license agreement with Voyager (the 2019
Voyager Agreement), pursuant to which we retain certain rights to develop and commercialize the Friedreich’s
ataxia program and two undisclosed programs. We are responsible for all development and commercialization costs
of any collabor
commercialization rights retained by Voyager.
ation product under the 2019 Voyager Agreement, subject to certain co-development and co-
a
In connection with the 2019 Voyager Agreement, we purchased approximately 4.2 million shares (at $11.9625 per
share) of Voyager common stock (the 2019 Purchased Shares), which are subject to certain transferff
ial
ownership, and voting restrictions for a period of up to three years from the effeff ctive date of the 2023 Voyager
Agreement (defined below). The 2019 Purchased Shares were recorded at a fair value of $54.7 million afteff
r
restrictions that were applicable to the shares on the
considering Voyager’s stock price and certain transferff
measurement date.
, beneficff
Under the terms of the 2019 Voyager Agreement, Voyager may be entitled to receive potential futff urt e payments of
up to $1.3 billion upon
on the futff urt e net sales of any collaboration product, subju ect to certain co-development and co-commercialization
rights retained by Voyager.
the achievement of certain event-based milestones and would be entitled to receive royalties
u
Unless terminated earlier, the 2019 Voyager Agreement will continue in effeff ct until the expiration of the last to
expire royalty term with respect to any collabor
ation product under the agreement or the last expiration or
termination of any exercised co-development and co-commercialization rights by Voyager as provided forff
2019 Voyager Agreement. We may terminate the 2019 Voyager Agreement upon
Voyager prior to the firff st commercial sale of any collaboration product under the 2019 Voyager Agreement or upon
u
one year afteff
ation product
r the date of notice if such notice is provided after the firff st commercial sale of any collabor
under the 2019 Voyager Agreement.
180 days’ written notice to
in the
u
a
a
78
2023 Voyao ger Agreement. In 2023, we entered into a collaboration and license agreement with Voyager (the 2023
Voyager Agreement), pursuant to which we acquired the global rights to the gene therapy products directed to the
gene that encodes glucosylceramidase beta 1 (GBA1) for the treatment of Parkinson's disease and other diseases
associated with GBA1 (the GBA1 Program), and three gene therapy programs directed to rare central nervous
system (CNS) targets, each enabled by Voyager's next-generation TRACRR
products subju ect to the GBA1 Program, we are responsible for all development and commercialization costs of any
such products, including in the U.S., where Voyager retains certain co-development and co-commercialization
rights. Voyager may elect to exercise such rights, pursuant to which we and Voyager would equally share in the
operating profits and losses of such products in the U.S. (in lieu of Voyager being entitled to receive potential futff urt e
payments of certain event-based milestones uponu
net sales of such products in the U.S.), folff
trial forff
receive potential future payments upon the achievement of certain event-based milestones outside the U.S. and
would be entitled to receive royalties on the future net sales of any such product outside the U.S. With respect to
collabor
a
for all development and commercialization costs for any such products.
ation products subju ect to the three gene therapy programs directed to rare CNS targets, we are responsible
each such product. Irrespective of Voyager’s election to exercise such rights, Voyager may be entitled to
lowing Voyager’s receipt of the top-line data froff m a first Phase 1 clinical
their achievement in the U.S. and receive royalties on the future
ERTM capsids. With respect to collaboration
a
a
nted to Voyager's board of directors with an initial term expiring in 2024.
In connection with the 2023 Voyager Agreement, we paid Voyager $175.0 million upfroff nt, including a purchase of
approximately 4.4 million shares (at $8.88 per share) of Voyager common stock (the 2023 Purchased Shares), which
are subject to certain transfer, beneficial ownership, and voting restrictions for a period of up to three years fromff
the
effeff ctive date of the 2023 Voyager Agreement. In addition, as part of the collabor
ation, Jude Onyia, Ph.D., Chief
Scientificff Offiff cer of Neurocrine, was appoi
Mr. Onyia (or another individual designated by us) will be nominated for election to Voyager's board of directors
annually for a maximum durd ation of 10 years from the effeff ctive date of the 2023 Voyager Agreement. As a result,
our strategic investment in Voyager became subject to the equity method of accounting, and Voyager became a
related party under ASC 850, following our purchase of the 2023 Purchased Shares, afteff
2019 Purchased Shares, we owned appr
option to account for our strategic investment in Voyager as we believe it creates greater transparency regarding the
investment's fair value at futff urt e reporting dates. The 2023 Purchased Shares were recorded at a faiff
million after considering Voyager’s stock price on the measurement date. The remaining $143.9 million of the
purchase price, which includes certain transaction-related costs, was expensed as IPR&D in 2023 as the license had
no foreseeable alternative futff urt e use. We accounted for the transaction as an asset acquisition as the set of acquired
assets did not constitute a business. We recognized unrealized gains of $15.5 million for 2023 and $14.5 million forff
2022 and an unrealized loss of $8.7 million forff
2023, the faiff
r which, together with the
oximately 19.9% of the voting stock of Voyager. We elected the fair value
r value (Level 1) of our strategic investment in Voyager was $72.4 million.
2021 on our strategic investment in Voyager. As of December 31,
r value of $31.3
a
Under the terms of the 2023 Voyager Agreement, Voyager may be entitled to receive potential futff urt e payments of
up to $6.1 billion upon
on the futff urt e net sales of any collaboration product, subju ect to certain co-development and co-commercialization
rights retained by Voyager.
the achievement of certain event-based milestones and would be entitled to receive royalties
u
Unless terminated earlier, the 2023 Voyager Agreement will continue in effeff ct until the expiration of the last to
expire royalty term with respect to any collabor
expiration or termination of any exercised co-development and co-commercialization rights by Voyager as provided
180 days’ written notice
for in the 2023 Voyager Agreement. We may terminate the 2023 Voyager Agreement upon
to Voyager prior to the firff st commercial sale of any collaboration product under the 2023 Voyager Agreement or
upon one year afteff
product under the 2023 Voyager Agreement.
r the date of notice if such notice is provided after the firff st commercial sale of any collabor
ation product under the 2023 Voyager Agreement or the last
ation
u
a
a
a
– PorPP tela & Ca,CC S.A., or BIABB L. In 2017, we received from BIAL a license to commercialize and market
) in the U.S. and Canada. We launched ONGENTYS in the U.S. as an FDA-approved
tions in
BIALII
ONGENTYS® (opicapone
add-on treatment to levodopa/carbir dopa in patients with Parkinson's disease experiencing motor fluff ctuat
2020. In 2023, we provided BIAL with written notice of termination of the license agreement to commercialize and
market ONGENTYS in the U.S. and Canada, and recognized reserves forff ONGENTYS inventory orr
totaling $5.2 million in cost of revenues in connection with the termination, which became effective in December
2023, as management determined the cost cannot be recovered.
bsolescence
79
ff
u
u
product forff
Corporatiott n, or MTPCTT
y agreement with MTPC,
commercial use in such markets. MTPC is
.CC We out-licensed the rights to valbenazine in Japaa n and other
Mitsii ubishi Tanabe Pharmarr
select Asian markets to MTPC in 2015. In 2020, we entered into a commercial suppl
y MTPC with valbenazine drugrr
pursuant to which we suppl
responsible for all development, manufact
urt
ing, and commercialization costs of valbenazine in such markets.
MTPC launched DYSVAL® (valbenazine) in Japan for the treatment of tardive dyskinesia in June 2022 and
subsu equently in other select Asian markets, where it is marketed as REMLEAS® (valbenazine). We receive royalties
at tiered percentage rates on MTPC net sales of valbenazine. In connection with MTPC's first commercial sale of
DYSVAL in Japaa n, we received a milestone payment of $20.0 million in 2022. ASC 606 provides a royalty
a sales-based or usage-based royalty promised in exchange for a license of intellectuat
exception forff
the royalty exception, the milestone would be recognized as revenue only when the later of (1) the subsequent sale
or usage occurs or (2) the performance obligation to which some or all of the sales-based or usage-based royalty has
been allocated has been satisfied (or partially satisfieff d). As the milestone related to a license of intellectuat
l property
and was contingent upon MTPC’s first commercial sale of DYSVAL in Japaa n, the milestone was recognized as
revenue in 2022.
l property. Under
u
Under the terms of our license agreement with MTPC, we may be entitled to receive potential futff urt e payments of upu
to $30.0 million upon
the achievement of certain sales-based milestones and are entitled to receive royalties at tiered
percentage rates on futff urt e MTPC net sales of valbenazine for the longer of 10 years or the life off
rights. MTPC may terminate the agreement upon
product rights would revert to us.
180 days’ written notice to us. In such event, all out-licensed
f the related patent
u
AbbVieVV Inc., or AbbVieVV .ee We out-licensed the global rights to elagolix to AbbVie in 2010. AbbVie is responsible for
all development and commercialization costs of elagolix.
AbbVie launched ORILISSA® (elagolix tabla ets) in the U.S. forff
with endometriosis in August 2018 and ORIAHNN® (elagolix, estradiol and norethindrone acetate capsules and
elagolix capsules) in the U.S. forff
the treatment of heavy menstrual bleeding dued
receive royalties at tiered percentage rates on AbbVie net sales of elagolix and recognized elagolix royalty revenue
of $16.7 million forff
the treatment of moderate to severe pain associated
2022 and $22.3 million for 2021.
2023, $21.2 million forff
roids in June 2020. We
to uterine fibff
Under the terms of our license agreement with AbbVie, we may be entitled to receive potential futff urt e payments of
up to $366.0 million upon the achievement of certain event-based milestones and are entitled to receive royalties at
tiered percentage rates on futff urt e AbbVie net sales of elagolix for the longer of 10 years or the life off
patent rights. AbbVie may terminate the agreement upon
licensed product rights would revert to us.
f the related
180 days’ written notice to us. In such event, all out-
u
3. Debt Securities
The folff
comprehensive income (loss) and faiff
l maturt
and contractuat
ity.
lowing tabla e presents the amortized cost, unrealized gain and loss recognized in accumulated other
r value of debt securities availabla e-for-sale, aggregated by majoa r security type
December 31,
2023
December 31,
2022
(in mii
illions)s
Contractual
Maturity
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Fair
Value
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Fair
Value
Commercial paper
0 to 1 years
$
53.5
$
— $
— $
53.5
$
Corporate debt securities
0 to 1 years
382.1
Securities of government-
sponsored entities
0 to 1 years
346.1
781.7
$
$
0.1
0.2
0.3
(1.0)
381.2
(0.5)
$
(1.5) $
345.8
780.5
$
156.2
296.2
283.4
735.8
$
$
— $
(0.2) $
—
—
(3.2)
(6.0)
— $
(9.4) $
156.0
293.0
277.4
726.4
Corporate debt securities
1 to 3 years
$
483.5
$
2.9
$
(0.4) $
486.0
$
259.5
$
0.2
$
(4.3) $
255.4
Securities of government-
sponsored entities
1 to 3 years
201.1
684.6
$
$
0.5
3.4
(0.1)
$
(0.5) $
201.5
687.5
45.0
$
304.5
$
—
0.2
(1.0)
44.0
$
(5.3) $
299.4
80
Unrealized losses on our availabla e-for-sale debt security investments were primarily due to changes in interest rates.
These investments are of high credit quality, and 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 beforff e recovery of their amortized cost basis. No
allowance forff
credit losses was recognized as of December 31, 2023 or 2022.
lowing tabla e presents debt securities available-forff
The folff
December 31, 2023, aggregated by majoa r security type and length of time in a continuous loss position.
-sale that were in an unrealized loss position as of
illill ons)
(in mii
Corporate debt securities
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
$
$
265.1
214.6
$
$
(0.4) $
183.8
(0.2) $
16.7
$
$
(1.0) $
448.9
(0.4) $
231.3
$
$
(1.4)
(0.6)
lowing tabla e presents debt securities available-forff
The folff
December 31, 2022, aggregated by majoa r security type and length of time in a continuous loss position.
-sale that were in an unrealized loss position as of
(in mii
illill ons)
Commercial paper
Corporate debt securities
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
$
$
$
32.1
199.5
107.7
$
$
$
(0.2) $
(1.9) $
— $
$
299.1
— $
(5.6) $
32.1
498.6
(2.5) $
198.4
$
(4.5) $
306.1
$
$
$
(0.2)
(7.5)
(7.0)
4. Fair Value Measurements
The folff
lowing tabla e presents a summary of financial assets, which were measured at fair value on a recurring basis.
ff
s
illions)s
(in mii
Cash and money market fund
Restricted cash
Commercial paper
Corporate debt securities
Securities of government-sponsored
entities
Equity securities
December 31,
2023
December 31,
2022
Fair
Value
Leveling
Level 1
Level 2
Fair
Value
Leveling
Level 1
Level 2
$
$
251.1
8.0
53.5
867.2
547.3
161.9
1,889.0
$
$
251.1
8.0
—
—
—
161.9
421.0
$
$
— $
—
53.5
867.2
262.9
7.8
156.0
548.4
547.3
—
1,468.0
$
321.4
102.1
1,398.6
$
$
262.9
7.8
—
—
—
102.1
372.8
$
$
—
—
156.0
548.4
321.4
—
1,025.8
5. Convertible Senior Notes
On May 2, 2017, we completed a private placement of $517.5 million in aggregate principal amount of 2.25% fixed-
rate convertible senior notes due May 15, 2024 (the 2024 Notes) and entered into the 2017 Indenturt e with respect to
the 2024 Notes. Interest on the 2024 Notes is dued
semi-annually on May 15 and November 15 of each year.
In 2020, we repurchased $136.2 million aggregate principal amount of the 2024 Notes forff
price of $186.9 million in cash. In 2022, we repurchased $210.8 million aggregate principal amount of the 2024
Notes forff
million loss on extinguishment.
an aggregate repurchase price of $279.0 million in cash, which resulted in the recognition of a $70.0
an aggregate repurchase
The folff
lowing tabla e presents a summary of the 2024 Notes as of December 31, 2023.
(in mii
illions)s
2024 Notes
Principal
Amount
Unamortized
Issuance Costs
Net Carrying
Amount
Amount
Fair Value
$
170.4
$
(0.3) $
170.1
$
295.7
Leveling
Level 2
81
The folff
lowing tabla e presents a summary of the 2024 Notes as of December 31, 2022.
(in mii
illions)s
2024 Notes
Principal
Amount
Unamortized
Issuance Costs
Net Carrying
Amount
Amount
Fair Value
$
170.4
$
(1.0) $
169.4
$
268.0
Leveling
Level 2
The folff
lowing tabla e presents a summary of the interest expense of the 2024 Notes.
(in mii
illions)s
Coupon interest
Amortization of debt discount and issuance costs
Total interest expense
Year Ended December 31,
2023
2022
2021
$
$
3.9
0.7
4.6
$
$
5.9
1.2
7.1
$
$
8.5
17.3
25.8
in the
The initial conversion rate forff
the 2024 Notes, which is subject to adjustment in some events (as provided forff
2017 Indenturt e), is 13.1711 shares of common stock per $1,000 principal amount and equivalent to an initial
conversion price of approximately $75.92 per share, refleff cting a conversion premium of appr
the closing price of $53.28 per share of our common stock on April 26, 2017.
a
oximately 42.5% above
We may redeem for cash all or part of the 2024 Notes if the last reported sale price (as definff ed in the 2017
Indenturt e) of our common stock has been at least 130% of the conversion price then in effeff ct (equal to $98.70 as of
December 31, 2023) 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.
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) durd ing any calendar quarter (and only durd ing 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 (equal to $98.70 as of December 31, 2023) on each applicable trading day;
(ii) during the five business-day period immediately afteff
measurement period) in which the trading price (as definff ed in the 2017 Indenturt e) per $1,000 principal amount
each trading day of the measurement period was less than 98% of the product of the last
of the 2024 Notes forff
reported sale price of our common stock and the conversion rate on each such trading day;
r any five consecutive trading-day period (the
(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 forff
preceding the redemption date.
redemption, until the close of business on the business day immediately
Until the close of business on the scheduled trading day immediately preceding May 15, 2024, holders of the 2024
Notes may convert the 2024 Notes at any time. On January 4, 2024, we provided notice to the holders of the 2024
Notes electing to settle all conversions of the 2024 Notes in cash. As such, upon
principal amount of their 2024 Notes and any conversion premium, 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 2017 Indenturt e), in cash.
conversion, holders will receive the
u
If we undergo a fundamental change (as definff ed in the 2017 Indenturt e), subject to certain conditions, holders of the
2024 Notes may require us to repurchase forff
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 funda
Indenturt e) occurs prior to January 15, 2024, we would, in certain circumstances, increase the conversion rate forff
holder who elects to convert their notes in connection with the make-whole funda
mental change (as definff ed in the 2017
mental change.
a
ff
ff
82
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. 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 2017
lt with respect to the 2024 Notes, including that upon certain events of
Indenturt e contains customary err
default, 100% of the principal and accrued and unpaid interest on the 2024 Notes will automatically become due and
payabla e.
vents of defauff
6. Goodwill and Intangible Assets
The folff
our consolidated balance sheets.
lowing tabla e presents the changes in the carryirr ng amount of goodwill. Goodwill is included in other assets in
illions)s
(in mii
Balance as of December 31, 2021
Goodwill recognized in connection with business combination
Foreign currency translation adjustments
Balance as of December 31, 2022
Foreign currency translation adjustments
Balance as of December 31, 2023
Amount
—
5.2
0.2
5.4
0.4
5.8
$
$
The folff
lowing tabla e presents inforff mation relating to our recognized intangible assets as of December 31, 2023.
(doldd lall
rs in millioii
ns)s
Developed product rights
Acquired IPR&D
Total intangible assets, net
Usefulff Life
10 years
Indefinite
$
$
Gross
Carrying
Amount
35.9
3.6
Accumulated
Amortization
4.0
$
—
$
Net
Carrying
Amount
$
$
31.9
3.6
35.5
our finite-lived intangible assets as
Amount
3.6
3.6
3.6
3.6
3.6
13.9
$
$
$
$
$
$
December 31,
2023
2022
21.5
9.7
12.3
43.5
(5.2)
38.3
$
$
12.0
5.6
17.5
35.1
—
35.1
$
$
lowing tabla e presents appr
The folff
of December 31, 2023.
a
oximate future annual amortization expense forff
illions)s
(in mii
Year ending December 31, 2024
Year ending December 31, 2025
Year ending December 31, 2026
Year ending December 31, 2027
Year ending December 31, 2028
r
Thereafteff
7. Other Balance Sheet Details
Inventory,rr
net, consisted of the following:
(in mii
illions)s
Raw materials
Work in process
Finished goods
Less inventory r
Total inventory,r
rr
eserves
net
83
Property and equipment, net, consisted of the following:
illions)s
(in mii
Tenant improvements
equipment
Scientificff
Computer equipment
tures
Furniture and fixff
Less accumulated depreciation
Total property and equipment, net
Accounts payable and accrued liabia lities consisted of the following:
(in mii
illions)s
Sales rebates and reserves
Accruerr d employee related costs
Current branded prescription drug feeff
Accruerr d development costs
Current income taxes payable
Accounts payable and other accruerr d liabia lities
Total accounts payable and accruerr d liabia lities
Other long-term liabia lities consisted of the following:
(in mii
illions)s
Noncurrent income taxes payable
Noncurrent branded prescription drug feeff
Total other long-term liabia lities
December 31,
2023
2022
38.1
79.6
25.2
10.9
153.8
(83.0)
70.8
$
$
37.9
58.8
21.5
6.7
124.9
(66.3)
58.6
December 31,
2023
2022
139.3
86.2
45.7
44.3
24.4
108.9
448.8
$
$
131.9
72.8
27.5
39.1
9.0
67.3
347.6
December 31,
2023
2022
96.0
10.3
106.3
$
$
19.8
9.9
29.7
$
$
$
$
$
$
lowing tabla e presents a reconciliation of cash, cash equivalents and restricted cash reported within the
The folff
consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of
cash floff ws.
(in mii
illions)s
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
December 31,
2023
2022
$
$
251.1
8.0
259.1
$
$
262.9
7.8
270.7
84
8. Earnings Per Share
Earnings per share were calculated as follows:
(in mii
illill ons, except per share datdd a)tt
Net income - basic and diluted
Weighted-average common shares outstanding:
Basic
Effeff ct of dilutive securities
Diluted
Earnings per share:
Basic
Diluted
Year Ended December 31,
2023
2022
2021
$
249.7
$
154.5
$
89.6
97.7
3.3
101.0
95.8
3.1
98.9
$
$
2.56
2.47
$
$
1.61
1.56
$
$
94.6
3.3
97.9
0.95
0.92
Shares which have been excluded froff m diluted per share amounts because their effect would have been anti-dilutive
2022 and 4.1 million for 2021.
were 4.7 million forff
2023, 4.6 million forff
Incentivtt e PlaPP n. In May 2022, our stockholders approved an amendment of the 2020 Equity Incentive
9. Stock-Based Compensation
2020 Equityii
Plan (as so amended, the Amended 2020 Plan). The Amended 2020 Plan provides forff
stock appr
awards. As of December 31, 2023, 10.5 million shares of common stock remain availabla e forff
Amended 2020 Plan.
a
eciation rights, restricted stock awards, restricted stock unit awards, performance awards, and other
the grant of stock options,
future grant under the
each share issued pursuant to an appr
Under the terms of the Amended 2020 Plan, the number of shares of common stock availabla e forff
(i) reducd ed by (a) one share forff
2020 Plan) granted under the Amended 2020 Plan and (b) 2.13 shares for each share issued pursuant to a full value
award (as defined in the Amended 2020 Plan) granted under the Amended 2020 Plan on or afteff
r May 18, 2022; and
(ii) increased by (a) one share forff
each share subject to an appr
issuance under the terms of the Amended 2020 Plan and (b) 2.13 shares for each share subju ect to a fulff
that becomes availabla e again for issuance under the terms of the Amended 2020 Plan on or afteff
eciation award that becomes availabla e again for
eciation award (as defined in the Amended
issuance will be:
r May 18, 2022.
l value award
a
a
2011 Equityii
Plan was a stockholder-appr
further awards can or will be made.
Incentivtt e PlaPP n. In May 2011, we adopted the 2011 Equity Incentive Plan (the 2011 Plan). The 2011
oved plan pursuant to which outstanding awards have been made, but from which no
a
ee Stoctt k Purchase PlaPP n. In May 2021, our stockholders approved an amendment and restatement of
2018 Emplm oyll
the 2018 Employee Stock Purchase Plan (as so amended and restated, the Amended 2018 ESPP). As of December
future issuance under the Amended 2018 ESPP.
31, 2023, 0.5 million shares of common stock remain availabla e forff
Stoctt k-Ba-
statements of income and comprehensive income by line-item folff
sed ComCC pem nsatiott n ExpEE ense.ee The effect of stock-based compensation expense on our consolidated
lows:
(in mii
illill ons)
Selling, general and administrative expense
Research and development expense
Total stock-based compensation expense
Year Ended December 31,
2023
2022
2021
$
$
126.3
68.0
194.3
$
$
115.4
57.7
173.1
$
$
85.8
48.4
134.2
85
Stock-based compensation expense by award-type follows:
(in mii
illill ons)
Stock options
RSUs
PRSUs
ESPP
Total stock-based compensation expense
Year Ended December 31,
2023
2022
2021
$
$
91.6
93.4
4.6
4.7
194.3
$
$
62.6
86.4
20.1
4.0
173.1
$
$
60.5
62.5
7.6
3.6
134.2
As of December 31, 2023, unrecognized stock-based compensation expense by award-type and the weighted-
average period over which such expense is expected to be recognized, as appl
icable, was as follows:
a
ns)s
rs in millioii
(doldd lall
Stock options
RSUs
PRSUs
Unrecognized
Expense
$
$
$
94.1
162.4
22.3
Weighted-Average
Recognition Period
2.3 years
2.3 years
r value of stock options using the Black-Scholes option-pricing model on the date of grant. The Black-Scholes
Stoctt k OptOO iott ns. Typically, stock options have a 10-year term and vest over a three to four
price of stock options granted is equal to the closing price of our common stock on the date of grant. We estimate
the faiff
option-pricing model incorpor
interest rates. The weighted-average grant-date fair values of stock options granted were $45.19 for 2023, $32.05 for
2022 and $45.02 for 2021.
ates various and highly sensitive assumptions including expected volatility, term and
-year period. The exercise
r
ff
r value of each stock option granted was estimated on the date of grant using the Black-Scholes option-
The faiff
pricing valuation model with the folff
lowing weighted-average assumptions:
Risk-free interest rate
Expected volatility of common stock
Dividend yield
Expected option term
The weighted-average valuation assumptions were determined as follows:
Year Ended December 31,
2023
3.9 %
40.8 %
0.0 %
5.5 years
2022
1.8 %
42.6 %
0.0 %
5.0 years
2021
0.6 %
45.9 %
0.0 %
5.2 years
•
•
•
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 offiff cers have a longer expected option term than all other employees.
The risk-free interest rate forff
a
interest rates appr
opriate for the expected term of our employee stock options.
periods within the contractuat
l life off
f a stock option is based upon observed
• We have not historically declared or paid dividends and do not intend to do so in the forff eseeable future.
The folff
lowing tabla e presents summary of activity related to stock options.
ted average data)tt
ept weighi
illions, es xcee
(in mii
Outstanding at December 31, 2022
Granted
Exercised
Canceled
Outstanding at December 31, 2023
Exercisabla e at December 31, 2023
Number of
Stock Options
Weighted
Average
Exercise Price
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic Value
$
9.0
1.9
$
(0.8) $
(0.1) $
$
10.0
$
6.8
79.10
103.66
66.84
98.29
84.46
78.75
86
6.2 years $
5.2 years $
467.8
361.3
The total intrinsic value of stock options exercised was $39.9 million forff
million forff
$20.7 million for 2021.
2021. Cash received froff m stock option exercises was $55.5 million forff
2023, $39.7 million forff
2022 and $58.0
2023, $37.0 million for 2022 and
Stoctt k UniUU tsii
. RSUs typically vest over a four-year period and may be subju ect to a deferff
Restritt ctedtt
arrangement at the election of eligible employees. The fair value of RSUs is based on the closing sale price of our
common stock on the date of issuance. The total fair value of RSUs that vested was $101.0 million forff
2023, $72.4
million forff
2022 and $64.3 million forff
red deliveryrr
2021.
The folff
lowing tabla e presents a summary of activity related to RSUs.
ted average data)tt
ept weighi
illions, es xcee
(in mii
Unvested at December 31, 2022
Granted
Released
Canceled
Unvested at December 31, 2023
Number of
RSUs
Weighted-Average
Grant Date
Fair Value
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic Value
$
2.3
$
1.1
(0.9) $
(0.1) $
$
2.4
92.61
103.54
93.46
95.62
97.32
1.3 years $
312.5
nce-Ba-
sed Restricted StoSS ck Units.tt PRSUs vest based on the achievement of certain predefinff ed Company-
Perforff marr
specific performance criteria. Any unvested PRSUs will expire if it is determined the related performance criteria
has not been met durd ing the applicable three to four-
based on the closing sale price of our common stock on the date of grant. The fair value of PRSUs that vested during
2023 was $34.4 million. No PRSUs vested durd ing 2022 or 2021.
year performance period. The faiff
r value of PRSUs is estimated
ff
The folff
lowing tabla e presents a summary of activity related to PRSUs.
ted average data)tt
ept weighi
illions, es xcee
(in mii
Unvested at December 31, 2022
Granted
Released
Canceled
Unvested at December 31, 2023
Number of
PRSUs
Weighted-Average
Grant Date
Fair Value
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic Value
$
0.5
0.3
$
(0.3) $
(0.2) $
$
0.3
101.00
97.22
98.43
115.60
89.23
1.7 years $
33.0
ee Stoctt k Purchase PlaPP n. Under the Amended 2018 ESPP, eligible employees may purchase shares of our
Emplm oyll
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 firff st day of
the offering period or (ii) the market value per share of common stock on the purchase date.
10. Income Taxes
The folff
international operations.
lowing tabla e presents income froff m continuing operations before provision for income taxes for domestic and
illill ons)
(in mii
U.S.
Foreign
Income before provision for income taxes
Year Ended December 31,
2023
2022
2021
$
$
409.2
(77.1)
332.1
$
$
218.0
(4.1)
213.9
$
$
101.4
—
101.4
87
The folff
lowing tabla e presents the components of income tax expense (benefit) for continuing operations.
illill ons)
(in mii
Current:
Federal
State
Current income taxes
Deferred:
Federal
State
Deferred income taxes
Provision for income taxes
Year Ended December 31,
2023
2022
2021
$
$
115.0
28.1
143.1
(45.2)
(15.5)
(60.7)
82.4
$
$
17.1
20.3
37.4
27.5
(5.5)
22.0
59.4
$
$
—
6.3
6.3
5.9
(0.4)
5.5
11.8
to the
Year Ended December 31,
2023
2022
2021
The provision for income taxes on earnings subju ect to income taxes diffeff
following:
rs from the statutory federal rate dued
(in mii
illill ons)
Federal income taxes at 21%
State income tax, net of federal benefitff
Branded prescription drug feeff
Loss on extinguishment of convertible senior notes
Stock-based compensation expense
Offiff cer compensation
Change in tax rate
Expired tax attributes
Research credits
Change in valuation allowance
Other
Provision for income taxes
$
$
69.7
17.5
8.7
—
(3.9)
9.6
(2.1)
—
(42.2)
22.0
3.1
82.4
The folff
lowing tabla e presents the significant components of our deferred tax assets.
illions)s
(in mii
Deferred tax assets:
Net operating losses
Research and development credits
Capia talized research and development
Stock-based compensation expense
Operating lease assets
Intangible assets
Other
Total deferff
red tax assets
Deferred tax liabia lities:
Operating lease liabia lities
Other
Total deferff
Net of deferff
Valuation allowance
Net deferff
red tax assets
red tax liabia lities
red tax assets and liabia lities
88
$
$
$
$
44.9
11.8
6.5
12.0
(2.5)
9.2
(1.3)
—
(29.9)
7.4
1.3
59.4
$
$
December 31,
2023
2022
36.4
55.3
178.7
52.7
72.0
110.0
25.0
530.1
(66.3)
(12.3)
(78.6)
451.5
(88.9)
362.6
$
$
21.3
6.2
4.8
—
(11.3)
7.0
0.2
0.6
(22.0)
5.0
—
11.8
27.4
108.9
91.1
45.9
26.8
80.7
24.9
405.7
(21.0)
(11.8)
(32.8)
372.9
(67.0)
305.9
As of December 31, 2023, our deferred tax assets were primarily the result of net operating loss carry forwards,
capitalized research costs, acquired intangible assets and tax credit carryforwards. As of December 31, 2023 and
2022, we recorded a valuation allowance of $88.9 million and $67.0 million, respectively, against our gross deferff
tax asset balance.
red
As of 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. As of December 31, 2023, management determined
there was sufficient positive evidence to conclude that it is more likely than not deferred tax assets of $362.6 million
are realizable. The recorded valuation allowance of $88.9 million consisted primarily of state and foreign net
operating loss carryforwards and state credit carryforwards for which management cannot conclude it is more likely
than not to be realized.
As of December 31, 2023, we had state and foreign income tax net operating loss carryforwards of $286.0 million
and $134.3 million, respectively. We had no fedff
eral income tax operating loss carryforwards as of December 31,
2023. Califorff nia net operating losses will begin to expire in 2029 unless previously utilized and the net operating
losses related to other states will begin to expire in 2026. Swiss net operating losses will begin to expire in 2030
unless previously utilized. UK net operating losses will carry forward indefinitely.
As of December 31, 2023, we had state R&D tax credit carryforwards of $85.6 million. California R&D tax credits
carry forward indefinitely, while R&D tax credits related to other states will begin to expire in 2033 unless
previously utilized.
Additionally, the future utilization of our net operating loss and R&D tax credit carryforwards to offsff et future
taxabla e income may be subju ect 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, 2023.
The impact of an uncertain income tax position on the income tax returt n must be recognized at the largest amount
that is more-likely-than-not to be sustained upon
position will not be recognized if it has less than a 50% likelihood of being sustained.
audit by the relevant taxing authority. An uncertain income tax
u
We recognize interest and penalties related to income tax matters in income tax expense. We had accruarr
interest related to income tax matters of $3.1 million and $1.2 million, respectively, as of December 31, 2023 and
penalties relates to income tax matters of $2.2 million and $0.4 million, respectively, as
2022. We had accruals forff
ls for interest and penalties related to income tax matters were not material
of December 31, 2023 and 2022. Accruar
as of December 31, 2021.
ls for
We are subject to taxation in the U.S. and various state and foreign jurisdictions. Tax years forff
inception forff California, 2016 to 2020 for other significant state jurisdictions, and 2021 and forff ward for forff eign are
subju ect to examination by tax authorities dued
credits.
to the carryforward of unutilized net operating losses and R&D tax
2020 for fedff
eral,
The folff
.
lowing tabla e presents a summary of activity related to unrecognized tax benefitsff
illill ons)
(in mii
Balance at January 1
Increase related to prior year tax positions
Increase related to current year tax positions
Decrease related to prior year tax positions
Expiration of the statutt e of limitations for the assessment of taxes
Balance at December 31
Year Ended December 31,
2023
2022
2021
$
$
84.5
3.4
36.7
(3.6)
—
121.0
$
$
64.6
4.7
15.2
—
—
84.5
$
$
60.8
0.6
4.9
—
(1.7)
64.6
As of December 31, 2023, we had $105.3 million of unrecognized tax benefitff s that, if recognized and realized,
would affect the effective tax rate, subject to changes in the valuation allowance. We do not expect a significant
change in our unrecognized tax benefitsff
in the next 12 months.
89
In 2021, the OECD announced an Inclusive Framework on Base Erosion and Profitff Shiftinff
Model RulRR es defining the global minimum tax, which calls for the taxation of large multinational corpor
minimum rate of 15%. Subsequently, multiple sets of administrative guidance have been issued. Many non-U.S. tax
jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model RulRR es
beginning in 2024 (including EU Member States) with the adoption of additional components in later years or
announced their plans to enact legislation in futff urt e years. We are continuing to evaluate the impacts of enacted
legislation and pending legislation to enact Pillar Two Model RulRR es in the non-U.S. tax jurisdictions we operate in.
g including Pillar Two
ations at a
r
11. Leases
Our operating leases that have commenced have terms that expire beginning 2025 through 2036 and consist of office
space and research and development laboratories, including our corporate headquarters. Certain of these lease
agreements contain clauses for renewal at our option. As we were not reasonabla y certain to exercise any of these
renewal options at commencement of the associated leases, no such options were recognized as part of our ROU
assets or operating lease liabia lities.
The folff
lowing tabla e presents supplemental operating lease information forff
operating leases that have commenced.
(in mii
illions, es xcee
ept weighi
ted average data)tt
Operating lease cost
Sublu ease income
$
Net operating lease cost
$
Cash paid for amounts included in the measurement of operating lease liabia lities $
Weighted average remaining lease term
Weighted average discount rate
Restricted cash related to letters of credit issued in lieu of cash security deposits
Year Ended December 31,
2023
2022
2021
17.1
(0.7)
16.4
17.9
$
$
$
16.3
—
16.3
16.9
$
$
$
15.3
—
15.3
12.6
December 31,
2023
10.8 years
5.1 %
7.8
$
December 31,
2022
7.9 years
5.3 %
7.8
$
lowing tabla e presents appr
The folff
and sublease income as of December 31, 2023.
a
oximate future non-cancelable minimum lease payments under operating leases
(in mii
illions)s
Year ending December 31, 2024
Year ending December 31, 2025
Year ending December 31, 2026
Year ending December 31, 2027
Year ending December 31, 2028
r
Thereafteff
Total operating lease payments (sublu ease income)
Less accreted interest
Total operating lease liabia lities
Less current operating lease liabia lities included in other current liabilities
Noncurrent operating lease liabia lities
_________________________
gg
Operating
Leases (1)
Sublease
Income
(1.7)
(1.7)
(1.7)
(1.7)
(1.7)
(4.3)
(12.8)
$
$
$
$
33.0
34.7
34.0
34.8
35.6
211.4
383.5
93.2
290.3
32.0
258.3
(1) Amounts presented in the table above exclude $15.4 million forff
a
r of appr
2027, $25.1 million forff
payments under operating leases that have not yet commenced.
2028 and $223.5 million thereafteff
2025, $23.6 million forff
2026, $24.3 million forff
oximate non-cancelabla e futff urt e minimum lease
.yy On Februar
New CamCC pum s FacFF ilityii
to be construcr
campus facility, comprised of offiff ce space and research and development laboratories, will serve as our new
corporate headquarters.
ry 8, 2022, we entered into a lease agreement for a four-building campus facility
tion of a fifth building. This
ted in San Diego, Califorff nia, including a six-year option forff
the construcr
90
The construcr
liabia lities of $189.8 million in association with the commencement of operating leases folff
the firff st phase of construcrr
tion of the campus facility is phased. We recognized ROU assets of $199.0 million and operating lease
lowing the completion of
tion relating to office space in December 2023.
As we begin to occupyu
our new campus facility, we will sublease certain of our existing leased premises when we
determine there is excess leased capacity. Certain of these subleases contain both lease and non-lease components.
Sublu ease income is recognized as an offset to operating expense on a straight-line basis over the lease term. Income
related to non-lease components is recognized in operating expenses as a reducd tion to costs we incur in relation to
the primary lease.
12. Retirement Plan
We have a 401(k) defined contribution savings plan for the benefit of all qualifyiff ng employees and permits
voluntary crr
contributions were $12.5 million forff
ontributions by employees up to 60% of base salary limited by the IRS-imposed maximum. Employer
2023, $10.3 million for 2022 and $8.1 million for 2021.
13. Legal Proceedings
During 2021, 2022, and 2023, we received notices from (i) Teva Pharmaceuticals Development, Inc., (ii) Lupiu n
Limited, (iii) Crysrr
eviated new drugrr
that each company had filed an abbr
generic version of INGREZZA. These companies represented that their respective ANDAs
Paragraph IV Patent Certification alleging that certain of our patents covering INGREZZA are invalid and/or will
not be infriff nged by the manufacff
tal Pharmaceutical (Suzhou) Co. Ltd., (iv) Sandoz Inc. and (v) Zydus Pharmaceuticals (USA) Inc.
ture, use or sale of the medicine forff which the ANDA was submitted.
application (ANDA) with the FDA seeking appr
each contained a
oval of a
AA
a
a
the District of Delaware durd ing 2021, 2022 and 2023, against (i) Teva
We filed suit in the U.S. District Court forff
Pharmaceuticals, Inc., Teva Pharmaceuticals Development, Inc., Teva Pharmaceuticals USA, Inc. and Teva
Pharmaceutical Industries Ltd. (entity dismissed), collectively, "Teva", (ii) Lupiu n Limited, Lupiu n Pharmaceuticals,
Inc., Lupin Inc. and Lupiu n Atlantis Holdings S.A., collectively, “Lupin”, (iii) Crysrr
tal Pharmaceutical (Suzhou) Co.,
Ltd., Crysrr
dismissed) and Sandoz AG (entity dismissed), collectively, “Sandoz” and (v) Zydus Pharmaceuticals (USA) Inc.,
Zydus Worldwide DMCC, Zydus Lifesciences Limited (formerly known as Cadila Healthcare Limited d/bdd /a Zydus
Cadila) and Zydus Healthcare (USA) LLC (entity dismissed), collectively, “Zydus”. We also filed suit in the U.S.
District Court forff
tal Pharmatech Co., Ltd., collectively, “Crystal”, (iv) Sandoz Inc., Sandoz International GmbH (entity
the District of New Jersey during 2021, 2022 and 2023 against Zydus.
In 2023 we entered into settlement agreements resolving the foregoing litigation with each of (i) Sandoz and Crystal,
collectively, the “Sandoz Parties”, (ii) Teva, (iii) Lupin and (iv) Zydus. Pursuant to the terms of the respective
agreements with the Sandoz Parties, Teva, Lupin, and Zydus, each of Teva, the Sandoz Parties, Lupiu n, and Zydus
has the right to sell generic versions of INGREZZA in the United States beginning March 1, 2038, or earlier under
certain circumstances. The settlements with Teva, the Sandoz Parties, Lupiu n and Zydus resolve all patent litigation
brought by us against the companies that fileff d ANDAs
cases have been dismissed.
oval to market generic INGREZZA, and all
seeking appr
AA
a
From time to time, we may also become subju ect to other legal proceedings or claims arising in the ordinary course of
our business. We currently believe that none of the claims or actions pending against us is likely to have,
individually or in the aggregate, a material adverse effecff
t on our business, financial condition or results of
operations. Given the unpredictabia lity inherent in litigation, however, we cannot predict the outcome of these
matters.
91
Item 9. Changes and Disaii gra eements withii Accountantt
Discii
a
Not appl
losure
icable.
ts on Accountintt g and Finaii ncial
ls and ProPP cedures
Item 9A. Contrott
We maintain disclosure controls and procedurd es that are designed to ensure that inforff mation required to be disclosed
in our Exchange Act reports is recorded, processed, summarized and reported within the timelines specified in the
SEC’s rulr es and forms, and that such inforff mation is accumulated and communicated to our management, including
our Chief Executive Offiff cer and Chief Financial Offiff cer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedurd es, management recognized that any
controls and procedures, no matter how well designed and operated, can only provide reasonabla e assurance of
achieving the desired control objectives, and in reaching a reasonabla e level of assurance, management necessarily
relationship of possible controls and procedurd es.
was required to appl
y its judgment in evaluating the cost-benefitff
a
As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supeu rvision and with the participation
of our management, including our Chief Executive Offiff cer and Chief Financial Offiff cer, of the effeff ctiveness of the
design and operation of our disclosure controls and procedurd es as of the end of the year covered by this report.
Based on the foregoing, our Chief Executive Officer and Chief Financial Offiff cer concluded that our disclosure
controls and procedures were effeff ctive at the reasonabla e assurance level.
92
Management’s Report on Internal Control Over Financial Reporting
Internal control over finff ancial reporting referff s to the process designed by, or under the supeu rvision of, our Chief
Executive Officer and Chief Financial Offiff cer, and effected by our board of directors, management and other
personnel, to provide reasonabla e assurance regarding the reliabia lity of financial reporting and the preparation of
financial statements forff
those policies and procedurd es that:
es in accordance with generally accepted accounting principles, and includes
external purpos
r
(1)
(2)
(3)
Pertain to the maintenance of records that in reasonabla e detail accurately and faiff
rly refleff ct the
transactions and dispositions of our assets;
Provide reasonabla e 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
Provide reasonabla e assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of our assets that could have a material effeff ct on the finff ancial statements.
Internal control over finff ancial reporting cannot provide absolute assurance of achieving financial reporting
objectives because of its inherent limitations. Internal control over finff ancial reporting is a process that involves
human diligence and compliance and is subju ect to lapses in judgment and breakdowns resulting froff m human
failures. Internal control over finff ancial 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
urt es of
a timely basis by internal control over finff ancial reporting. However, these inherent limitations are known feat
the finff ancial reporting process. Thereforff e, it is possible to design into the process safegff uards to reducd e, though not
eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over
financial reporting for the company.
ff
th in the report entitled Internal Control-Integrated Framework
Management has used the framework set forff
(2013 framework) published by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), known as COSO, to evaluate the effecff
Based on this assessment, management has concluded that our internal control over finff ancial reporting was effeff ctive
as of December 31, 2023. Ernst & Young, LLP, our independent registered public accounting firff m, has issued an
attestation report on our internal control over finff ancial reporting as of December 31, 2023, which is included herein.
tiveness of our internal control over finff ancial reporting.
There has been no change in our internal control over finff ancial reporting durd ing our most recent fisff cal quarter that
has materially affeff cted, or is reasonabla y likely to materially affect, our internal control over finff ancial reporting.
93
Report of Independent Registered Public Accounting Firm
To the Stockholders 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 finff ancial reporting as of December 31, 2023,
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 finff ancial
reporting as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Publu ic Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related
consolidated statements of income and comprehensive income, stockholders‘ equity and cash floff ws for each of the
three years in the period ended December 31, 2023, and the related notes and our report dated Februar
expressed an unqualifieff d opinion thereon.
ry 9, 2024
Basis forff Opinion
The Company’s management is responsible for maintaining effeff ctive internal control over finff ancial reporting and
for its assessment of the effeff ctiveness of internal control over finff ancial 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 finff ancial reporting based on our audit. We are a public accounting firff m
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
icable rules and regulations of the Securities and Exchange Commission and
U.S. federal securities laws and the appl
the PCAOB.
a
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonabla e assurance about
was maintained in all material respects.
whether effective internal control over finff ancial reporting
a
Our audit included obtaining an understanding of internal control over finff ancial 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 procedurd es as we considered necessary in the circumstances. We
believe that our audit provides a reasonabla e basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over finff ancial reporting is a process designed to provide reasonabla e assurance
regarding the reliability of financial reporting and the preparation of finff ancial statements for external purpos
es in
accordance with generally accepted accounting principles. A company’s internal control over finff ancial reporting
includes those policies and procedurd es that (1) pertain to the maintenance of records that, in reasonabla e detail,
accurately and faiff
assurance that transactions are recorded as necessary to permit preparation of finff ancial 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 reasonabla e
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 finff ancial statements.
rly refleff ct the transactions and dispositions of the assets of the company; (2) provide reasonabla e
rr
Because of its inherent limitations, internal control over finff ancial reporting may not prevent or detect misstatements.
Also, projeo ctions of any evaluation of effectiveness to futff urt e periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedurd es may
deteriorate.
/s/ Ernst & Young LLP
San Diego, Califorff nia
Februar
ry 9, 2024
94
r InfII orff marr
Item 9B. Othett
During the period froff m October 1, 2023, to December 31, 2023, our executive offiff cers and directors adopted or
terminated contracts, instructions or written plans for the purchase or sale of our securities as noted below:
tion
Action
Date
Rule 10b5-1*
Non-Rule 10b5-1**
Trading Arrangement
Adopt
12/14/2023
Name and Title
George Morrow
(Director)
Terminate (1)
Eric Benevich
(Chief Commercial Officer) Adopt
Ingrid Delaet
Adopt
(Chief Regulatory Orr
fficer)
Leslie Norwalk
(Director)
Shalini Sharp
(Director)
Richard Pops
(Director)
Adopt
Adopt
Adopt
11/30/2023
11/29/2023
11/29/2023
11/28/2023
11/27/2023
11/21/2023
X
X
X
X
X
X
X
Total Shares
Authorized
to be Sold
Expiration
Date
40,000
11/15/2024
131,341
12/31/2023
169,818
11/27/2024
30,000
9/7/2025
9,106
11/28/2024
1
,106
5/31/2024
42,100
11/30/2024
______________
* Intended to satisfy the affirmative defenff
se of Rule 10b5-1(c)
** Not intended to satisfy the affirmative defenff
se of Rule 10b5-1(c)
(1) On November 30, 2023, Eric Benevich, Chief Commercial Offiff cer, terminated a trading arrangement that was intended to
satisfy the affirmative defenff
se of Rule 10b5-1 (the “Benevich 10b5-1 Plan”). The Benevich 10b5-1 Plan was entered into on
Februarr
ry 23, 2022, with an expiration date of December 31, 2023.
Item 9C. Discii
None.
losure Regar
e
dingii Foreign Jgg
urJJ isdictiott ns that Prevent InsII pes
ctiott ns
95
PART III
s,rr Executive OffiO cers arr
Item 10. Direii ctortt
Information required by this item will be contained in our Definitive Proxy Statement forff
our 2024 Annual Meeting
of Stockholders, to be filff ed pursuant to Regulation 14A with the SEC within 120 days of December 31, 2023. Such
information is incorpor
ated herein by reference.
nd Corporate Gtt
ovG ernance
rr
We have adopted a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, and to all of
our other officff ers, directors, employees and agents. The code of ethics is availabla e at the Corporate Governance
section of the Investors page on our website at www.neurocrine.com. We intend to disclose futff urt e amendments to,
or waivers froff m, certain provisions of our code of ethics on the above
lowing
the date of such amendment or waiver. Information found
not incorporated into, this Annual Report on Form 10-K.
website within four business days folff
on, or accessible through, our website is not part of, aff nd is
a
ff
Item 11. Executive ComCC pem nsatiott n
Information required by this item will be contained in our Definitive Proxy Statement forff
our 2024 Annual Meeting
of Stockholders, to be filff ed pursuant to Regulation 14A with the SEC within 120 days of December 31, 2023. Such
information is incorpor
ated herein by reference.
rr
r MatMM tett rs
Item 12. Securityii Ownership of Certaitt n Bii
Stoctt kholdell
Information required by this item will be contained in our Definitive Proxy Statement forff
our 2024 Annual Meeting
of Stockholders, to be filff ed pursuant to Regulation 14A with the SEC within 120 days of December 31, 2023. Such
information is incorpor
nd Managea ment and Relatll edtt
ated herein by reference.
ial Owners arr
eneficff
rr
elatll
iott nshipsii
and Relatll edtt Transactiott ns, as nd Direii ctortt
Item 13. Certaitt n Rii
Indepeee ndendd
our 2024 Annual Meeting
Information required by this item will be contained in our Definitive Proxy Statement forff
of Stockholders, to be filff ed pursuant to Regulation 14A with the SEC within 120 days of December 31, 2023. Such
information is incorpor
ated herein by reference.
ce
rr
ii
Accountintt g FeesFF
Item 14. Principal
Information required by this item will be contained in our Definitive Proxy Statement forff
our 2024 Annual Meeting
of Stockholders, to be filff ed pursuant to Regulation 14A with the SEC within 120 days of December 31, 2023. Such
information is incorpor
ated herein by reference.
and SerSS vices
rr
96
PART IV
inFF ancial Stattt emtt
, Fs
Item 15. Exhibitsii
(a) Documents filed as part of this report.
ent SchSS edulesll
1. List of Financial Statements. The folff
Report of Independent Registered Publu ic Accounting Firm
Consolidated Balance Sheets as of December 31, 2023 and 2022
lowing are included in Item 8 of this report:
Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2023, 2022 and
2021
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows forff
the years ended December 31, 2023, 2022 and 2021
Notes to the Consolidated Financial Statements
2. List of all Financial Statement scheduld es. All schedules are omitted because they are not applicable, or the
required inforff mation 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 folff
lowing exhibits are filff ed as part of, off
r
r incorpor
ated by reference into, this report:
Exhibit
3.1
Description: Certificate of Incorporation, as amended
ference:
Incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q fileff
November 5, 2018
d on
3.2
4.1
Description: Bylaws, as amended
Reference:
Incorporated by reference to Exhibit 3.2 of the Company's Quarterly Report on Form 10-Q fileff
August 1, 2023
d on
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
Description: First Supplemental Indenture, dated as of December 22, 2021, by and between the Company and
Reference:
U.S. Bank National Association, as Trustee
Incorporated by reference to Exhibit 4.3 of the Company’s Annual Report on Form 10-K fileff
Februarr
ry 11, 2022
d on
4.4
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
4.5
Description: Description of Common Stock of the Company
ference:
Incorporated by reference to Exhibit 4.4 of the Company’s Annual Report on Form 10-K fileff
Februarr
ry 7, 2020
d on
21.1
23.1
31.1
Description: Subsidiaries of the Company
Description: Consent of Independent Registered Public Accounting Firm
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
97
97+
Description: Neurocrine Biosciences, Inc. Clawback Policy
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 Labea
l 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
:
Collaboration and License Agregg ements
g
information contained in Exhibit 101)
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 10.1 of the Company's Quarterly Report on Form 10-Q fileff
May 5, 2021
d on
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 fileff
May 5, 2021
d on
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 10.3 of the Company's Quarterly Report on Form 10-Q fileff
May 5, 2021
d on
10.4*
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 fileff
Februarr
ry 7, 2019
d on
10.5
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 fileff
Februarr
ry 7, 2019
d on
10.6
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 fileff d on
July 29, 2019
10.7**
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 fileff d on
August 3, 2020
10.8**
Description: Collaboration and License Agreement dated November 22, 2021 between Heptares Therapeutics
Reference:
Limited and the Company
Incorporated by reference to Exhibit 10.10 of the Company’s Annual Report on Form 10-K fileff
Februarr
ry 11, 2022
d on
10.9**
Description: Collaboration and License Agreement dated January 8, 2023 between Voyager Therapeutics, Inc. and
Reference:
the Company
Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q fileff d on
May 3, 2023
10.10
Description: Stock Purchase Agreement dated January 8, 2023 between Voyager Therapeutics, Inc. and the
Reference:
Company
Incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q fileff d on
May 3, 2023
98
10.11
Description: Amended and Restated Investor Agreement dated January 8, 2023 between Voyager Therapeutics,
Reference:
Inc. and the Company
Incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q fileff d on
May 3, 2023
Equity Plans and Related Agreements
:
g
q
y
10.12+
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
10.13+
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
10.14+
10.15+
10.16+
10.17+
10.18+
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 fileff
Februarr
ry 13, 2018
d on
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 fileff d on
July 29, 2015
Description: Neurocrine Biosciences, Inc. 2018 Employee Stock Purchase Plan, as amended and restated
Reference:
Incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q fileff d on
August 4, 2022
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 10.17 of the Company’s Annual Report on Form 10-K fileff
Februarr
ry 11, 2022
d on
Reference:
Description: Neurocrine Biosciences, Inc. 2020 Equity Incentive Plan, as amended and restated
Reference:
Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q fileff d on
August 1, 2023
:
nd Directorsrr
ers arr
ffff
Agregg ements with Officff
g
10.19+
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 fileff d on
August 3, 2007
10.20+
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 fileff
Februarr
ry 11, 2008
d on
10.21+
10.22+
10.23+
Description: Employment Agreement dated October 28, 2014 between the Company and Darin Lippoldt
Reference:
Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q fileff d on
May 3, 2023
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 fileff
Februarr
ry 14, 2017
d on
Description: Employment Agreement effective November 29, 2017 between the Company and Matthew C.
ference:
Abernethy
Incorporated by reference to Exhibit 10.26 of the Company’s Annual Report on Form 10-K fileff
Februarr
ry 13, 2018
d on
10.24+
Description: Form of Indemnity Agreement entered into between the Company and its officers and directors
ference:
Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q fileff d on
November 1, 2017
99
10.25+
10.26+
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 fileff d on
July 29, 2019
Description: Employment Agreement dated November 29, 2021 between the Company and Jude Onyia
Reference:
Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q fileff d on
August 4, 2022
y:
Agregg ements Related to Real Propeo rtytt
g
p
10.27
Description: Amended and Restated Lease dated November 1, 2011 between the Company and Kilroy Realty,
ference:
L.P.
Incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on
January 18, 2012
10.28
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 fileff d on
August 3, 2017
10.29
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 fileff d on
November 1, 2017
10.30
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 fileff d on
November 4, 2019
10.31
Description: Commercial Lease dated February 8, 2022, by and between the Company and Gemdale Aperture
Reference:
Phase I, LLC
Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q fileff d on
May 4, 2022
+
*
**
***
Management contract or compensatory plan or arrangement.
Confidff ential treatment has been granted with respect to certain portions of the exhibit.
Certain inforff mation in this exhibit has been omitted pursuant to Item 601 of Regulation S-K.
These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C.
Section 1350 and are not being filff ed for purpos
es 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 beforff e
or afteff
r the date hereof, rff egardless of any general incorpor
ration language in such filing.
r
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) Fc
inFF ancial Stattt emtt
ent SchSS edulesll
.
. See Item 15(a)(2) above
a
100
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 duld y authorized.
SIGNATURES
NEUROCRINE BIOSCIENCES, INC.
(Registrant)
By:
/s/ Kevin C. GCC orman
Kevin C. Gorman
Chief Executive Officer
Date: Februarr
ry 9, 2024
By:
/s/ Matthett w C. ACC bernethytt
Matthew C. Abernethy
Chief Financial Offiff cer
Date: Februarr
ry 9, 2024
101
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 truer
and lawful attorneys-in-
fact and agents, with full power of subsu titution forff
sign any and all amendments to this Annual Report on Form 10-K, and to fileff
other documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, fulff
thing requisite and necessary to be done therewith, as fully to all intents and purpos
in person, hereby ratifyiff ng and confirff ming all that said attorneys-in-fact and agents, and any of them, his or her
subsu titute or subsu titutt es, may lawfulff
him or her, and in his or her name in any and all capacities, to
the same, with exhibits thereto and
l power of authority to do and perform each and every act and
ly do or cause to be done by virtuet
es as he or she might or could do
hereof.ff
rr
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 9rr
, 2024:
Signature
gg
/s/ Kevin C. GCC orman
Kevin C. Gorman, Ph.D.
/s/ MatMM thew C. Abernethyh
Matthew C. Abernethy
/s/ William H. RHH astetter
William H. Rastetter, Ph.D.
/s/ Gary A. Lyons
Gary A. Lyons
/s/ Johanna Mercier
Johanna Mercier
/s/ Georger
George J. Morrow
J. Morrow
/s/ Leslie V. Norwalkll
Leslie V. Norwalk
ine A. Poon
/s/ Christii
Christine A. Poon
/s/ Richard F. PFF ops
Richard F. Pops
/s/ Shalini Shar
pr
Shalini Sharp
SS
/s/ Stephen A. SheSS rwin
Stephen A. Sherwin, M.D.
Title
Chief Executive Officff er and Director
(Principal Executive OfficO er)r
Chief Financial Offiff cer
(Principal Financial and Accounting OfficO er)r
Chairman of the Board of Directors
Director
Director
Director
Director
Director
Director
Director
Director
102
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
Neurocrine Biosciences
Corporate Information
CORPORATE MANAGEMENT
Kevin C. Gorman, Ph.D.
(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:696)(cid:747)(cid:728)(cid:726)(cid:744)(cid:743)(cid:732)(cid:745)(cid:728)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)
Ingrid Delaet, Ph.D.
(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:709)(cid:728)(cid:730)(cid:744)(cid:735)(cid:724)(cid:743)(cid:738)(cid:741)(cid:748)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)
Matthew C. Abernethy
(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:697)(cid:732)(cid:737)(cid:724)(cid:737)(cid:726)(cid:732)(cid:724)(cid:735)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)
Eric Benevich
(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:694)(cid:738)(cid:736)(cid:736)(cid:728)(cid:741)(cid:726)(cid:732)(cid:724)(cid:735)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)
David W. Boyer
(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:694)(cid:738)(cid:741)(cid:739)(cid:738)(cid:741)(cid:724)(cid:743)(cid:728)(cid:3)(cid:692)(cid:729)(cid:729)(cid:724)(cid:732)(cid:741)(cid:742)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)
Julie S. Cooke
(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:699)(cid:744)(cid:736)(cid:724)(cid:737)(cid:3)(cid:709)(cid:728)(cid:742)(cid:738)(cid:744)(cid:741)(cid:726)(cid:728)(cid:742)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)
Kyle W. Gano, Ph.D.
Chief Business Development
(cid:724)(cid:737)(cid:727)(cid:3)(cid:710)(cid:743)(cid:741)(cid:724)(cid:743)(cid:728)(cid:730)(cid:748)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)(cid:3)
Darin M. Lippoldt, J.D.
(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:703)(cid:728)(cid:730)(cid:724)(cid:735)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)
Jude Onyia, Ph.D.
(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:710)(cid:726)(cid:732)(cid:728)(cid:737)(cid:743)(cid:732)(cid:1027)(cid:726)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)
Eiry W. Roberts, M.D.
(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:704)(cid:728)(cid:727)(cid:732)(cid:726)(cid:724)(cid:735)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)
BOARD OF DIRECTORS
William H. Rastetter, Ph.D.
Chairman of the Board,
Neurocrine Biosciences, Inc.
and Fate Therapeutics
Kevin C. Gorman, Ph.D.
(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:696)(cid:747)(cid:728)(cid:726)(cid:744)(cid:743)(cid:732)(cid:745)(cid:728)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)(cid:671)
Neurocrine Biosciences, Inc.
Gary A. Lyons
Former President and Chief
(cid:696)(cid:747)(cid:728)(cid:726)(cid:744)(cid:743)(cid:732)(cid:745)(cid:728)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)(cid:671)(cid:3)(cid:705)(cid:728)(cid:744)(cid:741)(cid:738)(cid:726)(cid:741)(cid:732)(cid:737)(cid:728)(cid:3)
Biosciences, Inc.
Johanna Mercier
(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:694)(cid:738)(cid:736)(cid:736)(cid:728)(cid:741)(cid:726)(cid:732)(cid:724)(cid:735)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)(cid:671)
Gilead Sciences
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
Christine A. Poon
Former Vice Chair and Worldwide
Chair of Pharmaceuticals at
Johnson & Johnson
Richard F. Pops
Chairman of the Board
(cid:724)(cid:737)(cid:727)(cid:3)(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:696)(cid:747)(cid:728)(cid:726)(cid:744)(cid:743)(cid:732)(cid:745)(cid:728)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)(cid:671)
Alkermes plc
Shalini Sharp
(cid:697)(cid:738)(cid:741)(cid:736)(cid:728)(cid:741)(cid:3)(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:697)(cid:732)(cid:737)(cid:724)(cid:737)(cid:726)(cid:732)(cid:724)(cid:735)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)(cid:3)(cid:724)(cid:737)(cid:727)(cid:3)
Executive Vice President
of Ultragenyx
Stephen A. Sherwin, M.D.
Former Chairman of the Board
(cid:724)(cid:737)(cid:727)(cid:3)(cid:694)(cid:731)(cid:732)(cid:728)(cid:729)(cid:3)(cid:696)(cid:747)(cid:728)(cid:726)(cid:744)(cid:743)(cid:732)(cid:745)(cid:728)(cid:3)(cid:706)(cid:729)(cid:1027)(cid:726)(cid:728)(cid:741)(cid:671)
Cell Genesys, Inc.
STOCKHOLDER INFORMATION
Transfer Agent
Equiniti Trust Company
Auditors
Ernst & Young LLP
Corporate Counsel
Cooley LLP
Neurocrine Biosciences is
a leading neuroscience-
focused, biopharmaceutical
company with a simple
purpose: to relieve suffering
for people with great needs,
but few options.
We are dedicated to discovering and
developing life-changing treatments
for patients with under-addressed
neurological, neuroendocrine, and
neuropsychiatric disorders.
The company’s diverse portfolio
includes FDA-approved treatments
for tardive dyskinesia, chorea
associated with Huntington’s disease,
(cid:728)(cid:737)(cid:727)(cid:738)(cid:736)(cid:728)(cid:743)(cid:741)(cid:732)(cid:738)(cid:742)(cid:732)(cid:742)(cid:669)(cid:3)(cid:724)(cid:737)(cid:727)(cid:3)(cid:744)(cid:743)(cid:728)(cid:741)(cid:732)(cid:737)(cid:728)(cid:3)(cid:1027)(cid:725)(cid:741)(cid:738)(cid:732)(cid:727)(cid:742)(cid:669)(cid:671)(cid:3)
as well as a robust pipeline including
multiple compounds in mid-to-late-
phase clinical development across
our core therapeutic areas. For three
decades, we have applied our unique
insight into neuroscience and the
interconnections between brain
and body systems to treat complex
conditions. We relentlessly pursue
medicines to ease the burden of
debilitating diseases and disorders,
because you deserve brave science.
For more information, visit
neurocrine.com, and follow the
company on LinkedIn, X (Formerly
Twitter) and Facebook.
*in collaboration with AbbVie
6027 EDGEWOOD BEND COURT
SAN DIEGO, CA 92130
(858) 617-7600
WWW.NEUROCRINE.COM