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What changed in ACADIA PHARMACEUTICALS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ACADIA PHARMACEUTICALS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+594 added−549 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in ACADIA PHARMACEUTICALS INC's 2023 10-K

594 paragraphs added · 549 removed · 430 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

96 edited+56 added−25 removed93 unchanged
Biggest changeAmong the provisions of the ACA of importance to NUPLAZID, trofinetide and our other product candidates are: • an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs; • an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively; • extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; • expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability; • a Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts to negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be covered under Medicare Part D; • expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; • a requirement to annually report drug samples that manufacturers and distributors provide to physicians; and • a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
Biggest changeBy way of example, in March 2010, Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the ACA) was signed into law, which intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees on the health industry and impose additional health policy reforms. 14 Among the provisions of the ACA of importance to NUPLAZID, DAYBUE and our product candidates are: (i) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations; (ii) established an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs; (iii) expanded the availability of lower pricing under the 340B drug pricing program by adding new entities to the program; (iv) increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price (AMP); (v) expanded the eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals, thereby potentially increasing manufacturers’ Medicaid rebate liability; (vi) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and (vii) established a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Most patients with schizophrenia in the United States today are treated with second-generation, or atypical, antipsychotics, which induce fewer motor disturbances than typical, or first-generation, antipsychotics, but still fail to fully address some of the negative symptoms of schizophrenia for a significant portion of patients.
Most patients with schizophrenia in the United States today are treated with second-generation, or atypical, antipsychotics, which induce fewer motor disturbances than first-generation, or typical, antipsychotics, but still fail to fully address some of the negative symptoms of schizophrenia for a significant portion of patients.
The term “remuneration” has been broadly interpreted to include anything of value. • Federal false claims and false statement laws, including the federal civil False Claims Act, and civil monetary penalties laws, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, for payment to, or approval by, federal programs, including Medicare and Medicaid, claims for items or services, including drugs, that are false or fraudulent. • The U.S. federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), created additional federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors or making any false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH), and their implementing regulations, imposes obligations on covered entities, including certain healthcare providers, health plans, and healthcare clearinghouses, and their respective business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as their covered subcontractors, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.
The term “remuneration” has been broadly interpreted to include anything of value. • Federal false claims and false statement laws, including the federal civil False Claims Act, and civil monetary penalties laws, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, for payment to, or approval by, federal programs, including Medicare and Medicaid, claims for items or services, including drugs, that are false or fraudulent. • The U.S. federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), created additional federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors or making any false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. 13 • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH), and their implementing regulations, imposes obligations on covered entities, including certain healthcare providers, health plans, and healthcare clearinghouses, and their respective business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as their covered subcontractors, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.
Either party may terminate the manufacturing agreement prior to expiration upon an uncured material breach by the other party, upon the dissolution or liquidation of the 15 other party, the commencement of insolvency procedures that are not dismissed within a certain period of time, the appointment of any receiver, trustee or assignee to take possession of the properties of the other party or the cessation of all or substantially all of the other party's business operations, upon certain continuing patent infringement, regulatory litigation or other legal proceedings involving the manufacture of our API, upon a continuing force majeure affecting the other party, or if no services are currently being provided under the manufacturing agreement.
Either party may terminate the manufacturing agreement prior to expiration upon an uncured material breach by the other party, upon the dissolution or liquidation of the other party, the commencement of insolvency procedures that are not dismissed within a certain period of time, the appointment of any receiver, trustee or assignee to take possession of the properties of the other party or the cessation of all or substantially all of the other party's business operations, upon certain continuing patent infringement, regulatory litigation or other legal proceedings involving the manufacture of our API, upon a continuing force majeure affecting the other party, or if no services are currently being provided under the manufacturing agreement.
The programs are currently in various stages of pre-clinical development. Competition We face, and will continue to face, intense competition from pharmaceutical and biotechnology companies, as well as numerous academic and research institutions and governmental agencies, both in the United States and abroad. We compete, or will compete, with existing and new products being developed by our competitors.
The programs are currently in various stages of pre-clinical development. 8 Competition We face, and will continue to face, intense competition from pharmaceutical and biotechnology companies, as well as numerous academic and research institutions and governmental agencies, both in the United States and abroad. We compete, or will compete, with existing and new products being developed by our competitors.
Through this novel mechanism, NUPLAZID demonstrated significant efficacy in reducing the hallucinations and delusions associated with PDP without negatively impacting motor function in our Phase 3 pivotal trial. NUPLAZID has the potential to avoid many of the debilitating side effects of existing antipsychotics, none of which are approved by the FDA in the treatment of PDP.
Through this novel mechanism, NUPLAZID demonstrated significant efficacy in reducing the hallucinations and delusions associated with PDP without negatively impacting motor function in our Phase 3 pivotal trial. NUPLAZID has the potential to avoid many of the debilitating side effects of existing antipsychotics, none of which are approved by the FDA for the treatment of PDP.
Acadia GmbH also may terminate any services under the manufacturing agreement for any reason on 90 days’ prior notice to Siegfried, subject to the requirements of the manufacturing agreement. We have contracted with Patheon Pharmaceuticals Inc. (Patheon), to manufacture NUPLAZID 10 mg tablet and 34 mg capsule drug product for commercial use in the United States.
Acadia GmbH also may terminate any services under the manufacturing agreement for any reason on 90 days’ prior notice to Siegfried, subject to the requirements of the manufacturing agreement. 16 We have contracted with Patheon Pharmaceuticals Inc. (Patheon), to manufacture NUPLAZID 10 mg tablet and 34 mg capsule drug product for commercial use in the United States.
Antisense Oligonucleotide (ASO) Programs In January 2022, we entered into a collaboration with Stoke Therapeutics to discover, develop and commercialize novel RNA-based medicines for the potential treatment of severe and rare genetic neurodevelopmental diseases of the CNS. The collaboration includes SYNGAP1, MECP2 (Rett syndrome) and an undisclosed CNS target of mutual interest.
Antisense Oligonucleotide (ASO) Programs In January 2022, we entered into a collaboration with Stoke to discover, develop and commercialize novel RNA-based medicines for the potential treatment of severe and rare genetic neurodevelopmental diseases of the CNS. The collaboration includes SYNGAP1, MECP2 (Rett syndrome) and an undisclosed CNS target of mutual interest.
Atypical antipsychotics are associated with a number of off-target and dose-limiting side effects, such as 7 extrapyramidal symptoms, orthostatic hypotension, hematologic abnormalities, and metabolic, gastrointestinal and sedative effects. These off-target toxicities are associated with increased risk for falls, infection, aspiration pneumonia, and other serious complications in this vulnerable patient population.
Atypical antipsychotics are associated with a number of off-target and dose-limiting side effects, such as extrapyramidal symptoms, orthostatic hypotension, hematologic abnormalities, and metabolic, gastrointestinal and sedative effects. These off-target toxicities are associated with increased risk for falls, infection, aspiration pneumonia, and other serious complications in this vulnerable patient population.
Our competitors, either alone or with their collaborators, may succeed in developing technologies or drugs that are more effective, safer, and more affordable, or more easily administered than ours and may achieve patent protection or commercialize drugs sooner than us. Our competitors may also develop alternative therapies that could further limit the market for any drugs that we may develop.
Our competitors, either alone or with their collaborators, may succeed in developing technologies or drugs that are more effective, safer, more 9 affordable, or more easily administered than ours and may achieve patent protection or commercialize drugs sooner than us. Our competitors may also develop alternative therapies that could further limit the market for any drugs that we may develop.
If this policy is changed in the future and if CMS no longer considers the antipsychotic class to be of “clinical concern”, Medicare Part D plans would have significantly more discretion to reduce the number of products covered in that class, including coverage of NUPLAZID.
If this policy is changed in the future and if CMS no longer considers the antipsychotic class to be of “clinical concern”, Medicare Part D plans would have significantly more discretion to reduce the number of products covered in that class, including coverage of NUPLAZID and DAYBUE.
Furthermore, private third-party payors often follow Medicare coverage policies and payment limitations in setting their own coverage policies. 12 Healthcare Laws and Regulations We are subject to healthcare regulation and enforcement by the federal government and the states and foreign governments in which we conduct our business.
Furthermore, private third-party payors often follow Medicare coverage policies and payment limitations in setting their own coverage policies. Healthcare Laws and Regulations We are subject to healthcare regulation and enforcement by the federal government and the states and foreign governments in which we conduct our business.
We own or have rights to various trademarks, copyrights and trade names used in our business, including Acadia ® and NUPLAZID ® . Our logos and trademarks are the property of Acadia Pharmaceuticals Inc. All other brand names or trademarks appearing in this report are the property of their respective holders.
We own or have rights to various trademarks, copyrights and trade names used in our business, including Acadia ® , NUPLAZID ® and DAYBUE ™ . Our logos and trademarks are the property of Acadia Pharmaceuticals Inc. All other brand names or trademarks appearing in this report are the property of their respective holders.
Moreover, government coverage and reimbursement policies will both directly and indirectly impact our ability to successfully commercialize NUPLAZID and any future approved products, and such coverage and reimbursement policies will be impacted by enacted and any applicable future healthcare reform and drug pricing measures.
Moreover, government coverage and reimbursement policies will both directly and indirectly impact our ability to successfully commercialize NUPLAZID, DAYBUE and any future approved products, and such coverage and reimbursement policies will be impacted by enacted and any applicable future healthcare reform and drug pricing measures.
Smaller companies also may prove to be significant competitors, particularly through proprietary research discoveries and collaborative arrangements with large pharmaceutical and established biotechnology companies. Many of our competitors have products that have been approved or are in advanced development and may develop superior technologies or methods to identify and validate drug targets and to discover novel small molecule drugs.
Smaller companies also may prove to be significant competitors, particularly through proprietary research discoveries and collaboration arrangements with large pharmaceutical and established biotechnology companies. Many of our competitors have products that have been approved or are in advanced development and may develop superior technologies or methods to identify and validate drug targets and to discover novel small molecule drugs.
ACP-204 as a Treatment for Alzheimer’s Disease Psychosis An estimated over 6.0 million people in the United States are living with Alzheimer’s disease dementia and studies suggest that approximately 30% of patients, or 1.8 million people, have psychosis, commonly consisting of delusions and hallucinations.
ACP-204 as a Treatment for Alzheimer’s Disease Psychosis An estimated over 6.0 million people in the United States are living with Alzheimer’s disease dementia and studies suggest that approximately 30% of them, or 1.8 million people, have psychosis, commonly consisting of delusions and hallucinations.
Before approving an NDA, the FDA can choose to inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facility complies with GMPs. The FDA may also audit sites at which clinical trials have been conducted to determine compliance with GCPs and data integrity.
Before approving an NDA, the FDA can choose to inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facility complies with cGMPs. The FDA may also audit sites at which clinical trials have been conducted to determine compliance with GCPs and data integrity.
We provide our employees with competitive cash compensation, opportunities to own equity, and an employee benefit program that promotes well-being, including wellness programs, healthcare, retirement planning and paid vacation time. We also provide employees with opportunities to continue their education and growth, including leadership development and tuition reimbursement.
We provide our employees with competitive cash compensation, opportunities to own equity, and an employee benefit program that promotes well-being, including wellness programs, healthcare, retirement planning and paid time off. We also provide employees with opportunities to continue their education and growth, including leadership development and tuition reimbursement.
Fourteen of these are Orange Book-listed patents that relate to pimavanserin, NUPLAZID and our approved indication, and cover the general formula of the compound, the composition of matter, with claims specifically directed to pimavanserin and salts thereof, the specific polymorph form of pimavanserin, the approved formulations, and the use thereof for treating our approved indication.
Fifteen of these are Orange Book-listed patents that relate to pimavanserin, NUPLAZID and our approved indication, and cover the general formula of the compound, the composition of matter, with claims specifically directed to pimavanserin and salts thereof, the specific polymorph form of pimavanserin, the approved formulations, and the use thereof for treating our approved indication.
The FDA may conclude that we or our collaborators or contract manufacturers are not in compliance with applicable GMP requirements and other FDA regulatory requirements, which may result in delay or failure to approve applications, warning letters, product recalls and/or imposition of fines or penalties.
The FDA may conclude that we or our collaborators or contract manufacturers are not in compliance with applicable cGMP requirements and other FDA regulatory requirements, which may result in delay or failure to approve applications, warning letters, product recalls and/or imposition of fines or penalties.
Approximately 900 thousand patients in the United States are currently treated for ADP and of those treated, approximately two-thirds are treated with off-label anti-psychotics. Symptoms of ADP are often persistent and may occur with increasing frequency with progression of disease as patients become more impaired.
Approximately 900,000 patients in the United States are currently treated for ADP and of those treated, approximately two-thirds are treated with off-label anti-psychotics. Symptoms of ADP are often persistent and may occur with increasing frequency with progression of disease as patients become more impaired.
With no approved therapies for the treatment of patients with ADP and current off-label use of atypical antipsychotics carrying significant morbidity risks including worsening in cognitive decline and other off target toxicities, we believe that ADP represents an area of high unmet need. ACP-204 is a new molecule which is designed to leverage the learnings from pimavanserin.
With no approved therapies for the treatment of patients with ADP and current off-label use of atypical antipsychotics carrying significant morbidity risks including worsening in cognitive decline and other off target toxicities, we believe that ADP represents an area of high unmet need. ACP-204 is a new chemical entity which is designed to leverage the learnings from pimavanserin.
Through the process created by the Budget Control Act of 2011, there are automatic reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments, including the Infrastructure 14 Investment and Jobs Act, will remain in effect through 2031 unless additional Congressional action is taken.
Through the process created by the Budget Control Act of 2011, there are automatic reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments, including the Infrastructure Investment and Jobs Act, will remain in effect through 2032 unless additional Congressional action is taken.
Some of these competitors are pursuing the development of pharmaceuticals that target the same diseases and conditions that our research and development programs target. For example, the use of NUPLAZID for the treatment of PDP competes with off-label use of various antipsychotic drugs, including the generic drugs quetiapine, clozapine, risperidone, aripiprazole, and olanzapine.
Some of these competitors have products or are pursuing the development of pharmaceuticals that target the same diseases and conditions that our research and development programs target. For example, the use of NUPLAZID for the treatment of PDP competes with off-label use of various antipsychotic drugs, including the generic drugs quetiapine, clozapine, risperidone, aripiprazole, and olanzapine.
Decreases in third-party payor reimbursement or a decision by a third-party payor to not cover NUPLAZID, trofinetide, if approved, or any other future approved products could reduce physician usage of our products, and have a material adverse effect on our sales, results of operations and financial condition.
Decreases in third-party payor reimbursement or a decision by a third-party payor to not cover NUPLAZID, DAYBUE or any other future approved products could reduce physician usage of our products, and have a material adverse effect on our sales, results of operations and financial condition.
In this study, pimavanserin demonstrated a statistically significant improvement on the study’s primary endpoint, the change from baseline to week 26 on the Negative Symptom Assessment-16 (NSA-16) total score, compared to placebo (p=0.043). A greater improvement in the NSA-16 total score compared to placebo was observed in patients who received the highest pimavanserin dose of 34 mg (n=107; unadjusted p=0.0065).
In this study, pimavanserin demonstrated a statistically significant improvement on the study’s primary endpoint, the change from baseline to week 26 on the NSA-16 total score, compared to placebo (p=0.043). A greater improvement in the NSA-16 total score compared to placebo was observed in patients who received the highest pimavanserin dose of 34 mg (n=107; unadjusted 6 p=0.0065).
The primary endpoint of the study was the change from baseline to week 26 on the NSA-16 total score. In November 2019, we announced positive top-line results from the ADVANCE study.
The primary endpoint of the study was the change from baseline to week 26 on the Negative Symptom Assessment-16 (NSA-16) total score. In November 2019, we announced positive top-line results from the ADVANCE study.
The Phase 3 study will evaluate the efficacy of pimavanserin 34 mg once daily compared to placebo in approximately 386 patients with predominantly negative symptoms of schizophrenia who have achieved adequate control of positive symptoms with their existing antipsychotic treatment. We anticipate announcing top-line results from the Phase 3 ADVANCE-2 study in early 2024.
The Phase 3 study will evaluate the efficacy of pimavanserin 34 mg once daily compared to placebo in approximately 454 patients with predominantly negative symptoms of schizophrenia who have achieved adequate control of positive symptoms with their existing antipsychotic treatment. We anticipate announcing top-line results from the Phase 3 ADVANCE-2 study in the first quarter of 2024.
In the United States, the Medicare Part D program provides a voluntary outpatient drug benefit to Medicare beneficiaries for certain products. NUPLAZID is available for coverage under Medicare Part D, but the individual Part D plans offer coverage subject to various factors such as those described above.
In the United States, the Medicare Part D program provides a voluntary outpatient drug benefit to Medicare beneficiaries for certain products. NUPLAZID and DAYBUE are available for coverage under Medicare Part D, but the individual Part D plans offer coverage subject to various factors such as those described above.
Our failure to compete effectively could have a material adverse effect on our business. Intellectual Property We currently hold 47 issued U.S. patents and a significant number of related issued foreign patents. We have also exclusively licensed rights to an additional 28 issued U.S. patents, and a number of related foreign patents.
Our failure to compete effectively could have a material adverse effect on our business. Intellectual Property We currently hold 59 issued U.S. patents and a significant number of related issued foreign patents. We have also exclusively licensed rights to an additional 35 issued U.S. patents, and a number of related foreign patents.
The term of the manufacturing agreement ends in the first quarter of 2023 and will automatically renew for subsequent two-year terms unless either party provides timely notice of its intent not to renew, or unless the manufacturing agreement is terminated early pursuant to its terms.
The term of the manufacturing agreement ended in the first quarter of 2023 and renewed for a two-year term and will automatically renew for subsequent two-year terms unless either party provides timely notice of its intent not to renew, or unless the manufacturing agreement is terminated early pursuant to its terms.
The Phase 3 program is evaluating the efficacy of pimavanserin in patients with predominantly negative symptoms of schizophrenia who have achieved adequate control of positive symptoms with their existing antipsychotic treatment. We expect that enrollment in ADVANCE-2 will be completed this year and that top-line results will be available in early 2024.
The Phase 3 program is evaluating the efficacy of pimavanserin in patients with predominantly negative symptoms of schizophrenia who have achieved adequate control of positive symptoms with their existing antipsychotic treatment. We completed enrollment in ADVANCE-2 and expect that top-line results will be available in the first quarter of 2024.
We cannot predict what healthcare reform initiatives may be adopted in the future. Manufacturing and Distribution We currently outsource, and plan to continue to outsource, manufacturing activities for NUPLAZID, as well as for trofinetide and our other existing and future product candidates for development and commercial purposes.
We cannot predict what healthcare reform initiatives may be adopted in the future. Manufacturing and Distribution We currently outsource, and plan to continue to outsource, manufacturing activities for NUPLAZID, DAYBUE and our existing and future product candidates for development and commercial purposes.
Our property and equipment totaled $6.0 million, $8.0 million, and $9.2 million as of December 31, 2022, 2021 and 2020, respectively. All of our tangible long-lived assets are located in the United States.
Our property and equipment totaled $4.6 million, $6.0 million, and $8.0 million as of December 31, 2023, 2022 and 2021, respectively. All of our tangible long-lived assets are located in the United States.
In August 2018, we acquired an exclusive North American license to develop and commercialize trofinetide for Rett syndrome and other indications from Neuren Pharmaceuticals Limited (Neuren). Rett syndrome is a debilitating neurological disorder that occurs predominantly in females following apparently normal development for the first six months of life.
We hold worldwide commercialization rights to pimavanserin. In August 2018, we acquired an exclusive North American license to develop and commercialize DAYBUE for Rett syndrome and other indications from Neuren Pharmaceuticals Limited (Neuren). Rett syndrome is a debilitating neurological disorder that occurs predominantly in females following apparently normal psychomotor development for the first six months of life.
We are a party to various license agreements that give us rights to use certain technologies in our research and development, subject to certain limitations. Pimavanserin To date, 36 U.S. patents have been issued to us that relate to pimavanserin, NUPLAZID and methods of use.
We are a party to various license agreements that give us rights to use certain technologies in our research and development, subject to certain limitations. Pimavanserin We currently hold 36 U.S. patents that relate to pimavanserin, NUPLAZID and methods of use of pimavanserin.
Several academic institutions and pharmaceutical companies are currently conducting clinical trials for the treatment of various symptoms of Rett syndrome. Trofinetide, if approved for the treatment of Rett syndrome, would compete indirectly with off-label usage of branded and generic prescription medications targeted at individual symptoms of Rett syndrome, including antiepileptics, antipsychotics, antidepressants and benzodiazepines.
Several academic institutions and pharmaceutical companies are currently conducting clinical trials for the treatment of various symptoms of Rett syndrome. DAYBUE competes indirectly with off-label usage of branded and generic prescription medications targeted at individual symptoms of Rett syndrome, including antiepileptics, antipsychotics, antidepressants and benzodiazepines.
The FDA’s review of an NDA may also involve review and recommendations by an independent FDA advisory committee, particularly for novel indications. The FDA is not bound by the recommendation of an advisory committee.
The FDA’s review of an NDA may also involve review and recommendations by an independent FDA advisory committee, particularly for novel indications.
Further, one payor’s determination to provide coverage for a drug product does not ensure that other payors will also provide coverage for the drug product. Coverage policies and third-party payor reimbursement rates may change at any time.
A third-party payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product does not ensure that other payors will also provide coverage for the drug product. Coverage policies and third-party payor reimbursement rates may change at any time.
Our intangible assets, comprised of right-of-use assets and other intangibles acquired, totaled $55.6 million, $58.3 million and $48.4 million as of December 31, 2022, 2021 and 2020, respectively. Employees and Human Capital Employees. At December 31, 2022, we had a total of 513 employees, 511 of whom were full-time.
Our intangible assets, comprised of right-of-use assets and other intangibles acquired, totaled $117.3 million, $55.6 million and $58.3 million as of December 31, 2023, 2022 and 2021, respectively. Employees and Human Capital Employees. At December 31, 2023, we had a total of 598 employees, 597 of whom were full-time.
In addition, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.
In addition, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions take effect progressively starting in fiscal year 2023.
Studies show that about 40% to 50% of schizophrenia patients suffer from prominent negative symptoms. While currently available antipsychotic treatments for schizophrenia mainly target positive symptoms, many patients remain functionally impaired because of residual negative and cognitive symptoms that are harder to treat with atypical antipsychotics. The residual negative and cognitive symptoms limit social functioning.
Schizophrenia is associated with persistent impairment of a patient’s social functioning and productivity. Studies show that about 40% to 50% people with schizophrenia suffer from negative symptoms. While currently available antipsychotic treatments for schizophrenia mainly target positive symptoms, many patients remain functionally impaired because of residual negative and cognitive symptoms that are harder to treat with atypical antipsychotics.
In selected markets outside of the United States in which NUPLAZID may be approved, if any, we may choose to commercialize NUPLAZID independently or by establishing one or more strategic alliances. We have begun expanding our commercial team to support the commercialization of trofinetide. Long-Lived Assets Our tangible long-lived assets are comprised of intangible assets and property and equipment.
In selected markets outside of the United States in which DAYBUE may be approved, if any, we may choose to commercialize DAYBUE independently or by establishing one or more strategic alliances. 18 Long-Lived Assets Our tangible long-lived assets are comprised of intangible assets and property and equipment.
Coverage and Reimbursement Sales of NUPLAZID and of trofinetide or our other product candidates, if approved, depend and will depend, in part, on the extent to which such products will be covered by third-party payors, such as government health care programs, commercial insurance and managed healthcare organizations.
Coverage and Reimbursement Sales of NUPLAZID, DAYBUE and our product candidates, if approved, depend and will depend, in part, on the extent to which such products will be covered by third-party payors, such as government health care programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly limiting coverage and/or reducing reimbursements for medical products and services.
As the first and only drug approved by the FDA for the treatment of hallucinations and delusions associated with PDP, NUPLAZID provides an innovative approach to the treatment of PDP without compromising motor control and potentially avoiding many of the debilitating side effects of existing antipsychotics. 5 In connection with the FDA approval of NUPLAZID, we have agreed to four post-marketing commitments.
As the first and only drug approved by the FDA for the treatment of hallucinations and delusions associated with PDP, NUPLAZID provides an innovative approach to the treatment of PDP without compromising motor control and potentially avoiding many of the debilitating side effects of existing antipsychotics.
If the regulatory authority is satisfied that adequate evidence of safety, quality and efficacy has been presented, marketing authorization will be granted. This foreign regulatory approval process involves all of the risks associated with FDA marketing approval discussed above.
The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country. If the regulatory authority is satisfied that adequate evidence of safety, quality and efficacy has been presented, marketing authorization will be granted. This foreign regulatory approval process involves all of the risks associated with FDA marketing approval discussed above.
In addition, delays or rejections may be encountered based upon changes in regulatory policy, regulations or statutes governing product approval during the period of product development and regulatory agency review.
The FDA is not bound by the recommendation of an advisory committee. 11 In addition, delays or rejections may be encountered based upon changes in regulatory policy, regulations or statutes governing product approval during the period of product development and regulatory agency review.
Additionally, we may be subject to state laws that require pharmaceutical companies to comply with the federal government’s and/or pharmaceutical industry’s voluntary compliance guidelines, state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, state laws that require drug manufacturers to report information on the pricing of certain drugs, state and local laws that require the registration of pharmaceutical sales representatives, as well as state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA. 13 If we are found to be in violation of any of these laws or any other federal or state regulations, we may be subject to significant administrative, civil and/or criminal penalties, damages, fines, disgorgement, imprisonment, exclusion from federal health care programs, additional reporting requirements and/or oversight, and the curtailment or restructuring of our operations.
Additionally, we may be subject to state laws that require pharmaceutical companies to comply with the federal government’s and/or pharmaceutical industry’s voluntary compliance guidelines, state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, state laws that require drug manufacturers to report information on the pricing of certain drugs, state and local laws that require the registration of pharmaceutical sales representatives, as well as state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA.
For the SYNGAP1 program, the two companies will jointly share global research, development and commercialization responsibilities and share 50/50 in all worldwide costs and future profits. For the Rett syndrome (MECP2) and the undisclosed neurodevelopmental program, Stoke will lead research and pre-clinical development activities, while we will lead clinical development and commercialization activities.
The collaboration includes SYNGAP1 syndrome, Rett syndrome (MECP2), and an undisclosed neurodevelopmental target. For the SYNGAP1 program, the two companies will jointly share global research, development and commercialization responsibilities and share 50/50 in all worldwide costs and future profits.
Additionally, the manufacture of our drug product must be done in accordance with current good manufacturing practices (GMPs). 10 To establish a new product candidate’s safety and efficacy, the FDA requires companies seeking approval to market a drug product to submit extensive preclinical and clinical data, along with other information, for each indication for which the product will be labeled.
To establish a new product candidate’s safety and efficacy, the FDA requires companies seeking approval to market a drug product to submit extensive preclinical and clinical data, along with other information, for each indication for which the product will be labeled.
NUPLAZID is a selective serotonin inverse agonist/antagonist, preferentially targeting 5-HT 2A receptors with no appreciable affinity for dopaminergic, histaminergic, or muscarinic receptors. Through this novel mechanism, NUPLAZID demonstrated significant efficacy in reducing the hallucinations and delusions associated with PDP without negatively impacting motor function in our Phase 3 pivotal trial.
NUPLAZID is a selective serotonin inverse agonist/antagonist preferentially targeting the 5-HT 2A receptor, a key serotonin receptor that plays an important role in psychosis. Through this novel mechanism, NUPLAZID demonstrated significant efficacy in reducing the hallucinations and delusions associated with PDP without negatively impacting motor function in our Phase 3 pivotal trial.
Trofinetide as a Treatment for Rett Syndrome Trofinetide is a novel synthetic analog of the amino‐terminal tripeptide of insulin-like growth factor 1 (IGF-1) designed to treat the core symptoms of Rett syndrome by reducing neuroinflammation and supporting synaptic function.
DAYBUE (trofinetide) as a Treatment for Rett Syndrome Trofinetide is a novel synthetic analog of the amino-terminal tripeptide of insulin-like growth factor 1 (IGF-1) designed to treat the core symptoms of Rett syndrome by reducing neuroinflammation and supporting synaptic function. Trofinetide has been granted FDA Fast Track Status and Orphan Drug Designation in the U.S. and Orphan Designation in Europe.
The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product. 11 We and our collaborators and contract manufacturers also are required to comply with the applicable FDA GMP regulations.
The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product.
We submitted to the FDA a New Drug Application (NDA) for trofinetide for the treatment of Rett syndrome in July 2022 based on the positive results from our pivotal Phase 3 Lavender™ study which demonstrated statistically significant improvement over placebo for both co-primary endpoints as well as the key secondary endpoint.
The FDA approval of DAYBUE for the treatment of Rett syndrome was based on the positive results from our pivotal Phase 3 LAVENDER ™ study which demonstrated statistically significant and clinically meaning improvement over placebo for both co-primary endpoints in the study as well as the key secondary endpoint of the study.
NUPLAZID as a Treatment for Parkinson’s Disease Psychosis Parkinson’s disease is the second most common neurodegenerative disorder after Alzheimer’s disease. According to the Parkinson’s Disease Foundation, about one million people in the United States and more than 10 million people globally suffer from this disease. Approximately 50% of Parkinson’s patients will experience psychosis over the course of their disease.
NUPLAZID is available in 34 mg capsule and 10 mg tablet dosage forms. 5 NUPLAZID as a Treatment for Parkinson’s Disease Psychosis Parkinson’s disease is the second most common neurodegenerative disorder after Alzheimer’s disease. According to the Parkinson’s Disease Foundation, about one million people in the United States and more than 10 million people globally suffer from this disease.
Our Strategy Our strategy is to identify, develop and commercialize innovative therapies that address unmet medical needs in CNS disorders and rare diseases. Key elements of our strategy are to: • Maximize the successful commercialization of NUPLAZID for Parkinson’s disease psychosis in the United States.
Our Strategy Our strategy is to identify, develop and commercialize innovative therapies that address unmet medical needs in CNS disorders and rare diseases. Key elements of our strategy are to: • Build on the strong commercialization of DAYBUE for the treatment of patients with Rett syndrome in the United States.
Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain.
Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain. 12 Outside of the United States, our ability to market a product is contingent upon receiving a marketing authorization from the appropriate regulatory authorities.
We developed and successfully commercialized NUPLAZID (pimavanserin), which was approved by the U.S. Food and Drug Administration (FDA) in April 2016 for the treatment of hallucinations and delusions associated with Parkinson’s disease psychosis (PDP), and is the first and only drug approved in the United States for this condition.
Our commercial portfolio includes two products. In April 2016, the U.S. Food and Drug Administration (FDA) approved NUPLAZID for the treatment of hallucinations and delusions associated with PDP, which is the first and only drug approved in the United States for this condition.
Our experienced commercial team is comprised of experienced professionals in marketing, key account management, patient access services, commercial operations, and sales force planning and management.
Our experienced commercial team is comprised of experienced professionals in marketing, key account management, patient access services, commercial operations, and sales force planning and management. In addition, our commercial infrastructure includes capabilities in manufacturing, health outcomes, medical affairs, quality control, and compliance.
Because the U.S. patent laws and judicial interpretations thereof change, modifications or new interpretations of the laws may impact our patent terms. 9 The remaining 22 U.S. patents relating to pimavanserin that have been issued to us cover methods of use of pimavanserin for, among other things, treating AD Psychosis, Alzheimer’s disease indications, schizophrenia, bipolar disorder, Lewy body dementia, sleep disorders, hallucinations and delusions, other indications and methods of producing pimavanserin.
The remaining 21 U.S. patents relating to pimavanserin that have been issued to us cover methods of use of pimavanserin for, among other things, treating ADP, Alzheimer’s disease indications, schizophrenia, bipolar disorder, Lewy body dementia, sleep disorders, hallucinations and delusions, other indications and methods of manufacturing pimavanserin.
Trofinetide has been granted FDA Fast Track Status and Orphan Drug Designation in the U.S. and Orphan Designation in Europe. 6 Rett syndrome is a debilitating neurological disorder that occurs primarily in females following apparently normal development for the first six months of life. Rett syndrome has been most often misdiagnosed as autism, cerebral palsy, or non-specific developmental delay.
Rett syndrome is a debilitating neurological disorder that occurs primarily in females following apparently normal development for the first six months of life. Rett syndrome has been most often misdiagnosed as autism, cerebral palsy, or non-specific developmental delay. Rett syndrome is caused by mutations on the X chromosome on a gene called MECP2.
Patent terms may be subject to change not only due to potential patent term extensions but also to any terminal disclaimer that reduces patent term, as well as other factors.
Patent terms may be subject to change not only due to potential patent term extensions but also to any terminal disclaimer that reduces patent term, as well as other factors. Because the U.S. patent laws and judicial interpretations thereof change, modifications or new interpretations of the laws may impact our patent terms.
In addition, our commercial infrastructure includes capabilities in manufacturing, health outcomes, medical affairs, quality control, and compliance. 16 We launched NUPLAZID in May 2016, and our focus is to continue to establish NUPLAZID as the standard of care for patients with PDP.
We launched NUPLAZID in May 2016, and our focus is to continue to establish NUPLAZID as the standard of care for patients with PDP.
Rett syndrome occurs worldwide in approximately one of every 10,000 to 15,000 female births causing problems in brain function that are responsible for cognitive, sensory, emotional, motor and autonomic function.
There are more than 200 different mutations found on the MECP2 gene that interfere with its ability to generate a normal gene product. Rett syndrome occurs worldwide in approximately one of every 10,000 to 15,000 female births causing problems in brain function that are responsible for cognitive, sensory, emotional, motor and autonomic function.
Our filings with the Securities and Exchange Commission (SEC), are available free of charge through our website as soon as reasonably practicable after being electronically filed with or furnished to the SEC.
We maintain a website at www.acadia.com , to which we regularly post copies of our press releases as well as additional information about us. Our filings with the Securities and Exchange Commission (SEC) are available free of charge through our website as soon as reasonably practicable after being electronically filed with or furnished to the SEC.
Clinical testing must also meet requirements for clinical trial registration, institutional review board oversight, informed consent, health information privacy, and good clinical practices (GCPs).
Clinical testing must also meet requirements for clinical trial registration, institutional review board oversight, informed consent, health information privacy, and good clinical practices (GCPs). Additionally, the manufacture of our drug product must be done in accordance with current good manufacturing practices (cGMPs).
Many of our competitors and their collaborators have significantly greater experience than we do in the following: • preclinical studies and clinical trials of potential pharmaceutical products; • obtaining FDA and other regulatory approvals; and • commercializing pharmaceutical products. 8 In addition, many of our competitors and their collaborators have substantially greater advantages in the following areas: • capital resources; • research and development resources; • manufacturing capabilities; • sales and marketing; and • production facilities.
Many of our competitors and their collaborators have significantly greater experience than we do in the following: • identifying and validating targets; • screening compounds against targets; • preclinical studies and clinical trials of potential pharmaceutical products; • obtaining FDA and other regulatory approvals; and • commercializing pharmaceutical products.
Government Regulation Our business activities, including the manufacturing and marketing of NUPLAZID, trofinetide, if approved, and our potential products and our ongoing research and development activities, are subject to extensive regulation by numerous governmental authorities in the United States and other countries.
Under the license agreement with Neuren, we continue to file and prosecute patent applications directed to trofinetide, formulations of trofinetide, methods of manufacturing and methods of treating Rett syndrome using trofinetide. 10 Government Regulation Our business activities, including the manufacturing and marketing of NUPLAZID, DAYBUE and our potential products and our ongoing research and development activities, are subject to extensive regulation by numerous governmental authorities in the United States and other countries.
We believe this manufacturing strategy will enable us to direct our financial resources to our commercial activities and to the ongoing development of pimavanserin without devoting the substantial resources and capital required to build manufacturing facilities. We licensed worldwide intellectual property rights related to pimavanserin in certain indications to Acadia Pharmaceuticals GmbH, our wholly-owned Swiss subsidiary (Acadia GmbH).
We believe this manufacturing strategy will enable us to direct our financial resources to our commercial activities and to the ongoing development of pimavanserin, trofinetide and other product candidates without devoting the substantial resources and capital required to build manufacturing facilities.
Through its unique mechanism and the clinical studies conducted to date, we believe that pimavanserin has the potential to address important unmet medical needs in neurological and psychiatric disorders in addition to PDP. Today we are evaluating pimavanserin for the treatment of the negative symptoms of schizophrenia in a Phase 3 clinical development program.
In addition to the treatment of hallucinations and delusions associated with the PDP, we believe that pimavanserin has the potential as a treatment of the negative symptoms of schizophrenia. Today we are evaluating pimavanserin for the treatment of the negative symptoms of schizophrenia in a Phase 3 clinical development program.
The development of psychosis in patients with Parkinson’s disease substantially contributes to the burden of Parkinson’s disease and deeply affects their quality of life. PDP is associated with a diminished quality of life, nursing home placement, and increased caregiver stress and burden.
PDP is associated with a diminished quality of life, nursing home placement, and increased caregiver stress and burden.
NUPLAZID has the potential to avoid many of the debilitating side effects of existing antipsychotics, none of which are approved by the FDA for the treatment of PDP. We hold worldwide commercialization rights to pimavanserin.
NUPLAZID has the potential to avoid many of the debilitating side effects of existing antipsychotics, none of which are approved by the FDA in the treatment of PDP. We hold worldwide commercialization rights to NUPLAZID for all indications and have established a broad patent portfolio, which includes numerous issued patents in the United States, Europe, and several additional countries.
We expect that healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and lower reimbursement, and additional downward pressure on the price that we receive for NUPLAZID and any future approved products. Further, it is possible that additional governmental action will be taken in response to the COVID-19 pandemic.
Any such approved importation plans, if implemented, may result in lower drug prices for products covered by those programs. We expect that healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and lower reimbursement, and additional downward pressure on the price that we receive for NUPLAZID, DAYBUE and any future approved products.
Acadia GmbH has contracted with Siegfried AG (Siegfried), to manufacture our API to be used in NUPLAZID for commercial sale. Under the manufacturing agreement, Acadia GmbH has agreed to purchase from Siegfried specified percentages of our commercial requirements of API for the United States and Europe.
Under the manufacturing agreement, Acadia GmbH has agreed to purchase from Siegfried specified percentages of our commercial requirements of API for the United States and Europe. The parties may also agree in the future on additional services under the manufacturing agreement with respect to non-commercial supply or development activities.
The term of the latest to expire agreement will end in 2027 and will automatically renew for subsequent two-year terms unless either party provides timely notice of its intent not to renew. Under the manufacturing agreement with Patheon described above, we also have the right to purchase trofinetide products for commercial use.
The term of the manufacturing agreement will end in November 2027 and will automatically renew for subsequent two-year terms unless either party provides timely notice of its intent not to renew, or unless the manufacturing agreement is terminated early pursuant to its terms.
We plan to initiate studies evaluating various doses of ACP-204 in ADP patients later this year. 4 Our Pipeline NUPLAZID (pimavanserin) Pimavanserin is a new chemical entity that we discovered and that was approved by the FDA in April 2016 for the treatment of hallucinations and delusions associated with PDP.
Our Pipeline NUPLAZID (pimavanserin) Pimavanserin is a chemical entity that we discovered and that was approved by the FDA in April 2016 for the treatment of hallucinations and delusions associated with PDP. It is the only drug approved in the United States for this condition and is marketed under the tradename NUPLAZID in the United States.
Trofinetide To date, 10 U.S. patents have been issued and exclusively licensed to us from Neuren Pharmaceuticals that relate to trofinetide, methods of manufacturing and methods of use of trofinetide. Several U.S. patents would be eligible for Orange Book listing, including a patent claiming the use of trofinetide for treating Rett syndrome.
Trofinetide We currently hold the exclusive licenses to 8 U.S. patents from Neuren Pharmaceuticals that relate to trofinetide, methods of manufacturing and methods of use of trofinetide. Two of the U.S. patents are listed in the Orange Book, including a patent claiming the use of trofinetide for treating Rett syndrome.
In addition, we recently announced that we are developing an internally discovered new molecule, ACP-204, which builds upon the learnings of pimavanserin in the treatment of neuropsychiatric symptoms, and is currently being evaluated in a Phase 1 clinical program.
In November 2023, we initiated the Phase 3 COMPASS PWS study evaluating the efficacy and safety of ACP-101 for the treatment of hyperphagia in PWS. 3 In addition, in August 2022, we announced that we are developing an internally discovered new molecule, ACP-204, which builds upon the learnings of pimavanserin in the treatment of neuropsychiatric symptoms.
Parkinson’s disease is more common in people over 60 years of age and the prevalence of this disease is expected to increase significantly as the population ages. PDP is a debilitating disorder commonly characterized by visual hallucinations and delusions that afflicts about 40% of the one million Parkinson’s disease patients in the United States.
PDP is a debilitating disorder commonly characterized by visual hallucinations and delusions that afflicts about 40% of the one million Parkinson’s disease patients in the United States. The development of psychosis in patients with Parkinson’s disease substantially contributes to the burden of Parkinson’s disease and deeply affects their quality of life.
GMP regulations include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Manufacturing facilities are subject to inspection by the FDA. These facilities must be approved before we can use them in commercial manufacturing of our potential products and must maintain ongoing compliance for commercial product manufacture.
We and our collaborators and contract manufacturers also are required to comply with the applicable FDA GMP regulations. cGMP regulations include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Manufacturing facilities are subject to inspection by the FDA.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe commencement of clinical trials can be delayed for a variety of reasons, including delays in: • demonstrating sufficient safety and efficacy to obtain regulatory approval to commence a clinical trial; • reaching agreement on acceptable terms with prospective contract research organizations (CROs) and clinical trial sites; • manufacturing sufficient quantities of a product candidate; • obtaining clearance from the FDA to commence clinical trials pursuant to an Investigational New Drug application; • obtaining approval to conduct clinical trials in countries outside the United States pursuant to evolving regional and local regulations (e.g., EU Clinical Trials Regulation (EU No. 536/2014)); • obtaining institutional review board approval to conduct a clinical trial at a prospective clinical trial site; and • patient recruitment, which is a function of many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical trial sites, the availability of effective treatments for the relevant disease and the eligibility criteria for the clinical trial. 24 Once a clinical trial has begun, it may be delayed, suspended or terminated due to a number of factors, including: • competition for internal and external resources, including clinical sites and study patients, that we may choose to allocate to other programs; • ongoing discussions with regulatory authorities regarding the scope or design of our clinical trials or requests by them for supplemental information with respect to our clinical trial results; • imposition of clinical holds by regulatory authorities or institutional review boards; • failure to conduct clinical trials in accordance with regulatory requirements; • inability to monitor patients adequately during or after treatment; • difficulty monitoring multiple study sites; • patient enrollment, which is a function of many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical trial sites, the availability of effective treatments for the relevant disease and the eligibility criteria for the clinical trial; • lower than anticipated screening or retention rates of patients in clinical trials; • serious adverse events or side effects experienced by participants; and • insufficient supply or deficient quality of product candidates or other materials necessary for the conduct of our clinical trials.
Biggest changeOnce a clinical trial has begun, it may be delayed, suspended or terminated due to a number of factors, including: • competition for internal and external resources, including clinical sites and study patients, that we may choose to allocate to other programs; • ongoing discussions with regulatory authorities regarding the scope or design of our clinical trials or requests by them for supplemental information with respect to our clinical trial results; • imposition of clinical holds by regulatory authorities or institutional review boards; • failure to conduct clinical trials in accordance with regulatory requirements; • inability to monitor patients adequately during or after treatment; 26 • difficulty monitoring multiple study sites; • patient enrollment, which is a function of many factors, most of which is outside our control, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical trial sites, the availability of effective treatments for the relevant disease and the eligibility criteria for the clinical trial; • lower than anticipated screening or retention rates of patients in clinical trials; • serious adverse events or side effects experienced by participants; and • insufficient supply or deficient quality of product candidates or other materials necessary for the conduct of our clinical trials.
Competing products, either developed by our collaborators or to which our collaborators have rights, may result in the allocation of resources by our collaborators to competing products and their withdrawal of support for our product candidates or may otherwise result in lower demand for our potential products.
Competing products and product candidates, either developed by our collaborators or to which our collaborators have rights, may result in the allocation of resources by our collaborators to competing products and product candidates, and their withdrawal of support for our products and product candidates or may otherwise result in lower demand for our potential products and product candidates.
For example, companies may face temporary or definitive bans on data processing and other corrective actions; fines of up to 20 million Euros under the EU GDPR / 17.5 million pounds sterling under the UK GDPR or 4% of annual global revenue, whichever is greater; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
For example, under the GDPR, companies may face temporary or definitive bans on data processing and other corrective actions; fines of up to 20 million Euros under the EU GDPR / 17.5 million pounds sterling under the UK GDPR or 4% of annual global revenue, whichever is greater; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our products. We may expend significant resources, fundamentally change our business activities and practices (including our clinical trials) to try to protect against security incidents.
A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our products. We may expend significant resources or fundamentally change our business activities and practices (including our clinical trials) to try to protect against security incidents.
A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • the U.S. federal civil and criminal false claims laws, including the civil False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil monetary penalties laws, which impose criminal and civil penalties on individuals or entities for, among other things, knowingly presenting, or causing to be presented to the U.S. federal government, claims for payment or approval that are false or fraudulent or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government.
A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; 43 • the U.S. federal civil and criminal false claims laws, including the civil False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil monetary penalties laws, which impose criminal and civil penalties on individuals or entities for, among other things, knowingly presenting, or causing to be presented to the U.S. federal government, claims for payment or approval that are false or fraudulent or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government.
Even if we or our collaborators successfully complete the clinical trials of product candidates and apply for such required authorizations, the product candidates, such as pimavanserin, may fail for other reasons, including the possibility that the product candidates will: • fail to receive the regulatory clearances required to market them as drugs; • be subject to proprietary rights held by others requiring the negotiation of a license agreement prior to marketing; • be difficult or expensive to manufacture on a commercial scale; • have adverse side effects that make their use less desirable; or • fail to compete with product candidates or other treatments commercialized by competitors.
Even if we or our collaborators successfully complete the clinical trials of product candidates and apply for such required authorizations, the product candidates, such as pimavanserin and trofinetide, may fail for other reasons, including the possibility that the product candidates will: • fail to receive the regulatory clearances required to market them as drugs; • be subject to proprietary rights held by others requiring the negotiation of a license agreement prior to marketing; • be difficult or expensive to manufacture on a commercial scale; • have adverse side effects that make their use less desirable; or • fail to compete with product candidates or other treatments commercialized by competitors.
In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), and corresponding provisions of state law, if a corporation 29 undergoes an “ownership change,” which is generally defined as a greater than 50 percent change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited.
In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percent change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited.
An expansion in the government’s role in the U.S. healthcare industry may increase existing congressional or governmental agency scrutiny on price increases, such as the ones we have implemented for NUPLAZID, cause general downward pressure on the prices of prescription drug products, lower reimbursements for providers using NUPLAZID or any other product for which we obtain regulatory approval, reduce product utilization and adversely affect our business and results of operations.
An expansion in the government’s role in the U.S. healthcare industry may increase existing congressional or governmental agency scrutiny on price increases, such as the ones we have implemented for NUPLAZID, cause general downward pressure on the prices of prescription drug products, lower reimbursements for providers using NUPLAZID, DAYBUE or any other product for which we obtain regulatory approval, reduce product utilization and adversely affect our business and results of operations.
Any legal action against us or our collaborators could lead to: • payment of damages, which could potentially be trebled if we are found to have willfully infringed a party’s patent rights; • injunctive or other equitable relief that may effectively block our ability to further develop, commercialize, and sell products; or • we or our collaborators having to enter into license arrangements that may not be available on commercially acceptable terms, or at all.
Any legal action against us or our collaborators could lead to: • payment of damages, which could potentially be trebled if we are found to have willfully infringed a party’s patent rights; • injunctive or other equitable relief that may effectively block our ability to further develop, commercialize, and sell products; or 40 • we or our collaborators having to enter into license arrangements that may not be available on commercially acceptable terms, or at all.
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, processing) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, data we collect about trial participants in connection with clinical trials, sensitive third-party data, business plans, transactions, financial information and medical information collected by our patient access management team (collectively, sensitive data).
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, data we collect about trial participants in connection with clinical trials, sensitive third-party data, business plans, transactions, financial information and medical information collected by our patient access management team (collectively, sensitive data).
These laws may impact, among other things, our clinical research, sales, marketing, grants, charitable donations, and education programs and constrain the business or financial arrangements with healthcare providers, physicians, charitable foundations that support Parkinson’s disease patients generally, and other parties that have the ability to directly or indirectly influence the prescribing, ordering, marketing, or 41 distribution of our products for which we obtain marketing approval.
These laws may impact, among other things, our clinical research, sales, marketing, grants, charitable donations, and education programs and constrain the business or financial arrangements with healthcare providers, physicians, charitable foundations that support Parkinson’s disease patients generally, and other parties that have the ability to directly or indirectly influence the prescribing, ordering, marketing, or distribution of our products for which we obtain marketing approval.
Neither we nor our collaborators can market a pharmaceutical product, including NUPLAZID, in the U.S. until it has completed rigorous preclinical testing and clinical trials and an extensive regulatory clearance process implemented by the FDA. Satisfaction of regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product, and requires substantial resources.
Neither we nor our collaborators can market a pharmaceutical product, including NUPLAZID and DAYBUE, in the U.S. until it has completed rigorous preclinical testing and clinical trials and an extensive regulatory clearance process implemented by the FDA. Satisfaction of regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product, and requires substantial resources.
The success of this strategy depends in large part on the combination of our regulatory, development and commercial capabilities and expertise and our ability to identify, select and acquire or in-license clinically-enabled product candidates for the treatment of neurological disorders, or for therapeutic indications that complement or augment our current product candidates, or that otherwise fit into our development or strategic plans on terms that are acceptable to us.
The success of this strategy depends in large part on the combination of our regulatory, development and commercial capabilities and expertise and our ability to identify, select and acquire or in-license clinically-enabled product candidates for the treatment of neurological disorders, or for therapeutic indications that complement or augment our current products and product candidates, or that otherwise fit into our development or strategic plans on terms that are acceptable to us.
Coverage decisions may depend upon clinical and economic standards that disfavor drug products when lower cost therapeutic alternatives are already available or subsequently become available. Even with coverage for NUPLAZID, or other products we may market, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high.
Coverage decisions may depend upon clinical and economic standards that disfavor drug products when lower cost therapeutic alternatives are already available or subsequently become available. Even with coverage for NUPLAZID, DAYBUE or other products we may market, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high.
For example, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively the ACA), as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we may receive for any approved product, including NUPLAZID.
For example, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the ACA), as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we may receive for any approved product, including NUPLAZID and DAYBUE.
Our collaborators may fail to develop or effectively commercialize products using our product candidates or technologies because they: • do not have sufficient resources or decide not to devote the necessary resources due to internal constraints such as limited cash or human resources or a change in strategic focus; • may not properly maintain, enforce or defend our intellectual property rights or may use our proprietary information in a manner that could jeopardize or invalidate our proprietary information or expose us to potential litigation; • terminate the arrangement or allow it to expire, which would delay the development and commercialization and may increase the cost of developing and commercializing our products or product candidates; • may sell, transfer or divest assets or programs related to our partnered product or product candidates; • may not pursue further development and commercialization of products resulting from the strategic collaboration arrangement; • decide to pursue a competitive product developed outside of the collaboration; or • cannot obtain the necessary regulatory approvals.
Our collaborators may fail to develop or effectively commercialize products using our product candidates, if approved, or technologies because they: • do not have sufficient resources or decide not to devote the necessary resources due to internal constraints such as limited cash or human resources or a change in strategic focus; • may not properly maintain, enforce or defend our intellectual property rights or may use our proprietary information in a manner that could jeopardize or invalidate our proprietary information or expose us to potential litigation; • terminate the arrangement or allow it to expire, which would delay the development and commercialization and may increase the cost of developing and commercializing our products or product candidates, if approved; • may sell, transfer or divest assets or programs related to our partnered product or product candidates; • may not pursue further development and commercialization of products resulting from the strategic collaboration arrangement; • decide to pursue a competitive product developed outside of the collaboration; or • cannot obtain the necessary regulatory approvals.
If any of the above occur, it could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of NUPLAZID, or any other product candidates that may be approved, outside the U.S. will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
If any of the above occur, it could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of NUPLAZID, DAYBUE or any product candidates that may be approved, outside the U.S. will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
These events, coupled with other factors, may limit our access to financing in the future. This could have a material adverse effect on our ability to access funding on acceptable terms, or at all, and our stock price may suffer further as a result. Item 1B. Unresolved Staff Comments. This item is not applicable. 52
These events, coupled with other factors, may limit our access to financing in the future. This could have a material adverse effect on our ability to access funding on acceptable terms, or at all, and our stock price may suffer further as a result. Item 1B. Unresolved Staff Comments. This item is not applicable.
Future changes in U.S. and non-U.S. tax laws, including implementation of international tax reform relating to the tax treatment of multinational corporations, if enacted, may reduce or eliminate any potential financial efficiencies that we hoped to achieve by establishing this operational structure. Additionally, taxing authorities, such as the U.S.
In addition, future changes in U.S. and non-U.S. tax laws, including implementation of international tax reform relating to the tax treatment of multinational corporations, if enacted, may reduce or eliminate any potential financial efficiencies that we hoped to achieve by establishing this operational structure. Additionally, taxing authorities, such as the U.S.
While we have a limited number of clinical sites in Ukraine and Russia, these significant disruptions and the suspension/termination of clinical trial activities could potentially delay the completion of enrollment in our clinical trials and complicate the analysis of data, as affected clinical sites might not be able to have their data be validated or protocol assessments may be missed.
While we have a limited number of clinical sites in Ukraine, these significant disruptions and the suspension/termination of clinical trial activities could potentially delay the completion of enrollment in our clinical trials and complicate the analysis of data, as affected clinical sites might not be able to have their data be validated or protocol assessments may be missed.
As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of NUPLAZID to each payor separately, with no assurance that coverage will be obtained. Coverage policies and third-party payor reimbursement rates may change at any time.
As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of NUPLAZID and DAYBUE to each payor separately, with no assurance that coverage will be obtained. Coverage policies and third-party payor reimbursement rates may change at any time.
We believe that comparisons from period to period of our financial results are not necessarily meaningful and should not be relied upon as indications of our future performance. From time to time, we provide guidance relating to our expectations for NUPLAZID net sales and certain expense line items based on estimates and the judgment of management.
We believe that comparisons from period to period of our financial results are not necessarily meaningful and should not be relied upon as indications of our future performance. From time to time, we provide guidance relating to our expectations for net sales of NUPLAZID and DAYBUE and certain expense line items based on estimates and the judgment of management.
We may use our cash resources for corporate purposes that do not yield a significant return or any return at all for our stockholders, which may cause our stock price to decline. We have incurred, and expect to continue to incur, significant costs as a result of laws and regulations relating to corporate governance and other matters.
We may use our cash resources for corporate purposes that do not yield a significant return or any return at all for our stockholders, which may cause our stock price to decline. 55 We have incurred, and expect to continue to incur, significant costs as a result of laws and regulations relating to corporate governance and other matters.
If any of the following risks actually occurs, our business, financial condition, results of operations, and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock would likely decline. Risks Related to Our Business Our prospects are highly dependent on the continued successful commercialization of NUPLAZID.
If any of the following risks actually occurs, our business, financial condition, results of operations, and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock would likely decline. Risks Related to Our Business Our prospects are highly dependent on the continued successful commercialization of NUPLAZID and DAYBUE.
If the results or timing of regulatory filings, the regulatory process, regulatory developments, clinical trials or preclinical studies, or other activities, actions or decisions related to NUPLAZID do not meet our or others’ expectations, the market price of our common stock could decline significantly and the long-term success of the product and our company could be harmed.
If the results or timing of regulatory filings, the regulatory process, regulatory developments, clinical trials or preclinical studies, or other activities, actions or decisions related to NUPLAZID or DAYBUE do not meet our or others’ expectations, the market price of our common stock could decline significantly and the long-term success of the product and our company could be harmed.
These investigations have alleged violations of various U.S. federal and state laws and regulations, including claims asserting antitrust violations, violations of the FDCA, the civil False Claims Act, the Prescription Drug Marketing Act, anti-kickback laws, and other alleged violations in connection with the promotion of products for unapproved 45 uses, pricing and Medicare and/or Medicaid reimbursement.
These investigations have alleged violations of various U.S. federal and state laws and regulations, including claims asserting antitrust violations, violations of the FDCA, the civil False Claims Act, the Prescription Drug Marketing Act, anti-kickback laws, and other alleged violations in connection with the promotion of products for unapproved uses, pricing and Medicare and/or Medicaid reimbursement.
Our competitors, either alone or with their collaborators, may succeed in developing drugs that are more effective, safer, more affordable, or more easily administered than ours and may achieve patent protection or commercialize drugs sooner than us. Our competitors may also develop alternative therapies that could further limit the market for any drugs that we may develop.
Our competitors, either alone or with their collaborators, may succeed in developing technologies or drugs that are more effective, safer, more affordable, or more easily administered than ours and may achieve patent protection or commercialize drugs sooner than us. Our competitors may also develop alternative therapies that could further limit the market for any drugs that we may develop.
Cyberattacks, malicious internet-based activity, online and offline fraud and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely. These threats are prevalent, continue to rise, and are becoming increasingly difficult to detect.
Cyberattacks, malicious internet-based activity, online and offline fraud and other similar activities threaten the confidentiality, integrity, and availability of our sensitive data and information technology systems, and those of the third parties upon which we rely. These threats are prevalent, continue to rise, and are becoming increasingly difficult to detect.
Patients may not use NUPLAZID if coverage is not provided or reimbursement is inadequate to cover a significant portion of its cost. In addition, the market for NUPLAZID depends significantly on access to third-party payors’ drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement.
Patients may not use NUPLAZID and DAYBUE if coverage is not provided or reimbursement is inadequate to cover a significant portion of its cost. In addition, the market for NUPLAZID and DAYBUE depends significantly on access to third-party payors’ drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement.
If there is no lawful manner for us to transfer personal data from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including by limiting our ability to conduct clinical trial activities in Europe and elsewhere, the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.
If there is no lawful manner for us to transfer personal data from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including by limiting our ability to conduct clinical trial activities in Europe and elsewhere, the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.
If we are unable to obtain coverage of, and adequate payment levels for, NUPLAZID or any other products we may market to third-party payors, physicians may limit how much or under what circumstances they will prescribe or administer them and patients may decline to purchase them.
If we are unable to obtain coverage of, and adequate payment levels for, NUPLAZID, DAYBUE or any other products we may market to third-party payors, physicians may limit how much or under what circumstances they will prescribe or administer them and patients may decline to purchase them.
If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.
If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, we will not be able to 39 establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.
We face an inherent risk of product liability as a result of the commercial sales of NUPLAZID in the U.S. and the clinical testing of our product candidates, and will face an even greater risk following commercial launch of NUPLAZID in additional jurisdictions, if approved, or if we engage in the clinical testing of new product candidates or commercialize any additional products.
We face an inherent risk of product liability as a result of the commercial sales of NUPLAZID and DAYBUE in the U.S. and the clinical testing of our product candidates, and will face an even greater risk following commercial launch of NUPLAZID or DAYBUE in additional jurisdictions, if approved, or if we engage in the clinical testing of new product candidates or commercialize any additional products.
Some of these characteristics may be more appealing to high quality candidates than that which we have to offer. If we are unable to continue to attract and retain high quality personnel, the rate and success at which we can develop and commercialize products and product candidates will be limited.
Some of these characteristics may be more appealing to high quality candidates than that which we have to offer. If we are unable to continue to attract and retain high quality personnel, the rate and success at which we can develop and commercialize products and product candidates, if approved, will be limited.
We do not have insurance for damages resulting from earthquakes. While we do have fire insurance 31 for our property and equipment located in San Diego, any damage sustained in a fire could cause a delay in our research and development efforts and our results of operations could be materially and adversely affected.
We do not have insurance for damages resulting from earthquakes. While we do have fire insurance for our property and equipment located in San Diego, any damage sustained in a fire could cause a delay in our research and development efforts and our results of operations could be materially and adversely affected.
We will be required to comply with different regulations and policies of the jurisdictions where we seek approval for our product candidates, and we have not yet identified all of the requirements that we will need to satisfy to submit NUPLAZID for approval for other indications or in other jurisdictions.
We will be required to comply with different regulations and policies of the jurisdictions where we seek approval for our product candidates, and we have not yet identified all of the requirements that we will need to satisfy to submit NUPLAZID or DAYBUE for approval for other indications or in other jurisdictions.
Further, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (IRA) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan 40 year 2025.
Further, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (IRA) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025.
Many of our competitors and their collaborators have significantly greater experience than we do in the following: • identifying and validating targets; • screening compounds against targets; • preclinical studies and clinical trials of potential pharmaceutical products; • obtaining FDA and other regulatory approvals; and • commercializing pharmaceutical products.
Many of our competitors and their collaborators have significantly greater experience than we do in the following: • identifying and validating targets; • screening compounds against targets; 49 • preclinical studies and clinical trials of potential pharmaceutical products; • obtaining FDA and other regulatory approvals; and • commercializing pharmaceutical products.
Discovery of any issues post-approval, including any safety concerns, such as unexpected side effects or drug-drug interaction problems, adverse events of unanticipated severity or frequency, or concerns over misuse or abuse of the product, problems with the facilities where the product is manufactured, packaged or distributed, or failure to comply with regulatory requirements, may result in, among other things, restrictions on NUPLAZID or on us, including: • withdrawal of approval, addition of warnings or narrowing of the approved indication in the product label; • requirement of a Risk Evaluation and Mitigation Strategy to mitigate the risk of off-label use in populations where the FDA may believe that the potential risks of use may outweigh its benefits; • voluntary or mandatory recalls; • warning letters; • suspension of any ongoing clinical studies; • refusal by the FDA or other regulatory authorities to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product approvals; • restrictions on operations, including restrictions on the marketing or manufacturing of the product or the imposition of costly new manufacturing requirements; or • seizure or detention, or refusal to permit the import or export of products.
Discovery of any issues post-approval, including any safety concerns, such as unexpected side effects or drug-drug interaction problems, adverse events of unanticipated severity or frequency, or concerns over misuse or abuse of the product, problems with the facilities where the product is manufactured, tested, packaged or distributed, or failure to comply with regulatory requirements, may result in, among other things, restrictions on NUPLAZID, DAYBUE or on us, including: • withdrawal of approval, addition of warnings or narrowing of the approved indication in the product label; • requirement of a Risk Evaluation and Mitigation Strategy to mitigate the risk of off-label use in populations where the FDA may believe that the potential risks of use may outweigh its benefits; • voluntary or mandatory recalls; • warning letters; 20 • suspension of any ongoing clinical studies; • refusal by the FDA or other regulatory authorities to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product approvals; • restrictions on operations, including restrictions on the marketing or manufacturing of the product or the imposition of costly new manufacturing requirements; or • seizure or detention, or refusal to permit the import or export of products.
The research, testing, manufacturing, labeling, approval, sale, import, export, marketing, and distribution of pharmaceutical product candidates are subject to extensive regulation by the FDA and other regulatory authorities in the U.S. and other countries, whose regulations differ from country to country.
The research, testing, manufacturing, packaging, labeling, approval, sale, import, export, marketing, and distribution of pharmaceutical product candidates are subject to extensive regulation by the FDA and other regulatory authorities in the U.S. and other countries, whose regulations differ from country to country.
In addition to data privacy and security laws, we may be contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future. We may also be bound by other contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.
In addition to data privacy and security laws, we may be contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future. We are also bound by other contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.
If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources.
If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates, if approved. Even successful defense would require significant financial and management resources.
These threats come from a variety of sources, including traditional computer “hackers,” threat actors, personnel misconduct or error (such as through theft or misuse), organized criminal threat actors, sophisticated nation-states, and nation-state-supported actors.
These threats come from a variety of sources, including traditional computer “hackers,” hacktivists, threat actors, personnel misconduct or error (such as through theft or misuse), organized criminal threat actors, sophisticated nation-states, and nation-state-supported actors.
We have contracted with Patheon Pharmaceuticals Inc. to manufacture NUPLAZID 10 mg tablet and 34 mg capsule drug product for commercial use in the U.S. We have also contracted with a second contract manufacturing organization to manufacture NUPLAZID 34 mg drug product for commercial use in the U.S.
We have contracted with Patheon Pharmaceuticals Inc. to manufacture NUPLAZID 10 mg tablet and 34 mg capsule drug product and DAYBUE for commercial use in the U.S. We have also contracted with a second contract manufacturing organization to manufacture NUPLAZID 34 mg drug product for commercial use in the U.S.
Any delay or interruption in our ability to meet commercial demand for NUPLAZID and any other approved products will result in the loss of potential revenues and could adversely affect our ability to gain market acceptance for these products.
Any delay or interruption in our ability to meet commercial demand for NUPLAZID, DAYBUE and any other approved products will result in the loss of potential revenues and could adversely affect our ability to gain market acceptance for these products.
While we have entered into agreements with each of these distributors and pharmacies to distribute NUPLAZID in the U.S., they may not perform as agreed or they may terminate their agreements with us.
While we have entered into agreements with each of these distributors and pharmacies to distribute NUPLAZID and DAYBUE in the U.S., they may not perform as agreed or they may terminate their agreements with us.
In particular, if we are unable to add additional commercial products to our portfolio, we may not be able to successfully leverage our commercial organization that we have assembled for the marketing and sale of NUPLAZID.
In particular, if we are unable to add additional commercial products to our portfolio, we may not be able to successfully leverage our commercial organization that we have assembled for the marketing and sale of NUPLAZID and DAYBUE.
Furthermore, especially as we and our market capitalization have grown, the price of our common stock has been increasingly affected by quarterly and annual comparisons with the valuations and recommendations 49 of the analysts who cover our business.
Furthermore, especially as we and our market capitalization have grown, the price of our common stock has been increasingly affected by quarterly and annual comparisons with the valuations and recommendations of the analysts who cover our business.
We have changed, and may continue to change, the price of NUPLAZID from time to time, however, we do not know if the price we have selected, or may select in the future, for NUPLAZID is or will be the optimized price.
We have changed, and may continue to change, the price of NUPLAZID or DAYBUE from time to time, however, we do not know if the price we have selected, or may select in the future, for NUPLAZID or DAYBUE is or will be the optimized price.
Conflicts may arise in our collaborations due to one or more of the following: • disputes or breaches with respect to payments that we believe are due under the applicable agreements, particularly in the current environment when companies, including large established ones, may be seeking to reduce external payments; • disputes on strategy as to what development or commercialization activities should be pursued under the applicable agreements; • disputes as to the responsibility for conducting development and commercialization activities pursuant to the applicable collaboration, including the payment of costs related thereto; • disagreements with respect to ownership of intellectual property rights; • unwillingness on the part of a collaborator to keep us informed regarding the progress of its development and commercialization activities, or to permit public disclosure of these activities; • delay or reduction of a collaborator’s development or commercialization efforts with respect to our product candidates; or • termination or non-renewal of the collaboration.
Conflicts may arise in our collaborations due to one or more of the following: • disputes or breaches with respect to payments that we believe are due under the applicable agreements, particularly in the current environment when companies, including large established ones, may be seeking to reduce external payments; • disputes on strategy as to what development or commercialization activities should be pursued under the applicable agreements; • disputes as to the responsibility for conducting development and commercialization activities pursuant to the applicable collaboration, including the payment of costs related thereto; • disagreements with respect to ownership of intellectual property rights; 34 • unwillingness on the part of a collaborator to keep us informed regarding the progress of its development and commercialization activities, or to permit public disclosure of these activities; • delay or reduction of a collaborator’s development or commercialization efforts with respect to our product candidates, if approved; or • termination or non-renewal of the collaboration.
Further, one payor’s determination to provide coverage and reimbursement for a product does not ensure that other payors will also provide coverage and reimbursement for the product. Therefore, coverage and reimbursement for NUPLAZID may differ significantly from payor to payor.
Further, one payor’s determination to provide coverage and reimbursement for a product does not ensure that other payors will also provide coverage and reimbursement for the product. Therefore, coverage and reimbursement for NUPLAZID and DAYBUE may differ significantly from payor to payor.
Some European regulators have ordered certain companies to suspend or permanently cease certain transfers of personal data to recipients outside Europe for allegedly violating the EU GDPR’s cross-border data transfer limitations.
Some European regulators have ordered certain companies to suspend or permanently cease certain transfers of personal data to recipients outside Europe for allegedly violating the GDPR’s cross-border data transfer limitations.
To the extent we cannot maintain or increase sales of NUPLAZID, our business, financial condition and results of operations may be materially adversely affected and the price of our common stock may decline.
To the extent we cannot maintain or increase sales of NUPLAZID or DAYBUE, our business, financial condition and results of operations may be materially adversely affected and the price of our common stock may decline.
We expect our research and development costs for continued development of pimavanserin to be substantial. We are currently undertaking ongoing development work for pimavanserin, including clinical trials of pimavanserin for indications other than in PDP.
We expect our research and development costs for continued development of pimavanserin and trofinetide to be substantial. We are currently undertaking ongoing development work for pimavanserin and trofinetide, including clinical trials of pimavanserin for indications other than in PDP.
In order to market pimavanserin for other indications or in other jurisdictions, we must obtain regulatory approval for each of those indications and in each of the applicable jurisdictions, and we may never be able to obtain such approval.
In order to market pimavanserin or trofinetide for other indications or in other jurisdictions, we must obtain regulatory approval for each of those indications and in each of the applicable jurisdictions, and we may never be able to obtain such approval.
Additionally, a failure by any of our third-party manufacturers to establish and follow cGMPs or to document their adherence to such practices may lead to significant delays in clinical trials or in obtaining regulatory approval of product candidates, or result in issues maintaining regulatory approval of NUPLAZID and trofinetide and any other product candidate that receives regulatory approval, negatively impact our commercialization of NUPLAZID, or lead to significant delays in the launch and commercialization of trofinetide or any other products we may have in the future.
Additionally, a failure by any of our third-party manufacturers to establish and follow cGMPs or to document their adherence to such practices may lead to significant delays in clinical trials or in obtaining regulatory approval of product candidates, or result in issues maintaining regulatory approval of NUPLAZID, DAYBUE and any product candidate that receives regulatory approval, negatively impact our commercialization of NUPLAZID or DAYBUE, or lead to significant delays in the launch and commercialization of any other products we may have in the future.
Disputes may arise between us and our licensors regarding intellectual property subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • our right to sublicense patents and other rights to third parties; • our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations; • our right to transfer or assign the license; and • the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners.
In addition, disputes may arise between us and our licensors regarding intellectual property subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • our right to sublicense patents and other rights to third parties; • our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, if approved, and what activities satisfy those diligence obligations; • our right to transfer or assign the license; and • the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners.
For example, we may be sued if NUPLAZID or any other product we develop allegedly causes injury or is found to be otherwise unsuitable for administration in humans.
For example, we may be sued if NUPLAZID, DAYBUE or any other product we develop allegedly causes injury or is found to be otherwise unsuitable for administration in humans.
In both the U.S. and certain foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the healthcare system in ways that could impact our ability to sell NUPLAZID, and any other potential products, as described in greater detail in the Government Regulation section of our Annual Report.
In both the U.S. and certain foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the healthcare system in ways that could impact our ability to sell NUPLAZID, DAYBUE and any other potential products, as described in greater detail in the Government Regulation section of this Annual Report.
For example, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price (AMP), for single source and innovator multiple source drugs, beginning January 1, 2024.
For example, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price (AMP), for single source and innovator multiple source drugs, effective January 1, 2024.
Our failure to compete effectively could have a material adverse effect on our business. If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of NUPLAZID or any other product for which we obtain regulatory approval, or development or commercialization of our product candidates.
Our failure to compete effectively could have a material adverse effect on our business. If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of NUPLAZID, DAYBUE or any other product for which we obtain regulatory approval, or development or commercialization of our product candidates, if approved.
U.S. patents and patent applications may also be 39 subject to interference proceedings as mentioned above, and U.S. patents may be subject to reexamination and post-issuance proceedings in the U.S.
U.S. patents and patent applications may also be subject to interference proceedings as mentioned above, and U.S. patents may be subject to reexamination and post-issuance proceedings in the U.S.
Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.
Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, effective January 1, 2024.
Our preclinical activities or clinical trials may be delayed, suspended, or terminated if: • these third parties do not successfully carry out their contractual duties or fail to meet regulatory obligations or expected deadlines; • these third parties need to be replaced; or • the quality or accuracy of the data obtained by these third parties is compromised due to their failure to adhere to our clinical protocols or regulatory requirements or for other reasons. 33 Failure to perform by these third parties may increase our development costs, delay our ability to obtain regulatory approval, and delay or prevent the commercialization of our product candidates.
Our preclinical activities or clinical trials may be delayed, suspended, or terminated if: • these third parties do not successfully carry out their contractual duties or fail to meet regulatory obligations or expected deadlines; • these third parties need to be replaced; or • the quality or accuracy of the data obtained by these third parties is compromised due to their failure to adhere to our clinical protocols or regulatory requirements or for other reasons. 35 Failure to perform by these third parties may increase our development costs, delay our ability to obtain regulatory approval, and delay or prevent the commercialization of our product candidates, if approved.
Moreover, while we do not bill third-party payors directly and our customers make the ultimate decision on how to submit claims, from time-to-time, for NUPLAZID, and any other product candidates that may be approved, we may provide reimbursement guidance to patients and healthcare providers.
Moreover, while we do not bill third-party payors directly and our customers make the ultimate decision on how to submit claims, from time-to-time, for NUPLAZID, DAYBUE and any product candidates that may be approved, we may provide reimbursement guidance to patients and healthcare providers.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims); additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
Preliminary, initial, top-line or interim results of clinical trials do not necessarily predict final results and such results may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final results.
Preliminary, initial, top-line or interim results of clinical trials do not necessarily predict final results and such results may change as more patient data becomes available and are subject to audit and verification procedures that could result in material changes in the final results.
Effective January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenses for tax purposes in the year incurred and requires taxpayers to capitalize and subsequently amortize such expenses over five years for research activities conducted in the United States and over 15 years for research activities conducted outside the United States.
Effective January 1, 2022, the Tax Cuts and Jobs Act eliminated the option to deduct research and development expenses for tax purposes in the year incurred and requires taxpayers to capitalize and subsequently amortize such expenses over five years for research activities conducted in the United States and over 15 years for research activities conducted outside the United States.
These limitations may limit the size of the market for the product or result in the incurrence of additional costs. Any delay or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenues from the particular product candidate.
These limitations may limit the size of the market for the product or result in the incurrence of additional costs. Any delay or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenues from the particular product candidate, if approved.
Additionally, we do not know whether and to what extent third-party payors will react to any possible future changes in the price of NUPLAZID. In the U.S., no uniform policy of coverage and reimbursement for drug products exists among third-party payors.
Additionally, we do not know whether and to what extent third-party payors will react to any possible future changes in the price of NUPLAZID or DAYBUE. In the U.S., no uniform policy of coverage and reimbursement for drug products exists among third-party payors.
Additionally, any negative publicity related to NUPLAZID, or negative development for NUPLAZID in our post-marketing commitments, in clinical development in additional indications, or in regulatory processes in other jurisdictions, may adversely impact the commercial results and potential of NUPLAZID. Thus, significant uncertainty remains regarding the commercial potential of NUPLAZID.
Additionally, any negative publicity related to NUPLAZID or DAYBUE, or negative development in our post-marketing commitments, in clinical development in additional indications, or in regulatory processes in other jurisdictions, may adversely impact our commercial results and potential of NUPLAZID or DAYBUE. Thus, significant uncertainty remains regarding the commercial potential of NUPLAZID and DAYBUE.
The current environment is putting pressure on companies to price products below what they may feel is appropriate. Selling NUPLAZID at less than an optimized price would impact our revenues and could impact our overall success as a company.
The current environment is putting pressure on companies to price products below what they may feel is appropriate. Selling NUPLAZID or DAYBUE at less than an optimized price would impact our revenues and could impact our overall success as a company.
However, we have not entered into any agreements with any alternate suppliers for 10 mg NUPLAZID drug product or NUPLAZID API, and we may face delays or increased costs in our supply chain that could jeopardize the commercialization of NUPLAZID.
However, we have not entered into any agreements with any alternate suppliers for 10 mg NUPLAZID drug product or NUPLAZID API. We may face delays or increased costs in our supply chain that could jeopardize the commercialization of NUPLAZID or DAYBUE.
We intend to comply with the requirements and restrictions of the FDA and other regulatory agencies with respect to our promotion of NUPLAZID and any other products we may market, but we cannot be sure that the FDA or other regulatory agencies will agree that we have not violated their restrictions.
We intend to comply with the requirements and restrictions of the FDA and other regulatory agencies with respect to our promotion of NUPLAZID, DAYBUE and any other products we may be approved to market, but we cannot be sure that the FDA or other regulatory agencies will agree that we have not violated their restrictions.
The degree of market acceptance by physicians, healthcare professionals and third-party payors of NUPLAZID, and any other product for which we obtain regulatory approval, and our profitability and growth, will depend on a number of factors, including: • the ability to provide acceptable evidence of safety and efficacy; • the scope of the approved indication(s) for the product; • the inclusion of any warnings or contraindications in the product label; • the relative convenience and ease of administration; • the prevalence and severity of any adverse side effects; • the availability of alternative treatments; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies, and our ability to increase awareness of our approved products through marketing efforts; • pricing and cost effectiveness, which may be subject to regulatory control; • effectiveness of our or our collaborators’ sales and marketing strategy; • publicity concerning us, our products or competing products and treatments; and • our ability to obtain sufficient third-party insurance coverage or adequate reimbursement levels.
The degree of market acceptance by physicians, healthcare professionals, patients, caregivers and third-party payors of NUPLAZID, DAYBUE and any other product for which we obtain regulatory approval, and our profitability and growth, will depend on a number of factors, including: • the ability to provide acceptable evidence of safety and efficacy; • the scope of the approved indication(s) for the product; • the inclusion of any warnings or contraindications in the product label; • the relative convenience and ease of administration; • the prevalence and severity of any actual or expected adverse side effects; • the availability of alternative treatments; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies, and our ability to increase awareness of our approved products through marketing efforts; • pricing and cost effectiveness, which may be subject to regulatory control; • effectiveness of our or our collaborators’ sales and marketing strategy; • publicity concerning us, our products or competing products and treatments; and • our ability to obtain and maintain sufficient third-party insurance coverage or adequate reimbursement levels.
The patent applications of pharmaceutical and biotechnology companies involve highly complex legal and factual questions, which, if determined adversely to us, could negatively impact our patent position. The strength of patents in the pharmaceutical and biotechnology field can be highly uncertain and involve complex legal and factual questions.
The patent applications of pharmaceutical and biotechnology companies involve highly complex legal and factual questions, which, if determined adversely to us, could negatively impact our patent position. The strength of patents in the pharmaceutical and biotechnology field can be highly uncertain and involve complex legal and factual questions. The U.S.
Also, third-party payors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly alternative is available, even if not approved for the indication for which NUPLAZID is approved. 22 Third-party payors, whether governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs.
Also, third-party payors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly alternative is available, even if not approved for the indication for which NUPLAZID and DAYBUE are approved. Third-party payors, whether governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs.
Small differences in these assumptions can lead to widely divergent estimates of the market potential of NUPLAZID. For example, certain research suggests that patients with Parkinson’s disease may be hesitant to report symptoms of PDP to their treating physicians for a variety of reasons, including apprehension about societal stigmas relating to mental illness.
Small differences in these assumptions can lead to widely divergent estimates of the market potential of NUPLAZID and DAYBUE. For example, with respect to NUPLAZID, certain research suggests that patients with Parkinson’s disease may be hesitant to report symptoms of PDP to their treating physicians for a variety of reasons, including apprehension about societal stigmas relating to mental illness.
These efforts will be expensive and time consuming, and we cannot be certain that we will be able to successfully expand, refine and further develop our sales force and related functional teams. Additionally, our strategy in the U.S. includes distributing NUPLAZID solely through a limited network of third-party specialty distributors and specialty pharmacies.
These efforts will be expensive and time consuming, and we cannot be certain that we will be able to successfully expand, refine and further develop our sales forces and related functional teams. Additionally, our strategy in the U.S. includes distributing NUPLAZID and DAYBUE solely through a limited network of third-party specialty distributors and specialty pharmacies.
On April 2, 2021, we received a CRL from the FDA, indicating that the FDA had completed its review of the application and determined that it could not be approved in its present form. In February 2022, we resubmitted the aforementioned sNDA refining the proposed indication to treatment of hallucinations and delusions associated with ADP.
On April 2, 2021, we received a complete response letter (CRL) from the FDA, indicating that the FDA had completed its review of the application and determined that it could not be approved in its present form. In February 2022, we resubmitted the aforementioned sNDA refining the proposed indication to treatment of hallucinations and delusions associated with ADP.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Pr operties. As of December 31, 2022, our primary facility consists of approximately 98,000 square feet of office space in San Diego, California. We also lease a facility in Princeton, New Jersey that covers approximately 25,000 square feet of office space, which is leased through January 2025.
Biggest changeItem 2. Pr operties. As of December 31, 2023, our primary facility consists of approximately 67,000 square feet of office space in San Diego, California. We also lease a facility in Princeton, New Jersey that covers approximately 25,000 square feet of office space, which is leased through January 2025.
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We believe that our existing facilities are adequate to meet our current needs, and that suitable additional alternative spaces will be available in the future on commercially reasonable terms.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOn February 3, 2023, the Court issued an order denying the motion for reconsideration. We currently believe that none of the foregoing claims or actions pending against us as of December 31, 2022 is likely to have, individually or in the aggregate, a material adverse effect on our business, liquidity, financial position, or results of operations.
Biggest changeWe currently believe that none of the foregoing claims or other actions pending against us as of December 31, 2023 is likely to have, individually or in the aggregate, a material adverse effect on our business, liquidity, financial position, or results of operations. Given the unpredictability inherent in litigation, however, we cannot predict the outcome of these matters.
On March 30, 2022, we filed a stipulation 53 and proposed order to dismiss two patents against Zydus, which was ordered by the Court on March 31, 2022.
On March 30, 2022, we filed a stipulation and proposed order to dismiss two patents against Zydus, which was ordered by the Court on March 31, 2022.
These complaints, which were filed in the United States District Court for the District of Delaware, allege infringement of certain of our Orange Book-listed patents covering NUPLAZID. The cases have been assigned to the Honorable Richard G. Andrews. On September 1, 2020, Aurobindo filed its answer and counterclaims seeking declaratory judgments of noninfringement and invalidity.
These complaints, which were filed in the United States District Court for the District of Delaware, allege infringement of certain of our Orange Book-listed patents covering NUPLAZID (Pimavanserin I Cases). The cases have been assigned to the Honorable Richard G. Andrews. On September 1, 2020, Aurobindo filed its answer and counterclaims seeking declaratory judgments of noninfringement and invalidity.
On July 24, 2020, we filed complaints against (i) Aurobindo Pharma Limited and its affiliate Aurobindo Pharma USA, Inc. and (ii) Teva Pharmaceuticals USA, Inc. and its affiliate Teva Pharmaceutical Industries Ltd., and on July 30, 2020, we filed complaints against (i) Hetero Labs Limited and its affiliates Hetero Labs Limited Unit-V and Hetero USA Inc., (ii) MSN Laboratories Private Ltd. and its affiliate MSN Pharmaceuticals, Inc., and (iii) Zydus Pharmaceuticals (USA) Inc. and its affiliate Cadila Healthcare Limited.
Patent Infringement On July 24, 2020, we filed complaints against (i) Aurobindo Pharma Limited and its affiliate Aurobindo Pharma USA, Inc. and (ii) Teva Pharmaceuticals USA, Inc. and its affiliate Teva Pharmaceutical Industries Ltd., and on July 30, 2020, we filed complaints against (i) Hetero Labs Limited and its affiliates Hetero Labs Limited Unit-V and Hetero USA Inc., (ii) MSN Laboratories Private Ltd. and its affiliate MSN Pharmaceuticals, Inc., and (iii) Zydus Pharmaceuticals (USA) Inc. and its affiliate Cadila Healthcare Limited.
The agreement allows Hetero to launch its generic pimavanserin product on July 27, 2038, subject to certain triggers for earlier launch. The Hetero case was dismissed by joint agreement on May 3, 2021. On August 27, 2021, we filed our second amended complaint against Zydus to include an additional Orange Book-listed patent covering NUPLAZID.
The agreement allows Hetero to launch its generic pimavanserin product on February 27, 2038, subject to certain triggers for earlier launch. The Hetero case was dismissed by joint agreement on May 3, 2021. 58 On August 27, 2021, we filed our second amended complaint against Zydus to include an additional Orange Book-listed patent covering NUPLAZID.
The complaint generally alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by failing to disclose that the materials submitted in support of our sNDA seeking approval of pimavanserin for the treatment of hallucinations and delusions associated with dementia-related psychosis contained statistical and design deficiencies and that the FDA was unlikely to approve the sNDA in our current form.
The amended complaint generally alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, by failing to disclose that the materials submitted in support of its sNDA seeking approval of pimavanserin for the treatment of hallucinations and delusions associated with dementia-related psychosis contained statistical and design deficiencies and that the FDA was unlikely to approve the sNDA in its current form.
On May 12, we filed our answer to Teva’s counterclaims. On May 13, we filed our answer to Zydus’s counterclaims and our answer to Aurobindo’s counterclaims. A joint trial in the matters is scheduled for May 15, 2023. We entered into an agreement effective April 22, 2021 with Hetero settling all claims and counterclaims in the litigation.
On May 12, we filed our answer to Teva’s counterclaims. On May 13, we filed our answer to Zydus’s counterclaims and its answer to Aurobindo’s counterclaims. We entered into an agreement effective April 22, 2021 with Hetero settling all claims and counterclaims in the litigation.
Given the unpredictability inherent in litigation, however, we cannot predict the outcome of these matters. We are unable to estimate possible losses or ranges of losses that may result from these matters, and therefore we have not accrued any amounts in connection with these matters other than attorneys’ fees incurred to date. Item 4. Mine Safety Disclosures .
We are unable to estimate possible losses or ranges of losses that may result from these matters, and therefore we have not accrued any amounts in connection with these matters other than attorneys’ fees incurred to date. Item 4. Mine Safety Disclosures . This item is not applicable. 60 PART II
Lead plaintiff filed an opposition to Defendants’ motion to dismiss on April 18, 2022, and Defendants filed a reply on June 2, 2022. On September 27, 2022, the Court issued an order denying Defendants’ motion to dismiss. Defendants filed their answer to the amended complaint on October 19, 2022, and filed a motion for reconsideration on October 25, 2022.
The amended complaint seeks unspecified monetary damages and other relief. Defendants filed a motion to dismiss the amended complaint on February 15, 2022. On September 27, 2022, the Court issued an order denying Defendants’ motion to dismiss. Defendants filed their answer to the amended complaint on October 19, 2022, and filed a motion for reconsideration on October 25, 2022.
Acadia Pharmaceuticals, Inc., Case No. 21-cv-0762) in the U.S. District Court for the Southern District of California against us and certain of our current executive officers.
Securities Class Action On April 19, 2021, a purported stockholder of us filed a putative securities class action complaint (captioned Marechal v. Acadia Pharmaceuticals Inc., Case No. 21-cv-0762) in the U.S. District Court for the Southern District of California against us and certain of our current executive officers.
On October 21, 2021, we filed complaints against Aurobindo, MSN and Zydus in the United States District Court for the District of Delaware alleging infringement of an additional Orange Book-listed patent covering NUPLAZID. On April 19, 2021, a purported stockholder of us filed a putative securities class action complaint (captioned Marechal v.
On October 21, 2022, we filed complaints against Aurobindo, MSN and Zydus in the United States District Court for the District of Delaware alleging infringement of an additional Orange Book-listed patent covering NUPLAZID (Pimavanserin II Cases).
The complaint seeks unspecified monetary damages and other relief. On September 29, 2021, the Court issued an order designating lead plaintiff and lead counsel. On December 10, 2021, lead plaintiff filed an amended complaint. Defendants filed a motion to dismiss the amended complaint on February 15, 2022.
On September 29, 2021, the Court issued an order designating lead plaintiff and lead counsel. On December 10, 2021, lead plaintiff filed an amended complaint.
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This item is not applicable. 54 PART II
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On March 29, 2023, following Aurobindo’s conversion of various patent certifications from Paragraph IV certifications to Paragraph III certifications in connection with the Pimavanserin I Case, we filed a stipulation and proposed order in the Pimavanserin I Case to dismiss the remaining asserted patents against Aurobindo. This stipulation was ordered by the Court on March 30, 2023.
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We entered into an agreement, effective March 31, 2023, with Zydus settling all claims and counterclaims in the Pimavanserin I Cases and Pimavanserin II Cases. The agreement allows Zydus to launch its generic pimavanserin 10 mg products on September 23, 2036 and 34 mg products on February 27, 2038, subject to certain triggers for earlier launch.
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On April 4, 2023, we filed a stipulation and proposed order to dismiss all claims and counterclaims between us and Zydus in the Pimavanserin I Cases and Pimavanserin II Cases, which was ordered by the Court on April 5, 2023. 59 As a result of the above, only MSN remained as an active defendant in the Pimavanserin I Cases.
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On April 6, 2023, we and MSN filed a stipulation and proposed order requesting adjournment of the final pre-trial conference and trial, and requesting resolution of the remaining issue – MSN’s validity challenge of the sole patent in suit – through summary judgment briefing by the parties, which was ordered by the Court on April 10, 2023.
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Briefing was completed on June 28, 2023 and oral argument took place on September 27, 2023. On December 13, 2023, the Court ruled in our favor on the summary judgment motions – denying MSN’s motion for summary judgment of invalidity and granting our cross-motion for no invalidity. MSN had previously stipulated to infringement of the patent-in-suit.
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On January 11, 2024, the District Court entered final judgment in our favor that MSN’s submission of ANDA No. 214925 was an act of infringement in the Pimavanserin I Case.
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On January 18, 2024, MSN filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit from the December 13, 2023 Memorandum Order of the United States District Court for the District of Delaware, and final judgment entered on January 11, 2024.
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On February 12, 2024, we filed an Entry of Appearance for the appeal to the United States Court of Appeals for the Federal Circuit. MSN’s Opening Appeal Brief is due on March 29, 2024. In connection with the Pimavanserin II cases, MSN and Aurobindo are the remaining defendants.
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On December 13, 2023, the Court issued a claim construction order finding in favor of us on all disputed terms of the patent-in-suit. Fact discovery closes on March 21, 2024. Trial is scheduled in the matter for December 3, 2024 to December 5, 2024.
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On February 2, 2023, the Court issued an order denying the motion for reconsideration. On August 21, 2023, plaintiffs filed a motion for class certification. Briefing on that motion concluded on January 12, 2024, and the Court will hear oral argument on the motion on February 28, 2024. The parties are currently engaged in discovery.
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The cutoff for fact discovery is June 13, 2024. Derivative Suit On December 15, 2023, a purported stockholder of us filed a derivative action (captioned Kanner et al v. Biggar et al. , Case No. 23-cv-2293) in the U.S. District Court for the Southern District of California against certain of our current directors. We are named as a nominal defendant.
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The complaint is based on the same alleged misconduct as the Securities Class Action, and asserts state law claims, on behalf of us, against the individual defendants for breach of fiduciary duty, unjust enrichment, abuse of control, waste of corporate assets, and insider trading.
Added
The complaint also asserts federal claims under sections 10(b), 21D, and 14(a) of the Securities Exchange Act of 1934, as amended. On December 27, 2023, the action was reassigned to District Judge William Q. Hayes and Magistrate Judge Michael S. Berg due to its relation to the Securities Class Action.
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On January 30, 2024, the parties jointly requested a stay of the action. The Court granted that request and the action was stayed on February 20, 2024, pending the outcome of our Demand Review Committee’s investigation into the underlying claims.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol “ACAD”. Holders As of February 21, 2023, there were 162,230,184 shares of common stock outstanding held by approximately 32 stockholders of record.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol “ACAD”. Holders As of February 21, 2024, there were 164,771,521 shares of common stock outstanding held by approximately 34 stockholders of record.
The comparisons in the graph are required by the SEC and are not intended to forecast or be indicative of the possible future performance of our common stock. The graph assumes that all dividends have been reinvested (to date, we have not declared any dividends). 55 Item 6. [Reserved ]
The comparisons in the graph are required by the SEC and are not intended to forecast or be indicative of the possible future performance of our common stock. The graph assumes that all dividends have been reinvested (to date, we have not declared any dividends). Item 6. [Reserved ] 61
Performance Graph The following graph shows a comparison of the total cumulative returns of an investment of $100 in cash from December 31, 2017 through December 31, 2022 in (i) our common stock, (ii) the Nasdaq Biotechnology Index, and (iii) the Nasdaq U.S. Benchmark TR Index.
Performance Graph The following graph shows a comparison of the total cumulative returns of an investment of $100 in cash from December 31, 2018 through December 31, 2023 in (i) our common stock, (ii) the Nasdaq Biotechnology Index, and (iii) the Nasdaq U.S. Benchmark TR Index.
Removed
Many stockholders hold their shares in street name and thus, the actual number of beneficial owners of such shares is not known or included in the foregoing number; however, we believe that there are approximately 49,000 beneficial owners of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOur future capital requirements will depend on, and could increase significantly as a result of, many factors, including: • the progress in, and the costs of, our ongoing and planned development activities for pimavanserin, post-marketing studies for NUPLAZID to be conducted over the next several years, and ongoing and planned commercial activities for NUPLAZID; • the costs of our development activities for trofinetide for the treatment of Rett syndrome; • the costs of our development activities for ACP-204 and our other early-stage pipeline programs; • the costs of commercializing NUPLAZID, including the maintenance and development of our sales and marketing capabilities; • the costs of establishing, or contracting for, sales and marketing capabilities for other product candidates; • the amount of U.S. product sales from NUPLAZID; • the costs of preparing applications for regulatory approvals for NUPLAZID in additional indications other than PDP and for other product candidates, as well as the costs required to support review of such applications; • the costs of manufacturing and distributing NUPLAZID for commercial use in the U.S.; • the costs of manufacturing and distributing trofinetide for potential commercial use in the U.S.; • our ability to obtain regulatory approval for, and subsequently generate product sales from, pimavanserin for the negative symptoms of schizophrenia, from trofinetide for the treatment of Rett syndrome, from ACP-204 and from our other product candidates; • the costs of acquiring additional product candidates or research and development programs; • the scope, prioritization and number of our research and development programs; • the ability of our collaborators and us to reach the milestones and other events or developments triggering payments under our collaboration or license agreements, or our collaborators’ ability to make payments under these agreements; • our ability to enter into new collaboration and license agreements; • the extent to which we are obligated to reimburse collaborators or collaborators are obligated to reimburse us for costs under collaboration agreements; • the costs involved in filing, prosecuting, enforcing, and defending patent claims and other intellectual property rights; • the costs of maintaining or securing manufacturing arrangements for clinical or commercial production of pimavanserin, trofinetide or other product candidates; and • the costs associated with litigation, including the costs incurred in defending against any product liability claims that may be brought against us related to NUPLAZID.
Biggest changeOur future capital requirements will depend on, and could increase significantly as a result of, many factors, including: • the costs of acquiring additional product candidates or research and development programs; • the scope, prioritization and number of our research and development programs; • the ability of our collaborators and us to reach the milestones and other events or developments triggering payments under our collaboration or license agreements, or our collaborators’ ability to make payments under these agreements; • our ability to enter into new collaboration and license agreements; • the progress in, and the costs of, our ongoing and planned development activities for pimavanserin, post-marketing studies for DAYBUE to be conducted over the next several years, and ongoing and planned commercial activities for NUPLAZID and DAYBUE; • the costs of our development activities for our early-stage pipeline programs; • the costs of commercializing NUPLAZID and DAYBUE, including the maintenance and development of our sales and marketing capabilities; • the costs of establishing, or contracting for, sales and marketing capabilities for our product candidates; 70 • the amount of U.S. product sales from NUPLAZID and DAYBUE; • the costs of preparing applications for regulatory approvals for DAYBUE in jurisdictions other than the U.S., for NUPLAZID in additional indications other than PDP and for other product candidates, as well as the costs required to support review of such applications; • the costs of manufacturing and distributing NUPLAZID and DAYBUE for commercial use in the U.S.; • our ability to obtain regulatory approval for, and subsequently generate product sales from, NUPLAZID for the negative symptoms of schizophrenia, or from DAYBUE, and our product candidates; • the extent to which we are obligated to reimburse collaborators or collaborators are obligated to reimburse us for costs under collaboration agreements; • the costs involved in filing, prosecuting, enforcing, and defending patent claims and other intellectual property rights; • the costs of maintaining or securing manufacturing arrangements for clinical or commercial production of pimavanserin, trofinetide or other product candidates; and • the costs associated with litigation, including the costs incurred in defending against any product liability claims that may be brought against us related to NUPLAZID or DAYBUE.
License Fees and Royalties License fees and royalties were $0 and $8.3 million in 2022 and 2021, respectively, and in 2021 include royalties due to the Ipsen Group of two percent of net sales of NUPLAZID and amortization related to the milestone paid to the Ipsen Group upon FDA approval of NUPLAZID in 2016.
License fees and royalties were $0 and $8.3 million in 2022 and 2021, respectively, and in 2021 include royalties due to the Ipsen Group of two percent of net sales of NUPLAZID and amortization related to the milestone paid to the Ipsen Group upon FDA approval of NUPLAZID in 2016.
However, subsequent changes in estimates may result in a material change in our accruals, which could also materially affect our balance sheet and results of operations Stock-Based Compensation The fair value of each employee stock option and each employee stock purchase plan right granted is estimated on the grant date under the fair value method using the Black-Scholes valuation model, which requires us to make a number of assumptions including the estimated expected life of the award and related volatility.
However, subsequent changes in estimates may result in a material change in our accruals, which could also materially affect our balance sheet and results of operations. 67 Stock-Based Compensation The fair value of each employee stock option and each employee stock purchase plan right granted is estimated on the grant date under the fair value method using the Black-Scholes valuation model, which requires us to make a number of assumptions including the estimated expected life of the award and related volatility.
As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships. Recent Accounting Pronouncements See Item 15 of Part IV, “Notes to Consolidated Financial Statements—Note 2—Summary of Significant Accounting Policies.”
As such, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in these relationships. Recent Accounting Pronouncements See Item 15 of Part IV, “Notes to Consolidated Financial Statements—Note 2—Summary of Significant Accounting Policies.” 72
Also included in selling, general and administrative expenses are fees paid to external service providers to support our commercial activities associated with NUPLAZID, professional fees associated with legal and accounting services, costs associated with patents and patent applications for our intellectual property and charitable donations to independent charitable foundations that support Parkinson’s disease patients generally.
Also included in selling, general and administrative expenses are fees paid to external service providers to support our commercial activities associated with NUPLAZID and DAYBUE, professional fees associated with legal and accounting services, costs associated with patents and patent applications for our intellectual property and charitable donations to independent charitable foundations that support Parkinson’s disease patients generally.
We have entered into various collaboration, licensing and merger agreements which generally include upfront license fees, development and commercial milestone payments upon achievement of certain clinical and commercial development and annual net sales milestones, as well as royalties calculated as a percentage of product revenues, with rates that vary by agreement.
We have entered into various collaboration, licensing and merger agreements which generally include upfront license fees, development and commercial milestone payments upon achievement of certain clinical and commercial development and annual net sales milestones, as well as royalties calculated as a percentage of net product sales, with rates that vary by agreement.
To date, our estimates have not differed 60 materially from the actual chargebacks and organization fees. However, subsequent changes in estimates may result in a material change in our accruals, which could also materially affect our balance sheet and results of operations.
To date, our estimates have not differed materially from the actual chargebacks and organization fees. However, subsequent changes in estimates may result in a material change in our accruals, which could also materially affect our balance sheet and results of operations.
Historically, we have used our internal research and development resources, including our employees and discovery infrastructure, across several projects and many of our costs have not been attributable to a specific project. Accordingly, we have not reported our internal research and development costs on a project basis.
Historically, we have used our internal research and development resources, including our employees and discovery infrastructure, across several projects and many of our costs have not been attributable to a specific project. Accordingly, we have not reported our internal research and development costs on a project-by-project basis.
Selling, General and Administrative Expenses Our selling, general and administrative expenses consist of salaries and other related costs, including stock-based compensation expense, for our commercial personnel, including our specialty sales force, our medical education professionals, and our personnel serving in executive, finance, business development, and business operations functions.
Selling, General and Administrative Expenses Our selling, general and administrative expenses consist of salaries and other related costs, including stock-based compensation expense, for our commercial personnel, including our specialty sales forces, our medical education professionals, and our personnel serving in executive, finance, business development, and business operations functions.
We believe the following critical accounting policies and estimates describe the more significant judgments and estimates used in the preparation of our consolidated financial statement. Product Sales, Net We sell our product through SPs and SDs.
We believe the following critical accounting policies and estimates describe the more significant judgments and estimates used in the preparation of our consolidated financial statement. 66 Product Sales, Net We sell NUPLAZID through SPs and SDs.
While our current development efforts are primarily focused on advancing the development of pimavanserin for the treatment of the negative symptoms of schizophrenia and the development of ACP-204, we anticipate that we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the scientific and clinical success of each product candidate, as well as an ongoing assessment of the commercial potential of each opportunity and our financial position.
While our current development efforts are primarily focused on advancing the development of pimavanserin for the treatment of the negative symptoms of schizophrenia and the development of ACP-101, ACP-204 and other early-stage programs, we anticipate that we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the scientific and clinical success of each product candidate, as well as an ongoing assessment of the commercial potential of each opportunity and our financial position.
The decrease in net cash provided by financing activities in 2022 relative to 2021 and in 2021 relative to 2020 was primarily due to a decrease in proceeds resulting from the exercise of employee stock options.
The decrease in net cash provided by financing activities in 2022 relative to 2021 was primarily due to a decrease in proceeds resulting from the exercise of employee stock options.
Selling, General and Administrative Expenses Selling, general and administrative expenses decreased to $369.1 million in 2022, including $44.5 million in stock-based compensation expense, from $396.0 million in 2021, including $40.4 million in stock-based compensation expense.
Selling, General and Administrative Expenses Selling, general and administrative expenses decreased to $369.1 million in 2022, including $44.5 million in stock-based compensation expense, from $396.0 million in 2021, including $40.3 million in stock-based compensation expense.
We have incurred substantial operating losses since our inception due in large part to expenditures for our research and development activities. As of December 31, 2022, we had an accumulated deficit of $2.4 billion.
We have incurred substantial operating losses since our inception due in large part to expenditures for our research and development activities. As of December 31, 2023, we had an accumulated deficit of approximately $2.4 billion.
Our estimates for expected utilization of rebates is based on historical data received from the SPs and SDs since product launch.
Our estimates for expected utilization of rebates is based on historical data received from the SPs, SDs and the single wholesale distributor since product launch.
Such forward-looking statements include statements about the benefits to be derived from NUPLAZID ® (pimavanserin), trofinetide and from our other drug candidates, the potential market opportunities for pimavanserin and our drug candidates, our strategy for the commercialization of NUPLAZID, our plans for exploring and developing pimavanserin for indications other than Parkinson’s disease psychosis, trofinetide as a treatment for Rett syndrome, ACP-204 as a treatment for ADP and our ASO programs, our plans and timing with respect to seeking regulatory approvals, the potential commercialization of any of our drug candidates that receive regulatory approval, the progress, timing, results or implications of clinical trials and other development activities involving pimavanserin, trofinetide and our other drug candidates, our strategy for discovering, developing and, if approved, commercializing drug candidates, our existing and potential future collaborations, our estimates of future payments, revenues and profitability, our estimates regarding our capital requirements, future expenses and need for additional financing, the potential or expected impacts of geopolitical and macroeconomic developments, possible changes in legislation, and other statements that are not historical facts, including statements which may be preceded by the words “believes,” “expects,” “hopes,” “may,” “will,” “plans,” “intends,” “estimates,” “could,” “should,” “would,” “continues,” “seeks,” “aims,” “projects,” “predicts,” “pro forma,” “anticipates,” “potential” or similar words.
Such forward-looking statements include statements about the benefits to be derived from NUPLAZID ® (pimavanserin), DAYBUE ™ (trofinetide) and our drug candidates, the potential market opportunities for NUPLAZID and DAYBUE and our drug candidates, our strategy for the commercialization of NUPLAZID and DAYBUE, our plans for exploring and developing NUPLAZID and DAYBUE for indications other than PDP or Rett syndrome, respectively, and the commercialization of DAYBUE in jurisdictions other than the U.S., our plans and timing with respect to seeking regulatory approvals, the potential commercialization of any of our drug candidates that receive regulatory approval, the progress, timing, results or implications of clinical trials and other development activities involving NUPLAZID, DAYBUE and our drug candidates, our strategy for discovering, developing and, if approved, commercializing drug candidates, our existing and potential future collaborations, our estimates of future payments, revenues and profitability, our estimates regarding our capital requirements, future expenses and need for additional financing, the potential or expected impacts of geopolitical and macroeconomic developments, possible changes in legislation, and other statements that are not historical facts, including statements which may be preceded by the words “believes,” “expects,” “hopes,” “may,” “will,” “plans,” “intends,” “estimates,” “could,” “should,” “would,” “continues,” “seeks,” “aims,” “projects,” “predicts,” “pro forma,” “anticipates,” “potential” or similar words.
As of December 31, 2022, we may be required to make milestone payments up to $1.6 billion in the aggregate. These payments are contingent upon achieving future development, regulatory and commercial milestones. We are also required to make royalty payments in connection with the sale of products developed under those agreements.
As of December 31, 2023, we may be required to make milestone payments up to $3.4 billion in the aggregate. These payments are contingent upon achieving future development, regulatory and commercial milestones. We are also required to make royalty payments in connection with the sale of products developed under those agreements.
We expect that our cash, cash equivalents, and investment securities will be sufficient to fund our planned operations through at least the next 12 months. 63 We may require significant additional financing in the future to fund our operations.
We expect that our cash, cash equivalents, and investment securities will be sufficient to fund our planned operations through and beyond the next 12 months. We may require additional financing in the future to fund our operations.
We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the progress and timing of expenditures related to our commercial activities associated with NUPLAZID and the extent to which we generate revenue from product sales, our potential approval and commercialization of trofinetide for the treatment of Rett syndrome, our development of pimavanserin for the negative symptoms of schizophrenia, our further development of the early-stage pipeline programs and the progress and timing of expenditures related to studies of NUPLAZID in PDP pursuant to our post-marketing commitments.
We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the progress and timing of expenditures related to our commercial activities associated with NUPLAZID and DAYBUE and the extent to which we generate revenue from product sales, our development of pimavanserin for the negative symptoms of schizophrenia, our further development of our early-stage pipeline programs and the progress and timing of expenditures related to studies of DAYBUE pursuant to our post-marketing commitments.
SPs dispense product to a patient based on the fulfillment of a prescription and SDs sell product to government facilities, long-term care pharmacies, or in-patient hospital pharmacies. Product shipping and handling costs are included in cost of product sales.
SPs dispense product to a patient based on the fulfillment of a prescription and SDs sell product to government facilities, long-term care pharmacies, or in-patient hospital pharmacies. We sell DAYBUE through a single wholesale distributor. Product shipping and handling costs are included in cost of product sales.
Product sales, net for the year ended December 31, 2022 increased as compared to the year ended December 31, 2021 primarily due to a higher average gross selling price of NUPLAZID in 2022 as compared to 2021. 61 The following table provides a summary of activity with respect to our sales allowances and accruals for the year ended December 31, 2022 (in thousands): Distribution Fees, Discounts & Chargebacks Co-Pay Assistance Rebates, Data Fees & Returns Total Balance at December 31, 2021 $ 8,467 $ (202 ) $ 15,717 $ 23,982 Provision related to current period sales 80,836 3,087 51,872 135,795 Credits/payments for current period sales (69,913 ) (3,427 ) (25,826 ) (99,166 ) Credits/payments for prior period sales (8,467 ) 202 (15,717 ) (23,982 ) Balance at December 31, 2022 $ 10,923 $ (340 ) $ 26,046 $ 36,629 Cost of Product Sales Cost of product sales was $10.2 million and $10.8 million in 2022 and 2021, respectively, or approximately 2% of product sales, net in both years.
The following table provides a summary of activity with respect to our sales allowances and accruals for the year ended December 31, 2022 (in thousands): Distribution Fees, Discounts & Chargebacks Co-Pay Assistance Rebates, Data Fees & Returns Total Balance at December 31, 2021 $ 8,467 $ (202 ) $ 15,717 $ 23,982 Provision related to current period sales 80,836 3,087 51,872 135,795 Credits/payments for current period sales (69,913 ) (3,427 ) (25,826 ) (99,166 ) Credits/payments for prior period sales (8,467 ) 202 (15,717 ) (23,982 ) Balance at December 31, 2022 $ 10,923 $ (340 ) $ 26,046 $ 36,629 69 Cost of Product Sales Cost of product sales was $10.2 million and $19.1 million in 2022 and 2021, respectively, or approximately 2% and 4% of net product sales, respectively.
Due to these same factors, we are unable to determine with any certainty the anticipated completion dates for our current research and development programs. Clinical development and regulatory approval timelines, probability of success, and development costs vary widely.
Likewise, we are unable to determine with certainty the anticipated completion dates for our current research and development programs. Clinical development and regulatory approval timelines, probability of success, and development costs vary widely.
The royalty obligation terminated in October 2021 which was the primary reason for the decrease in license fees and royalties during 2022 as compared to 2021. Research and Development Expenses Research and development expenses increased to $361.6 million in 2022, including $22.6 million in stock-based compensation, from $239.4 million in 2021, including $22.0 million in stock-based compensation.
The royalty obligation terminated in October 2021 which was the primary reason for the decrease in cost of product sales during 2022 as compared to 2021. Research and Development Expenses Research and development expenses increased to $361.6 million in 2022, including $22.6 million in stock-based compensation expense, from $239.4 million in 2021, including $22.0 million in stock-based compensation expense.
Financial Operations Overview Product and Collaborative Revenues Product sales, net consist of sales of NUPLAZID, our first and only commercial product to date. The FDA approved NUPLAZID in April 2016 for the treatment of hallucinations and delusions associated with PDP, and we launched the product in the United States in May 2016.
Financial Operations Overview Product Revenues Net product sales consist of sales of NUPLAZID and DAYBUE. The FDA approved NUPLAZID in April 2016 for the treatment of hallucinations and delusions associated with PDP and we launched the product in the United States in May 2016.
Contingent on the level of business development activities we may complete as well as pipeline programs we may advance, we may continue to incur operating losses for the next few years as we incur significant research and development costs and costs for potential approval and commercialization of trofinetide for the treatment of Rett syndrome.
Contingent on the level of business development activities we may complete as well as pipeline programs we may advance, we may continue to incur operating losses for the next few years as we incur significant research and development costs and costs for continued commercialization of NUPLAZID and DAYBUE.
The cost of product sales as a percentage of product sales, net stayed flat during 2022 as compared to 2021.
The cost of product sales excluding license fees and royalties, as a percentage of net product sales stayed flat during 2022 as compared to 2021.
We submitted to the FDA an NDA for trofinetide for the 56 treatment of Rett syndrome in July 2022 based on the positive results from our pivotal Phase 3 Lavender™ study which demonstrated statistically significant improvement over placebo for both co-primary endpoints as well as the key secondary endpoint.
The FDA approval of DAYBUE for the treatment of Rett syndrome was based on the positive results from our pivotal Phase 3 LAVENDER ™ study which demonstrated statistically significant improvement over placebo for both co-primary endpoints as well as the key secondary endpoint.
In addition, we expect to incur increased research and development expenses as a result of advancement of our early-stage development pipeline programs. We use external service providers to manufacture our product candidates and for the majority of the services performed in connection with the preclinical and clinical development of pimavanserin, trofinetide, and our early-stage programs.
We use external service providers to manufacture our product candidates and for the majority of the services performed in connection with the preclinical and clinical development of pimavanserin, trofinetide, and our early-stage programs.
Although NUPLAZID was approved by the FDA for the treatment of hallucinations and delusions associated with PDP, at this time, due to the risks inherent in regulatory requirements and clinical development, we are unable to estimate with certainty the costs we will incur for the ongoing or additional development of pimavanserin for the negative symptoms of schizophrenia, to support the potential approval and commercialization of trofinetide for the treatment of Rett syndrome, as well as the further development of our early-stage pipeline programs.
At this time, due to the risks inherent in regulatory requirements and clinical development, we are unable to estimate with certainty the costs we will incur for the ongoing or additional development of pimavanserin for the negative symptoms of schizophrenia or to support the commercialization of DAYBUE, as well as the further development of our early-stage pipeline programs.
For example, due to macroeconomic developments, including the Ukraine-Russia conflict, the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability.
For example, due to geopolitical and macroeconomic developments, including the Ukraine-Russia military conflict and related sanctions, and the ongoing conflict in Israel and surrounding areas, the global credit and financial markets have experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability.
Liquidity and Capital Resources We have funded our operations primarily through sales of our equity securities, payments received under our collaboration agreements, debt financings, interest income, and, since 2016, with revenues from sales of NUPLAZID.
Liquidity and Capital Resources We have funded our operations primarily with revenues from sales of NUPLAZID and DAYBUE since their approvals, and through sales of our equity securities and interest income.
On a long-term basis, we manage future cash requirements relative to our long-term business plans. Our primary uses of cash and operating expenses relate to paying employees and consultants, administering clinical trials, marketing our products, and providing technology and facility infrastructure to support our operations.
Our primary uses of cash and operating expenses relate to paying employees and consultants, administering clinical trials, marketing our products, and providing technology and facility infrastructure to support our operations.
We anticipate that the level of cash used in our operations will fluctuate in future periods depending on the levels of spend for our ongoing and planned commercial activities for NUPLAZID, our potential approval and commercialization of trofinetide for the treatment of Rett syndrome, our ongoing and planned development activities for pimavanserin for the negative symptoms of schizophrenia, studies to be conducted pursuant to our post-marketing commitments, our ongoing and planned development activities for the early-stage pipeline programs and any potential future business development activities.
We anticipate that the level of cash used in our operations will fluctuate in future periods depending on the levels of spending required for our ongoing and planned commercial activities for NUPLAZID and DAYBUE, our ongoing and planned development activities for pimavanserin for the negative symptoms of schizophrenia, ACP-101 as a treatment for Prader-Willi syndrome and ACP-204 as a treatment for ADP, studies to be conducted pursuant to our post-marketing commitments, our ongoing and planned development activities for other early-stage pipeline programs and strategic business development to further expand our portfolio.
We developed and successfully commercialized NUPLAZID (pimavanserin), which was approved by the FDA, in April 2016 for the treatment of hallucinations and delusions associated with PDP, and is the first and only drug approved in the United States for this condition.
Our commercial portfolio includes two products. In April 2016, the FDA approved NUPLAZID for the treatment of hallucinations and delusions associated with PDP, which is the first and only drug approved in the United States for this condition.
Cost of Product Sales Cost of product sales consists of third-party manufacturing costs, freight, and indirect overhead costs associated with sales of NUPLAZID. Cost of product sales may also include period costs related to certain inventory manufacturing services, excess or obsolete inventory adjustment charges, unabsorbed manufacturing and overhead costs, and manufacturing variances.
Cost of product sales may also include period costs related to certain inventory manufacturing services, excess or obsolete inventory adjustment charges, unabsorbed manufacturing and overhead costs, and manufacturing variances. In addition, cost of product sales may include license fees and royalties.
We also may be required to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose.
We also may be required to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. Additional funding, if obtained, may significantly dilute existing stockholders and could negatively impact the price of our stock.
The decrease in net cash used in operating activities in 2021 relative to 2020 was due to an increase in our net revenues as well as decreased research and development costs and sales and marketing costs .
The increase in net cash provided by operating activities in 2023 relative to 2022 was primarily due to an increase in our net revenues and decreased research and development costs , partially offset by increased sales and marketing costs .
We expect our research and development expenses continue to be substantial as we conduct studies pursuant to our post-marketing commitments and pursue the development of pimavanserin for the negative symptoms of schizophrenia and trofinetide for the treatment of Rett syndrome as well as the further development of ACP-204 and other early-stage pipeline programs.
Similarly, we are unable to estimate with certainty the costs we will incur for post-marketing studies that we committed to conduct in connection with FDA approval of DAYBUE. 65 We expect our research and development expenses will continue to be substantial as we conduct studies pursuant to our post-marketing commitments and pursue the development of pimavanserin for the negative symptoms of schizophrenia and the further development of ACP-101, ACP-204 and other early-stage pipeline programs.
To the extent these long-term commitments are noncancelable, they are reflected in the above table. We also enter into short-term agreements with various vendors and suppliers of goods and services in the normal course of operations through purchase orders or other documentation, or that are undocumented except for an invoice.
We also enter into short-term agreements with various vendors and suppliers of goods and services in the normal course of operations through purchase orders or other documentation, or that are undocumented except for an invoice. Such short-term agreements are generally outstanding for periods less than a year and are settled by cash payments upon delivery of goods and services.
Net cash provided by investing activities totaled $73.2 million in 2022 compared to net cash used in investing activities of $71.1 million in 2021 and net cash provided by investing activities of $192.5 million in 2020. The increase in net cash provided by investing activities in 2022 compared to 2021 was primarily due to increased net maturities of investment securities.
The decrease in net cash provided by investing activities in 2023 compared to 2022 was primarily due to milestone payment of $40 million to Neuren and decreased net sale and maturities of investment securities. The increase in net cash provided by investing activities in 2022 compared to 2021 was primarily due to increased net maturities of investment securities.
Research and Development Expenses Our research and development expenses have consisted primarily of fees paid to external service providers, salaries and related personnel expenses, facilities and equipment expenses, and other costs incurred related to pre-commercial product candidates. We charge all research and development expenses to operations as incurred.
However, we do not expect that the cost of sales as a percentage of net sales of DAYBUE will increase significantly once we commence the sales of full cost inventories. 64 Research and Development Expenses Our research and development expenses have consisted primarily of fees paid to external service providers, salaries and related personnel expenses, facilities and equipment expenses, and other costs incurred related to pre-commercial product candidates.
We cannot predict with certainty what the full impact that macroeconomic developments, including the ongoing conflict between Ukraine and Russia and the COVID-19 pandemic, may have on our business, results of operations, financial condition and prospects. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance.
We cannot predict with certainty what the full impact that geopolitical and macroeconomic developments, including the ongoing military conflict between Ukraine and Russia and the ongoing conflict in Israel and surrounding areas may have on our business, results of operations, financial condition and prospects.
Changes in selling, general and administrative expenses in future periods are subject to the evolving PDP market dynamics, the regulatory and approval processes of trofinetide and our further development of pimavanserin in additional indications other than PDP. 59 Critical Accounting Policies and Estimates A summary of the significant accounting policies is provided in Note 2 to our Consolidated Financial Statements.
Changes in selling, general and administrative expenses in future periods are subject to the evolving PDP market dynamics, the Rett syndrome market and our further development of pimavanserin in additional indications other than PDP.
Our research and development activities have focused on pimavanserin, trofinetide, ACP-204 and other early-stage programs. We currently are responsible for all costs incurred in the ongoing development of pimavanserin and we expect to continue to make substantial investments in clinical studies of pimavanserin for the treatment of the negative symptoms of schizophrenia.
We charge all research and development expenses to operations as incurred. Our research and development activities have focused on pimavanserin, trofinetide, ACP-101, ACP-204 and other early-stage programs. We currently are responsible for all costs incurred in the ongoing development of pimavanserin. In connection with the FDA approval of NUPLAZID, we committed to conduct four post-marketing studies.
Comparison of the Years Ended December 31, 2022 and 2021 Product Sales, Net Product sales, net, comprised of NUPLAZID, were $517.2 million and $484.1 million in 2022 and 2021, respectively.
The increase in selling, general and administrative expenses was primarily due to increased commercial costs associated with the DAYBUE launch, partially offset by reductions in expenses associated with NUPLAZID. Comparison of the Years Ended December 31, 2022 and 2021 Product Sales, Net Product sales, net, comprised of NUPLAZID, were $517.2 million and $484.1 million in 2022 and 2021, respectively.
To the extent that external expenses are not attributable to a specific project, they are included in other early-stage programs. 58 The following table summarizes our research and development expenses for the years ended December 31, 2022, 2021, and 2020 (in thousands): Years Ended December 31, 2022 2021 2020 Costs of external service providers: NUPLAZID (pimavanserin) $ 62,746 $ 73,696 $ 96,705 Trofinetide 62,300 39,814 47,614 Early stage programs 64,786 35,964 14,691 Upfront and milestone payments* 88,741 10,999 72,666 Subtotal 278,573 160,473 231,676 Internal costs 60,422 56,973 56,140 Stock-based compensation 22,580 21,969 31,314 Total research and development expenses $ 361,575 $ 239,415 $ 319,130 _____________________ * Includes upfront and milestone consideration as well as transaction costs associated with acquired in-process research and development.
The following table summarizes our research and development expenses for the years ended December 31, 2023, 2022, and 2021 (in thousands): Years Ended December 31, 2023 2022 2021 Costs of external service providers: NUPLAZID (pimavanserin) $ 55,527 $ 62,746 $ 73,696 DAYBUE (trofinetide) 32,065 62,300 39,814 ACP-101 11,887 2,085 — ACP-204 43,768 16,898 2,569 Early-stage programs 26,789 45,803 33,395 Upfront and milestone payments* 102,500 88,741 10,999 Subtotal 272,536 278,573 160,473 Internal costs 61,675 60,422 56,973 Stock-based compensation 17,408 22,580 21,969 Total research and development expenses $ 351,619 $ 361,575 $ 239,415 _____________________ * Includes upfront and milestone consideration as well as transaction costs associated with acquired in-process research and development.
The increase in net cash used in investing activities in 2021 compared to 2020 was primarily due to increased net purchases of investment securities. Net cash provided by financing activities decreased to $8.2 million in 2022 compared to $18.2 million in 2021 and $81.0 million in 2020.
Net cash provided by financing activities increased to $25.1 million in 2023 compared to $8.2 million in 2022 and $18.2 million in 2021. The increase in net cash provided by financing activities in 2023 relative to 2022 was primarily due to an increase in proceeds resulting from the exercise of employee stock options.
License Fees and Royalties License fees and royalties consist of milestone payments expensed or capitalized and subsequently amortized under our 2006 license agreement with the Ipsen Group. License fees and royalties also include royalties of 2% due to the Ipsen Group based upon net sales of NUPLAZID. This obligation terminated in October 2021.
License fees and royalties currently consist of milestone payments capitalized and subsequently amortized under our 2018 license agreement with Neuren. License fees and royalties also include royalties of tiered, escalating, double-digit percentages due to Neuren based upon net sales of DAYBUE.
The cost of product sales as a percentage of product sales, net stayed flat during 2021 as compared to 2020.
Cost of product sales as a percentage of net product sales for NUPLAZID remains flat in 2023 as compared to 2022.
We also make investments in our office and laboratory facilities to enable continued expansion of our business.
We also make investments in our office and laboratory facilities to enable continued expansion of our business. 71 As of December 31, 2023 we have long-term contractual obligations related to our operating leases of $66.5 million.
This $103.9 million decrease in cash, cash equivalents, and investment securities during 2022 was primarily due to net cash used in operating activities, offset in part by cash proceeds from the exercise of employee stock options. 65 Net cash used in operating activities decreased to $114.0 million in 2022 compared to $125.7 million in 2021 and $136.2 million in 2020.
Cash Flows At December 31, 2023, we had $438.9 million in cash, cash equivalents, and investment securities, compared to $416.8 million at December 31, 2022. This $22.1 million increase in cash, cash equivalents, and investment securities during 2023 was primarily due to net cash provided by operating activities and increased cash proceeds from the exercise of employee stock options.
Such short-term agreements are generally outstanding for periods less than a year and are settled by cash payments upon delivery of goods and services. The nature of the work being conducted under these agreements is such that, in most cases, the services may be stopped on short notice.
The nature of the work being conducted under these agreements is such that, in most cases, the services may be stopped on short notice. In such event, we would not be liable for the full amount of the agreement.
Material Cash Requirements Our material cash requirements in the short and long term consist of the operational, manufacturing, and capital expenditures, a portion of which contain contractual or other obligations. We plan to fund our material cash requirements with our current financial resources together with our anticipated receipts from product sales.
We plan to fund our material cash requirements with our current financial resources together with our anticipated receipts from product sales. On a long-term basis, we manage future cash requirements relative to our long-term business plans.
Our investment policy defines allowable investments and establishes guidelines relating to credit quality, diversification, and maturities of our investments to preserve principal and maintain liquidity. All investment securities have a credit rating of at least Aa3/AA- or better, or P-1/A-1 or better, as determined by Moody’s Investors Service or Standard & Poor’s.
All investment securities have a credit rating of at least Aa3/AA- or better, or P-1/A-1 or better, as determined by Moody’s Investors Service or Standard & Poor’s. Our investment portfolio has not been adversely impacted by the disruptions in the credit markets that have occurred in the past.
We acquired an exclusive North American license to develop and commercialize trofinetide for Rett syndrome and other indications from Neuren in August of 2018.
We hold worldwide commercialization rights to pimavanserin. 62 In August 2018, we acquired an exclusive North American license to develop and commercialize DAYBUE for Rett syndrome and other indications from Neuren. Rett syndrome is a debilitating neurological disorder that occurs predominantly in females following apparently normal development for the first six months of life.
We project completing the enrollment this year with top-line results in early 2024. In addition, we recently announced that we are developing an internally discovered new molecule, ACP-204, which builds upon the learnings of pimavanserin in the treatment of neuropsychiatric symptoms, and is currently being evaluated in a Phase 1 clinical program.
In addition, in August 2022 we announced that we are developing an internally discovered new molecule, ACP-204, which builds upon the learnings of pimavanserin in the treatment of neuropsychiatric symptoms. We completed Phase 1 study of ACP-204 which demonstrated a favorable safety and tolerability profile, and supports its target product profile as a potential treatment for ADP.
Our investment portfolio has not been adversely impacted by the disruptions in the credit markets that have occurred in the past. However, if there are future disruptions in the credit markets, there can be no assurance that our investment portfolio will not be adversely affected .
However, if there are future disruptions in the credit markets, there can be no assurance that our investment portfolio will not be adversely affected. Material Cash Requirements Our material cash requirements in the short and long term consist of the operational, manufacturing, and capital expenditures, a portion of which contain contractual or other obligations.
Product sales, net for the year ended December 31, 2021 increased as compared to the year ended December 31, 2020 primarily due to a higher average gross selling price of NUPLAZID in 2021 as compared to 2020 as well as the growth in NUPLAZID unit sales of approximately 3% in 2021 as compared to 2020. 62 The following table provides a summary of activity with respect to our sales allowances and accruals for the year ended December 31, 2021 (in thousands): Distribution Fees, Discounts & Chargebacks Co-Pay Assistance Rebates, Data Fees & Returns Total Balance at December 31, 2020 $ 4,221 $ (152 ) $ 14,116 $ 18,185 Provision related to current period sales 72,011 1,794 40,490 114,295 Credits/payments for current period sales (63,544 ) (1,996 ) (24,773 ) (90,313 ) Credits/payments for prior period sales (4,221 ) 152 (14,116 ) (18,185 ) Balance at December 31, 2021 $ 8,467 $ (202 ) $ 15,717 $ 23,982 Cost of Product Sales Cost of product sales was $10.8 million and $10.2 million in 2021 and 2020, respectively, or approximately 2% of product sales, net in both years.
The following table provides a summary of activity with respect to our sales allowances and accruals for the year ended December 31, 2023 (in thousands): Distribution Fees, Discounts & Chargebacks Co-Pay Assistance Rebates, Data Fees & Returns Total Balance at December 31, 2022 $ 10,923 $ (340 ) $ 26,046 $ 36,629 Provision related to current period sales 97,797 3,979 113,011 214,787 Credits/payments for current period sales (85,641 ) (4,499 ) (26,957 ) (117,097 ) Credits/payments for prior period sales (10,923 ) 340 (26,046 ) (36,629 ) Balance at December 31, 2023 $ 12,156 $ (520 ) $ 86,054 $ 97,690 68 Cost of Product Sales Cost of product sales was $41.6 million and $10.2 million in 2023 and 2022, respectively, or approximately 6% and 2% of net product sales, respectively.
NUPLAZID is a selective serotonin inverse agonist/antagonist, preferentially targeting 5-HT 2A receptors with no appreciable affinity for dopaminergic, histaminergic, or muscarinic receptors. Through this novel mechanism, NUPLAZID demonstrated significant efficacy in reducing the hallucinations and delusions associated with PDP without negatively impacting motor function in our Phase 3 pivotal trial.
Through this novel mechanism, NUPLAZID demonstrated significant efficacy in reducing the hallucinations and delusions associated with PDP without negatively impacting motor function in our Phase 3 pivotal trial. NUPLAZID has the potential to avoid many of the debilitating side effects of existing antipsychotics, none of which are approved by the FDA for the treatment of PDP.
Upon completion of our Phase 1 work, we plan to initiate studies evaluating various doses of ACP-204 in patients with Alzheimer’s disease psychosis. ACP-204 is a new chemical entity for which we hold the worldwide rights.
In November 2023, we initiated a Phase 2 study evaluating the efficacy and safety of ACP-204 for the treatment of hallucinations and delusions associated with ADP. ACP-204 is a new chemical entity for which we hold the worldwide rights.
The following is a summary of our long-term contractual obligations as of December 31, 2022 (in thousands): Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Operating leases $ 73,391 $ 9,562 $ 18,304 $ 16,838 $ 28,687 Other long-term contractual obligations 2,000 1,000 1,000 — — Total $ 75,391 $ 10,562 $ 19,304 $ 16,838 $ 28,687 In addition to operating leases, we enter into certain other long-term commitments for goods and services that are outstanding for periods greater than one year.
In May 2023, we subleased our 2 nd floor of corporate office space in San Diego with a total minimum sublease income of $18.4 million. In addition to operating leases, we enter into certain other long-term commitments for goods and services that are outstanding for periods greater than one year.
Selling, General and Administrative Expenses Selling, general and administrative expenses increased to $396.0 million in 2021, including $40.4 million in stock-based compensation expense, from $388.7 million in 2020, including $50.5 million in stock-based compensation expense.
There was a similar level of clinical spend and business development investment year over year. Selling, General and Administrative Expenses Selling, general and administrative expenses increased to $406.6 million in 2023, including $48.0 million in stock-based compensation expense, from $369.1 million in 2022, including $44.5 million in stock-based compensation expense.
Additional funding, if obtained, may significantly dilute existing stockholders and could negatively impact the price of our stock. 64 We have invested a substantial portion of our available cash in money market funds, U.S. treasury notes, and high quality, marketable debt instruments of corporations and government sponsored enterprises in accordance with our investment policy.
We have invested a substantial portion of our available cash in money market funds, municipal bonds, and government sponsored enterprises in accordance with our investment policy. Our investment policy defines allowable investments and establishes guidelines relating to credit quality, diversification, and maturities of our investments to preserve principal and maintain liquidity.
Removed
NUPLAZID has the potential to avoid many of the debilitating side effects of existing antipsychotics, none of which are approved by the FDA for the treatment of PDP. We hold worldwide commercialization rights to pimavanserin. NUPLAZID is available in 34 mg capsules and 10 mg tablets dosage forms.
Added
In September 2023, we announced that the FDA made two changes to the NUPLAZID label clarifying its use in patients with Parkinson’s disease-related hallucinations and delusions, with or without dementia, which is consistent with the current indication.
Removed
We are currently in registration for trofinetide, an investigational new drug for the treatment of Rett syndrome, a rare genetic neurodevelopmental disorder. If approved, trofinetide would be the first and only drug approved in the United States for this condition.
Added
In March 2023, the FDA approved DAYBUE for the treatment of Rett syndrome, which is the first and only drug approved for this condition. DAYBUE became available for prescription in the United States in April 2023. NUPLAZID is a selective serotonin inverse agonist/antagonist, preferentially targeting 5-HT 2A receptors with no appreciable affinity for dopaminergic, histaminergic, or muscarinic receptors.
Removed
The FDA filed the NDA in September 2022 and assigned a PDUFA target action date of March 12, 2023. Through its unique mechanism and the clinical studies conducted to date, we believe that pimavanserin has the potential to address important unmet medical needs in neurological and psychiatric disorders in addition to PDP.
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Rett syndrome also occurs in boys, albeit far less frequently. Typically, between six to eighteen months of age, patients experience a period of rapid decline with loss of purposeful hand use and spoken communication and inability to independently conduct activities of daily living. Symptoms also include seizures, hand movements or stereotypies, disorganized breathing patterns, scoliosis and sleep disturbances, among others.
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Impact of COVID-19 on our Business As a result of the COVID-19 pandemic, there have been changes in the practice of medical care and medical education.
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Under the terms of the 2018 agreement, Neuren received an upfront payment of $10.0 million and is eligible to receive milestone payments of up to $400.0 million based on the achievement of certain development and sales milestones for Rett syndrome in North America, of which, $50 million has been paid to date.
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For example, many health care providers initially expanded their utilization of telemedicine to conduct patient visits, and in many regions within the United States the ability of our commercial and medical field teams to call upon medical clinics, hospitals, long-term care facilities and skilled nursing facilities was restricted or converted to virtual access.
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Neuren is also eligible to receive up to $55.0 million in development and sales milestone for Fragile X syndrome in North America. In addition, Neuren is eligible to receive tiered, escalating, double-digit percentage royalties based on net sales in North America.
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We continue to access our customers both in person and virtually. Currently, health care providers are conducting patient visits in-person and through telemedicine and our sales force has been able to call upon medical clinics, hospitals, long-term care facilities and skilled nursing facilities either in person in accordance with applicable regulatory guidance and local policies or virtually.
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The following tables provide a summary of milestone and royalty payments that Neuren remains eligible to receive based on the achievement of net sales of trofinetide in North America in any given year: Sales Milestones Based on Annual Net Sales in North America Net Sales ≥$250 million $50 million Net Sales ≥$500 million $50 million Net Sales ≥$750 million $100 million Net Sales ≥$1 billion $150 million Tiered Royalty Rates Based on Annual Net Sales in North America ≤$250 million 10% >$250 million, but ≤$500 million 12% >$500 million, but ≤$750 million 14% >$750 million 15% In July 2023, we expanded our current licensing agreement for trofinetide with Neuren to acquire rights to the drug outside of North America as well as global rights in Rett syndrome and Fragile X syndrome to Neuren’s development candidate NNZ-2591.
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Most medical congresses, an important means for medical education, are being conducted both in person and virtually and enrollment in clinical trials is being assessed based on local COVID-19 conditions and regional regulation and public health guidance.
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Under the terms of the expanded agreement, Neuren received an upfront payment of $100.0 million and is eligible to receive up to an additional $426.3 million in milestone payments based on the achievement of certain commercial and sales milestones for trofinetide outside of North America and up to $831.3 million in milestone payments based on the achievement of certain development and sales milestones for NNZ-2591.
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In an effort to protect the health and safety of our employees, our community, and our stakeholders, we have developed dynamic pandemic and workplace health policies applicable to all of our employees. These policies are localized based on current COVID-19 conditions, regulatory guidance, public health and scientific recommendations, and federal, state, and local laws.
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In addition, we will be required to pay Neuren tiered royalties from the mid-teens to low-twenties percent based on net sales of trofinetide and NNZ-2591.
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Some examples of these policies include a mandatory COVID-19 vaccination policy and increasing systemic precautions in our offices. In addition, we have expanded our wellness programs to support the overall health and wellbeing of our employees. Since the beginning of the pandemic, we have been able to provide an uninterrupted supply of NUPLAZID to patients.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAlthough we are seeing, and expect to continue to see, increased interest rates, due to our investment in investment-grade, interest-bearing securities, as of the date of this Annual Report on Form 10-K, we do not expect anticipated changes in interest rates to have a material effect on our interest rate risk in future reporting periods.
Biggest changeDue to our investment in investment-grade, interest-bearing securities, as of the date of this Annual Report on Form 10-K, we do not expect anticipated changes in interest rates to have a material effect on our interest rate risk in future reporting periods.
If a 10 percent change in interest rates were to have occurred on December 31, 2022 and 2021, this change would not have had a material effect on the fair value of our investment portfolio as of each such date.
If a 10 percent change in interest rates were to have occurred on December 31, 2023 and 2022, this change would not have had a material effect on the fair value of our investment portfolio as of that date.

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