NEUROCRINE BIOSCIENCES, INC. The following Management's Discussion and Analysis of Financial Condition and Results of Operations section contains forward-looking statements pertaining to, among other things, the commercialization of our product and product candidates, the expected continuation of our collaborative agreements, the receipt of research and development payments thereunder, the future achievement of various milestones in product development and the receipt of payments related thereto, the potential receipt of royalty payments, preclinical testing and clinical trials of potential products, the period of time that our existing capital resources will meet our funding requirements, and our financial results of operations. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various risks and uncertainties, including those set forth in this Annual Report on Form 10-K under the heading "Item 1A. Risk Factors." See "Forward-Looking Statements" in Part I of this Annual Report on Form 10-K.
Overview
We are a commercial-stage biopharmaceutical company focused on discovering and developing innovative and life-changing treatments for patients with serious, challenging and under-addressed neurological, endocrine and psychiatric disorders. We specialize in targeting and interrupting disease-causing mechanisms involving the interconnected pathways of the nervous and endocrine systems. Currently, we are primarily focused on the commercialization of INGREZZA® (valbenazine) inthe United States , orU.S. , our firstU.S. Food and Drug Administration , or FDA, approved product. InApril 2017 , we received FDA approval of our first product, INGREZZA, for the treatment of adults with tardive dyskinesia, or TD. Shortly after receiving FDA approval, we began commercializing INGREZZA in theU.S. using a specialty sales force primarily focused on educating physicians who treat patients with TD, including psychiatrists and neurologists. In addition to our first marketed product, our collaboration partner, AbbVie Inc., or AbbVie, received approval of ORILISSA® (elagolix) for the management of moderate to severe endometriosis pain in women from the FDA inJuly 2018 andHealth Canada inOctober 2018 . We receive royalties at tiered percentage rates on any net sales of ORILISSA. Our late-stage pipeline includes opicapone as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients, elagolix for the treatment of heavy menstrual bleeding, or HMB, associated with uterine fibroids in women, valbenazine for the treatment of chorea in adult patients with Huntington's disease, or HD, and NBIb-1817 (VY-AADC) for the treatment of advanced Parkinson's disease patients with motor fluctuations that are refractory to medical management. Our product candidates for uterine fibroids and advanced Parkinson's disease are partnered withAbbVie and Voyager Therapeutics, Inc., or Voyager, respectively. In the third quarter of 2019, the FDA accepted our new drug application, or NDA, for opicapone for the treatment of Parkinson's disease with a Prescription Drug User Fee Act, or PDUFA, target action date ofApril 26, 2020 . Also, in the third quarter of 2019, the FDA accepted AbbVie's NDA for elagolix for the treatment of uterine fibroids with a PDUFA target action date in the second quarter of 2020.
Our early-stage clinical pipeline includes crinecerfont (NBI-74788) for the treatment of congenital adrenal hyperplasia, or CAH, elagolix for the treatment of polycystic ovary syndrome, or PCOS, in women and a vesicular monoamine transporter 2, or VMAT2, inhibitor with potential use in the treatment of neurologic and psychiatric disorders. Our product candidate for PCOS is partnered with AbbVie.
InDecember 2019 , we entered into a license and collaboration agreement with Xenon Pharmaceuticals Inc, or Xenon, a clinical-stage biopharmaceutical company. Pursuant to the terms of the agreement, we acquired an exclusive license to NBI-921352 (XEN901), a clinical-stage candidate with potential in epilepsy. InJanuary 2020 , we announced a collaboration and optional licensing agreement withIdorsia Pharmaceuticals Ltd , granting us an option to license ACT-709478, a potent, selective, orally active and brain penetrating T-type calcium channel blocker, in clinical development for the treatment of a rare pediatric epilepsy. The option also includes a research collaboration to discover, identify and develop additional novel T-type calcium channel blockers. Going forward, we expect to augment our product pipeline by acquiring, through license or otherwise, additional drug candidates for research and development, or R&D, and potential commercialization. Results of Operations Revenues
The following table presents our revenues by category.
Year Ended December 31,
(in thousands) 2019 2018 2017
INGREZZA product sales, net $ 752,900 $ 409,608 $ 116,626
Collaboration revenue 35,187 41,632 45,000
Total revenues $ 788,087 $ 451,240 $ 161,626
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Product Sales, net
In
Collaboration Revenue
Collaboration revenue reflects event-based milestones, royalties and license fees earned under our collaboration agreements withAbbVie and Mitsubishi Tanabe Pharma Corporation, or MTPC. In the third quarter of 2019, we recognized a$20.0 million event-based milestone as revenue upon theFDA's acceptance of AbbVie's NDA submission of elagolix for the treatment of uterine fibroids. In the third quarter of 2018, we recognized a$40.0 million event-based milestone as revenue upon the FDA-approval of AbbVie's ORILISSA for the management of moderate to severe endometriosis pain in women. In the third quarter of 2017, AbbVie's NDA submission for elagolix in endometriosis was accepted as filed by the FDA, resulting in the achievement of a$30.0 million event-based milestone, which we recognized as revenue in the fourth quarter of 2017. We also recognized$15.0 million in development event-based payments as revenue in 2017, resulting from Mitsubishi Tanabe Pharma Corporation's, or MTPC's, initiation of Phase II/III development of INGREZZA in TD inAsia . We are eligible to receive royalties at tiered percentage rates on any net sales of ORILISSA. We recognized royalty revenues on net sales of ORILISSA of$14.3 million for 2019 and$1.6 million for 2018. We recognized no royalty revenues in 2017. Operating Expenses Cost of Sales
Cost of sales was
Research and Development
We support our drug discovery and development efforts through the commitment of significant resources to discovery, R&D programs, and business development opportunities.
Costs are reflected in the applicable development stage based upon the program status when incurred. Therefore, the same program could be reflected in different development stages in the same reporting period. For several of our programs, the R&D activities are part of our collaborative and other relationships. Late stage consists of costs incurred related to product candidates in Phase II registrational studies and onwards. Early stage consists of costs incurred related to product candidates in post-investigational new drug application, or IND, through Phase II non-registrational studies. Research and discovery consists of pre-IND costs. Milestone expenses reflect payments made in connection with our collaborative and other relationships. Payroll and benefits consists of costs incurred for salaries and wages, payroll taxes, benefits, and share-based compensation associated with employees involved in ongoing R&D activities. Share-based compensation may fluctuate from period to period based on factors that are not within our control, such as our stock price on the dates share-based grants are issued.
Facilities and other consists of indirect costs incurred in support of overall R&D activities and non-specific programs, including activities that benefit multiple programs, such as management costs, as well as depreciation, information technology, and facility-based expenses. These costs are not allocated to a specific program or stage.
The following table presents R&D expense by category:
Year Ended December 31,
(in thousands) 2019 2018 2017
Late stage $ 43,673 $ 14,237 $ 6,423
Early stage 25,260 41,659 18,917
Research and discovery 24,642 17,047 11,173
Milestone payments 10,000 10,000 -
Payroll and benefits 71,347 61,950 42,180
Facilities and other 25,120 10,881 13,134
Total R&D expense $ 200,042 $ 155,774 $ 91,827
R&D expense was $200.0 million in 2019, $155.8 million in 2018 and $91.8 million
in 2017. The increase in R&D expense from 2018 to 2019 was primarily due to
funding of development activities in connection with our collaboration with
Voyager, ongoing progression of our product candidate pipeline and increased
personnel expenses on higher headcount. The increase in R&D expense from 2017 to
2018 was primarily due to the ongoing progression of our product candidate
pipeline and increased personnel expenses on higher headcount.
In-process research and development, or IPR&D, was$154.3 million for 2019,$4.8 million for 2018 and$30.0 million for 2017. In connection with the payment of the upfront fee pursuant to our collaboration and license agreement with Voyager, we recorded a 36 -------------------------------------------------------------------------------- charge of$113.1 million , accounted for as IPR&D, in the first quarter of 2019. In the second quarter of 2019, we entered into an amendment to the collaboration and license agreement with Voyager, pursuant to which we paid Voyager$5.0 million upfront, accounted for as IPR&D, to obtain outside theU.S. rights to the Friedreich's ataxia program. In connection with the payment of the upfront fee pursuant to our collaboration with Xenon, we recorded a charge of$36.2 million , accounted for as IPR&D, in the fourth quarter of 2019. In the third quarter of 2018, we entered into a research collaboration withJnana Therapeutics Inc. , or Jnana, pursuant to which we paid Jnana$4.8 million upfront, accounted for as IPR&D, to obtain access to their proprietary drug discovery platform. In connection with the payment of the upfront fee pursuant to our exclusive license agreement withBIAL - Portela & Ca, S.A. , we recorded a charge of$30.0 million , accounted for as IPR&D, in the first quarter of 2017.
Sales, General and Administrative
Sales, general and administrative, or SG&A, expense was$354.1 million in 2019,$248.9 million in 2018 and$169.9 million in 2017. The increase in SG&A expense from 2018 to 2019 was primarily due to the sales force expansion completed in the third quarter of 2018, the national launch of a patient-focused disease state awareness campaign, Talk About TD, and an increase in the Branded Pharmaceutical Drug fee expense. The increase in SG&A expense from 2017 to 2018 was primarily due to our commercial launch for INGREZZA inApril 2017 and the subsequent sales force expansion in the third quarter of 2018.
Other Expense
Other expense, net, was$25.7 million in 2019,$15.1 million in 2018 and$11.2 million in 2017. The increase in other expense, net, from 2018 to 2019 was primarily due to an unrealized loss of$13.0 million to adjust our equity investments in Voyager and Xenon to fair value as ofDecember 31, 2019 . The increase in other expense, net, from 2017 to 2018 was primarily due to higher interest expense resulting from our issuance of$517.5 million of 2.25% convertible senior notes dueMay 15, 2024 , or the 2024 Notes, inMay 2017 .
Provision for Income Taxes
Our provision for income taxes was$9.5 million for 2019 and$0.7 million for 2018, reflecting estimated current state income taxes for both periods. We did not have a provision for income taxes for 2017. AtDecember 31, 2019 and 2018, we had full valuation allowances against our net deferred tax assets as realization was uncertain. As a result, our tax expense for both periods varies from the statutory tax rate primarily due to changes in our valuation allowances, net of other permanent book/tax differences, tax credits generated and impacts of changes in tax laws.
Net Income (Loss)
Net income was$37.0 million , or$0.39 diluted earnings per share, for 2019 and$21.1 million , or$0.22 diluted earnings per share, for 2018. We incurred a net loss of$142.5 million , or$1.62 net loss per share, for 2017. The change from 2018 to 2019 was primarily the result of increased INGREZZA net product sales, offset by$154.3 million of IPR&D in connection with our collaborations with Voyager and Xenon, ongoing support for the commercial launch of INGREZZA for TD and progression of our clinical pipeline. The change from 2017 to 2018 was primarily the result of increased INGREZZA net product sales, offset by ongoing support for the commercial launch of INGREZZA for TD and progression of our clinical pipeline.
Liquidity and Capital Resources
At
Net cash provided by operating activities was$152.1 million for 2019 and$101.4 million for 2018. Net cash used in operating activities was$94.3 million for 2017. The increase in positive cash flow from 2018 to 2019 was primarily driven by increased INGREZZA net product sales, partially offset by incremental INGREZZA investment and upfront payments of$118.1 million and$36.2 million in connection with our collaborations with Voyager and Xenon, respectively. The significant change to positive cash flow generated from operations from 2017 to 2018 was primarily driven by increased INGREZZA net product sales and the achievement of a$40.0 million event-based milestone related to theFDA's approval of ORILISSA. Net cash used in investing activities was$211.1 million for 2019,$242.9 million for 2018 and$251.3 million for 2017. The change in net cash used in investing activities for all periods presented resulted primarily from timing differences in purchases, sales and maturities of marketable securities and changes in our portfolio-mix between cash equivalents and short-term and long-term investment holdings. Net cash used in investing activities for 2019 also reflects equity investments of$54.7 million in Voyager in the first quarter of 2019 and$14.2 million in Xenon in the fourth quarter of 2019. Net cash provided by financing activities was$27.3 million for 2019,$29.5 million for 2018 and$516.6 million in 2017. Net cash provided by financing activities for 2019 and 2018 reflected proceeds from stock option issuances. Net cash provided by financing activities for 2017 primarily reflected net proceeds of$502.8 million associated with our issuance of the 2024 Notes inMay 2017 .
Shelf Registration Statement. In
Convertible Senior Notes. InMay 2017 , we issued$517.5 million of 2.25% convertible senior notes dueMay 15, 2024 , or the 2024 Notes. AtDecember 31, 2019 , the conditional conversion feature of the 2024 Notes had been triggered, allowing holders of 2024 37
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Notes to convert their 2024 Notes at any time during the period beginning on
Off-Balance Sheet Arrangements
As of
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon financial statements that we have prepared in accordance with accounting principles generally accepted inthe United States of America , or GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, and related disclosures. On an on-going basis, we evaluate these estimates, including those related to revenue recognition and share-based compensation. Estimates are based on historical experience, information received from third parties and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Historically, revisions to our estimates have not resulted in a material change to the financial statements. The items in our financial statements requiring significant estimates and judgments are as follows:
Product Sales, Net
Our product sales, net consist of sales of INGREZZA in theU.S. to a limited network of specialty pharmacy providers, which delivers INGREZZA to patients by mail, and a specialty distributor, which distributes INGREZZA primarily to closed-door pharmacies and government facilities. Product sales, net are recognized at the time the customer takes possession of the product. Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, payors and other third parties. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.
Our significant categories of sales discounts and allowances are as follows:
Product discounts - product discounts are based on payment terms extended to our customers, which include incentives offered for prompt payment. We maintain a reserve for product discounts based on our historical experience, including the timing of customer payments. To date, actual product discounts have not differed materially from our estimates. Product returns - our contracts with customers provide for product returns only if the product is damaged or there has been an error in shipment. Returns based on product expiry are not permitted. To date, product returns have not been significant, and a reserve has not been established. Government rebates - we are obligated to pay rebates for mandated discounts under the Medicaid Drug Rebate Program. The liability for such rebates consist of invoices received for claims from prior quarters that remain unpaid or for which an invoice has not been received and estimated rebates for the current applicable reporting period. Such rebates are primarily estimated based upon actual historical rebates, estimated payor mix, state and federal regulations and related contractual terms and are recorded as a reduction of product sales in the same period the related revenue is recognized. To date, actual government rebates have not differed materially from our estimates. Chargebacks - the difference between the list price, or the price at which we sell INGREZZA product to our customers, and the contracted price, or the price at which our customers sell INGREZZA product to qualified healthcare professionals, is charged back to us by our customers. In addition to actual chargebacks received, we maintain a reserve for chargebacks based on estimated contractual discounts on INGREZZA product inventory levels on hand in our distribution channel. To date, actual chargebacks have not differed materially from our estimates. Payor and pharmacy rebates - we are obligated to pay rebates as a percentage of sales under payor and pharmacy contracts. We estimate these rebates based on actual historical rebates, contractual rebate percentages, sales made through the payor channel and purchases made by pharmacies. To date, actual payor and pharmacy rebates have not differed materially from our estimates. Copay assistance - we offer qualified patients financial assistance with prescription drug co-payments required by insurance. We accrue for copay assistance based on estimated claims and the cost per claim we expect to receive associated with inventory that remains in the distribution channel at period end. To date, actual copay assistance has not differed materially from our estimates.
Share-Based Compensation
For purposes of calculating share-based compensation, we estimate the fair value
of share-based compensation awards using a Black-Scholes option-pricing model.
The determination of the fair value of share-based compensation awards utilizing
the Black-Scholes model is affected by our stock price and a number of
assumptions, including but not limited to expected stock price volatility over
the term of the awards and the expected term of stock options. Our stock options
have characteristics significantly different from those of traded options, and
changes in the assumptions can materially affect the fair value estimates. For
example, an increase in the underlying stock price results in a significant
increase in the Black-Scholes option-pricing. The fair value of
performance-based
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restricted stock units, or PRSUs, is estimated based on the closing sale price of our common stock on the date of grant. Expense recognition for PRSUs commences when attainment of the associated performance-based criteria is determined to be probable.
If factors change and we employ different assumptions, share-based compensation expense may differ significantly from what we have recorded in the past. If there is a difference between the assumptions used in determining share-based compensation expense and the actual factors which become known over time, we may change the input factors used in determining share-based compensation expense for future grants. These changes, if any, may materially impact our results of operations in the period such changes are made. For actual forfeitures, we recognize the adjustment to compensation expense in the period the forfeitures occur. Additional Information
Refer to Note 1 to the consolidated financial statements for information on accounting pronouncements that have impacted or are expected to materially impact our consolidated financial condition, results of operations, or cash flows.
Factors That May Affect Future Financial Condition and Liquidity
The funding necessary to execute our business strategies is subject to numerous uncertainties, which may adversely affect our liquidity and capital resources. Marketing of approved pharmaceuticals and completion of clinical trials may take several years or more, but the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product candidate. It is also important to note that if a clinical candidate is identified, the further development of that candidate can be halted or abandoned at any time due to a number of factors. These factors include, but are not limited to, funding constraints, safety or a change in market demand. The nature and efforts required to develop our product candidates into commercially viable products include research to identify a clinical candidate, preclinical development, clinical testing, FDA approval and commercialization. In the pharmaceutical industry, total R&D spend for a drug candidate that successfully completes all stages of R&D and is commercialized may exceed$2 billion . Further, it can take in excess of ten years to complete all stages of R&D for a drug candidate. We test our potential product candidates in numerous preclinical studies to identify disease indications for which our product candidates may show efficacy. We may conduct multiple clinical trials to cover a variety of indications for each product candidate. As we obtain results from trials, we may elect to discontinue clinical trials for certain product candidates or for certain indications in order to focus our resources on more promising product candidates or indications. The duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the clinical trial protocol, including, among others, the following:
• we or the FDA or similar foreign regulatory authorities may suspend the
trials;
• we may discover that a product candidate may cause harmful side effects;
• patient recruitment may be slower than expected; and • patients may drop out of the trials. For each of our programs, we periodically assess the scientific progress and merits of the programs to determine if continued R&D is economically viable. Certain of our programs have been terminated due to the lack of scientific progress and lack of prospects for ultimate commercialization. Because of the uncertainties associated with R&D of these programs, we may not be successful in achieving commercialization. As such, the ultimate timeline and costs to commercialize a product cannot be accurately estimated. Our in-license, research and clinical development agreements are generally cancelable with written notice within 180 days or less. We may be required to pay up to$4.9 billion in milestone payments, plus sales royalties, in the event that all scientific research, development and commercialization milestones under these agreements are achieved. Other than INGREZZA, which has been approved by the FDA for the treatment of TD, and ORILISSA (partnered with AbbVie), which has been approved by the FDA for the management of moderate to severe endometriosis pain in women, our product candidates have not yet achieved FDA regulatory approval, which is required before we can market them as therapeutic products in theU.S. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval, the FDA must conclude that our clinical data establish safety and efficacy. We must satisfy the requirements of similar regulatory authorities in foreign countries in order to market products in those countries. The results from preclinical testing and early clinical trials may not be predictive of results in later clinical trials. It is possible for a candidate to show promising results in clinical trials, but subsequently fail to establish sufficient safety and efficacy data necessary to obtain regulatory approvals. As a result of the uncertainties discussed above, among others, the duration and completion costs of our R&D projects, clinical trials, and post-marketing studies are difficult to estimate and are subject to considerable variation. Our inability to complete our R&D projects in a timely manner or our failure to enter into collaborative agreements, when appropriate, could significantly increase our capital requirements and could adversely impact our liquidity. These uncertainties could force us to seek additional, external sources of financing from time to time in order to continue with our business strategy. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would jeopardize the future success of our business. We currently have limited experience in marketing and selling pharmaceutical products. If we fail to maintain successful marketing, sales, and reimbursement capabilities, or fail to enter into successful arrangements with third parties, our product revenues may suffer. We also may be required to make further substantial expenditures if unforeseen difficulties arise in other areas of our business. In particular, our future capital requirements will depend on many factors, including: 39
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• the commercial success of INGREZZA and/or ORILISSA; • debt service obligations on the 2024 Notes;
• continued scientific progress in our R&D and clinical development programs;
• the magnitude and complexity of our research and development programs;
• progress with preclinical testing and clinical trials; • the time and costs involved in obtaining regulatory approvals;
• whether the FDA approves opicapone for the treatment of Parkinson's disease
and elagolix for the treatment of uterine fibroids, both of which have a
PDUFA target action date in the second quarter of 2020;
• the costs involved in filing and pursuing patent applications, enforcing
patent claims, or engaging in interference proceedings or other patent
litigation;
• competing technological and market developments;
• the establishment of additional strategic alliances;
• developments related to any future litigation;
• the cost of commercialization activities and arrangements, including
manufacturing of our product candidates; and
• the cost of product in-licensing and any possible acquisitions.
We believe that our existing capital resources, funds generated by anticipated
INGREZZA net product sales and investment income will be sufficient to satisfy
our current and projected funding requirements for at least the next
twelve months. However, we cannot guarantee that our existing capital resources
and anticipated revenues will be sufficient to conduct and complete all of our
research and development programs or commercialization activities as planned.
We may require additional funding to effectively commercialize INGREZZA, 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 securities from time to time. In addition, we
issued $517.5 million of convertible debt in May 2017 and we have previously
financed capital purchases and may continue to pursue opportunities to obtain
additional debt financing in the future. 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, products or product
candidates. To the extent that we are unable to obtain third-party funding for
such expenses, we expect that increased expenses will result in increased cash
flow losses from operations. We cannot assure you that we will successfully
develop our products under development or that our approved products will
generate revenues sufficient to enable us to earn a profit.
Contractual Obligations
Our contractual obligations as of
2024 and
(in millions) Total 2020 2021 2022 2023 Thereafter
2024 Notes and related
interest (1) $ 569.7 $ 11.6 $ 11.6 $ 11.6 $ 11.6 $ 523.3
Operating leases (2) 160.9 8.6 10.8 13.1 13.9 114.5
Total contractual
obligations $ 730.6 $ 20.2 $ 22.4 $ 24.7 $ 25.5 $ 637.8
(1) In May 2017 , we completed a private placement of $517.5 million in aggregate
principal amount of 2.25% convertible senior notes scheduled to mature on May
15, 2024 , unless earlier converted, redeemed, or repurchased. At December 31,
2019 , the conditional conversion feature of the 2024 Notes had been triggered,
allowing holders of 2024 Notes to convert their 2024 Notes at any time during
the period beginning on January 2, 2020 and ending at the close of business on
March 31, 2020 . We may not redeem the 2024 Notes prior to May 15, 2021 . On or
after this date, at our election, we may redeem all, or any portion, of the 2024
Notes under certain circumstances. The 2024 Notes do not contain any financial
or operating covenants or any restrictions on the payment of dividends, the
issuance of other indebtedness or the issuance or repurchase of securities by
us. There are customary events of default with respect to the 2024 Notes,
including that upon certain events of default, 100% of the principal and accrued
and unpaid interest on the 2024 Notes will automatically become due and payable.
Amounts for the 2024 Notes and related interest in the table above assume that
the 2024 Notes will be held until maturity.
(2) We lease our corporate headquarters, which consist of laboratory and office
space located San Diego, California , under various operating lease agreements.
In addition to minimum rental commitments, these operating leases may require us
to pay additional amounts for taxes, insurance, maintenance and other operating
expenses. The non-cancelable lease terms for these operating leases expire at
various dates between 2029 and 2031 and do not include renewal options. Amounts
for operating leases presented in the
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table above reflect future minimum rental commitments under non-cancelable
operating leases as of
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