UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2015
OR
| ¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
to
Commission file number 0-22705
NEUROCRINE
BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
|
|
|
| Delaware |
|
33-0525145 |
| (State or other jurisdiction of
incorporation or organization) |
|
(IRS Employer
Identification No.) |
|
|
| 12780 El Camino Real,
San Diego, California |
|
92130 |
| (Address of principal executive office) |
|
(Zip Code) |
(858) 617-7600
(Registrant’s telephone number, including area code)
Not Applicable
(Former
name, former address and former fiscal year, if changed since last report)
Indicate by
check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
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| Large accelerated filer |
|
x |
|
Accelerated filer |
|
¨ |
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|
|
|
| Non-accelerated filer |
|
¨ (Do not check if a smaller reporting company) |
|
Smaller reporting company |
|
¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ¨ No x
The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 85,873,191 as of July 24, 2015.
NEUROCRINE BIOSCIENCES, INC.
FORM 10-Q INDEX
2
PART I. FINANCIAL INFORMATION
| ITEM 1. |
FINANCIAL STATEMENTS |
NEUROCRINE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
(unaudited)
|
|
|
|
|
|
|
|
|
| |
|
June 30,
2015 |
|
|
December 31,
2014 |
|
| ASSETS |
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
132,070 |
|
|
$ |
31,014 |
|
| Short-term investments, available for sale |
|
|
252,650 |
|
|
|
162,795 |
|
| Other current assets |
|
|
4,696 |
|
|
|
4,394 |
|
|
|
|
|
|
|
|
|
|
| Total current assets |
|
|
389,416 |
|
|
|
198,203 |
|
| Property and equipment, net |
|
|
2,802 |
|
|
|
2,507 |
|
| Long-term investments, available for sale |
|
|
114,172 |
|
|
|
37,492 |
|
| Restricted cash |
|
|
4,815 |
|
|
|
4,831 |
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
$ |
511,205 |
|
|
$ |
243,033 |
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable |
|
$ |
1,035 |
|
|
$ |
246 |
|
| Accrued liabilities |
|
|
12,392 |
|
|
|
11,508 |
|
| Current portion of cease-use liability |
|
|
556 |
|
|
|
467 |
|
| Current portion of deferred rent |
|
|
197 |
|
|
|
119 |
|
| Current portion of deferred gain on sale of real estate |
|
|
3,373 |
|
|
|
3,324 |
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
17,553 |
|
|
|
15,664 |
|
| Deferred gain on sale of real estate |
|
|
12,614 |
|
|
|
14,322 |
|
| Deferred revenue |
|
|
10,231 |
|
|
|
— |
|
| Deferred rent |
|
|
1,852 |
|
|
|
1,877 |
|
| Cease-use liability |
|
|
1,770 |
|
|
|
2,211 |
|
| Other liabilities |
|
|
245 |
|
|
|
260 |
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
|
44,265 |
|
|
|
34,334 |
|
| Commitments and contingencies |
|
|
|
|
|
|
|
|
| Stockholders’ equity: |
|
|
|
|
|
|
|
|
| Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding |
|
|
— |
|
|
|
— |
|
| Common stock, $0.001 par value; 110,000,000 shares authorized; issued and outstanding shares were 85,750,371 as of June 30, 2015
and 76,465,942 as of December 31, 2014 |
|
|
86 |
|
|
|
76 |
|
| Additional paid-in capital |
|
|
1,318,742 |
|
|
|
1,035,205 |
|
| Accumulated other comprehensive loss |
|
|
(404 |
) |
|
|
(277 |
) |
| Accumulated deficit |
|
|
(851,484 |
) |
|
|
(826,305 |
) |
|
|
|
|
|
|
|
|
|
| Total stockholders’ equity |
|
|
466,940 |
|
|
|
208,699 |
|
|
|
|
|
|
|
|
|
|
| Total liabilities and stockholders’ equity |
|
$ |
511,205 |
|
|
$ |
243,033 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated financial statements.
3
NEUROCRINE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
| |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
| Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| License fees |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
19,769 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Total revenues |
|
|
— |
|
|
|
— |
|
|
|
19,769 |
|
|
|
— |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and development |
|
|
18,719 |
|
|
|
10,161 |
|
|
|
35,294 |
|
|
|
18,733 |
|
| General and administrative |
|
|
6,603 |
|
|
|
4,200 |
|
|
|
12,085 |
|
|
|
8,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating expenses |
|
|
25,322 |
|
|
|
14,361 |
|
|
|
47,379 |
|
|
|
27,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
|
(25,322 |
) |
|
|
(14,361 |
) |
|
|
(27,610 |
) |
|
|
(27,086 |
) |
| Other income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gain/(loss) on sale/disposal of assets |
|
|
— |
|
|
|
5 |
|
|
|
9 |
|
|
|
(5 |
) |
| Deferred gain on real estate |
|
|
829 |
|
|
|
805 |
|
|
|
1,659 |
|
|
|
1,609 |
|
| Investment income, net |
|
|
506 |
|
|
|
167 |
|
|
|
763 |
|
|
|
256 |
|
| Other income, net |
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total other income |
|
|
1,335 |
|
|
|
980 |
|
|
|
2,431 |
|
|
|
1,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(23,987 |
) |
|
$ |
(13,381 |
) |
|
$ |
(25,179 |
) |
|
$ |
(25,223 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted |
|
$ |
(0.28 |
) |
|
$ |
(0.18 |
) |
|
$ |
(0.30 |
) |
|
$ |
(0.35 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used in the calculation of net loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted |
|
|
85,518 |
|
|
|
75,879 |
|
|
|
82,947 |
|
|
|
73,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(23,987 |
) |
|
$ |
(13,381 |
) |
|
$ |
(25,179 |
) |
|
$ |
(25,223 |
) |
| Net unrealized (losses)/gains on available-for-sale securities |
|
|
(225 |
) |
|
|
68 |
|
|
|
(127 |
) |
|
|
(131 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss |
|
$ |
(24,212 |
) |
|
$ |
(13,313 |
) |
|
$ |
(25,306 |
) |
|
$ |
(25,354 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated financial statements.
4
NEUROCRINE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
| |
|
Six Months Ended
June 30, |
|
| |
|
2015 |
|
|
2014 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(25,179 |
) |
|
$ |
(25,223 |
) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
495 |
|
|
|
386 |
|
| Gain on sale of assets |
|
|
(1,668 |
) |
|
|
(1,604 |
) |
| Deferred revenues |
|
|
10,231 |
|
|
|
— |
|
| Deferred rent |
|
|
53 |
|
|
|
12 |
|
| Amortization of premiums on investments |
|
|
2,579 |
|
|
|
1,594 |
|
| Non-cash share-based compensation expense |
|
|
8,263 |
|
|
|
5,274 |
|
| Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Other current assets |
|
|
(302 |
) |
|
|
(196 |
) |
| Accounts payable and accrued liabilities |
|
|
1,673 |
|
|
|
229 |
|
| Cease-use liability |
|
|
(352 |
) |
|
|
(204 |
) |
| Other non-current liabilities |
|
|
(15 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
| Net cash used in operating activities |
|
|
(4,222 |
) |
|
|
(19,732 |
) |
| CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
| Purchases of investments |
|
|
(286,860 |
) |
|
|
(208,337 |
) |
| Sales and maturities of investments |
|
|
117,619 |
|
|
|
85,069 |
|
| Proceeds from sales of property and equipment |
|
|
9 |
|
|
|
45 |
|
| Deposits and restricted cash |
|
|
16 |
|
|
|
— |
|
| Purchases of property and equipment |
|
|
(790 |
) |
|
|
(904 |
) |
|
|
|
|
|
|
|
|
|
| Net cash used in investing activities |
|
|
(170,006 |
) |
|
|
(124,127 |
) |
| CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
| Issuance of common stock |
|
|
275,284 |
|
|
|
136,515 |
|
|
|
|
|
|
|
|
|
|
| Net cash provided by financing activities |
|
|
275,284 |
|
|
|
136,515 |
|
|
|
|
|
|
|
|
|
|
| Net increase (decrease) in cash and cash equivalents |
|
|
101,056 |
|
|
|
(7,344 |
) |
| Cash and cash equivalents at beginning of the period |
|
|
31,014 |
|
|
|
44,789 |
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents at end of the period |
|
$ |
132,070 |
|
|
$ |
37,445 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated financial statements.
5
NEUROCRINE BIOSCIENCES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business. Neurocrine Biosciences, Inc. (the Company or Neurocrine) was incorporated in California in
1992 and reincorporated in Delaware in 1996. The Company discovers and develops innovative and life-changing pharmaceuticals, in diseases with high unmet medical needs, through its novel research and development (R&D) platform, focused on
neurological and endocrine based diseases and disorders. The Company’s two lead late-stage clinical programs are elagolix, a gonadotropin-releasing hormone (GnRH) antagonist for women’s health that is partnered with AbbVie Inc. (AbbVie),
and a vesicular monoamine transporter 2 (VMAT2) inhibitor for the treatment of movement disorders.
Basis of Presentation. The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions of the
Securities and Exchange Commission (SEC) on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, the
condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the
periods presented. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year
ended December 31, 2014 included in the Company’s Annual Report on Form 10-K filed with the SEC. The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for
any other interim period or for the full year. The balance sheet at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete
financial statements.
Impact of Recently Issued Accounting Standards. In May 2014, the Financial Accounting Standards Board (FASB)
amended the existing accounting standards for revenue recognition, which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new standard requires a company to recognize revenue upon
transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. The amended guidance defines a five-step approach for recognizing revenue, which may require a
company to use more judgment and make more estimates than under the current guidance. The amended guidance as currently issued will be effective for the Company starting in 2018. The new standard allows for two methods of adoption: (a) full
retrospective adoption, meaning the standard is applied to all periods presented, or (b) modified retrospective adoption, meaning the cumulative effect of applying the new standard is recognized as an adjustment to the opening retained earnings
balance. The Company is in the process of determining the adoption method it will implement, as well as the effects the adoption will have on its consolidated financial statements.
Use of Estimates. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.
2. REVENUE RECOGNITION AND SIGNIFICANT COLLABORATIVE RESEARCH AND DEVELOPMENT AGREEMENTS
Revenue Recognition Policy. The Company recognizes revenue for the performance of services when each of the
following four criteria is met: (i) persuasive evidence of an arrangement exists; (ii) services are rendered or products are delivered; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably
assured.
Effective in 2011, the Company follows the Accounting Standards Codification (ASC) for Revenue Recognition - Multiple-Element
Arrangements, if applicable, to determine the recognition of revenue under license and collaboration agreements. The terms of these agreements generally contain multiple elements, or deliverables, which may include (i) licenses to the
Company’s intellectual property, (ii) materials and technology, (iii) pharmaceutical supply, (iv) participation on joint development or joint steering committees, and (v) development services. The payments the Company
receives under these arrangements typically include one or more of the following: up-front license fees; funding of research and/or development efforts; amounts due upon the achievement of specified milestones; manufacturing and royalties on future
product sales.
6
The ASC provides guidance relating to the separation of deliverables included in an arrangement
into different units of accounting and the allocation of consideration to the units of accounting. The evaluation of multiple-element arrangements requires management to make judgments about (i) the identification of deliverables,
(ii) whether such deliverables are separable from the other aspects of the contractual relationship, (iii) the estimated selling price of each deliverable, and (iv) the expected period of performance for each deliverable.
To determine the units of accounting under a multiple-element arrangement, management evaluates certain separation criteria, including
whether the deliverables have stand-alone value, based on the relevant facts and circumstances for each arrangement. The selling prices of deliverables under an arrangement may be derived using vendor specific objective evidence (VSOE), third-party
evidence, or a best estimate of selling price (BESP), if VSOE or third-party evidence is not available. For most pharmaceutical licensing and collaboration agreements, BESP is utilized. The objective of BESP is to determine the price at which the
Company would transact a sale if the element within the agreement was sold on a standalone basis. Establishing BESP involves management’s judgment and considers multiple factors, including market conditions and company-specific factors,
including those factors contemplated in negotiating the agreements, as well as internally developed models that include assumptions related to market opportunity, discounted cash flows, estimated development costs, probability of success and the
time needed to commercialize a product candidate pursuant to the agreement. In validating the BESP, management considers whether changes in key assumptions used to determine the BESP will have a significant effect on the allocation of the
arrangement consideration between the multiple deliverables. The allocated consideration for each unit of accounting is recognized over the related obligation period in accordance with the applicable revenue recognition criteria.
If there are deliverables in an arrangement that are not separable from other aspects of the contractual relationship, they are treated as a
combined unit of accounting, with the allocated revenue for the combined unit recognized in a manner consistent with the revenue recognition applicable to the final deliverable in the combined unit. Payments received prior to satisfying the relevant
revenue recognition criteria are recorded as unearned revenue in the accompanying balance sheets and recognized as revenue when the related revenue recognition criteria are met.
The Company typically receives up-front payments when licensing its intellectual property, which often occurs in conjunction with a research
and development agreement. The Company recognizes revenue attributed to the license upon delivery, provided that the license has stand-alone value.
For payments payable on achievement of milestones that do not meet all of the conditions to be considered substantive, the Company recognizes
the portion of the payment allocable to delivered items as revenue when the specific milestone is achieved, and the contingency is removed.
Prior to the revised multiple element guidance, described above, adopted by the Company on January 1, 2011, upfront, nonrefundable
payments for license fees, grants, and advance payments for sponsored research revenues received in excess of amounts earned were classified as deferred revenue and recognized as income over the contract or development period. Revenues from
development milestones are accounted for in accordance with the Revenue Recognition – Milestone Method Topic of the FASB ASC (Milestone Method). Milestones are recognized when earned, as evidenced by written acknowledgment from the collaborator
or other persuasive evidence that the milestone has been achieved, provided that the milestone event is substantive. A milestone event is considered to be substantive if its achievability was not reasonably assured at the inception of the agreement
and the Company’s efforts led to the achievement of the milestone or the milestone was due upon the occurrence of a specific outcome resulting from the Company’s performance. The Company assesses whether a milestone is substantive at the
inception of each agreement.
Mitsubishi Tanabe Pharma Corporation (Mitsubishi Tanabe). On March 31, 2015, the Company
entered into a collaboration and license agreement with Mitsubishi Tanabe for the development and commercialization of NBI-98854 for movement disorders in Japan and other select Asian markets. Payments to the Company under this agreement include an
up-front license fee of $30 million, up to $85 million in development and commercialization event-based payments, payments for the manufacture of pharmaceutical products, and royalties on product sales in select territories in Asia. Under the terms
of the agreement, Mitsubishi Tanabe is responsible for all third-party development, marketing and commercialization costs in Japan and other select Asian markets with the exception of a single Huntington’s chorea clinical trial to be performed
by the Company, at an estimated cost of approximately $12 million, should Mitsubishi Tanabe request the clinical trial. The Company will be entitled to a percentage of sales of NBI-98854 in Japan and other select Asian markets for the longer of ten
years or the life of the related patent rights.
Under the terms of the Company’s agreement with Mitsubishi Tanabe, the collaboration
effort between the parties to advance NBI-98854 towards commercialization in Japan and other select Asian markets is governed by a joint steering committee and joint development committee with representatives from both the Company and Mitsubishi
Tanabe. There are no performance, cancellation, termination or refund provisions in the agreement that would have a material financial consequence to the Company. The Company does not directly control when event-based payments will be achieved or
when royalty payments will begin. Mitsubishi Tanabe may terminate the agreement at its discretion upon 180 days’ written notice to the Company. In such event, all NBI-98854 product rights for Japan and other select Asian markets would revert to
the Company.
7
The Company has identified the following deliverables associated with the Mitsubishi Tanabe
agreement: NBI-98854 technology license and existing know-how, development activities to be performed as part of the collaboration, and the manufacture of pharmaceutical products. The respective standalone value from each of these deliverables has
been determined by applying the BESP method and the revenue was allocated based on the relative selling price method with revenue recognition timing to be determined either by delivery or the provision of services.
As discussed above, the BESP method required the use of significant estimates. The Company used an income approach to estimate the selling
price for the technology license and an expense approach for estimating development activities and the manufacture of pharmaceutical products. The development activities and the manufacture of pharmaceutical products are expected to be delivered
throughout the duration of the agreement. The technology license and existing know-how was delivered on the effective date of the agreement.
For the six months ended June 30, 2015, the Company recognized revenue under this agreement of $19.8 million associated
with the delivery of a technology license and existing know-how. In accordance with the Company’s continuing performance obligations, $10.2 million of the $30 million up-front payment is being deferred and recognized in future
periods. Under the terms of the agreement, there is no general obligation to return the up-front payment for any non-contingent deliverable.
The Company evaluated the event-based payments under the Milestone Method and concluded only one immaterial event-based payment represents a
substantive milestone. Event-based payments will be recognized when earned.
The Company is eligible to receive from Mitsubishi Tanabe
tiered royalty payments based on product sales in Japan and other select Asian markets. Royalties will be recognized as earned in accordance with the terms of the agreement, when product sales are reported by Mitsubishi Tanabe, the amount can be
reasonably estimated, and collectability is reasonably assured.
AbbVie Inc. (AbbVie). In June 2010, the Company announced
an exclusive worldwide collaboration with AbbVie to develop and commercialize elagolix and all next-generation gonadotropin-releasing hormone (GnRH) antagonists (collectively, GnRH Compounds) for women’s and men’s health. AbbVie made an
upfront payment of $75 million and agreed to make additional development and regulatory event-based payments of up to $480 million and up to an additional $50 million in commercial event-based payments. The Company has assessed event-based payments
under the revised authoritative guidance for research and development milestones and determined that event-based payments prior to commencement of a Phase III clinical study, as defined in the agreement, meet the definition of a milestone in
accordance with authoritative guidance as (i) they are events that can only be achieved in part on the Company’s past performance, (ii) there is substantive uncertainty at the date the arrangement was entered into that the event will
be achieved and (iii) they result in additional payments being due to the Company. Development and regulatory event-based payments subsequent to the commencement of a Phase III clinical study, however, currently do not meet these criteria as
their achievement is based on the performance of AbbVie. As of June 30, 2015, $500 million remains outstanding in future event-based payments under the agreement. However, none of the remaining event-based payments meet the definition of a
milestone in accordance with authoritative accounting guidance.
Under the terms of the agreement, AbbVie is responsible for all
third-party development, marketing and commercialization costs. The Company received funding for certain internal collaboration expenses, which included reimbursement from AbbVie for internal and external expenses related to the GnRH Compounds,
through the end of 2012. The Company will be entitled to a percentage of worldwide sales of GnRH Compounds for the longer of ten years or the life of the related patent rights. Under the terms of the Company’s agreement with AbbVie, the
collaboration effort between the parties to advance GnRH Compounds towards commercialization was governed by a joint development committee with representatives from both the Company and AbbVie. The Company’s participation in the joint
development committee was determined to be a substantive deliverable under the contract, and therefore, the upfront payment was deferred and recognized over the term of the joint development committee, which was completed, as scheduled, in December
2012. AbbVie may terminate the collaboration at its discretion upon 180 days’ written notice to the Company. In such event, the Company would be entitled to specified payments for ongoing clinical development and related activities and all GnRH
Compound product rights would revert to the Company.
3. INVESTMENTS
Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in comprehensive
loss. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included in interest income. Realized gains and losses and declines in
value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income or expense. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as
available-for-sale are included in interest income.
8
Investments consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
| |
|
June 30,
2015 |
|
|
December 31,
2014 |
|
| Certificates of deposit |
|
$ |
13,890 |
|
|
$ |
17,438 |
|
| Commercial paper |
|
|
23,904 |
|
|
|
7,498 |
|
| Corporate debt securities |
|
|
324,192 |
|
|
|
174,323 |
|
| Securities of government sponsored entities |
|
|
4,836 |
|
|
|
1,028 |
|
|
|
|
|
|
|
|
|
|
| Total investments |
|
$ |
366,822 |
|
|
$ |
200,287 |
|
|
|
|
|
|
|
|
|
|
The following is a summary of investments classified as available-for-sale securities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Contractual
Maturity
(in years) |
|
|
Amortized
Cost |
|
|
Gross
Unrealized
Gains(1) |
|
|
Gross
Unrealized
Losses(1) |
|
|
Aggregate
Estimated
Fair
Value |
|
| June 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Classified as current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Certificates of deposit |
|
|
Less than 1 |
|
|
$ |
9,560 |
|
|
$ |
6 |
|
|
$ |
(1 |
) |
|
$ |
9,565 |
|
| Commercial paper |
|
|
Less than 1 |
|
|
|
23,903 |
|
|
|
9 |
|
|
|
(8 |
) |
|
|
23,904 |
|
| Corporate debt securities |
|
|
Less than 1 |
|
|
|
214,459 |
|
|
|
5 |
|
|
|
(119 |
) |
|
|
214,345 |
|
| Securities of government-sponsored entities |
|
|
Less than 1 |
|
|
|
4,843 |
|
|
|
— |
|
|
|
(7 |
) |
|
|
4,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total short-term available-for-sale securities |
|
|
|
|
|
$ |
252,765 |
|
|
$ |
20 |
|
|
$ |
(135 |
) |
|
$ |
252,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Classified as non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Certificates of deposit |
|
|
1 to 2 |
|
|
$ |
4,320 |
|
|
$ |
5 |
|
|
$ |
— |
|
|
$ |
4,325 |
|
| Corporate debt securities |
|
|
1 to 2 |
|
|
|
110,141 |
|
|
|
1 |
|
|
|
(295 |
) |
|
|
109,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total long-term available-for-sale securities |
|
|
|
|
|
$ |
114,461 |
|
|
$ |
6 |
|
|
$ |
(295 |
) |
|
$ |
114,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2014: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Classified as current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Certificates of deposit |
|
|
Less than 1 |
|
|
$ |
9,072 |
|
|
$ |
— |
|
|
$ |
(6 |
) |
|
$ |
9,066 |
|
| Commercial paper |
|
|
Less than 1 |
|
|
|
7,497 |
|
|
|
1 |
|
|
|
— |
|
|
|
7,498 |
|
| Corporate debt securities |
|
|
Less than 1 |
|
|
|
145,321 |
|
|
|
5 |
|
|
|
(123 |
) |
|
|
145,203 |
|
| Securities of government-sponsored entities |
|
|
Less than 1 |
|
|
|
1,029 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
1,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total short-term available-for-sale securities |
|
|
|
|
|
$ |
162,919 |
|
|
$ |
6 |
|
|
$ |
(130 |
) |
|
$ |
162,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Classified as non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Certificates of deposit |
|
|
1 to 2 |
|
|
$ |
8,400 |
|
|
$ |
— |
|
|
$ |
(28 |
) |
|
$ |
8,372 |
|
| Corporate debt securities |
|
|
1 to 2 |
|
|
|
29,245 |
|
|
|
— |
|
|
|
(125 |
) |
|
|
29,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total long-term available-for-sale securities |
|
|
|
|
|
$ |
37,645 |
|
|
$ |
— |
|
|
$ |
(153 |
) |
|
$ |
37,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Unrealized gains and losses are included in other comprehensive loss. |
9
The following table presents information about available-for-sale investments in an unrealized
loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Less Than 12 Months |
|
|
12 Months or Greater |
|
|
Total |
|
| |
|
Estimated
Fair
Value |
|
|
Unrealized
Losses |
|
|
Estimated
Fair
Value |
|
|
Unrealized
Losses |
|
|
Estimated
Fair
Value |
|
|
Unrealized
Losses |
|
| June 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Certificates of deposit |
|
$ |
199 |
|
|
$ |
(1 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
199 |
|
|
$ |
(1 |
) |
| Commercial paper |
|
|
11,452 |
|
|
|
(8 |
) |
|
|
— |
|
|
|
— |
|
|
|
11,452 |
|
|
|
(8 |
) |
| Corporate debt securities |
|
|
283,310 |
|
|
|
(407 |
) |
|
|
4,803 |
|
|
|
(7 |
) |
|
|
288,113 |
|
|
|
(414 |
) |
| Securities of government-sponsored entities |
|
|
4,684 |
|
|
|
(7 |
) |
|
|
— |
|
|
|
— |
|
|
|
4,684 |
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
299,645 |
|
|
$ |
(423 |
) |
|
$ |
4,803 |
|
|
$ |
(7 |
) |
|
$ |
304,448 |
|
|
$ |
(430 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2014: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Certificates of deposit |
|
$ |
16,957 |
|
|
$ |
(34 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
16,957 |
|
|
$ |
(34 |
) |
| Corporate debt securities |
|
|
149,477 |
|
|
|
(248 |
) |
|
|
— |
|
|
|
— |
|
|
|
149,477 |
|
|
|
(248 |
) |
| Securities of government-sponsored entities |
|
|
1,028 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
1,028 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
167,462 |
|
|
$ |
(283 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
167,462 |
|
|
$ |
(283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The primary objective of the Company’s investment portfolio is to enhance overall returns in an efficient
manner while maintaining safety of principal, prudent levels of liquidity and acceptable levels of risk. The Company’s investment policy limits interest-bearing security investments to certain types of instruments issued by institutions with
primarily investment grade credit ratings and places restrictions on maturities and concentration by asset class and issuer.
The Company
reviews the available-for-sale investments for other-than-temporary declines in fair value below cost basis each quarter and whenever events or changes in circumstances indicate that the cost basis of an asset may not be recoverable. This evaluation
is based on a number of factors, including the length of time and the extent to which the fair value has been below the cost basis and adverse conditions related specifically to the security, including any changes to the credit rating of the
security, and the intent to sell, or whether the Company will more likely than not be required to sell the security before recovery of its amortized cost basis. The assessment of whether a security is other-than-temporarily impaired could change in
the future due to new developments or changes in assumptions related to any particular security. As of June 30, 2015 and December 31, 2014, the Company believes the cost bases for available-for-sale investments were recoverable in all
material respects.
4. FAIR VALUE MEASUREMENTS
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering
such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
|
|
|
| Level 1: |
|
Observable inputs such as quoted prices in active markets; |
|
|
| Level 2: |
|
Inputs include quoted prices for similar instruments in active markets and/or quoted prices for identical or similar instruments in markets that are not active near the measurement date; and |
|
|
| Level 3: |
|
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
The Company classifies its cash equivalents and available for sale investments within Level 1 or Level 2. The
fair value of the Company’s high quality investment grade corporate debt securities is determined using proprietary valuation models and analytical tools. These valuation models and analytical tools use market pricing or prices for similar
instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and/or offers. The Company did not
reclassify any investments between levels in the fair value hierarchy during the six months ended June 30, 2015.
10
The Company’s assets which were measured at fair value on a recurring basis as of
June 30, 2015 and December 31, 2014 were determined using the inputs described above and are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Fair Value Measurements Using |
|
| |
|
Carrying
Value |
|
|
Quoted Prices in
Active
Markets for
Identical Assets
(Level 1) |
|
|
Significant Other
Observable
Inputs
(Level 2) |
|
|
Significant
Unobservable
Inputs
(Level 3) |
|
| June 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Classified as current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and money market funds |
|
$ |
129.6 |
|
|
$ |
129.6 |
|
|
$ |
— |
|
|
$ |
— |
|
| Certificates of deposit |
|
|
9.6 |
|
|
|
9.6 |
|
|
|
— |
|
|
|
— |
|
| Commercial paper |
|
|
23.9 |
|
|
|
— |
|
|
|
23.9 |
|
|
|
— |
|
| Securities of government-sponsored entities |
|
|
4.8 |
|
|
|
— |
|
|
|
4.8 |
|
|
|
— |
|
| Corporate debt securities |
|
|
216.9 |
|
|
|
— |
|
|
|
216.9 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Subtotal |
|
|
384.8 |
|
|
|
139.2 |
|
|
|
245.6 |
|
|
|
— |
|
| Classified as long-term assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Certificates of deposit |
|
|
9.1 |
|
|
|
9.1 |
|
|
|
— |
|
|
|
— |
|
| Corporate debt securities |
|
|
109.8 |
|
|
|
— |
|
|
|
109.8 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
503.7 |
|
|
|
148.3 |
|
|
|
355.4 |
|
|
|
— |
|
| Less cash, cash equivalents and restricted cash |
|
|
(136.9 |
) |
|
|
(134.3 |
) |
|
|
(2.6 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total investments |
|
$ |
366.8 |
|
|
$ |
14.0 |
|
|
$ |
352.8 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2014: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Classified as current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and money market funds |
|
$ |
28.7 |
|
|
$ |
28.7 |
|
|
$ |
— |
|
|
$ |
— |
|
| Certificates of deposit |
|
|
9.1 |
|
|
|
9.1 |
|
|
|
— |
|
|
|
— |
|
| Commercial paper |
|
|
7.5 |
|
|
|
— |
|
|
|
7.5 |
|
|
|
— |
|
| Securities of government-sponsored entities |
|
|
1.5 |
|
|
|
— |
|
|
|
1.5 |
|
|
|
— |
|
| Corporate debt securities |
|
|
147.0 |
|
|
|
— |
|
|
|
147.0 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Subtotal |
|
|
193.8 |
|
|
|
37.8 |
|
|
|
156.0 |
|
|
|
— |
|
| Classified as long-term assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Certificates of deposit |
|
|
13.2 |
|
|
|
13.2 |
|
|
|
— |
|
|
|
— |
|
| Corporate debt securities |
|
|
29.1 |
|
|
|
— |
|
|
|
29.1 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
236.1 |
|
|
|
51.0 |
|
|
|
185.1 |
|
|
|
— |
|
| Less cash, cash equivalents and restricted cash |
|
|
(35.8 |
) |
|
|
(33.5 |
) |
|
|
(2.3 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total investments |
|
$ |
200.3 |
|
|
$ |
17.5 |
|
|
$ |
182.8 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. SHARE-BASED COMPENSATION
The compensation expense related to the Company’s share-based compensation arrangements has been included in the
condensed consolidated statements of comprehensive loss as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
| |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
| General and administrative |
|
$ |
2.4 |
|
|
$ |
1.4 |
|
|
$ |
4.1 |
|
|
$ |
2.6 |
|
| Research and development |
|
|
2.3 |
|
|
|
1.5 |
|
|
$ |
4.2 |
|
|
$ |
2.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total share-based compensation expense |
|
$ |
4.7 |
|
|
$ |
2.9 |
|
|
$ |
8.3 |
|
|
$ |
5.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
The fair value of equity instruments that vest based on continued employee service, net of
estimated forfeitures, is recognized and amortized on a straight-line basis over the requisite service period. For restricted stock units (RSUs) with performance-based vesting requirements (PRSUs), no expense is recorded until the performance
condition is probable of being achieved. The Company estimates forfeiture rates for equity awards based on past behavior for similar equity awards with further consideration given to the class of employees to whom the equity awards were granted.
As of June 30, 2015, total unrecognized estimated compensation cost related to non-vested stock options and non-vested RSUs, that
vest over a given service period, granted prior to that date was $31.4 million and $19.6 million, respectively, which is expected to be recognized over a weighted average period of approximately 2.8 years and 3.1 years, respectively. Additionally,
the Company has approximately 0.5 million PRSUs outstanding. The total unrecognized estimated compensation cost related to these PRSUs is $11.0 million and is expected to be recognized beginning at the point when the events will become
probable.
During the six months ended June 30, 2015 and 2014, stock options to purchase approximately 1.1 million and
0.5 million shares of the Company’s common stock were exercised, respectively. The cash received by the Company from stock option exercises during the six months ended June 30, 2015 and 2014 was approximately $4.6 million and $3.3
million, respectively. The Company also issued approximately 0.2 million and 0.1 million shares of common stock pursuant to the vesting of RSUs during the six months ended June 30, 2015 and 2014, respectively.
Stock Option Assumptions
The Company granted stock options to purchase approximately 1.0 million and 0.9 million shares of the Company’s common stock
during the six months ended June 30, 2015 and 2014, respectively. These stock options generally vest monthly over a four-year period. The exercise price of all stock options granted during the six months ended June 30, 2015 and 2014 was
equal to the closing price of the Company’s common stock on the date of grant. The estimated fair value of each stock option granted was determined on the date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for the stock option grants:
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
| |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
| Risk-free interest rate |
|
1.8% |
|
2.1% |
|
1.6% |
|
2.3% |
| Expected volatility of common stock |
|
66.3% |
|
70.6% |
|
66.5% |
|
71.2% |
| Dividend yield |
|
0.0% |
|
0.0% |
|
0.0% |
|
0.0% |
| Expected option term |
|
6.6 years |
|
7.3 years |
|
6.7 years |
|
7.1 years |
The Black-Scholes option-pricing model incorporates various and highly sensitive assumptions including
expected volatility, expected term and interest rates. The expected volatility is based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected term of the Company’s
stock options. The expected option term is estimated based on historical experience as well as the status of the employee. For example, directors and officers have a longer expected option term than all other employees. The risk-free rate for
periods within the contractual life of the option is based upon observed interest rates appropriate for the expected term of the Company’s employee stock options. The Company has never declared or paid dividends and has no plans to do so in the
foreseeable future. For the six months ended June 30, 2015 and 2014, share-based compensation expense related to stock options was $5.5 million and $4.1 million, respectively.
Restricted Stock Units
During each of the six months ended June 30, 2015 and 2014, the Company granted approximately 0.4 million RSUs that generally vest
annually over a four year period. Additionally, during the six months ended June 30, 2015 and 2014, the Company granted 50,000 and 475,000 PRSUs, respectively. These PSRUs vest based on the achievement of pre-defined Company-specific
performance criteria and expire approximately five years from the grant date. As the performance based criteria for vesting for the PRSUs is not currently probable, no associated expense has been recorded for these PRSUs during the six months ended
June 30, 2015. The fair value of RSUs is estimated based on the closing sale price of the Company’s common stock on the date of the RSU grant. For the six months ended June 30, 2015 and 2014, share-based compensation expense related
to RSUs was $2.8 million and $1.2 million, respectively.
12
6. STOCKHOLDERS’ EQUITY
Equity Financing
In February 2015, the Company completed a public offering of common stock in which the Company sold 8.0 million shares of its common stock
at an offering price of $36.00 per share. The net proceeds generated from this transaction, after underwriting discounts and commissions and offering costs, were approximately $270.7 million.
In February 2014, the Company completed a public offering of common stock in which the Company sold 8.0 million shares of its common
stock at an offering price of $17.75 per share. The net proceeds generated from this transaction, after underwriting discounts and commissions and offering costs, were approximately $133.2 million.
Shelf Registration Statements
In February 2014, the Company filed an automatic shelf registration statement which immediately became effective by rule of the SEC. For so
long as the Company continues to satisfy the requirements to be deemed a well-known seasoned issuer, this shelf registration statement allows the Company to issue an unlimited number of shares of its common stock from time to time. As of
June 30, 2015, the Company had sold 16.0 million shares under this shelf registration statement.
In December 2012, the SEC
declared effective a shelf registration statement filed by the Company in November 2012. The shelf registration statement allows the Company to issue shares of its common stock from time to time for an aggregate initial offering price of up to
$150 million. As of June 30, 2015, the Company had not sold any shares under this shelf registration statement.
The specific
terms of future offerings, if any, under any of the shelf registration statements would be established at the time of such offerings.
7. REAL ESTATE
In December 2007, the Company closed the sale of its facility and associated real property for a purchase price of $109
million. Concurrent with the sale, the Company retired the entire $47.7 million in mortgage debt previously outstanding with respect to the facility and associated real property, and received cash of $61.0 million net of transaction costs
and debt retirement.
Upon the closing of the sale of the facility and associated real property, the Company entered into a lease
agreement (Lease) whereby it leased back for an initial term of 12 years its corporate headquarters comprised of two buildings located at 12790 El Camino Real (Front Building) and 12780 El Camino Real (Rear Building) in San Diego, California.
The Company also entered into a series of lease amendments (Amendments), beginning in late 2008, through which it vacated the Front Building, but continues to occupy the Rear Building. The ultimate result of this real estate sale was a net gain of
$39.1 million which was deferred in accordance with authoritative guidance. The Company recognized $1.7 million and $1.6 million of the deferred gain during the six month periods ended June 30, 2015 and 2014, respectively, and will recognize
the remaining $16.0 million of the deferred gain over the initial Lease term which will expire at the end of 2019.
Under the terms of the
Lease and the Amendments, the Company pays base annual rent (subject to an annual fixed percentage increase), plus a 3.5% annual management fee, property taxes and other normal and necessary expenses associated with the Lease such as utilities,
repairs and maintenance. In lieu of a cash security deposit under the Lease, Wells Fargo Bank, N.A. issued on the Company’s behalf a letter of credit in the amount of $4.6 million, which is secured by a deposit of equal amount with the
same bank. The Company also has the right to extend the Lease for two consecutive ten-year terms.
As of June 30, 2015, the Company
has entered into three sublease agreements for approximately 34,000 square feet of the Rear Building. These subleases are expected to result in approximately $1.3 million of rental income in 2016 with this sublease rental income being recorded as an
offset to rent expense. The income generated under these subleases is lower than the Company’s financial obligation under the Lease for the Rear Building, as determined on a per square foot basis. Consequently, the Company is required to record
a cease-use liability for the net present value of the estimated difference between the expected income to be generated under the subleases and future subleases and the Lease obligation over the remaining term of the Lease for the space that is
occupied by the subtenant. The subleases provide various options to extend for additional one-year renewal periods. The current terms each of these three subleases expire in August 2015, February 2017 and March 2018. In August 2015, when one of
the subleases expires, the 3,322 of square feet subject to this sublease will be utilized by the Company.
13
The following table sets forth changes to the accrued cease-use liability during the three and
six months ended June 30, 2015 and 2014 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
| |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
| Beginning balance |
|
$ |
2,565 |
|
|
$ |
2,994 |
|
|
$ |
2,678 |
|
|
$ |
3,096 |
|
| Change in estimate |
|
|
(87 |
) |
|
|
— |
|
|
|
(87 |
) |
|
|
— |
|
| Payments |
|
|
(152 |
) |
|
|
(102 |
) |
|
|
(265 |
) |
|
|
(204 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Ending balance |
|
$ |
2,326 |
|
|
$ |
2,892 |
|
|
$ |
2,326 |
|
|
$ |
2,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. LOSS PER COMMON SHARE
The Company computes basic net loss per share using the weighted average number of common shares outstanding during the
period. In computing the diluted net loss, potentially dilutive securities, composed of incremental common shares issuable upon the exercise of stock options and warrants and the vesting of RSUs and PRSUs, are excluded from the diluted loss per
share calculation because of their anti-dilutive effect.
For the three and six months ended June 30, 2015, the Company realized a
net loss of $24.0 million and $25.2 million, respectively. Potentially dilutive securities totaled approximately 4.1 million and 4.0 million, for the three and six months ended June 30, 2015, respectively. Options to purchase
approximately 0.2 million and 0.3 million shares of common stock were outstanding during the three and six months ended June 30, 2015, respectively, with an exercise price greater than the average market price of the underlying common
shares.
For the three and six months ended June 30, 2014, the Company realized a net loss of $13.4 million and $25.2 million,
respectively. Potentially dilutive securities totaled approximately 2.6 million and 2.8 million, for the three and six months ended June 30, 2014, respectively. Options to purchase approximately 0.9 million shares of common stock
were outstanding during each of the three and six month periods ended June 30, 2014, with an exercise price greater than the average market price of the underlying common shares.
9. RESEARCH AND DEVELOPMENT
Research and development (R&D) expenses consists primarily of salaries, payroll taxes, employee benefits, and
share-based compensation charges, for those individuals involved in ongoing R&D efforts; as well as scientific contractor fees, preclinical and clinical trial costs, R&D facilities costs, laboratory supply costs, and depreciation of
scientific equipment. All such costs are charged to R&D expense as incurred. These expenses result from the Company’s independent R&D efforts as well as efforts associated with collaborations and in-licensing arrangements. In addition,
the Company funds R&D at other companies and research institutions under agreements, which are generally cancelable. The Company reviews and accrues clinical trial expenses based on work performed, which relies on estimates of total costs
incurred based on patient enrollment, completion of patient studies and other events. The Company follows this method since reasonably dependable estimates of the costs applicable to various stages of a research agreement or clinical trial can be
made. Accrued clinical costs are subject to revisions as trials progress. Revisions are charged to expense in the period in which the facts that give rise to the revision become known.
| ITEM 2: |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations section contains forward-looking
statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below in Part II, Item 1A under
the caption “Risk Factors.” The interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Financial Statements and Notes thereto
for the year ended December 31, 2014 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are contained in our Annual Report on Form 10-K for the year ended December 31, 2014 and
our Quarterly Report on Form 10-Q for the three months ended March 31, 2015.
OVERVIEW
We discover and develop
innovative and life-changing pharmaceuticals, in diseases with high unmet medical needs, through our novel research and development (R&D) platform, focused on neurological and endocrine based diseases and disorders. Utilizing a portfolio
approach to drug discovery, we have multiple small molecule drug candidates at various stages of pharmaceutical development. We develop proprietary pharmaceuticals for our pipeline, as well as collaborate with other pharmaceutical companies on our
discoveries.
To date, we have not generated any revenues from the sale of products. We have funded our operations primarily through
private and public offerings of our common stock and payments received under R&D collaboration agreements. While we
14
independently develop many of our product candidates, we have entered into collaborations for several of our programs, and intend to rely on existing and future collaborators to meet funding
requirements. We expect to generate future operating cash flow losses as product candidates are advanced through the various stages of clinical development. As of December 31, 2014, we had an accumulated deficit of $826.3 million and expect to
incur operating cash flow losses for the foreseeable future, which may be greater than losses in prior years.
Our two lead late-stage
clinical programs are elagolix, a gonadotropin-releasing hormone (GnRH) antagonist in Phase III development for the treatment of endometriosis and Phase II clinical studies for the treatment of uterine fibroids that is partnered with AbbVie Inc.
(AbbVie), and a vesicular monoamine transporter 2 (VMAT2) inhibitor for the treatment of movement disorders, currently in Phase III development. We intend to maintain certain commercial rights to our VMAT2 inhibitor and other programs to evolve
into a fully-integrated pharmaceutical company.
During the quarter ended June 30, 2015, we suspended two planned clinical studies of our
CRF Antagonist, NBI-77860, due to previously unobserved pre-clinical findings.
AbbVie Inc. (AbbVie). In June 2010, we announced an
exclusive worldwide collaboration with AbbVie to develop and commercialize elagolix and all next-generation GnRH antagonists (collectively, GnRH Compounds) for women’s and men’s health. The goal of the agreement is to develop and
commercialize GnRH Compounds. AbbVie made an upfront payment of $75 million and agreed to make additional development and regulatory event-based payments of up to $480 million and up to an additional $50 million in commercial event-based
payments. We have assessed event-based payments under the revised authoritative guidance for R&D milestones and determined that event-based payments prior to commencement of a Phase III clinical study, as defined in the agreement, meet the
definition of a milestone in accordance with authoritative guidance as (1) they are events that can only be achieved in part on our past performance, (2) there is substantive uncertainty at the date the arrangement was entered into that
the event will be achieved and (3) they result in additional payments being due to us. Development and regulatory event-based payments subsequent to the commencement of a Phase III clinical study, however, currently do not meet these criteria
as their achievement is based on the performance of AbbVie. As of June 30, 2015, $500 million remains outstanding in future event-based payments under the agreement. However, none of the remaining event-based payments meet the definition of a
milestone in accordance with authoritative accounting guidance.
Under the terms of the agreement, AbbVie is responsible for all
third-party development, marketing and commercialization costs. We received funding for certain internal collaboration expenses which included reimbursement from AbbVie for internal and external expenses related to the GnRH Compounds through the end
of 2012. We will be entitled to a percentage of worldwide sales of GnRH Compounds for the longer of ten years or the life of the related patent rights. Under the terms of our agreement with AbbVie, the collaboration effort between the parties
to advance GnRH Compounds towards commercialization was governed by a joint development committee with representatives from both us and AbbVie. The collaborative development portion of the agreement concluded, as scheduled, on December 31,
2012. Our participation in the joint development committee was determined to be a substantive deliverable under the contract, and therefore, the upfront payment was deferred and recognized over the term of the joint development committee, which was
completed in December 2012. AbbVie may terminate the collaboration at its discretion upon 180 days’ written notice to us. In such event, we would be entitled to specified payments for ongoing clinical development and related activities and all
GnRH Compound product rights would revert to us. Since the inception of the agreement, we have recorded revenues of $75.0 million related to the amortization of up-front license fees, $30.0 million in milestone revenue, and $37.0 million in
sponsored development revenue.
Mitsubishi Tanabe Pharma Corporation (Mitsubishi Tanabe). On March 31, 2015, we entered into a
collaboration and license agreement with Mitsubishi Tanabe for the development and commercialization of NBI-98854 for movement disorders in Japan and other select Asian markets. Payments from Mitsubishi Tanabe under this agreement include an
up-front license fee of $30 million, up to $85 million in development and commercialization event-based payments, payments for the manufacture of pharmaceutical products, and royalties on product sales in select territories in Asia. Under the terms
of the agreement, Mitsubishi Tanabe is responsible for all third-party development, marketing and commercialization costs in Japan and other select Asian markets with the exception of a single Huntington’s chorea clinical trial to be performed
by us, at a cost of approximately $12 million, should Mitsubishi Tanabe request the clinical trial. We will be entitled to a percentage of sales of NBI-98854 in Japan and other select Asian markets for the longer of ten years or the life of the
related patent rights. Under the terms of the agreement with Mitsubishi Tanabe, the collaboration effort between the parties to advance NBI-98854 towards commercialization is governed by a joint steering committee and joint development committee
with representatives from both Neurocrine and Mitsubishi Tanabe. Mitsubishi Tanabe may terminate the agreement at its discretion upon 180 days’ written notice to us. In such event, all NBI-98854 product rights in Japan and other select Asian
markets would revert to us. During the first half of 2015, we have recorded revenues of $19.8 million related to the up-front license fee. In accordance with our continuing performance obligations, $10.2 million of the $30
million upfront payment is being deferred and recognized in future periods.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations is based upon financial statements that have been prepared in
accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and
expenses, and related disclosures. On an on-going basis, we evaluate these estimates, including those related to revenues under
15
collaborative research agreements and grants, clinical trial accruals (R&D expense) and share-based compensation. Estimates are based on historical experience, information received from third
parties and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different assumptions or conditions. The items in our financial statements requiring significant estimates and judgments are as follows:
Revenue Recognition. We recognize revenue for the performance of services when each of the following four criteria is met:
(i) persuasive evidence of an arrangement exists; (ii) services are rendered or products are delivered; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured.
Effective in 2011, we follow the Accounting Standards Codification (ASC) for Revenue Recognition - Multiple-Element Arrangements and the ASC
for Collaborative Arrangements, if applicable, to determine the recognition of revenue under our license and collaboration agreements. The terms of these agreements generally contain multiple elements, or deliverables, which may include
(i) licenses to our intellectual property, (ii) materials and technology, (iii) pharmaceutical supply, (iv) participation on joint development or joint steering committees, and (v) development services. The payments we
receive under these arrangements typically include one or more of the following: up-front license fees; funding of research and/or development efforts; amounts due upon the achievement of specified milestones; manufacturing and royalties on future
product sales.
The ASC provides guidance relating to the separation of deliverables included in an arrangement into different units of
accounting and the allocation of arrangement consideration to the units of accounting. The evaluation of multiple-element arrangements requires management to make judgments about (i) the identification of deliverables, (ii) whether such
deliverables are separable from the other aspects of the contractual relationship, (iii) the estimated selling price of each deliverable, and (iv) the expected period of performance for each deliverable.
To determine the units of accounting under a multiple-element arrangement, we evaluate certain separation criteria, including whether the
deliverables have stand-alone value, based on the relevant facts and circumstances for each arrangement. The selling prices of deliverables under an arrangement may be derived using vendor specific objective evidence (VSOE), third-party evidence, or
a best estimate of selling price (BESP), if VSOE or third-party evidence is not available. For most pharmaceutical licensing and collaboration agreements, BESP is utilized. The objective of BESP is to determine the price at which the Company would
transact a sale if the element within the agreement was sold on a standalone basis. Establishing BESP involves management’s judgment and considers multiple factors, including market conditions and company-specific factors, including those
factors contemplated in negotiating the agreements, as well as internally developed models that include assumptions related to market opportunity, discounted cash flows, estimated development costs, probability of success and the time needed to
commercialize a product candidate pursuant to the agreement. In validating the BESP, we consider whether changes in key assumptions used to determine the BESP will have a significant effect on the allocation of the arrangement consideration between
the multiple deliverables. The allocated consideration for each unit of accounting is recognized over the related obligation period in accordance with the applicable revenue recognition criteria. If there are deliverables in an arrangement that are
not separable from other aspects of the contractual relationship, they are treated as a combined unit of accounting, with the allocated revenue for the combined unit recognized in a manner consistent with the revenue recognition applicable to the
final deliverable in the combined unit. Payments received prior to satisfying the relevant revenue recognition criteria are recorded as unearned revenue in the accompanying balance sheets and recognized as revenue when the related revenue
recognition criteria are met.
We typically receive up-front payments when licensing our intellectual property, which often occurs in
conjunction with a research and development agreement. We recognize revenue attributed to the license upon delivery, provided that the license has stand-alone value.
For payments payable on achievement of milestones that do not meet all of the conditions to be considered substantive, we recognize the
portion of the payment allocable to delivered items as revenue when the specific milestone is achieved, and the contingency is removed.
Prior to the revised multiple element guidance, described above, adopted by us on January 1, 2011, upfront, nonrefundable payments for
license fees, grants, and advance payments for sponsored research revenues received in excess of amounts earned were classified as deferred revenue and recognized as income over the contract or development period. Revenues from development
milestones are accounted for in accordance with the Revenue Recognition – Milestone Method Topic of the FASB ASC. Milestones are recognized when earned, as evidenced by written acknowledgment from the collaborator or other persuasive evidence
that the milestone has been achieved, provided that the milestone event is substantive. A milestone event is considered to be substantive if its achievability was not reasonably assured at the inception of the agreement and our efforts led to the
achievement of the milestone or the milestone was due upon the occurrence of a specific outcome resulting from our performance. We assess whether a milestone is substantive at the inception of each agreement.
16
Research and Development Expense. Our R&D expenditures include costs related to
preclinical and clinical trials, scientific personnel, equipment, consultants, sponsored research, share-based compensation and allocated facility costs. We do not track fully burdened R&D costs separately for each of our drug candidates. We
review our R&D expenses by focusing on four categories: external development, personnel, facility and depreciation, and other. External development expenses consist of costs associated with our external preclinical and clinical trials, including
pharmaceutical development and manufacturing. Personnel expenses include salaries and wages, share-based compensation, payroll taxes and benefits for those individuals involved in ongoing R&D efforts. Other R&D expenses mainly represent
laboratory supply expenses, scientific consulting expenses and other expenses.
Share-based Compensation. We grant stock
options to purchase our common stock to our employees and directors under our 2011 Equity Incentive Plan, as amended (the 2011 Plan), and grant stock options to certain employees pursuant to Employment Commencement Nonstatutory Stock Option
Agreements. We also grant certain employees stock bonuses and restricted stock units (RSUs) under the 2011 Plan. Additionally, we have outstanding stock options that were granted under previous option plans from which we no longer make grants.
Share-based compensation expense recognized in accordance with authoritative guidance for the three months ended June 30, 2015 and 2014 was $4.7 million and $2.9 million, respectively. For the six months ended June 30, 2015 and 2014,
we recognized share-based compensation expense of $8.3 million and $5.3 million, respectively.
For purposes of calculating share-based
compensation, we estimate the fair value of stock option awards using a Black-Scholes option-pricing model. The determination of the fair value of share-based compensation awards utilizing the Black-Scholes model is affected by our stock price and a
number of assumptions, including but not limited to expected stock price volatility over the term of the awards and the expected term of stock options. Our stock options have characteristics significantly different from those of traded options, and
changes in the assumptions can materially affect the fair value estimates. The fair value of RSUs is estimated based on the closing sale price of our common stock on the date of issuance.
Stock option awards and RSUs generally vest over a four year period and the corresponding expense is ratably recognized over those same time
periods. For RSUs with performance-based vesting requirements (PRSUs), no expense is recorded until the performance condition is probable of being achieved.
If factors change and we employ different assumptions, share-based compensation expense may differ significantly from what we have recorded in
the past. If there is a difference between the assumptions used in determining share-based compensation expense and the actual factors which become known over time, specifically with respect to anticipated forfeitures, we may change the input
factors used in determining share-based compensation expense for future grants. These changes, if any, may materially impact our results of operations in the period such changes are made. If actual forfeitures vary from our estimates, we will
recognize the difference in compensation expense in the period the actual forfeitures occur or at the time of vesting.
THREE MONTHS
ENDED JUNE 30, 2015 AND 2014
Operating Expenses
Research and Development
The following table presents our total R&D expenses by category during the periods presented:
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
June 30, |
|
| |
|
2015 |
|
|
2014 |
|
| |
|
(In millions) |
|
| External development expense: |
|
|
|
|
|
|
|
|
| VMAT2 |
|
$ |
6.6 |
|
|
$ |
1.4 |
|
| Corticotropin-Releasing Factor (CRF) |
|
|
1.0 |
|
|
|
0.5 |
|
| Other |
|
|
0.2 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
| Total external development expense |
|
|
7.8 |
|
|
|
2.5 |
|
| R&D personnel expense |
|
|
7.1 |
|
|
|
4.7 |
|
| R&D facility and depreciation expense |
|
|
1.4 |
|
|
|
1.4 |
|
| Other R&D expense |
|
|
2.4 |
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
| Total R&D expense |
|
$ |
18.7 |
|
|
$ |
10.2 |
|
|
|
|
|
|
|
|
|
|
R&D expense increased by $8.5
million; from $10.2 million in the second quarter of 2014 to $18.7 million in the second quarter of 2015. The majority of this increase in R&D expense is due to a $5.3 million increase in external development expenses from 2014 to 2015. Our
VMAT2 Phase III clinical program, which was initiated during the second half of 2014, is responsible for the majority of the increase in external development expenses. Approximately $2.4 million of the increase in R&D expense was due to higher
R&D personnel related expense, primarily due to an increase in headcount coupled with a $0.8 million increase in share-based compensation expense. Other R&D expense also increased by $0.8 million from 2014 to 2015 primarily due to external
consulting expenses as we expanded our efforts on the New Drug Application (NDA) for NBI-98854 in tardive dyskinesia.
17
General and Administrative
General and administrative expense increased to $6.6 million in the second quarter of 2015 compared with $4.2 million during the same period in
2014. The $2.4 million increase in general and administrative expense is primarily due to higher personnel related costs (increased by $1.7 million), with share-based compensation expenses accounting for $1.0 million of the increase. Additionally,
external costs related to market research, licensing and other professional services were $0.7 million higher for the second quarter of 2015 when compared to the same period in 2014.
Net Loss
Our net
loss for the second quarter of 2015 was $24.0 million, or a net loss of $0.28 per share, compared to a net loss of $13.4 million, or a net loss of $0.18 per share, during the same period in 2014. The increase in our net loss from 2014 to 2015
was a result of the above mentioned higher expenses.
SIX MONTHS ENDED JUNE 30, 2015 AND 2014
License Fee Revenues
As discussed above, during the first quarter of 2015, we entered into a collaboration and license agreement with Mitsubishi Tanabe for the
development and commercialization of our VMAT2 inhibitor NBI-98854 for movement disorders in Japan and other select Asian markets. Payments from Mitsubishi Tanabe under this agreement included an up-front license fee of $30 million. During the first
half of 2015, we recorded revenues of $19.8 million related to the up-front license fee.
Operating Expenses
Research and Development
The following table presents our total R&D expenses by category during the periods presented:
|
|
|
|
|
|
|
|
|
| |
|
Six Months Ended
June 30, |
|
| |
|
2015 |
|
|
2014 |
|
| |
|
(In millions) |
|
| External development expense: |
|
|
|
|
|
|
|
|
| VMAT2 |
|
$ |
11.7 |
|
|
$ |
2.0 |
|
| CRF |
|
|
2.5 |
|
|
|
0.9 |
|
| Other |
|
|
0.6 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
| Total external development expense |
|
|
14.8 |
|
|
|
3.6 |
|
| R&D personnel expense |
|
|
13.7 |
|
|
|
9.4 |
|
| R&D facility and depreciation expense |
|
|
2.9 |
|
|
|
2.7 |
|
| Other R&D expense |
|
|
3.9 |
|
|
|
3.0 |
|
|
|
|
|
|
|
|
|
|
| Total R&D expense |
|
$ |
35.3 |
|
|
$ |
18.7 |
|
|
|
|
|
|
|
|
|
|
The $16.6 million increase in six-month R&D expenses from 2014 to 2015 was primarily due to a $9.7 million
increase in external development expenses related to our VMAT2 Phase III clinical program, which was initiated during the second half of 2014. The $4.3 million increase in R&D personnel related expenses was due to increased headcount coupled
with a $1.5 million increase in share-based compensation expense. Other R&D expense also increased by $0.9 million from 2014 to 2015 primarily due to external consulting expenses as we expanded our efforts on the NDA for NBI-98854 in tardive
dyskinesia.
General and Administrative
General and administrative expense increased to $12.1 million in the first half of 2015 compared with $8.4 million during the same period in
2014. The increase in general and administrative expense is primarily due to a $2.7 million increase in personnel related costs, of which $1.5 million was related to higher share-based compensation expenses. Increases in market research, licensing
and other professional fees accounted for $1.0 million the increase in general and administrative expenses from 2014 to 2015.
18
Net Loss
Our net loss for the first half of 2015 and 2014 was $25.2 million. Although 2015 revenue increased by $19.8 million due to the up-front
license fee from Mitsubishi Tanabe. This revenue increase was offset by an increase in 2015 operating expenses of $20.3 million. Additionally, we realized an increase in other income of approximately $0.6 million, period to period, primarily
associated with increased interest income due to higher investment principal balances.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities during the first six months of 2015 was $4.2 million compared to $19.7 million during the same period in
2014. The $15.5 million change in cash flows from operating activities is primarily due to a $30 million up-front payment from Mitsubishi Tanabe received in the second quarter of 2015. This up-front payment was offset by an increase in operating
expenses of approximately $20.3 million, however approximately $3.0 million of this increase in expenses consisted of non-cash share-based compensation expense.
Net cash used in investing activities during the first six months of 2015 was $170.0 million compared to $124.1 million during the same period
in 2014. The fluctuation in net cash used in investing activities resulted primarily from the timing differences in investment purchases, sales and maturities of investments, and the fluctuation of our portfolio mix between cash equivalents and
short-term and long-term investment holdings.
Net cash provided by financing activities during the first six months of 2015 was $275.3
million compared to $136.5 million during the same period in 2014. The increase in cash provided by financing activities was primarily due to net proceeds of approximately $270.7 million from our public offering of common stock in February 2015,
compared to net proceeds of approximately $133.2 million from our public offering of common stock in February 2014. Stock option exercises yielded approximately $4.6 million and $3.3 million in cash proceeds during the first six months of 2015 and
2014, respectively.
At June 30, 2015, our cash, cash equivalents, and investments totaled $498.9 million compared with $231.3
million at December 31, 2014.
Equity Financing. In February 2015, we completed a public offering of common stock in which we
sold 8.0 million shares of our common stock at an offering price of $36.00 per share. The net proceeds generated from this transaction, after underwriting discounts and commissions and offering costs, were approximately $270.7 million.
In February 2014, we completed a public offering of common stock in which we sold 8.0 million shares of our common stock at an
offering price of $17.75 per share. The net proceeds generated from this transaction, after underwriting discounts and commissions and offering costs, were approximately $133.2 million.
Shelf Registration Statements. In February 2014, we filed an automatic shelf registration statement which immediately became effective
by rule of the SEC. For so long as we continue to satisfy the requirements to be deemed a well-known seasoned issuer, this shelf registration statement allows us to issue an unlimited number of shares of our common stock from time to time. As of
June 30, 2015, we had sold 16.0 million shares under this shelf registration statement.
In December 2012, the SEC
declared effective a shelf registration statement filed by us in November 2012. The shelf registration statement allows us to issue shares of our common stock from time to time for an aggregate initial offering price of up to $150 million. As
of June 30, 2015, we had not sold any shares under this shelf registration statement.
We believe that our existing capital
resources, together with interest income and future payments due under our strategic alliances, will be sufficient to satisfy our current and projected funding requirements for at least the next 12 months. However, we cannot guarantee that these
capital resources and payments will be sufficient to conduct all of our R&D programs as planned. The amount and timing of expenditures will vary depending upon a number of factors, including progress of our R&D programs.
We may require additional funding to continue our research and product development programs, to conduct preclinical studies and clinical
trials, for operating expenses, to pursue regulatory approvals for our product candidates, for the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims, if any, the cost of product in-licensing and
any possible acquisitions, and we may require additional funding to establish manufacturing and marketing capabilities in the future. We may seek to access the public or private equity markets whenever conditions are favorable. For example, we have
an effective shelf registration statement on file with the SEC which allows us to issue an unlimited number of shares of our common stock from time to time. We may also seek additional funding through strategic alliances or other financing
mechanisms. We cannot assure you that adequate funding will be available on terms acceptable to us, if at all. Any additional equity financings will be dilutive to our stockholders and any additional debt may involve operating covenants that may
restrict our business. If adequate funds are not available through these means, we may be required to curtail significantly one or more of our research or development programs or obtain funds through arrangements with collaborators or others. This
may require us to relinquish rights to certain of our technologies or product
19
candidates. To the extent that we are unable to obtain third-party funding for such expenses, we expect that increased expenses will result in increased cash flow losses from operations. We
cannot assure you that we will successfully develop our products under development or that our products, if successfully developed, will generate revenues sufficient to enable us to earn a profit.
OFF-BALANCE SHEET ARRANGEMENTS
As of
June 30, 2015, we did not have any off-balance sheet arrangements.
INTEREST RATE RISK
We are exposed to interest rate risk on our short and long term investments. The primary objective of our investment activities is to preserve
principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest in highly liquid and high quality government and other debt securities. To minimize our exposure due to adverse shifts in
interest rates, we invest in short-term securities and ensure that the maximum average maturity of our investments does not exceed 12 months. If a 10% change in interest rates had occurred on June 30, 2015, this change would not have had a
material effect on the fair value of our investment portfolio as of that date. Due to the short holding period of our investments and the nature of our investments, we have concluded that we do not have a material financial market risk exposure.
NEW ACCOUNTING PRONOUNCEMENTS
In
May 2014, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU), “Revenue from Contracts with Customers,” which outlines a comprehensive revenue recognition model and supersedes most current revenue
recognition guidance. The new standard requires a company to recognize revenue upon transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. The ASU
defines a five-step approach for recognizing revenue, which may require a company to use more judgment and make more estimates than under the current guidance. The ASU as currently issued will be effective for us starting in 2018. The new standard
allows for two methods of adoption: (a) full retrospective adoption, meaning the standard is applied to all periods presented, or (b) modified retrospective adoption, meaning the cumulative effect of applying the new standard is recognized
as an adjustment to the opening retained earnings balance. We are in the process of determining the adoption method we will implement as well as the effects the adoption will have on our consolidated financial statements.
FORWARD-LOOKING STATEMENTS
This
Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on
facts and factors currently known by us. Consequently, these forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in the
forward-looking statements.
Forward-looking statements can be identified by the use of forward-looking words such as
“believes,” “expects,” “hopes,” “may,” “will,” “plan,” “intends,” “estimates,” “could,” “should,” “would,” “continue,”
“seeks,” “proforma,” or “anticipates,” or other similar words (including their use in the negative), or by discussions of future matters such as the development or regulatory approval of new products, technology
enhancements, possible changes in legislation and other statements that are not historical. These statements include but are not limited to statements under the captions “Risk Factors,” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” as well as other sections in this report. You should be aware that the occurrence of any of the events discussed under the heading in Part II titled “Item 1A. Risk Factors” and
elsewhere in this report could substantially harm our business, results of operations and financial condition and that if any of these events occurs, the trading price of our common stock could decline and you could lose all or a part of the value
of your shares of our common stock.
The cautionary statements made in this report are intended to be applicable to all related
forward-looking statements wherever they may appear in this report. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we assume no obligation to
update our forward-looking statements, even if new information becomes available in the future.
| ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
A discussion of our exposure
to, and management of, market risk appears in Part I, Item 2 of this Quarterly Report on Form 10-Q under the heading “Interest Rate Risk.”
| ITEM 4. |
CONTROLS AND PROCEDURES |
We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports required by the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the timelines
20
specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only
provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing,
our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
An evaluation was also performed under the supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officers, of any change to our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting. Our evaluation did not identify significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the quarter
ended June 30, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II: OTHER INFORMATION
The following risk factors do not reflect any material changes to the Risk
Factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, other than the revisions to the risk factors set forth below with an asterisk (*) next to the title. The following information sets forth
risk factors that could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Quarterly Report on Form 10-Q and those we may make from time to time. If any of the following risks
actually occur, our business, operating results, prospects or financial condition could be harmed. Additional risks not presently known to us, or that we currently deem immaterial, may also affect our business operations.
Risks Related to Our Company
Our clinical trials
may fail to demonstrate the safety and efficacy of our product candidates, which could prevent or significantly delay their regulatory approval.
Before obtaining regulatory approval for the sale of any of our potential products, we must subject these product candidates to extensive
preclinical and clinical testing to demonstrate their safety and efficacy for humans. Clinical trials are expensive, time-consuming and may take years to complete.
In connection with the clinical trials of our product candidates, we face the risks that:
| |
• |
|
the U.S. Food and Drug Administration (FDA) or similar foreign regulatory authority may not approve an Investigational New Drug (IND) Application or foreign equivalent filings required to initiate human clinical studies
for our drug candidates or the FDA may require additional preclinical or clinical studies as a condition of the initiation of Phase I clinical studies, progression from Phase I to Phase II, or Phase II to Phase III, or for New
Drug Application (NDA) approval; |
| |
• |
|
the product candidate may not prove to be effective or as effective as other competing product candidates; |
| |
• |
|
we may discover that a product candidate may cause harmful side effects or results of required toxicology studies may not be acceptable to the FDA; |
| |
• |
|
the results may not replicate the results of earlier, smaller trials; |
| |
• |
|
the FDA or similar foreign regulatory authorities may require use of new or experimental endpoints that may prove insensitive to treatment effects; |
| |
• |
|
we or the FDA or similar foreign regulatory authorities may suspend the trials; |
| |
• |
|
the results may not be statistically significant; |
| |
• |
|
patient recruitment may be slower than expected; |
| |
• |
|
patients may drop out of the trials; and |
| |
• |
|
regulatory requirements may change. |
These risks and uncertainties impact all of our clinical
programs. Specifically, with respect to our gonadotropin-releasing hormone (GnRH) program with AbbVie Inc. (AbbVie), any of the clinical, regulatory or operational events described above could delay timelines for the completion of the Phase III
endometriosis program or the Phase II uterine fibroids program, require suspension of these programs and/or obviate filings for regulatory approvals. Similarly, our VMAT2 inhibitor program will be impacted if any of the events above lead to delayed
timelines for the enrollment in, or completion of, the Phase III tardive dyskinesia or the Phase I Tourette syndrome clinical trials of NBI-98854.
21
In addition, late stage clinical trials are often conducted with patients having the most
advanced stages of disease. During the course of treatment, these patients can die or suffer other adverse medical effects for reasons that may not be related to the pharmaceutical agent being tested but which can nevertheless adversely affect
clinical trial results. Any failure or substantial delay in completing clinical trials for our product candidates may severely harm our business.
*We depend on our current collaborators, and may need to enter into future collaborations to develop and commercialize certain of our product
candidates.
Our strategy for fully developing and commercializing elagolix is dependent upon maintaining our current
collaboration agreement with AbbVie. This collaboration agreement provides for significant future payments should certain development, regulatory and commercial milestones be achieved, and royalties on future sales of elagolix. Under this agreement,
AbbVie is responsible for, among other things, conducting clinical trials and obtaining required regulatory approvals for elagolix; as well as manufacturing and commercialization of elagolix in the event it receives regulatory approval.
Because of our reliance on AbbVie, the development and commercialization of elagolix could be substantially delayed, and our ability to
receive future funding could be substantially impaired, if AbbVie:
| |
• |
|
failed to gain the requisite regulatory approval of elagolix; |
| |
• |
|
did not successfully launch and commercialize elagolix; |
| |
• |
|
did not conduct its collaborative activities in a timely manner; |
| |
• |
|
did not devote sufficient time and resources to our partnered program; |
| |
• |
|
terminated its agreement with us; |
| |
• |
|
developed, either alone or with others, products that may compete with elagolix; |
| |
• |
|
disputed our respective allocations of rights to any products or technology developed during our collaboration; or |
| |
• |
|
merged with a third party that wants to terminate our agreement. |
In March 2015, we entered
into a collaboration and license agreement with Mitsubishi Tanabe to develop and commercialize NBI-98854 in Japan and other select Asian markets. We will rely on Mitsubishi Tanabe to achieve certain development, regulatory and commercial milestones
which, if achieved, could generate significant future revenue for us. Our collaboration with Mitsubishi Tanabe is subject to risks and uncertainties similar to those described above. In addition, we may need to enter into other collaborations to
assist in the development and commercialization of other product candidates we are developing now or may develop in the future, and any such future collaborations would be subject to similar risks and uncertainties.
These issues and possible disagreements with AbbVie, Mitsubishi Tanabe or any future corporate collaborators could lead to delays in the
collaborative research, development or commercialization of our product candidates. Furthermore, disagreements with these parties could require or result in litigation or arbitration, which would be time-consuming and expensive. If any of these
issues arise, it may delay the development and commercialization of drug candidates and, ultimately, our generation of product revenues.
Because
the development of our product candidates is subject to a substantial degree of technological uncertainty, we may not succeed in developing any of our product candidates.
All of our product candidates are currently in research or clinical development. Only a small number of research and development programs
ultimately result in commercially successful drugs. Potential products that appear to be promising at early stages of development may not reach the market for a number of reasons. These reasons include the possibilities that the potential products
may:
| |
• |
|
be found ineffective or cause harmful side effects during preclinical studies or clinical trials; |
| |
• |
|
fail to receive necessary regulatory approvals on a timely basis or at all; |
| |
• |
|
be precluded from commercialization by proprietary rights of third parties; |
| |
• |
|
be difficult to manufacture on a large scale; or |
| |
• |
|
be uneconomical to commercialize or fail to achieve market acceptance. |
If any of our products
encounters any of these potential problems, we may never successfully market that product.
22
We do not and will not have access to all information regarding the product candidates we licensed to
AbbVie.
We do not and will not have access to all information regarding the products being developed and potentially
commercialized by AbbVie, including potentially material information about clinical trial design and execution, safety reports from clinical trials, spontaneous safety reports if a product candidate is later approved and marketed, regulatory
affairs, process development, manufacturing, marketing and other areas known by AbbVie. In addition, we have confidentiality obligations under our agreement with AbbVie. Thus, our ability to keep our shareholders informed about the status of product
candidates under our collaboration with AbbVie will be limited by the degree to which AbbVie keeps us informed and allows us to disclose such information to the public. If AbbVie fails to keep us informed about the clinical development and
regulatory approval of our collaboration and product candidates licensed to it, we may make operational and investment decisions that we would not have made had we been fully informed, which may materially and adversely affect our business and
operations.
We have a history of losses and expect to incur negative operating cash flows for the foreseeable future, and we may never achieve
sustained profitability.
Since our inception, we have incurred significant net losses and negative cash flow from operations. As
a result of historical operating losses, we had an accumulated deficit of $826.3 million as of December 31, 2014. We do not expect to be profitable, or generate positive cash flows from operations, for the year ending December 31, 2015.
We have not yet obtained regulatory approvals of any products and, consequently, have not generated revenues from the sale of products.
Even if we succeed in developing and commercializing one or more of our drugs, we may not be profitable. We also expect to continue to incur significant operating and capital expenditures as we:
| |
• |
|
seek regulatory approvals for our product candidates; |
| |
• |
|
develop, formulate, manufacture and commercialize our product candidates; |
| |
• |
|
in-license or acquire new product development opportunities; |
| |
• |
|
implement additional internal systems and infrastructure; and |
| |
• |
|
hire additional clinical, scientific and marketing personnel. |
We expect to experience
negative cash flow in the coming years as we fund our operations, in-licensing or acquisition opportunities, and capital expenditures. We will need to generate significant revenues to achieve and maintain profitability and positive cash flow on an
annual basis. We may not be able to generate these revenues, and we may never achieve profitability on an annual basis in the future. Our failure to achieve or maintain profitability on an annual basis could negatively impact the market price of our
common stock. Even if we become profitable on an annual basis, we cannot assure you that we would be able to sustain or increase profitability on an annual basis.
*The price of our common stock is volatile.
The market prices for securities of biotechnology and pharmaceutical companies historically have been highly volatile, and the market has from
time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. Over the course of the last 12 months, the price of our common stock has ranged from approximately $13.00 per
share to approximately $56.00 per share. The market price of our common stock may fluctuate in response to many factors, including:
| |
• |
|
the results of our clinical trials; |
| |
• |
|
developments concerning new and existing collaboration agreements; |
| |
• |
|
announcements of technological innovations or new therapeutic products by us or others; |
| |
• |
|
general economic and market conditions; |
| |
• |
|
developments in patent or other proprietary rights; |
| |
• |
|
developments related to the FDA; |
| |
• |
|
future sales of our common stock by us or our stockholders; |
| |
• |
|
comments by securities analysts; |
| |
• |
|
fluctuations in our operating results; |
| |
• |
|
health care reimbursement; |
| |
• |
|
failure of any of our product candidates, if approved, to achieve commercial success; and |
| |
• |
|
public concern as to the safety of our drugs. |
23
Because our operating results may vary significantly in future periods, our stock price may decline.
Our quarterly revenues, expenses and operating results have fluctuated in the past and are likely to fluctuate significantly in
the future. Our revenues are unpredictable and may fluctuate, among other reasons, due to our achievement of product development objectives and milestones, clinical trial enrollment and expenses, research and development expenses and the timing and
nature of contract manufacturing and contract research payments. A high portion of our costs are predetermined on an annual basis, due in part to our significant research and development costs. Thus, small declines in revenue could
disproportionately affect operating results in a quarter. Because of these factors, our operating results in one or more future quarters may fail to meet the expectations of securities analysts or investors, which could cause our stock price to
decline.
We license some of our core technologies and drug candidates from third parties. If we default on any of our obligations under those
licenses, we could lose our rights to those technologies and drug candidates.
We are dependent on licenses from third parties for
some of our key technologies. These licenses typically subject us to various commercialization, reporting and other obligations. If we fail to comply with these obligations, we could lose important rights. For example, we license some of the core
technologies used in our research and development activities and collaborations from third parties, including the GnRH receptor which we license from The Mount Sinai School of Medicine of the City University of New York for use in the elagolix
program. If we were to default on our obligations under any of our licenses, we could lose some or all of our rights to develop, market and sell products covered by these licenses. Likewise, if we were to lose our rights under a license to use
proprietary research tools, it could adversely affect our existing collaborations or adversely affect our ability to form new collaborations. We also face the risk that our licensors could, for a number of reasons, lose patent protection or lose
their rights to the technologies we have licensed, thereby impairing or extinguishing our rights under our licenses with them.
We have limited
marketing experience, and no sales force or distribution capabilities, and if our products are approved, we may not be able to commercialize them successfully.
Although we do not currently have any marketable products, our ability to produce revenues ultimately depends on our ability to sell our
products if and when they are approved by the FDA. We currently have limited experience in marketing and selling pharmaceutical products. If we fail to establish successful marketing and sales capabilities or fail to enter into successful marketing
arrangements with third parties, our product revenues will suffer.
The independent clinical investigators and contract research organizations that
we rely upon to conduct our clinical trials may not be diligent, careful or timely, and may make mistakes, in the conduct of our trials.
We depend on independent clinical investigators and contract research organizations (CROs) to conduct our clinical trials under their
agreements with us. The investigators are not our employees, and we cannot control the amount or timing of resources that they devote to our programs. If independent investigators fail to devote sufficient time and resources to our drug development
programs, or if their performance is substandard, or not in compliance with Good Clinical Practices, it may delay or prevent the approval of our FDA applications and our introduction of new drugs. The CROs we contract with for execution of our
clinical trials play a significant role in the conduct of the trials and the subsequent collection and analysis of data. Failure of the CROs to meet their obligations could adversely affect clinical development of our products. Moreover, these
independent investigators and CROs may also have relationships with other commercial entities, some of which may compete with us. If independent investigators and CROs assist our competitors at our expense, it could harm our competitive position.
We have no manufacturing capabilities. If third-party manufacturers of our product candidates fail to devote sufficient time and resources to our
concerns, or if their performance is substandard, our clinical trials and product introductions may be delayed and our costs may rise.
We have in the past utilized, and intend to continue to utilize, third-party manufacturers to produce the drug compounds we use in our
clinical trials and for the potential commercialization of our future products. We have no experience in manufacturing products for commercial purposes and do not currently have any manufacturing facilities. Consequently, we depend on, and will
continue to depend on, several contract manufacturers for all production of products for development and commercial purposes. If we are unable to obtain or retain third-party manufacturers, we will not be able to develop or commercialize our
products. The manufacture of our products for clinical trials and commercial purposes is subject to specific FDA regulations, including current Good Manufacturing Practice regulations. Our third-party manufacturers might not comply with FDA
regulations relating to manufacturing our products for clinical trials and commercial purposes or other regulatory requirements now or in the future. Our reliance on contract manufacturers also exposes us to the following risks:
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• |
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contract manufacturers may encounter difficulties in achieving volume production, quality control and quality assurance, and also may experience shortages in qualified personnel. As a result, our contract manufacturers
might not be able to meet our clinical schedules or adequately manufacture our products in commercial quantities when required; |
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switching manufacturers may be difficult because the number of potential manufacturers is limited. It may be difficult or impossible for us to find a replacement manufacturer quickly on acceptable terms, or at all;
|
24
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our contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to successfully produce, store or distribute our products; and |
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drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the U.S. Drug Enforcement Administration, and other agencies to ensure strict compliance with good manufacturing practices and other
government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’ compliance with these regulations and standards. |
Our current dependence upon third parties for the manufacture of our products may harm our profit margin, if any, on the sale of our future
products and our ability to develop and deliver products on a timely and competitive basis.
If we cannot raise additional funding, we may be unable
to complete development of our product candidates.
We may require additional funding to continue our research and product
development programs, to conduct preclinical studies and clinical trials, for operating expenses and to pursue regulatory approvals for product candidates, for the costs involved in filing and prosecuting patent applications and enforcing or
defending patent claims, if any, product in-licensing and any possible acquisitions, and we may require additional funding to establish manufacturing and marketing capabilities in the future. We believe that our existing capital resources, together
with investment income, and future payments due under our strategic alliances, will be sufficient to satisfy our current and projected funding requirements for at least the next 12 months. However, these resources might be insufficient to conduct
research and development programs to the full extent currently planned. If we cannot obtain adequate funds, we may be required to curtail significantly one or more of our research and development programs or obtain funds through additional
arrangements with corporate collaborators or others that may require us to relinquish rights to some of our technologies or product candidates.
Our future capital requirements will depend on many factors, including:
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continued scientific progress in our research and development programs; |
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the magnitude and complexity of our research and development programs; |
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progress with preclinical testing and clinical trials; |
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the time and costs involved in obtaining regulatory approvals; |
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the costs involved in filing and pursuing patent applications, enforcing patent claims, or engaging in interference proceedings or other patent litigation; |
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competing technological and market developments; |
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the establishment of additional strategic alliances; |
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the cost of commercialization activities and arrangements, including manufacturing of our product candidates; and |
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the cost of product in-licensing and any possible acquisitions. |
We intend to seek additional
funding through strategic alliances, and may seek additional funding through public or private sales of our securities, including equity securities. For example, we have an effective shelf registration statement on file with the Securities and
Exchange Commission (SEC) which, for so long as we continue to satisfy the requirements to be deemed a well-known seasoned issuer, allows us to issue an unlimited number of shares of our common stock from time to time. We also have an effective
shelf registration statement on file with the SEC which allows us to issue shares of our common stock from time to time for an aggregate initial offering price of up to $150 million. In the event that we fail to satisfy the requirements to be deemed
a well-known seasoned issuer, we would be limited to using this shelf registration statement which may be used for the issuance of shares of our common stock for an aggregate initial offering price of up to only $150 million. In addition, we have
previously financed capital purchases and may continue to pursue opportunities to obtain additional debt financing in the future. Additional equity or debt financing might not be available on reasonable terms, if at all. Any additional equity
financings will be dilutive to our stockholders and any additional debt financings may involve operating covenants that restrict our business.
If
we are unable to retain and recruit qualified scientists or if any of our key senior executives discontinues his or her employment with us, it may delay our development efforts.
We are highly dependent on the principal members of our management and scientific staff. The loss of any of these people could impede the
achievement of our objectives. Furthermore, recruiting and retaining qualified scientific personnel to perform research and development work in the future is critical to our success. We may be unable to attract and retain personnel on acceptable
terms given the competition among biotechnology, pharmaceutical and health care companies, universities and non-profit research institutions for experienced scientists. In addition, we rely on a significant number of consultants to assist us in
formulating our research and development strategy. Our consultants may have commitments to, or advisory or consulting agreements with, other entities that may limit their availability to us.
25
We may be subject to claims that we or our employees have wrongfully used or disclosed alleged trade
secrets of their former employers.
As is commonplace in the biotechnology industry, we employ individuals who were previously
employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or
otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in
substantial costs and be a distraction to management.
Governmental and third-party payors may impose sales and pharmaceutical pricing controls on
our products or limit coverage or reimbursement for our products that could limit our product revenues and delay sustained profitability.
The continuing efforts of government and third-party payors to contain or reduce the costs of health care through various means may reduce our
potential revenues. These payors’ efforts could decrease the price that we receive for any products we may develop and sell in the future. In addition, third-party insurance coverage and adequate reimbursement levels may not be available to
patients for any products we develop. Coverage and reimbursement levels may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If government and third-party payors do not provide adequate coverage
and reimbursement levels for our products, or if price controls are enacted, our product revenues will suffer.
If physicians and patients do not
accept our products, we may not recover our investment.
The commercial success of our products, if they are approved for
marketing, will depend upon the acceptance of our products as safe and effective by the medical community and patients.
The market
acceptance of our products could be affected by a number of factors, including:
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the timing of receipt of marketing approvals; |
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the safety and efficacy of the products; |
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the success of existing products addressing our target markets or the emergence of equivalent or superior products; and |
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the cost-effectiveness of the products. |
In addition, market acceptance depends on the
effectiveness of our marketing strategy, and, to date, we have very limited sales and marketing experience or capabilities. If the medical community and patients do not ultimately accept our products as being safe, effective, superior and/or
cost-effective, we may not recover our investment.
Compliance with changing regulation of corporate governance and public disclosure may result in
additional expenses.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including
the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, new SEC regulations and NASDAQ rules, are creating uncertainty for companies such as ours. These laws, regulations and standards are subject to varying
interpretations in some cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply
with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and management time related to compliance activities. If we fail to comply with these laws,
regulations and standards, our reputation may be harmed and we might be subject to sanctions or investigation by regulatory authorities, such as the SEC. Any such action could adversely affect our financial results and the market price of our common
stock.
Risks Related to Our Industry
We may
not receive regulatory approvals for our product candidates or approvals may be delayed.
Regulation by government authorities in
the United States and foreign countries is a significant factor in the development, manufacture and marketing of our proposed products and in our ongoing research and product development activities. Any failure to receive the regulatory approvals
necessary to commercialize our product candidates would harm our business. The process of obtaining these approvals and the subsequent compliance with federal and state statutes and regulations require spending substantial time and financial
resources. If we fail or our collaborators or licensees fail to obtain or maintain, or encounter delays in obtaining or maintaining, regulatory approvals, it could adversely affect the marketing of any products we develop, our ability to receive
product or royalty revenues, our recovery of prepaid royalties, and our liquidity and capital resources. All of our products are in research and development, and we have not yet received regulatory approval to commercialize any product from the FDA
or any other regulatory body. In addition, we have limited experience in filing and pursuing applications necessary to gain regulatory approvals, which may impede our ability to obtain such approvals.
26
In particular, human therapeutic products are subject to rigorous preclinical testing and
clinical trials and other approval procedures of the FDA and similar regulatory authorities in foreign countries. The FDA regulates, among other things, the development, testing, manufacture, safety, efficacy, record keeping, labeling, storage,
approval, advertising, promotion, sale and distribution of biopharmaceutical products. Securing FDA approval requires the submission of extensive preclinical and clinical data and supporting information to the FDA for each indication to establish
the product candidate’s safety and efficacy. The approval process may take many years to complete and may involve ongoing requirements for post-marketing studies. Any FDA or other regulatory approval of our product candidates, once obtained,
may be withdrawn. If our potential products are marketed abroad, they will also be subject to extensive ongoing regulation by foreign governments.
Health care reform measures and other recent legislative initiatives could adversely affect our business.
The business and financial condition of pharmaceutical and biotechnology companies are affected by the efforts of governmental and third-party
payers to contain or reduce the costs of health care. In the United States, comprehensive health care reform legislation was enacted by the Federal government and we expect that there will continue to be a number of federal and state proposals to
implement government control over the pricing of prescription pharmaceuticals. In addition, increasing emphasis on reducing the cost of health care in the United States will continue to put pressure on the rate of adoption and pricing of
prescription pharmaceuticals. Moreover, in some foreign jurisdictions, pricing of prescription pharmaceuticals is already subject to government control. Additionally, other recent federal legislation imposes new obligations on manufacturers of
pharmaceutical products, among others, related to product tracking and tracing. Among the requirements of this new legislation, manufacturers are required to provide certain information regarding the drug product to individuals and entities to which
product ownership is transferred, label drug product with a product identifier, and keep certain records regarding distribution of the drug product. Further, under this new legislation, manufacturers will have drug product investigation, quarantine,
disposition, notification and purchaser license verification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products, as well as products that are the subject of fraudulent transactions or which are
otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.
We are
currently unable to predict what additional legislation or regulation, if any, relating to the health care industry may be enacted in the future or what effect recently enacted Federal legislation or any such additional legislation or regulation
would have on our business. The pendency or approval of such proposals or reforms could result in a decrease in our stock price or limit our ability to raise capital or to enter into collaboration agreements for the further development and
commercialization of our programs and products.
We face intense competition, and if we are unable to compete effectively, the demand for our
products, if any, may be reduced.
The biotechnology and pharmaceutical industries are subject to rapid and intense technological
change. We face, and will continue to face, competition in the development and marketing of our product candidates from academic institutions, government agencies, research institutions and biotechnology and pharmaceutical companies.
Competition may also arise from, among other things:
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other drug development technologies; |
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methods of preventing or reducing the incidence of disease, including vaccines; and |
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new small molecule or other classes of therapeutic agents. |
Developments by others may render
our product candidates or technologies obsolete or noncompetitive.
We are performing research on or developing products for the treatment
of several disorders including endometriosis, tardive dyskinesia, uterine fibroids, Tourette syndrome, classic congenital adrenal hyperplasia, stress-related disorders, pain, and other neurological and endocrine-related diseases and disorders, and
there are a number of competitors to products in our research pipeline. If one or more of our competitors’ products or programs are successful, the market for our products may be reduced or eliminated.
Compared to us, many of our competitors and potential competitors have substantially greater:
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research and development resources, including personnel and technology; |
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preclinical study and clinical testing experience; |
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manufacturing and marketing experience; and |
27
If we are unable to protect our intellectual property, our competitors could develop and market products
based on our discoveries, which may reduce demand for our products.
Our success will depend on our ability to, among other
things:
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obtain patent protection for our products; |
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preserve our trade secrets; |
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prevent third parties from infringing upon our proprietary rights; and |
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operate without infringing upon the proprietary rights of others, both in the United States and internationally. |
Because of the substantial length of time and expense associated with bringing new products through the development and regulatory approval
processes in order to reach the marketplace, the pharmaceutical industry places considerable importance on obtaining patent and trade secret protection for new technologies, products and processes. Accordingly, we intend to seek patent protection
for our proprietary technology and compounds. However, we face the risk that we may not obtain any of these patents and that the breadth of claims we obtain, if any, may not provide adequate protection of our proprietary technology or compounds.
We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and
maintain our competitive position, which we seek to protect, in part, through confidentiality agreements with our commercial collaborators, employees and consultants. We also have invention or patent assignment agreements with our employees and
some, but not all, of our commercial collaborators and consultants. However, if our employees, commercial collaborators or consultants breach these agreements, we may not have adequate remedies for any such breach, and our trade secrets may
otherwise become known or independently discovered by our competitors.
In addition, although we own a number of patents, the issuance of
a patent is not conclusive as to its validity or enforceability, and third parties may challenge the validity or enforceability of our patents. We cannot assure you how much protection, if any, will be given to our patents if we attempt to enforce
them and they are challenged in court or in other proceedings. It is possible that a competitor may successfully challenge our patents or that challenges will result in limitations of their coverage. Moreover, competitors may infringe our patents or
successfully avoid them through design innovation. To prevent infringement or unauthorized use, we may need to file infringement claims, which are expensive and time-consuming. In addition, in an infringement proceeding a court may decide that a
patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover its technology. Interference proceedings declared by the United States Patent and
Trademark Office may be necessary to determine the priority of inventions with respect to our patent applications or those of our licensors. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and
be a distraction to management. We cannot assure you that we will be able to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.
The technologies we use in our research as well as the drug targets we select may infringe the patents or violate the proprietary rights of
third parties.
We cannot assure you that third parties will not assert patent or other intellectual property infringement
claims against us or our collaborators with respect to technologies used in potential products. If a patent infringement suit were brought against us or our collaborators, we or our collaborators could be forced to stop or delay developing,
manufacturing or selling potential products that are claimed to infringe a third party’s intellectual property unless that party grants us or our collaborators rights to use its intellectual property. In such cases, we could be required to
obtain licenses to patents or proprietary rights of others in order to continue to commercialize our products. However, we may not be able to obtain any licenses required under any patents or proprietary rights of third parties on acceptable terms,
or at all. Even if our collaborators or we were able to obtain rights to the third party’s intellectual property, these rights may be non-exclusive, thereby giving our competitors access to the same intellectual property. Ultimately, we may be
unable to commercialize some of our potential products or may have to cease some of our business operations as a result of patent infringement claims, which could severely harm our business.
Our employees, independent contractors, principal investigators, consultants, commercial partners and vendors may engage in misconduct or other improper
activities, including non-compliance with regulatory standards and requirements.
We are exposed to the risk of employee fraud or
other misconduct. Misconduct by employees and independent contractors, such as principal investigators, consultants, commercial partners and vendors, could include failures to comply with FDA regulations, to provide accurate information to the FDA,
to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and abuse laws, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales,
marketing and other business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, kickbacks, self-dealing and other abusive practices. Employee and independent contractor misconduct could also involve the
improper use of individually identifiable information, including, without limitation, information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation.
28
Any relationships with healthcare professionals, principal investigators, consultants, customers (actual
and potential) and third-party payors in connection with our current and future business activities are and will continue to be subject, directly or indirectly, to federal and state healthcare laws. If we are unable to comply, or have not fully
complied, with such laws, we could face penalties, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations.
Our business operations and activities may be directly, or indirectly, subject to various federal and state healthcare laws, including without
limitation, fraud and abuse laws, false claims laws, data privacy and security laws, as well as transparency laws regarding payments or other items of value provided to healthcare providers. These laws may restrict or prohibit a wide range of
business activities, including, but not limited to, research, manufacturing, distribution, pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. These laws may impact, among
other things, our current activities with principal investigators and research subjects, as well as proposed and future sales, marketing and education programs.
Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible
that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws. If our operations or
activities are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to, without limitation, civil, criminal and administrative penalties, damages, monetary fines,
disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations, any
of which could adversely affect our ability to operate.
In addition, any sales of our product candidates once commercialized outside the
United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
We face
potential product liability exposure far in excess of our limited insurance coverage.
The use of any of our potential products in
clinical trials, and the sale of any approved products, may expose us to liability claims. These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling our products. We have obtained limited
product liability insurance coverage for our clinical trials in the amount of $10 million per occurrence and $10 million in the aggregate. However, our insurance may not reimburse us or may not be sufficient to reimburse us for any expenses or
losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. We intend to
expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products
approved for marketing. On occasion, juries have awarded large judgments in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us would decrease our cash
reserves and could cause our stock price to fall.
Our activities involve hazardous materials, and we may be liable for any resulting contamination
or injuries.
Our research activities involve the controlled use of hazardous materials. We cannot eliminate the risk of
accidental contamination or injury from these materials. If an accident occurs, a court may hold us liable for any resulting damages, which may harm our results of operations and cause us to use a substantial portion of our cash reserves, which
would force us to seek additional financing.
Security breaches and other disruptions could compromise our information and expose us to liability,
which would cause our business and reputation to suffer.
In the ordinary course of our business, we collect and store
confidential and sensitive information on our networks and in our data centers. This information includes, among other things, our intellectual property and proprietary information, the confidential information of our collaborators and
licensees, and the personally identifiable information of our employees. It is important to our operations and business strategy that this information remains secure and is perceived to be secure. Despite security measures, however, our
information technology and network infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. Any such attack or breach could compromise our networks and data centers and the
information stored there could be accessed, publicly disclosed, lost, or stolen. Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal
information, delays and impediments to our discovery and development efforts, and damage to our reputation.
| ITEM 5: |
Other Information |
Not applicable.
29
|
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|
| Exhibit
Number |
|
Description |
|
|
| 3.1 |
|
Certificate of Incorporation(1) |
|
|
| 3.2 |
|
Certificate of Amendment to Certificate of Incorporation(1) |
|
|
| 3.3 |
|
Bylaws, as amended(1) |
|
|
| 4.1 |
|
Form of Common Stock Certificate(2) |
|
|
| 10.1** |
|
Neurocrine Biosciences, Inc. Inducement Plan and form of stock option agreement and restricted stock unit agreement. |
|
|
| 31.1 |
|
Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934 |
|
|
| 31.2 |
|
Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934 |
|
|
| 32* |
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
| 101.INS |
|
XBRL Instance Document. |
|
|
| 101.SCH |
|
XBRL Taxonomy Extension Schema Document. |
|
|
| 101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
| 101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
| 101.LAB |
|
XBRL Taxonomy Extension Label Linkbase Document. |
|
|
| 101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document. |
| (1) |
Incorporated by reference to the Company’s Annual Report on Form 10-K filed on February 8, 2013 |
| (2) |
Incorporated by reference to the Company’s Registration Statement on Form S-1 (Registration No. 333-03172) |
| * |
These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of
1934 and are not to be incorporated by reference into any filing of Neurocrine Biosciences, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
| ** |
Management contract or compensatory plan or arrangement |
Except as specifically noted above,
the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K have a Commission File Number of 000-22705.
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
|
|
NEUROCRINE BIOSCIENCES, INC.
(Registrant) |
|
|
|
|
| Dated: July 29, 2015 |
|
|
|
|
|
/S/ TIMOTHY P.
COUGHLIN |
|
|
|
|
|
|
Timothy P. Coughlin |
|
|
|
|
|
|
Chief Financial Officer |
|
|
|
|
|
|
(Duly authorized officer and Principal Financial Officer) |
31
Exhibit 10.1
NEUROCRINE BIOSCIENCES, INC.
INDUCEMENT PLAN
ADOPTED: SEPTEMBER 15, 2014
AMENDED: OCTOBER 7, 2014
AMENDED: APRIL 29, 2015
(a) Eligible Award Recipients. Options under the Plan may only be granted to
Employees who satisfy the standards for inducement grants under Rule 5635(c)(4) of the NASDAQ Listing Rules. A person who previously served as an Employee or Director shall not be eligible to receive Options under the Plan, other than following
a bona fide period of non-employment.
(b) Available Awards. The Plan
provides solely for the grant of Options. All Options shall be Nonstatutory Stock Options.
(c) Purpose. The Company, by means of the Plan, seeks to secure and retain the
services of the group of persons eligible to receive Options as set forth in Section 1(b), to provide an inducement material for certain individuals to enter into employment with the Company within the meaning of Rule 5635(c)(4) of
the NASDAQ Listing Rules, to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate and to provide a means by which such eligible recipients may be given an opportunity to benefit from increases
in value of the Common Stock through the granting of Options.
(a) Administration by Board. The Board shall administer the Plan unless and until
the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(d). However, the grant of Options shall be approved by the Company’s independent compensation committee or a majority of the
Company’s independent directors (as defined in Rule 5605(a)(2) of the NASDAQ Listing Rules) in order to comply with the exemption from the stockholder approval requirement for “inducement grants” provided under Rule 5635(c)(4) of
the NASDAQ Listing Rules.
(b) Powers of Board. The Board shall have the power,
subject to, and within the limitations of, the express provisions of the Plan:
(i) To determine from time to time (A) which of the persons eligible under the
Plan shall be granted Options; (B) when and how each Option shall be granted; (C) the provisions of each Option granted (which need not be identical), including the time or times when a person shall be permitted to receive Common Stock
pursuant to an Option; (D) the number of shares of Common Stock with respect to which an Option shall be granted to each such person; and (E) the Fair Market Value applicable to an Option.
(ii) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any
1.
Option Agreement in a manner and to the extent it shall deem necessary or expedient to make the Plan or Option fully effective.
(iii) To settle all controversies regarding the Plan and Options granted under it.
(iv) To accelerate the time at which an Option may first be exercised or the
time during which an Option or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Option stating the time at which it may first be exercised or the time during which it will vest.
(v) To suspend or terminate the Plan at any time. Suspension or termination
of the Plan shall not impair rights and obligations under any Option granted while the Plan is in effect except with the written consent of the affected Participant.
(vi) To amend the Plan in any respect the Board deems necessary or advisable.
However, except as provided in Section 8(a) relating to Capitalization Adjustments, to the extent required by applicable law or listing requirements, stockholder approval shall be required for any amendment of the Plan that either
(A) materially increases the number of shares of Common Stock available for issuance under the Plan, (B) materially expands the class of individuals eligible to receive Options under the Plan, (C) materially increases the benefits
accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (D) materially extends the term of the Plan, or (E) expands the types of awards available
for issuance under the Plan. Except as provided above, rights under any Option granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (1) the Company requests the consent of the affected Participant, and
(2) such Participant consents in writing.
(vii) To submit any amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Rule 16b-3.
(viii) To approve forms of Option Agreements for use under the Plan and to amend the terms of
any one or more Options, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Option Agreement, subject to any specified limits in the Plan that are not subject to Board
discretion; provided however, that a Participant’s rights under any Option shall not be impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and (B) such Participant consents in
writing. Notwithstanding the foregoing, subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Options without the affected Participant’s consent if necessary to bring the Option into compliance
with Section 409A of the Code or to comply with other applicable laws or listing requirements.
(ix) Generally, to exercise such powers and to perform such acts as the Board deems
necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Options.
(x) To adopt such procedures and sub-plans as are necessary or appropriate to
permit participation in the Plan by eligible Employees who are foreign nationals or employed outside the United States.
2.
(c) Delegation to Committee.
(i) General. The Board may delegate some or all of the administration of the Plan
to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the
Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Committee may, at any time, abolish the subcommittee and/or revest in the Committee any powers delegated
to the subcommittee. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.
(ii) Rule 16b-3 Compliance. The Committee may consist solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3.
(d) Effect of Board’s Decision.
All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.
(e) Cancellation and Re-Grant of Awards. Except in connection with a Corporate Transaction, as
provided in Section 8(a) relating to Capitalization Adjustments, or unless the stockholders of the Company have approved such an action within twelve (12) months prior to such an event, neither the Board nor any Committee shall have
the authority to: (i) reduce the exercise price of any outstanding Options under the Plan, or (ii) cancel any outstanding Options that have an exercise price greater than the current Fair Market Value of the Common Stock in exchange for
other stock awards, cash, or Options with an exercise price less than the original exercise price of the Options that are cancelled.
| 3. |
SHARES SUBJECT TO THE PLAN. |
(a) Share Reserve. Subject to Section 8(a) relating to Capitalization Adjustments,
the aggregate number of shares of Common Stock that may be issued pursuant to Options from and after the Effective Date shall not exceed 330,000 shares. For clarity, the Share Reserve in this Section 3(a) is a limitation on the number of
shares of the Common Stock that may be issued pursuant to the Plan and does not limit the granting of Options except as provided in Section 8(a). Shares may be issued in connection with a merger or acquisition as permitted by, as
applicable, NASDAQ Listing Rule 5635(c) or, if applicable, NYSE Listed Company Manual Section 303A.08, AMEX Company Guide Section 711 or other applicable rule, and such issuance shall not reduce the number of shares available for issuance
under the Plan. Furthermore, if an Option or any portion thereof expires or otherwise terminates without all of the shares covered by such Option having been issued, such expiration or termination shall not reduce (or otherwise offset) the number of
shares of Common Stock that may be available for issuance under the Plan.
3.
(b) Reversion of Shares to the Share
Reserve. If any shares of common stock issued pursuant to an Option are forfeited back to the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited
shall revert to and again become available for issuance under the Plan.
(c) Shares
Not Available For Subsequent Issuance. If any shares subject to an Option are not delivered to a Participant because the Option is exercised through a reduction of shares subject to the Option (i.e., “net exercised”), the number of
shares that are not delivered to the Participant shall no longer be available for issuance under the Plan. Also, any shares used to pay the exercise price of an Option or that are withheld in satisfaction of applicable tax withholding obligations
shall no longer be available for issuance under the Plan. Any shares repurchased on the open market with the proceeds of the exercise price of an Option shall not again be available for issuance under the Plan.
(d) Source of Shares. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market or otherwise; provided, however that the Company may not repurchase shares to be used under this Plan to the extent such repurchased
shares would exceed the limitation in Section 3(a).
(a) Eligibility. Options may only be granted to persons who are Employees described
in Section 1(a) of the Plan, where the Option is an inducement material to the individual’s entering into employment with the Company or an Affiliate within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules. For clarity, Options
may not be granted to (1) Consultants or Directors, for service in such capacities, or (2) any individual who was previously an Employee or Director of the Company, other than following a bona fide period of non-employment.
Notwithstanding the foregoing, Options may not be granted to Employees who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405 promulgated under the Securities Act, unless the stock
underlying such Options is treated as “service recipient stock” under Section 409A of the Code because the Options are granted pursuant to a corporate transaction (such as a spin off transaction) or unless such Options comply with the
distribution requirements of Section 409A of the Code.
(b) Approval
Requirements. All Options must be granted either by a majority of the Company’s independent directors or by the Company’s compensation committee comprised of independent directors within the meaning of Rule 5605(a)(2) of the NASDAQ
Listing Rules.
| 5. |
PROVISIONS RELATING TO OPTIONS. |
Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options
shall be Nonstatutory Stock Options. The provisions of separate Options need not be identical; provided, however, that each Option Agreement shall conform to (through incorporation of provisions hereof by reference in the Option Agreement or
otherwise) the substance of each of the following provisions:
4.
(a) Term. No Option shall be exercisable
after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Option Agreement.
(b) Exercise Price. The exercise price of each Option shall be not less than one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Option if such Option is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Corporate Transaction and in a manner consistent with
the provisions of Sections 409A of the Code.
(c) Purchase Price for Options. The
purchase price of Common Stock acquired pursuant to the exercise of an Option shall be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth
below. The Board shall have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize
a particular method of payment. The permitted methods of payment are as follows:
(i) by cash, check, bank draft or money order payable to the Company;
(ii) pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from
the sales proceeds;
(iii) by delivery to the Company (either by actual
delivery or attestation) of shares of Common Stock;
(iv) by a “net
exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price;
provided, however, that the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued;
provided, further, that shares of Common Stock will no longer be subject to an Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are reduced to pay the exercise price pursuant to the “net
exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or
(v) in any other form of legal consideration that may be acceptable to the Board.
(d) Transferability of Options. The Board may, in its sole discretion, impose such
limitations on the transferability of Options as the Board shall determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply:
5.
(i) Restrictions on Transfer. An
Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant. Except as explicitly provided herein, an Option may not be
transferred.
(ii) Domestic Relations Orders. Notwithstanding the foregoing, an
Option may be transferred pursuant to a domestic relations order.
(iii) Beneficiary Designation. Notwithstanding the foregoing, the Participant may,
by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect Option exercises, designate a third party who, in the event of the death of the
Participant, shall thereafter be entitled to exercise the Option and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, the executor or administrator of the Participant’s estate
shall be entitled to exercise the Option and receive the Common Stock or other consideration resulting from such exercise.
(e) Vesting Generally. The total number of shares of Common Stock subject to an
Option may vest and therefore become exercisable in periodic installments that may or may not be equal. The Option may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the
satisfaction of performance goals or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this Section 5(e) are subject to any Option provisions governing the minimum
number of shares of Common Stock as to which an Option may be exercised.
(f) Termination of Continuous Service. Except as otherwise provided in the
applicable Option Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause or upon the Participant’s death or Disability), the Participant may exercise his
or her Option (to the extent that the Participant was entitled to exercise such Option as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three (3) months
following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the applicable Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If,
after termination of Continuous Service, the Participant does not exercise his or her Option within the time specified herein or in the Option Agreement, the Option shall terminate.
(g) Extension of Termination Date. If the exercise of an Option following the
termination of the Participant’s Continuous Service (other than for Cause or upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a total period of three (3) months (that need not be consecutive) after the termination of the Participant’s Continuous
Service during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the applicable Option Agreement. In addition, unless otherwise
provided in a Participant’s Option Agreement, if the
6.
immediate sale of any Common Stock received upon exercise of an Option following the termination of the Participant’s Continuous Service (other than for Cause) would violate the
Company’s insider trading policy, then the Option shall terminate on the earlier of (i) the expiration of a period equal to the applicable post-termination exercise period after the termination of the Participant’s Continuous Service
during which the sale of the Common Stock received upon exercise of the Option would not be in violation of the Company’s insider trading policy, or (ii) the expiration of the term of the Option as set forth in the applicable Option
Agreement.
(h) Disability of Participant. Except as otherwise provided in the
applicable Option Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Option (to the
extent that the Participant was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination
of Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Participant does
not exercise his or her Option within the time specified herein or in the Option Agreement, the Option shall terminate.
(i) Death of Participant. Except as otherwise provided in the applicable Option
Agreement or other agreement between the Participant and the Company, if (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified
in the Option Agreement for exercisability after the termination of the Participant’s Continuous Service (for a reason other than death), then the Option may be exercised (to the extent the Participant was entitled to exercise such Option as of
the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Participant’s death, but only within the period
ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option
Agreement. If, after the Participant’s death, the Option is not exercised within the time specified herein or in the Option Agreement, the Option shall terminate.
(j) Termination for Cause. Except as explicitly provided otherwise in a
Participant’s Option Agreement or other individual written agreement between the Company or any Affiliate and the Participant, if a Participant’s Continuous Service is terminated for Cause, the Option shall terminate immediately upon such
Participant’s termination of Continuous Service , and the Participant shall be prohibited from exercising his or her Option from and after the time of such termination of Continuous Service.
(k) Non-Exempt Employees. No Option, whether or not vested, granted to an Employee
who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option. Notwithstanding the
foregoing, consistent with the provisions of the Worker Economic Opportunity Act, (i) in the event of the Participant’s death or Disability, (ii) upon a Corporate Transaction in which such Option is not assumed, continued, or
7.
substituted, (iii) upon a Change in Control, or (iv) upon the Participant’s retirement (as such term may be defined in the Participant’s Option Agreement or in another
applicable agreement or in accordance with the Company’s then current employment policies and guidelines), any such vested Options may be exercised earlier than six months following the date of grant. The foregoing provision is intended to
operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay.
| 6. |
COVENANTS OF THE COMPANY. |
(a) Availability of Shares. During the terms of the Options, the Company shall keep
available at all times the number of shares of Common Stock reasonably required to satisfy such Options.
(b) Securities Law Compliance. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant Options and to issue and sell shares of Common Stock upon exercise of the Options; provided, however, that this undertaking shall not require the
Company to register under the Securities Act the Plan, any Option or any Common Stock issued or issuable pursuant to any such Option. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the
authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Options unless
and until such authority is obtained. A Participant shall not be eligible for the grant of an Option or the subsequent issuance of Common Stock pursuant to the Option if such grant or issuance would be in violation of any applicable securities law.
(c) No Obligation to Notify or Minimize Taxes. The Company shall have no duty
or obligation to any Participant to advise such holder as to the time or manner of exercising such Option. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of an
Option or a possible period in which the Option may not be exercised. The Company has no duty or obligation to minimize the tax consequences of an Option to the holder of such Option.
(a) Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of
Common Stock pursuant to Options shall constitute general funds of the Company.
(b) Corporate Action Constituting Grant of Options. Corporate action constituting a
grant by the Company of an Option to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Option is
communicated to, or actually received or accepted by, the Participant.
(c) Stockholder Rights. No Participant shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares of Common Stock subject to such Option unless and until (i) such Participant has satisfied all requirements for exercise of the
8.
Option pursuant to its terms, if applicable, and (ii) the issuance of the Common Stock subject to such Option has been entered into the books and records of the Company.
(d) No Employment or Other Service Rights. Nothing in the Plan, any Stock Option
Agreement or any other instrument executed thereunder or in connection with any Option granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the
Option was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the
Affiliate is incorporated, as the case may be.
(e) Investment Assurances. The
Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Option, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Option; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Option for the Participant’s own
account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (A) the issuance of the shares upon
the exercise or acquisition of Common Stock under the Option has been registered under a then currently effective registration statement under the Securities Act, or (B) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.
(f) Withholding Obligations. Unless prohibited by the terms of a Stock Option
Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to an Option by any of the following means or by a combination of such means: (i) causing the Participant to tender a
cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Option; provided, however, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid classification of the Option as a liability for financial accounting purposes); (iii) withholding cash from an Option settled
in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Option Agreement.
(g) Electronic Delivery. Any reference herein to a “written” agreement or
document shall include any agreement or document delivered electronically or posted on the Company’s
9.
intranet (or other shared electronic medium controlled by the Company to which the Participant has access).
(h) Deferrals. To the extent permitted by applicable law, the Board, in its sole
discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Option may be deferred and may establish programs and procedures for deferral elections to be
made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or
otherwise providing services to the Company. The Board is authorized to make deferrals of Options and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s
termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.
(i) Compliance with Section 409A. To the extent that the Board determines that
any Option granted hereunder is subject to Section 409A of the Code, the Option Agreement evidencing such Option shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To
the extent applicable, the Plan and Option Agreements shall be interpreted in accordance with Section 409A of the Code. Notwithstanding anything to the contrary in this Plan (and unless the Option Agreement specifically provides otherwise), if
the shares of Common Stock are publicly traded and a Participant holding an Option that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the
Code, no distribution or payment of any amount shall be made upon a “separation from service” before a date that is six (6) months following the date of such Participant’s “separation from service” (as defined in
Section 409A of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s death.
| 8. |
ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE
EVENTS. |
(a) Capitalization
Adjustments. In the event of a Capitalization Adjustment, the Board shall appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), and
(ii) the class(es) and number of securities and price per share of stock subject to outstanding Options. The Board shall make such adjustments, and its determination shall be final, binding and conclusive.
(b) Dissolution or Liquidation. Except as otherwise provided in the Stock Option
Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Options shall terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s
repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Option is providing Continuous Service, provided, however, that the Board may, in its sole
discretion, cause some or all Options to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Options have not previously expired or terminated) before the dissolution or liquidation is completed
but contingent on its completion.
10.
(c) Corporate Transaction. The
following provisions shall apply to Options in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Option or any other written agreement between the Company or any Affiliate and the Participant or unless
otherwise expressly provided by the Board at the time of grant of an Option.
(i) Options May Be Assumed. In the event of a Corporate Transaction, any surviving
corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue any or all Options outstanding under the Plan or may substitute similar stock awards for Options outstanding under the Plan
(including but not limited to, awards to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued
pursuant to Options may be assigned by the Company to the successor of the Company (or the successor’s parent company, if any), in connection with such Corporate Transaction. A surviving corporation or acquiring corporation (or its parent) may
choose to assume or continue only a portion of an Option or substitute a similar stock award for only a portion of an Option, or may choose to assume or continue the Options held by some, but not all Participants. The terms of any assumption,
continuation or substitution shall be set by the Board.
(ii) Options Held by
Current Employee and Director Participants. In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Options or substitute similar
stock awards for such outstanding Options, then with respect to Options that have not been assumed, continued or substituted and that are held by Participants that are Employees or Directors and whose Continuous Service has not terminated prior to
the effective time of the Corporate Transaction (referred to as the “Current Employee and Director Participants”), the vesting of such Options (and the time when such Options may be exercised) shall be accelerated in full to
a date prior to the effective time of such Corporate Transaction (contingent upon the effectiveness of the Corporate Transaction) as the Board shall determine (or, if the Board shall not determine such a date, to the date that is fifteen
(15) days prior to the effective time of the Corporate Transaction), and such Options shall terminate if not exercised at or prior to the effective time of the Corporate Transaction, and any reacquisition or repurchase rights held by the
Company with respect to such Options shall lapse (contingent upon the effectiveness of the Corporate Transaction).
(d) Options Held by Persons other than Current Employee and Director Participants.
In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Options or substitute similar stock awards for such outstanding Options, then
with respect to Options that have not been assumed, continued or substituted and that are held by persons other than Current Employee and Director Participants, such Options shall terminate if not exercised prior to the effective time of the
Corporate Transaction; provided, however, that any reacquisition or repurchase rights held by the Company with respect to such Options shall not terminate and may continue to be exercised notwithstanding the Corporate Transaction.
(e) Payment for Options in Lieu of Exercise. Notwithstanding the foregoing, in the
event an Option will terminate if not exercised prior to the effective time of a Corporate
11.
Transaction, the Board may provide, in its sole discretion, that the holder of such Option may not exercise such Option but will receive a payment, in such form as may be determined by the Board,
equal in value, at the effective time, to the excess, if any, of (A) the value of the property the Participant would have received upon the exercise of the Option (including, at the discretion of the Board, any unvested portion of such Option),
over (B) any exercise price payable by such holder in connection with such exercise.
(f) Change in Control. An Option may be subject to acceleration of vesting and
exercisability upon or after a Change in Control as may be provided in the Stock Option Agreement for such Option or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of
such provision, no such acceleration shall occur.
| 9. |
TERMINATION OR SUSPENSION OF THE PLAN. |
(a) Plan Term. The Board may suspend or terminate the Plan at any time. No Options
may be granted under the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall not impair
rights and obligations under any Option granted while the Plan is in effect except with the written consent of the affected Participant.
| 10. |
EFFECTIVE DATE OF PLAN. |
This Plan shall become effective on the Effective Date.
The laws of the State of California shall govern all questions concerning the construction, validity and interpretation of
this Plan, without regard to that state’s conflict of laws rules.
| 12. |
DEFINITIONS. As used in the Plan, the following definitions shall apply to the capitalized terms indicated below: |
(a) “Affiliate” means, at the time of determination, any
“parent” or “subsidiary” of the Company as such terms are defined in Rule 405 promulgated under the Securities Act. The Board shall have the authority to determine the time or times at which “parent” or
“subsidiary” status is determined within the foregoing definition.
(b) “Board” means the Board of Directors of the Company.
(c) “Capitalization Adjustment” means any change that
is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Option after the Effective Date without the receipt of consideration by the Company through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or any similar
equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards
12.
No. 123 (revised), or any successor thereto. Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a Capitalization Adjustment.
(d) “Cause” shall mean, with respect to a Participant,
the occurrence of any of the following events: (i) such Participant’s commission of any crime involving fraud, dishonesty or moral turpitude; (ii) such Participant’s attempted commission of or participation in a fraud or act of
dishonesty against the Company that results in (or might have reasonably resulted in) material harm to the business of the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between Participant
and the Company or any statutory duty Participant owes to the Company; or (iv) such Participant’s conduct that constitutes gross insubordination, incompetence or habitual neglect of duties and that results in (or might have reasonably
resulted in) material harm to the business of the Company; provided, however, that the action or conduct described in clauses (iii) and (iv) above will constitute “Cause” only if such action or conduct continues after the Company
has provided such Participant with written notice thereof and not less than five business days to cure the same.
(e) “Change in Control” means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the following events:
(i) any Exchange Act Person becomes the Owner, directly or indirectly, of
securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the
foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any
affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity
securities, or (C) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other
acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company,
and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned
by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;
(ii) there is consummated a merger, consolidation or similar transaction involving
(directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either
(A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent
(50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their
13.
Ownership of the outstanding voting securities of the Company immediately prior to such transaction;
(iii) the stockholders of the Company approve or the Board approves a plan of
complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur, except for a liquidation into a parent corporation;
(iv) there is consummated a sale, lease, exclusive license or other disposition of
all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity,
more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company
immediately prior to such sale, lease, license or other disposition; or
(v) individuals who, on the date the Plan is adopted by the Board, are members of
the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member
was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board.
Notwithstanding the foregoing or any other provision of this Plan, the term Change in Control shall not include a sale of
assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.
(f) “Code” means the Internal Revenue Code of 1986, as
amended, including any applicable regulations and guidance thereunder.
(g) “Committee” means a committee of one or more Directors
to whom authority has been delegated by the Board in accordance with Section 2(d) and which is comprised of a majority of independent directors within the meaning of Rule 5606(a)(2) of the NASDAQ Listing Rules.
(h) “Common Stock” means the common stock of the Company.
(i) “Company” means Neurocrine Biosciences, Inc., a
Delaware corporation.
(j) “Consultant” means any
person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is
compensated for such services. However, service solely as a Director, or payment of a fee for such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan. Notwithstanding the foregoing, a person is
treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the Securities Act is available to register either the offer or the sale of the Company’s securities to such person. Consultants are not eligible to receive
Options under the Plan with respect to their service in such capacity.
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(k) “Continuous
Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to
the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or
an Affiliate, shall not terminate a Participant’s Continuous Service; provided, however, if the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board, in its sole discretion, such
Participant’s Continuous Service shall be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s
sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of (i) any leave of absence approved by the Board or Chief Executive Officer, including sick leave, military leave or any other personal
leave, or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in an Option only to such extent as may be
provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.
(l) “Corporate Transaction” means the consummation, in a
single transaction or in a series of related transactions, of any one or more of the following events:
(i) a sale or other disposition of all or substantially all, as determined by the
Board, in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
(ii) a sale or other disposition of at least ninety percent (90%) of the
outstanding securities of the Company;
(iii) a merger, consolidation or
similar transaction following which the Company is not the surviving corporation; or
(iv) a merger, consolidation or similar transaction following which the Company is
the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property,
whether in the form of securities, cash or otherwise.
(m) “Director” means a member of the Board. Directors are
not eligible to receive Options under the Plan with respect to their service in such capacity.
(n) “Disability” means, with respect to a Participant, the
inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and shall be determined by the Board on the basis of such medical evidence as the Board deems warranted under the
circumstances.
(o) “Effective Date” means the date this
Plan is approved by the Board.
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(p) “Employee”
means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.
(q) “Entity” means a corporation, partnership, limited
liability company or other entity.
(r) “Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(s) “Exchange Act Person” means any natural person, Entity
or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of
the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to a
registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person,
Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of
the combined voting power of the Company’s then outstanding securities.
(t) “Fair Market Value” means, as of any date, the value of
the Common Stock determined as follows:
(i) If the Common Stock is listed on
any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the date of determination, as reported in a source the Board deems reliable.
(ii) Unless otherwise provided by the Board, if there is no closing sales price for
the Common Stock on the date of determination, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.
(iii) In the absence of such markets for the Common Stock, the Fair Market Value
shall be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code.
(u) “Non-Employee Director” means a Director who either
(i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a
Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest
in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business
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relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule
16b-3.
(v) “Nonstatutory Stock Option” means any option
granted pursuant to Section 5 of the Plan that does not qualify as an “incentive stock option” within the meaning of Section 422 of the Code.
(w) “Officer” means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act.
(x) “Option” means a Nonstatutory Stock Option to purchase
shares of Common Stock granted pursuant to the Plan.
(y) “Option
Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.
(z) “Optionholder” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
(aa) “Own,” “Owned,” “Owner,”
“Ownership” A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.
(bb) “Participant” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
(cc) “Plan” means this Neurocrine Biosciences, Inc.
Inducement Plan.
(dd) “Rule 16b-3” means Rule 16b-3
promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
(ee) “Securities Act” means the Securities Act of 1933, as
amended.
(ff) “Stock Option Agreement” means a written
agreement between the Company and a Participant evidencing the terms and conditions of an Option grant. Each Stock Option Agreement shall be subject to the terms and conditions of the Plan.
(gg) “Subsidiary” means, with respect to the Company,
(i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any
other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or
other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%).
17.
NEUROCRINE BIOSCIENCES, INC.
STOCK OPTION GRANT NOTICE
(INDUCEMENT PLAN)
NEUROCRINE BIOSCIENCES, INC. (the “Company”),
pursuant to its Inducement Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and
conditions as set forth herein and in the Option Agreement, the Plan, and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.
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Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt
of, and understands and agrees to, this Stock Option Grant Notice, the Option Agreement and the Plan. Optionholder acknowledges and agrees that this Stock Option Grant Notice and the Option Agreement may not be modified, amended or revised except in
a writing signed by Optionholder and a duly authorized officer of the Company. Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the Option Agreement, and the Plan
set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements, promises and/or
representations on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:
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ATTACHMENTS: Option Agreement, Inducement Plan and Notice of Exercise
NEUROCRINE BIOSCIENCES, INC.
INDUCEMENT PLAN
OPTION
AGREEMENT
(NONSTATUTORY STOCK OPTION)
Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Option Agreement,
NEUROCRINE BIOSCIENCES, INC. (the “Company”) has granted you an option under its Inducement Plan (the “Plan”) to purchase the number of shares of the
Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Option Agreement but defined in the Plan shall have the same definitions as in the Plan.
The details of your option are as follows:
(a) Subject to the limitations contained herein, your option will vest as provided
in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service, except as otherwise explicitly otherwise provided herein.
(b) In the event of your termination of Continuous Service due to your death or
Disability, as of such date your option will vest in accordance with the vesting schedule set forth in your Grant Notice as if you had provided an additional six (6) months of Continuous Service as of the date of your termination.
(c) In the event of the Company’s involuntary termination of your Continuous
Service without Cause upon or within the twelve (12) month period following a Corporate Transaction, your option will immediately fully vest.
2. NUMBER OF SHARES AND
EXERCISE PRICE. The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization
Adjustments.
3. EXERCISE RESTRICTION FOR
NON-EXEMPT EMPLOYEES. In the event that you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (i.e., a “Non-Exempt
Employee”), you may not exercise your option until you have completed at least six (6) months of Continuous Service measured from the Date of Grant specified in your Grant Notice, notwithstanding any other provision of your option.
4. METHOD OF PAYMENT.
Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice, which may include one or
more of the following:
(a) Provided that at the time of exercise the Common
Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock,
results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is publicly traded and
quoted regularly in The Wall Street Journal, by delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security interests, and
that are valued at Fair Market Value on the date of exercise. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or
agreement restricting the redemption of the Company’s stock.
5. WHOLE
SHARES. You may exercise your option only for whole shares of Common Stock.
6. SECURITIES LAW COMPLIANCE.
Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so
registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option also must comply with other applicable laws and regulations governing your
option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
7. TERM. You may not exercise your option before the commencement of
its term or after its term expires. The term of your option commences on the Date of Grant and expires upon the earliest of the following:
(a) immediately upon the termination of your Continuous Service for Cause;
(b) three (3) months after the termination of your Continuous Service for any
reason other than Cause, Disability or death, provided that if during any part of such three (3)-month period you may not exercise your option solely because of the condition set forth in the preceding paragraph relating to “Securities Law
Compliance,” your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;
(c) twelve (12) months after the termination of your Continuous Service due to
your Disability;
(d) eighteen (18) months after your death if you die
during your Continuous Service;
(e) the Expiration Date indicated in your Grant
Notice; or
(f) the day before the tenth (10th) anniversary of the Date of
Grant.
Notwithstanding the foregoing, if you die during the period provided in Section 8(b) above, the term
of your option shall not expire until the earlier of eighteen (18) months after your termination of your Continuous Service, the Expiration Date indicated in your Grant Notice, or
the day before the tenth (10th) anniversary of the Date of Grant.
(a) You may exercise the vested portion of your option (and the unvested portion of
your option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may
designate, during regular business hours, together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any exercise of your
option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, or (2) the disposition
of shares of Common Stock acquired upon such exercise.
9.
TRANSFERABILITY. Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written
notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option. In addition, if permitted by the Company you may transfer your
option to a trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the option is held in the trust, provided that you and the trustee enter into a transfer and other
agreements required by the Company.
10. OPTION NOT A
SERVICE CONTRACT. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ
of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees
to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
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WITHHOLDING OBLIGATIONS. |
(a) At the time you exercise your option, in whole or in part, or at any time
thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate,
if any, which arise in connection with the exercise of your option.
(b) Upon
your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the
exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to
be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting purposes).
(c) You may not exercise your option unless the tax withholding obligations of the
Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or
release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.
12. NOTICES. Any notices provided for in your option or
the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you
at the last address you provided to the Company.
13. GOVERNING
PLAN DOCUMENT. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules
and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.
NEUROCRINE BIOSCIENCES, INC.
RESTRICTED STOCK UNIT GRANT NOTICE
(INDUCEMENT PLAN)
Neurocrine Bioscience, Inc. (the “Company”), pursuant to its Inducement Plan
(the “Plan”), hereby awards to Participant a Restricted Stock Unit Award for the number of stock units set forth below (the “Award”). The Award is subject to all of the terms and conditions
as set forth herein and in the Plan and the Restricted Stock Unit Agreement, both of which are attached hereto and incorporated herein in their entirety. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan or
the Restricted Stock Unit Agreement. Except as otherwise explicitly provided herein, in the event of any conflict between the terms in the Award and the Plan, the terms of the Plan shall control.
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1/3rd of the Stock Units shall vest on each of the first, second and third anniversary of the
Vesting Commencement Date, subject to the Participant’s Continuous Service through such applicable vesting dates. Vesting shall terminate upon the Participant’s termination of Continuous Service. |
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The shares of Common Stock to be issued in respect of the Award will be issued in accordance with the issuance schedule set forth in Section 6 of the
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Additional Terms/Acknowledgements: The undersigned Participant acknowledges
receipt of, and understands and agrees to, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Agreement and the Plan. Participant further acknowledges that as of the Date of Grant, this Restricted Stock Unit Grant Notice, the
Restricted Stock Unit Agreement and the Plan set forth the entire understanding between Participant and the Company regarding the Award and supersedes all prior oral and written agreements on that subject, with the exception of any employment or
severance arrangement that would provide for vesting acceleration of the Award upon the terms and conditions set forth therein.
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ATTACHMENTS: Restricted Stock Unit Agreement, Inducement Plan
NEUROCRINE BIOSCIENCES, INC.
INDUCEMENT PLAN
RESTRICTED STOCK UNIT AGREEMENT
Pursuant to the Restricted Stock Unit Grant Notice (“Grant Notice”) and this Restricted Stock Unit
Agreement and in consideration of your services, Neurocrine Biosciences, Inc. (the “Company”) has awarded you a Restricted Stock Unit Award (the “Award”) under its Inducement Plan
(the “Plan”). Your Award is granted to you effective as of the Date of Grant set forth in the Grant Notice for this Award. This Restricted Stock Unit Award Agreement shall be deemed to be agreed to by the Company and you
upon the signing by you of the Restricted Stock Unit Grant Notice to which it is attached. Capitalized terms not explicitly defined in this Restricted Stock Unit Agreement shall have the same meanings given to them in the Plan or the Grant Notice,
as applicable. Except as otherwise explicitly provided herein, in the event of any conflict between the terms in this Restricted Stock Unit Agreement and the Plan, the terms of the Plan shall control. The details of your Award, in addition to those
set forth in the Grant Notice and the Plan, are as follows.
1.
GRANT OF THE AWARD. This Award represents the right to be issued on a future date the number of shares of the Company’s Common Stock that is equal to the number of stock units indicated in the Grant Notice
(the “Stock Units”). As of the Date of Grant, the Company will credit to a bookkeeping account maintained by the Company for your benefit (the “Account”) the number of Stock Units subject to the
Award. This Award was granted in consideration of your services to the Company. Except as otherwise provided herein, you will not be required to make any payment to the Company (other than past and future services to the Company) with respect to
your receipt of the Award, the vesting of the Stock Units or the delivery of the Common Stock to be issued in respect of the Award.
2. VESTING.
(a) Subject to the limitations contained herein, your Award will vest, if at all,
in accordance with the vesting schedule provided in the Grant Notice, provided that vesting will cease upon the termination of your Continuous Service. Upon such termination of your Continuous Service, the Stock Units credited to the Account that
were not vested on the date of such termination will be forfeited at no cost to the Company and you will have no further right, title or interest in the Stock Units or the shares of Common Stock to be issued in respect of the Award.
(b) The Award may immediately fully accelerate vesting in connection with a
Corporate Transaction, as provided under, and subject to the terms of, the Plan.
(c) In the event of the Company’s involuntary termination of your Continuous
Service without Cause upon or within the twelve (12) month period following a Corporate Transaction, your Award will immediately fully vest.
3. NUMBER OF SHARES.
(a) The number of Stock Units subject to your Award may be adjusted from time to
time for Capitalization Adjustments, as provided in the Plan.
(b) Any
additional Stock Units that become subject to the Award pursuant to this Section 3 and Section 7, if any, shall be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time
and manner of delivery as applicable to the other Stock Units covered by your Award.
(c) Notwithstanding the provisions of this Section 3, no fractional shares or
rights for fractional shares of Common Stock shall be created pursuant to this Section 3. The Board shall, in its discretion, determine an equivalent benefit for any fractional shares or fractional shares that might be created by the
adjustments referred to in this Section 3.
4. SECURITIES LAW COMPLIANCE. You may not be issued any shares in
respect of your Award unless either (i) the shares are registered under the Securities Act; or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Your Award also
must comply with other applicable laws and regulations governing the Award, and you will not receive such shares if the Company determines that such receipt would not be in material compliance with such laws and regulations.
5. TRANSFER RESTRICTIONS. Your Award is not transferable, except by will
or by the laws of descent and distribution. In addition to any other limitation on transfer created by applicable securities laws, you agree not to assign, hypothecate, donate, encumber or otherwise dispose of any interest in any of the shares of
Common Stock subject to the Award until the shares are issued to you in accordance with Section 6 of this Agreement. After the shares have been issued to you, you are free to assign, hypothecate, donate, encumber or otherwise dispose of any
interest in such shares provided that any such actions are in compliance with the provisions herein and applicable securities laws. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company,
you may designate a third party who, in the event of your death, shall thereafter be entitled to receive any distribution of Common Stock to which you were entitled at the time of your death pursuant to this Agreement.
6. DATE OF ISSUANCE.
(a) If the Award is exempt from application of Section 409A of the Code and
any state law of similar effect (collectively “Section 409A”), the Company will deliver to you a number of shares of the Company’s Common Stock equal to the number of vested Stock Units subject to your Award,
including any additional Stock Units received pursuant to Section 3 above that relate to those vested Stock Units on the applicable vesting date(s). However, if a scheduled delivery date falls on a date that is not a business day, such delivery
date shall instead fall on the next following business day. Notwithstanding the foregoing, in the event that (i) you are subject to the Company’s policy permitting officers and directors to sell shares only during certain
“window” periods, in effect from time to time (the “Policy”) or you are otherwise prohibited from selling shares of the Company’s Common Stock in the public market and any shares covered by your Award are
scheduled to be delivered on a day (the “Original Distribution Date”) that does not occur during an open “window period” applicable to you or a day on which you are permitted to sell shares of the
Company’s common stock pursuant to a written plan that meets the requirements of Rule 10b5-1 under the Exchange Act, as determined by the Company in accordance with the Policy, or does not occur on a date when you are otherwise permitted to
sell shares of the Company’s common stock on the open market, and (ii) the Company elects not to satisfy its tax withholding obligations by withholding shares from your distribution, then such shares shall not be delivered on such Original
Distribution Date and shall instead be delivered on the first business day of the next occurring open “window period” applicable to you pursuant to such policy (regardless of whether you are still providing continuous services at such
time) or the next business day when you are not prohibited from selling shares of the Company’s Common Stock in the open market, but in no event later than the fifteenth (15th) day of the third calendar month of the calendar year following
the calendar year in which the shares covered by the Award vest. Delivery of the shares pursuant to the provisions of this Section 6(a) is intended to comply with the requirements for the short-term deferral exemption available under Treasury
Regulations Section 1.409A-1(b)(4) and shall be construed and administered in such manner. The form of such delivery of the shares (e.g., a stock certificate or electronic entry evidencing such shares) shall be determined by the Company.
(b) The provisions of this Section 6(b) are intended to apply if the
Award is subject to Section 409A because of the terms of a severance arrangement or other agreement between you and the Company, if any, that provide for acceleration of vesting of the Award upon your separation from service (as such term is
defined in Section 409A(a)(2)(A)(i) of the Code (“Separation from Service”) and such severance benefit does not satisfy the requirements for an exemption from application of Section 409A provided under Treasury
Regulations Section 1.409A-1(b)(4) or 1.409A-1(b)(9) (“Non-Exempt Severance Arrangement”). If the Award is subject to and not exempt from application of Section 409A due to application of a Non-Exempt Severance
Arrangement, the following provisions in this Section 6(b) shall supersede anything to the contrary in Section 6(a).
(i) If the Award vests in the ordinary course during your Continuous Service in
accordance with the vesting schedule set forth in the Grant Notice, without accelerating vesting under the terms of a Non-Exempt Severance Arrangement, in no event will the shares to be issued in respect of
your Award be issued
any later than the later of: (i) December 31st of the calendar year that includes the applicable vesting date and (ii) the
60th day that follows the applicable vesting date.
(ii) If vesting of the Award accelerates under the terms of a Non-Exempt Severance
Arrangement in connection with your Separation from Service, and such vesting acceleration provisions were in effect as of the date of grant of the Award and, therefore, are part of the terms of the Award as of the date of grant, then the shares
will be earlier issued in respect of your Award upon your Separation from Service in accordance with the terms of the Non-Exempt Severance Arrangement, but in no event later than the 60th day
that follows the date of your Separation from Service. However, if at the time the shares would otherwise be issued you are subject to the distribution limitations contained in Section 409A applicable to “specified employees,” as
defined in Section 409A(a)(2)(B)(i) of the Code, such shares shall not be issued before the date that is six (6) months following the date of your Separation from Service, or, if earlier, the date of your death that occurs within such six
month period.
(iii) If vesting of the Award accelerates under the terms of a
Non-Exempt Severance Arrangement in connection with your Separation from Service, and such vesting acceleration provisions were not in effect as of the date of grant of the Award and, therefore, are not a part of the terms of the Award on the date
of grant, then such acceleration of vesting of the Award shall not accelerate the issuance date of the shares, but the shares shall instead be issued on the same schedule as set forth in the Grant Notice as if they had vested in the ordinary course
during your Continuous Service, notwithstanding the vesting acceleration of the Award. Such issuance schedule is intended to satisfy the requirements of payment on a specified date or pursuant to a fixed schedule, as provided under Treasury
Regulations Section 1.409A-3(a)(4).
(c) If the Award is subject to
Section 409A because of application of a Non-Exempt Severance Arrangement or a provision for deferral of the delivery of shares in respect of the Award (a “Non-Exempt Award”), then the following provisions in this
Section shall apply and shall supersede anything to the contrary that may be set forth in the Plan or this Agreement that would provide for accelerated issuance of the shares in respect of your Award in connection with a Corporate Transaction that
is not also a 409A Change of Control (a “Non-Qualifying Transaction”). For such purposes, a “409A Change in Control” is a change in the ownership or effective control of the Company, or
in the ownership of a substantial portion of the Company’s assets, as provided in Section 409A(a)(2)(A)(v) of the Code. In the event of a Non-Qualifying Transaction, then with respect to a Non-Exempt Award, the surviving or acquiring
corporation (or its parent company) (the “Acquiring Entity”) must either assume, continue or substitute your Non-Exempt Award, and shares to be issued in respect of your Non-Exempt Award, to the extent vested, shall be issued
to you by the Acquiring Entity on the same schedule that the shares would have been issued to you if the Non-Qualifying Transaction had not occurred.
(d) Notwithstanding anything to the contrary set forth herein, the Company
explicitly reserves the right to earlier issue the shares in respect of any Non-Exempt Award to the extent permitted and in compliance with the requirements of Section 409A, including pursuant to any of the exemptions available in Treasury
Regulations Section 1.409A-3(j)(4)(ix).
(e) The provisions in this
Agreement for delivery of the shares in respect of the Award are intended either to comply with the requirements of Section 409A or to provide a basis for exemption from such requirements so that the delivery of the shares will not trigger the
additional tax imposed under Section 409A, and any ambiguities herein will be so interpreted.
7. DIVIDENDS. You shall receive no benefit or adjustment to your Award with
respect to any cash dividend, stock dividend or other distribution that does not result from a Capitalization Adjustment as provided in the Plan; provided, however, that this sentence shall not apply with respect to any shares of Common Stock that
are delivered to you in connection with your Award after such shares have been delivered to you.
8. RESTRICTIVE LEGENDS. The shares issued in respect of your Award shall
be endorsed with appropriate legends determined by the Company.
9. AWARD NOT A SERVICE CONTRACT.
(a) Your Continuous Service with the
Company or an Affiliate is not for any specified term and may be terminated by you or by the Company or an Affiliate at any time, for any reason, with or without cause and with or without notice. Nothing in this Restricted Stock Unit Agreement
(including, but not limited to, the vesting of your Award pursuant to the schedule set forth in Section 2 herein or the issuance of the shares in respect of your Award), the Plan or any covenant of good faith and fair dealing that may be found
implicit in this Restricted Stock Unit Agreement or the Plan shall: (i) confer upon you any right to continue in the employ of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment by the Company
or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or affiliation; (iii) confer any right or benefit under this Restricted Stock Unit
Agreement or the Plan unless such right or benefit has specifically accrued under the terms of this Agreement or Plan; or (iv) deprive the Company of the right to terminate you at will and without regard to any future vesting opportunity that
you may have.
(b) By accepting this Award, you acknowledge and agree that the
right to continue vesting in the Award pursuant to the schedule set forth in Section 2 is earned only by continuing as an employee, director or consultant at the will of the Company (not through the act of being hired, being granted this Award
or any other award or benefit) and that the Company has the right to reorganize, sell, spin-out or otherwise restructure one or more of its businesses or Affiliates at any time or from time to time, as it deems appropriate (a
“reorganization”). You further acknowledge and agree that such a reorganization could result in the termination of your Continuous Service, or the termination of Affiliate status of your employer and the loss of benefits available to
you under this Restricted Stock Unit Agreement, including but not limited to, the termination of the right to continue vesting in the Award. You further acknowledge and agree that this Restricted Stock Unit Agreement, the Plan, the transactions
contemplated hereunder and the vesting schedule set forth herein or any covenant of good faith and fair dealing that may be found implicit in any of them do not constitute an express or implied promise of continued engagement as an employee or
consultant for the term of this Agreement, for any period, or at all, and shall not interfere in any way with your right or the Company’s right to terminate your Continuous Service at any time, with or without cause and with or without notice.
10. WITHHOLDING OBLIGATIONS.
(a) On or before the time you receive a distribution of the shares subject to your
Award, or at any time thereafter as requested by the Company, you hereby agree to make adequate provision in cash for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or any Affiliate
which arise in connection with your Award (the “Withholding Taxes”). Additionally, the Company may, in its sole discretion, satisfy all or any portion of the Withholding Taxes obligation relating to your Award by any of
the following means or by a combination of such means: (i) withholding from any compensation otherwise payable to you by the Company; or (ii) causing you to tender a cash payment.
(b) Unless the tax withholding obligations of the Company and/or any Affiliate are
satisfied, the Company shall have no obligation to deliver to you any Common Stock.
(c) In the event the Company’s obligation to withhold arises prior to the
delivery to you of Common Stock or it is determined after the delivery of Common Stock to you that the amount of the Company’s withholding obligation was greater than the amount withheld by the Company, you agree to indemnify and hold the
Company harmless from any failure by the Company to withhold the proper amount.
11. UNSECURED OBLIGATION. Your Award is unfunded, and as a holder of a vested Award, you shall be
considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares pursuant to this Agreement. You shall not have voting or any other rights as a stockholder of the Company with respect to the
shares to be issued pursuant to this Agreement until such shares are issued to you pursuant to Section 6 of this Agreement. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company. Nothing contained in
this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.
12. OTHER DOCUMENTS. You hereby acknowledge receipt or the right to receive a document
providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan
prospectus. In addition, you acknowledge receipt of the Company’s policy permitting officers and directors to sell shares only during certain “window” periods and the
Company’s insider trading policy, in effect from time to time.
13. NOTICES. Any notices
provided for in your Award or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage
prepaid, addressed to you at the last address you provided to the Company. Notwithstanding the foregoing, the Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Award by electronic
means or to request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system
established and maintained by the Company or another third party designated by the Company.
14. MISCELLANEOUS.
(a) The rights and obligations of the Company under your Award shall be
transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns. Your rights and obligations under your Award may only be
assigned with the prior written consent of the Company.
(b) You agree upon
request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
(c) You acknowledge and agree that you have reviewed your Award in its entirety,
have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award, and fully understand all provisions of your Award.
(d) This Agreement shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities exchanges as may be required.
(e) All obligations of the Company under the Plan and this Agreement shall be
binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
15. GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan, the
provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. Except as expressly provided
herein, in the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.
16. SEVERABILITY. If all or any part of this Agreement or the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so
declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
17. EFFECT ON OTHER EMPLOYEE BENEFIT PLANS. The value of the Award subject to
this Agreement shall not be included as compensation, earnings, salaries, or other similar terms used when calculating the Employee’s benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan
otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.
18. AMENDMENT. This Agreement may not be modified, amended or terminated except by an instrument in
writing, signed by you and by a duly authorized representative of the Company. Notwithstanding the foregoing, this Agreement may be amended solely by the Board by a writing which specifically states that it is amending this Agreement, so long as a
copy of such amendment is delivered to you, and provided that no such
amendment adversely affecting your rights hereunder may be made without your written consent. Without limiting the foregoing, the Board reserves the right to change, by written notice to you, the
provisions of this Agreement in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that
any such change shall be applicable only to rights relating to that portion of the Award which is then subject to restrictions as provided herein.
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kevin C. Gorman, President and Chief Executive Officer of Neurocrine Biosciences, Inc., certify that:
| 1. |
I have reviewed this quarterly report on Form 10-Q of Neurocrine Biosciences, Inc.; |
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report; |
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report; |
| 4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have: |
| |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| |
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and |
| |
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions): |
| |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and |
| |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
|
|
|
|
|
|
| Dated: July 29, 2015 |
|
|
|
|
|
/s/ Kevin C. Gorman |
|
|
|
|
|
|
Kevin C. Gorman |
|
|
|
|
|
|
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Timothy P. Coughlin, Chief Financial Officer of Neurocrine Biosciences, Inc., certify that:
| 1. |
I have reviewed this quarterly report on Form 10-Q of Neurocrine Biosciences, Inc.; |
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report; |
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report; |
| 4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have: |
| |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| |
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and |
| |
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions): |
| |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and |
| |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
|
|
|
|
|
|
| Dated: July 29, 2015 |
|
|
|
|
|
/s/ Timothy P. Coughlin |
|
|
|
|
|
|
Timothy P. Coughlin |
|
|
|
|
|
|
Chief Financial Officer |
Exhibit 32
CERTIFICATIONS OF
CHIEF
EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Neurocrine Biosciences, Inc. (Company) on Form 10-Q for the period ended June 30, 2015 as
filed with the Securities and Exchange Commission on the date hereof (Report), I, Kevin C. Gorman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) |
The Report fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934; and |
| (2) |
That information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
|
|
|
|
|
|
| July 29, 2015 |
|
|
|
By: |
|
/s/ Kevin C. Gorman |
|
|
|
|
Name: |
|
Kevin C. Gorman |
|
|
|
|
Title: |
|
President and Chief Executive Officer |
In connection with the Quarterly Report of Neurocrine Biosciences, Inc. (Company) on Form 10-Q for the period
ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (Report), I, Timothy P. Coughlin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) |
The Report fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934; and |
| (2) |
That information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
|
|
|
|
|
|
| July 29, 2015 |
|
|
|
By: |
|
/s/ Timothy P. Coughlin |
|
|
|
|
Name: |
|
Timothy P. Coughlin |
|
|
|
|
Title: |
|
Chief Financial Officer |
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