ADAMAS PHARMACEUTICALS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included elsewhere in this report, and with the consolidated financial statements and management's discussion and analysis of our financial condition and results of operations in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theSEC onFebruary 23, 2021 . This discussion and other parts of this report contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions, including our expectations regarding the acquisition of our company by Supernus Pharmaceuticals, Inc. and the expected impact that the COVID-19 pandemic will continue to have on our business. Our actual results could differ materially from those discussed in these forward-looking statements. In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report titled "Risk factors." Pending Transaction with Supernus Pharmaceuticals, Inc. OnOctober 10, 2021 , we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Supernus Pharmaceuticals, Inc. ("Parent") andSupernus Reef, Inc. , a wholly owned subsidiary of Parent ("Purchaser"). On the terms and subject to the conditions of the Merger Agreement, Purchaser commenced a cash tender offer (the "Tender Offer") to acquire all of the outstanding shares of our common stock for (i)$8.10 per share in cash plus (ii) two contingent value right payments per share collectively worth up to$1.00 per share in cash, net of applicable withholding taxes and without interest. Following the completion of the Tender Offer, Purchaser will merge with and intoAdamas Pharmaceuticals, Inc. , withAdamas Pharmaceuticals, Inc. continuing as the surviving corporation and as an indirect wholly owned subsidiary of Parent. If the Merger Agreement is terminated under specified circumstances, we will be required to pay Parent a termination fee of$16.0 million . The Merger Agreement is subject to customary closing conditions and is anticipated to close in the fourth quarter of 2021 or first quarter of 2022. OverviewAt Adamas Pharmaceuticals, Inc. , our mission is to make everyday life significantly better for people affected by neurological diseases. We are a fully integrated company with commercial and partnered medicines, focused on growing a portfolio of therapies to address a range of neurological diseases while actively supporting our patient and physician communities. We combine our proven expertise in discovery, development and commercialization with our passion for improving lives to deliver innovative medicines that reduce the burden of neurological diseases on patients, caregivers, and society. Currently, we are primarily focused on the commercialization of GOCOVRI inthe United States . Additionally, we have integrated OSMOLEX ER, which we acquired onJanuary 4, 2021 , and are commercializing the product inthe United States . GOCOVRI® (amantadine) extended release capsules is the first and only FDA-approved medicine indicated for the treatment of dyskinesia in patients with Parkinson's disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, and as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson's disease experiencing OFF episodes. GOCOVRI was approved for marketing by theU.S. Food and Drug Administration , or FDA, onAugust 24, 2017 for its initial indication to treat dyskinesia. OnFebruary 1, 2021 , we announced we had received marketing authorization from the FDA for a supplemental New Drug Application (sNDA) for GOCOVRI, gaining a second indication for the product as an adjunctive treatment for OFF episodes. The update to the label indication makes GOCOVRI the only medicine clinically proven and approved to reduce both OFF and dyskinesia in Parkinson's patients taking a levodopa-based medication, resulting in a clinically meaningful increase in good ON time without the need for a 'trade-off' when managing motor complications. OnJune 17, 2020 , we announced that we had discontinued further development of (ADS-5102) a potential additional indication for GOCOVRI for the treatment of walking impairment in patients with multiple sclerosis ("MSW"). 22 -------------------------------------------------------------------------------- Table of Contents OSMOLEX ER® (amantadine) extended release tablets, was approved by the FDA onFebruary 16, 2018 , for the treatment of Parkinson's disease and drug-induced extrapyramidal reactions in adult patients. OnJanuary 4, 2021 , we acquired the global rights to OSMOLEX ER fromOsmotica Pharmaceuticals US LLC , a subsidiary of Osmotica Pharmaceuticals plc. NAMZARIC® (memantine hydrochloride extended release and donepezil hydrochloride) capsules for the treatment of moderate to severe dementia of the Alzheimer's type, is marketed inthe United States by Allergan plc under an exclusive license agreement between us andForest Laboratories Holdings Limited ("Forest"), an indirect, wholly-owned subsidiary of Allergan plc (collectively, "Allergan"). We began recognizing royalty revenue on net sales of NAMZARIC inMay 2020 . Going forward, if the Merger does not occur, we intend to expand our product pipeline by acquiring, through license or otherwise, additional candidates for research and development and potential commercialization. OnDecember 1, 2020 , we entered into a purchase agreement (the "Asset Purchase Agreement") with Osmotica pursuant to which we acquired the global rights to OSMOLEX ER and existing inventory for$7.5 million and the assumption of certain liabilities. The Asset Purchase Agreement closed onJanuary 4, 2021 . OnDecember 1, 2020 , we entered into an agreement withHealthCare Royalty Partners III, L.P. ("HCR") to amend certain key terms of our royalty-backed loan agreement ("Royalty-Backed Loan") with HCR, to be effective upon the closing of the Asset Purchase Agreement with Osmotica which subsequently closed onJanuary 4, 2021 . OnJanuary 2, 2020 , we announced we had grantedSandoz Inc. a license for its generic version of GOCOVRI as ofMarch 4, 2030 , which is over 12 years post GOCOVRI launch, or earlier in certain circumstances typical for such agreements. The agreement contains provisions that may accelerate the license date, including if unit sales of GOCOVRI for the 12-month period endingJuly 31, 2025 or any subsequent 12-month period decline by a specified percentage below GOCOVRI unit sales for the year endedDecember 31, 2019 . OnFebruary 1, 2021 , we announced we had grantedZydus a license for its generic version of GOCOVRI as ofMarch 4, 2030 . The agreement has similar terms as the Sandoz agreement, including the potential license acceleration provision. With these licenses granted to Sandoz andZydus , the first filer ANDA challenges for GOCOVRI's two available strengths have now been settled. Impact of the COVID-19 pandemic on our company Despite the roll-out of vaccines, the novel Coronavirus ("COVID-19") pandemic is continuing. How we are operating in the current COVID-19 environment We are committed to the health and safety of our employees and their families and doing our part to slow the community spread of COVID-19. We are following the guidelines of theCenters for Disease Control and other federal, state and local authorities and will continue to assess when it is appropriate for our team to fully return to normal work practices. Impact on our ability to sell GOCOVRI We continue to see stable GOCOVRI prescription refill rates due to our continued strong patient persistence, adequate supply of GOCOVRI, and patient access to GOCOVRI through distribution from our specialty pharmacy directly to a patient's home. However, we have seen that new prescription rates have been impacted due to several factors, including: a fluid environment in which office practices are changing frequently including many healthcare providers closing their offices temporarily or are restricting patient visits; patients are postponing visits to healthcare provider facilities; and our sales force continues to operate in a mix of virtual and live interactions with healthcare providers, adapting to the local environment. While we believe the initial decline and continued impact on new prescriptions to be temporary, the duration and severity is dependent on future developments, which are highly uncertain and cannot be predicted with confidence. Impact on our supply chain Our GOCOVRI supply chain remains robust and thus far we have observed no disruptions to our inventory on hand or our planned manufacturing schedule. InOctober 2020 , the FDA approved our sNDA for AMSA S.p.A. as a secondary supplier of active pharmaceutical ingredient for GOCOVRI. InJuly 2021 , the FDA approved our sNDA for a 23 -------------------------------------------------------------------------------- Table of Contents second and alternative packager of GOCOVRI. Based on current information, we believe that our partners in our supply chain have been and will continue to operate during the current COVID-19 outbreak. Impact on our financial condition and capital resources The extent of the impact of COVID-19 on our business, financial results, liquidity and cash flows will depend largely on future developments, including the emergence of new variants and new information that may emerge concerning the severity and duration of actions taken to contain or prevent further spread. Throughout the COVID-19 pandemic we have observed widespread closure of clinics and cancellation or rescheduling of patient appointments, restriction of access to sales representatives in some institutions and a marked increase in telemedicine consultations. While certain governments have eased restrictions, there continues to be areas where restrictions remain in place and new variants may lead to new shutdowns or business disruptions in the future that may further impact sales. As ofSeptember 30, 2021 , we had cash, cash equivalents, and investments of$111.1 million . Financial operations overview Product sales consist of sales of GOCOVRI, which was approved by the FDA onAugust 24, 2017 , and sales of OSMOLEX ER, for which we acquired the global rights onJanuary 4, 2021 . Royalty revenue consists of royalties from Allergan for sales of NAMZARIC inthe United States , which we began to recognize inMay 2020 . We made GOCOVRI available for physician and patient use in the fourth quarter of 2017, with a full commercial launch inJanuary 2018 . Prior to the generation of product sales from GOCOVRI, our revenue had been generated primarily from payments under our license agreement with Allergan for non-refundable upfront license payments, milestone payments and reimbursements for research and development expenses for full-time equivalent employees assigned to the license agreement. There are no further milestone payments to be earned under our license agreement with Allergan, and we expect reimbursements for full-time equivalents assigned to the license agreement to be inconsequential in future periods. Beginning inMay 2020 , we began to recognize tiered royalties from Allergan in the low double digits to mid-teens, as a percent of net sales of NAMZARIC inthe United States . Based on recent trends of NAMZARIC net sales, we expect the tiered royalty to be in the low double digits through the term of the agreement, but will be eliminated in any quarter where there is significant competition from generics. Based on Allergan's and our current settlement agreements with the NAMZARIC ANDA filers to date, the earliest date on which any of these agreements grant a license to market a NAMZARIC ANDA filer's generic version of NAMZARIC isJanuary 1, 2025 (or earlier in certain circumstances). Alternatively, the NAMZARIC ANDA filers with the earliest license date have the option to launch an authorized generic version of NAMZARIC beginning onJanuary 1, 2026 instead of launching their own generic version of NAMZARIC onJanuary 1, 2025 . For further discussion of NAMZARIC ANDA filers, see Litigation and Other Legal Proceedings in "Note 9. Commitments and Contingencies." Our investment in research and development activities, including the clinical development of our product candidates, has historically represented a significant portion of our total operating expenses. We have concluded the two-year Phase 3 open-label study of GOCOVRI, suspended investment in the development of ADS-4101, and completed additional analyses of the data from the INROADS trial for ADS-5102 for MSW and will not initiate further Phase 3 development. The majority of our research and development efforts thus far in 2021 have been focused on completing activities for ADS-5102 for MSW, primarily the open-label extension study which closed out during the second quarter of 2021. As a result, we expect research and development costs to be at or below 2020 levels for the foreseeable future, based on this focused strategy. The process of conducting the necessary clinical research to obtain FDA approval is costly and time consuming. The actual probability of success for each product candidate and clinical program may be affected by a variety of factors, including but not limited to, the quality of the product candidate, early clinical data, investment in the program, competition, manufacturing capability, and commercial viability. Furthermore, in the past we have entered into licensing arrangements with other pharmaceutical companies to develop and commercialize our product candidates, and we may enter into additional licensing arrangements or collaborations in the future. In situations in which third parties have control over the clinical development of a product candidate, the estimated completion dates are largely under the control of such third parties and not under our control. We cannot forecast with any degree of certainty which of our product candidates, if any, will be subject to future licensing or collaboration arrangements or how such arrangements would affect our development plans or capital requirements. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates. 24 -------------------------------------------------------------------------------- Table of Contents Critical accounting policies and significant judgments and estimates Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance withUnited States generally accepted accounting principles, orU.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. We base our estimates on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no significant and material changes in our critical accounting policies from those as reflected in "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report on Form 10-K for the year endedDecember 31, 2020 . Results of operations Fluctuations in Operating Results Our results of operations have fluctuated from period to period in the past and are likely to continue to do so in the future. We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the impact on our operations as a result of fluctuations in product sales due to variances in the number of paid prescriptions from period to period, conversions from our free drug trial program to paid prescriptions, and fluctuations in our Medicare Part D Coverage Gap liability and the volume of purchases eligible for government mandated discounts and rebates, as well as changes in discount percentages that may be impacted by potential future price increases and other factors. Further, we expect the timing of expenditures related to our commercial activities associated with GOCOVRI and OSMOLEX ER in addition to research and development activities to vary from period to period, including those associated with the label revision for GOCOVRI to include OFF episodes, and potential development of additional product candidates. Due to these fluctuations, we believe that the period to period comparisons of our operating results are not necessarily a good indication of our future performance. Comparison of the three and nine months endedSeptember 30, 2021 and 2020 Financial results for the periods endedSeptember 30, 2021 include OSMOLEX ER's financial results subsequent to the acquisition closing date ofJanuary 4, 2021 . Revenues The following table summarizes the sources of our revenues by category for the periods indicated (dollars in thousands): Three Months Ended September Nine Months Ended September 30, Increase % Increase 30, Increase % Increase 2021 2020 (Decrease) (Decrease) 2021 2020 (Decrease) (Decrease) Product sales$ 24,579 $ 18,970 $ 5,609 30 %$ 63,114 $ 51,405 $ 11,709 23 % Royalty revenue 1,317 1,206 111 9 % 4,065 2,046 2,019 99 % Total revenues$ 25,896 $ 20,176 $ 5,720 28 %$ 67,179 $ 53,451 $ 13,728 26 % Product sales Product sales by product were as follows for the periods indicated (dollars in thousands): Three Months Ended September Nine Months Ended September 30, Increase % Increase 30, Increase % Increase 2021 2020 (Decrease) (Decrease) 2021 2020 (Decrease) (Decrease) GOCOVRI$ 24,013 $ 18,970 $ 5,043 27 %$ 61,737 $ 51,405 $ 10,332 20 % OSMOLEX ER 566 - 566 NM 1,377 - 1,377 NM Total product sales$ 24,579 $ 18,970 $ 5,609 30 %$ 63,114 $ 51,405 $ 11,709 23 % NM - Not meaningful. 25
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Table of Contents The following table summarizes the approximate number of total GOCOVRI paid prescriptions for the periods indicated:
Three Months Ended September 30 , Increase % Increase Nine Months Ended September 30 , Increase % Increase
2021 2020 (Decrease) (Decrease) 2021 2020 (Decrease) (Decrease)
Total GOCOVRI Paid Prescriptions 10,700 7,785 2,915 37 % 28,835 22,905 5,930 26 %
GOCOVRI product sales increased by $5.0 million , or 27%, to $24.0 million for
the three months ended September 30, 2021 , from $19.0 million for the three
months ended September 30, 2020 , and increased by $10.3 million , or 20%, to
$61.7 million for the nine months ended September 30, 2021 , from $51.4 million
for the nine months ended September 30, 2020 . The increase in both periods was
due to growth in sales of GOCOVRI, in addition to a 3% price increase that went
into effect in January 2021 . The approximate number of total GOCOVRI paid
prescriptions increased by 2,915, or 37%, to 10,700 for the three months ended
September 30, 2021 , from 7,785 for the three months September 30, 2020 , and
increased by 5,930, or 26% to 28,835 for the nine months ended September 30,
2021 , from 22,905 for the nine months ended September 30, 2020 . OSMOLEX ER
product sales were $0.6 million and $1.4 million for the three and nine months
ended September 30, 2021 , compared to no sales for the three and nine months
ended September 30, 2020 , as we acquired OSMOLEX ER at the beginning of January
2021 .
Strong GOCOVRI patient persistence of 45%-50% at 12 months continued in the
third quarter of 2021. In addition to total paid prescriptions, we monitor new
paid prescriptions as a key performance indicator for our business. The
following table summarizes the approximate number of total GOCOVRI paid
prescriptions and approximate number of new GOCOVRI paid prescriptions for each
of the quarterly periods indicated:
Three Months Ended
September 30 June 30 March 31 December 31 September 30 June 30 March 31
2021 2021 2021 2020 2020 2020 2020
Total GOCOVRI paid
prescriptions 10,700 9,400 8,735 8,165 7,785 7,915 7,205
New GOCOVRI paid
prescriptions 690 730 590 510 430 370 500
Royalty revenue
Royalty revenue was $1.3 million and $4.1 million for the three and nine months
ended September 30, 2021 , respectively, compared to $1.2 million and $2.0
million for the three and nine months ended September 30, 2020 , respectively. We
began recognizing royalty revenue on net sales of NAMZARIC in May 2020 .
Cost of product sales
Cost of product sales for the periods indicated were as follows (dollars in
thousands):
Three Months Ended Nine Months Ended September
September 30, Increase % Increase 30, Increase % Increase
2021 2020 (Decrease) (Decrease) 2021 2020 (Decrease) (Decrease)Cost of product sales$ 576 $ 488 $ 88 18 %$ 1,488 $ 1,441 $ 47 3 % Cost of product sales increased by$0.1 million to$0.6 million , or 2% of product sales, for the three months endedSeptember 30, 2021 , from$0.5 million , or 3% of product sales, for the three months endedSeptember 30, 2020 ; and increased by$47,000 to$1.5 million , or 2% of product sales, for the nine months endedSeptember 30, 2021 , from$1.4 million , or 3% of product sales, for the nine months endedSeptember 30, 2020 . Included in cost of product sales for the nine months endedSeptember 30, 2021 and 2020, is a provision for the write-down of inventory of$29,000 and$0.3 million , respectively. Prior to receiving FDA approval inAugust 2017 , we recorded all inventory costs incurred in the manufacture of GOCOVRI to be sold upon commercialization as research and development expense. As ofJune 30, 2020 , substantially all the inventory that was previously expensed to research and development had been sold to customers. We do not expect our cost of product sales of GOCOVRI as a percentage of product sales to exceed 6% for the foreseeable future, excluding potential unknown one-time charges. 26 -------------------------------------------------------------------------------- Table of Contents Research and development expenses Research and development expenses for the periods indicated were as follows (dollars in thousands): Three Months Ended September Nine Months Ended September 30, Increase % Increase 30, Increase % Increase 2021 2020 (Decrease) (Decrease) 2021 2020 (Decrease) (Decrease) Research and development expenses$ 1,225 $ 2,333 $ (1,108) (47) %$ 4,485 $ 7,348 $ (2,863) (39) % Research and development expenses decreased by$1.1 million , or 47%, to$1.2 million for the three months endedSeptember 30, 2021 , from$2.3 million for the three months endedSeptember 30, 2020 ; and decreased by$2.9 million , or 39%, to$4.5 million for the nine months endedSeptember 30, 2021 , from$7.3 million for the nine months endedSeptember 30, 2020 . The decrease in research and development expenses for both periods was mainly attributable to lower clinical activity for the open-label extension study of ADS-5102 for the treatment of walking impairment in patients with multiple sclerosis. We discontinued additional development of this program inJune 2020 and the open-label extension study closed out during the second quarter of 2021. Included in research and development expenses was stock-based compensation expense, which was$0.1 million and$0.3 million for the three and nine months endedSeptember 30, 2021 , respectively, as well as the three and nine months endedSeptember 30, 2020 . Research and development expenses by category for the periods indicated were as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 GOCOVRI(1) $ 649$ 2,031 $ 2,850$ 6,183 Other research and development expenses 576 302 1,635 1,165 Total research and development expenses $ 1,225$ 2,333 $ 4,485$ 7,348 (1)Includes program costs we incurred for GOCOVRI (formerly referred to as ADS-5102) for the treatment of dyskinesia in patients with Parkinson's disease, and ADS-5102 (GOCOVRI) for additional potential CNS indications, including for the treatment of walking impairment in patients with multiple sclerosis. The program-specific expenses summarized in the table above include costs directly attributable to our product candidates. Other research and development expenses include costs for early stage programs and costs not allocated to a specific program. We allocate benefits, stock-based compensation, and indirect costs to our product candidates on a program-specific basis, and we include these costs in the program-specific expenses. We begin to track and report program-specific expenses for early stage programs once they have been nominated and selected for further development and clinical-stage work has commenced. Selling, general and administrative expenses, net Selling, general and administrative expenses, net were as follows (dollars in thousands): Three Months Ended September Nine Months Ended September 30, Increase % Increase 30, Increase % Increase 2021 2020 (Decrease) (Decrease) 2021 2020 (Decrease) (Decrease) Selling, general and administrative expenses, net$ 29,731 $ 26,120 $ 3,611 14 %$ 85,522 $ 73,849 $ 11,673 16 % Selling, general and administrative expenses, net, increased by$3.6 million , or 14%, to$29.7 million for the three months endedSeptember 30, 2021 , from$26.1 million for the three months endedSeptember 30, 2020 ; and increased by$11.7 million , or 16%, to$85.5 million for the nine months endedSeptember 30, 2021 , from$73.8 million for the nine months endedSeptember 30, 2020 . The increase in selling, general and administrative expenses for the three and nine months endedSeptember 30, 2021 , was primarily due to: increased costs of approximately$1.8 million and$4.1 million , respectively, in personnel related costs, including stock-based compensation; and increased costs of approximately$1.8 million and$7.6 million , respectively, for GOCOVRI related promotional costs, market research and other external professional services, costs for the initial promotion of OSMOLEX ER, and other general corporate expenses. Included in selling, general and administrative expenses was stock-based compensation expense, which was 27 -------------------------------------------------------------------------------- Table of Contents$1.8 million and$5.2 million for the three and nine months endedSeptember 30, 2021 , respectively, compared to$1.6 million and$4.5 million for the three and nine months endedSeptember 30, 2020 , respectively. Interest and other income (expense), net Interest and other income (expense), net were as follows (dollars in thousands): Three Months Ended September Nine Months Ended September 30, Increase % Increase 30, Increase % Increase 2021 2020 (Decrease) (Decrease) 2021 2020 (Decrease) (Decrease)
Interest and other income (expense), net$ (10,385) $ 355 $ (10,740) NM$ (9,721) $ 654 $ (10,375) NM NM - Not meaningful. Interest and other expense, net, for the three and nine months endedSeptember 30, 2021 was$10.4 million and$9.7 million , respectively, compared to interest and other income, net, of$0.4 million and$0.7 million for the three and nine months endedSeptember 30, 2020 , respectively. During the three months endedSeptember 30, 2021 there was a loss on the fair value of the embedded derivative liability related to our Royalty-Backed Loan with HCR of$10.4 million compared to a gain of$0.2 million during the three months endedSeptember 30, 2020 . During the nine months endedSeptember 30, 2021 there was a loss on the fair value of the embedded derivative liability of$9.8 million , compared to a loss of$0.3 million during the nine months endedSeptember 30, 2020 . The change in the fair value of the embedded derivative liability was due to an increase in the probability of a change in control. For further discussion of the Merger Agreement we entered into with Supernus Pharmaceuticals, Inc., see "Note 14. Subsequent Event" in the accompanying "Notes to Condensed Consolidated Financial Statements (unaudited)" in Item 1 of this Quarterly Report on Form 10-Q. During the nine months endedSeptember 30, 2021 there was also lower interest income due to lower interest rates compared to the nine months endedSeptember 30, 2020 . Interest expense Interest expense related to our Royalty-Backed Loan was as follows (in thousands, except percentages): Three Months Ended September Nine Months Ended September 30, Increase % Increase 30, Increase % Increase 2021 2020 (Decrease) (Decrease) 2021 2020 (Decrease) (Decrease) Interest expense$ 3,497 $ 3,506 $ (9) 0 %$ 10,398 $ 10,597 $ (199) (2) % Interest expense for the three and nine months endedSeptember 30, 2021 remained relatively consistent with the three and nine months endedSeptember 30, 2020 . Liquidity and Capital Resources Our principal sources of liquidity are our cash, cash equivalents, and investments, which totaled$111.1 million and$83.4 million atSeptember 30, 2021 andDecember 31, 2020 , respectively. As ofSeptember 30, 2021 , we had an accumulated deficit of$549.7 million . Prior to 2019, we raised an aggregate of approximately$336.6 million in sales of equity securities and entered into a Royalty-Backed Loan with HCR, whereby we borrowed a total of$100.0 million . As ofSeptember 30, 2021 , the total remaining payment obligation of the Royalty-Backed Loan was$167.9 million . SinceJanuary 1, 2019 , we have funded our operations primarily through sales of GOCOVRI, through sales of our common stock, and to a lesser extent through royalties received on net sales of NAMZARIC and sales of OSMOLEX ER. InNovember 2019 , we entered into a sales agreement withCowen and Company, LLC , pursuant to which we may, from time to time, issue and sell shares of common stock having an aggregate offering value of up to$50.0 million . As ofSeptember 30, 2021 , we had issued 1,553,299 shares of common stock under the sales agreement and raised net proceeds of$8.3 million , including 1,335,896 shares sold at an average price of$5.57 , for net proceeds of$7.2 million during the nine months endedSeptember 30, 2021 . We did not issue any shares under this agreement during the three months endedSeptember 30, 2021 . InMarch 2021 , we completed a follow-on public offering of 14,375,000 shares of our common stock, which includes the exercise in full by the underwriters of their option to purchase 1,875,000 shares of common stock, at an 28 -------------------------------------------------------------------------------- Table of Contents offering price of$4.40 per share. Proceeds from the follow-on public offering were approximately$59.3 million , net of underwriting discounts and offering-related transaction costs. We believe our existing cash, cash equivalents, and investments atSeptember 30, 2021 will be sufficient to fund our projected operating requirements, including continued commercialization of GOCOVRI for the treatment of OFF and dyskinesia in patients with Parkinson's disease and OSMOLEX ER activities, for at least 12 months from the issuance of this Quarterly Report on Form 10-Q. However, it is possible that we will not achieve the progress that we expect, because revenues from GOCOVRI and OSMOLEX ER may be less than anticipated, especially in light of the current COVID-19 pandemic, and the actual costs and timing of drug development, particularly clinical studies, and regulatory approvals are difficult to predict, subject to substantial risks and delays, and often vary depending on the particular indication and development strategy. The duration and severity of the COVID-19 pandemic is unknown and makes projecting the outcome of future developments highly uncertain and cannot be predicted with confidence. Moreover, the costs associated with commercializing drugs are high and market acceptance is uncertain. We expect to incur substantial expenses and operating losses for the foreseeable future. We expect to continue significant spending in connection with the continued commercialization of GOCOVRI for the treatment of OFF and dyskinesia in patients with Parkinson's disease, OSMOLEX ER activities, and potential development of additional product candidates. If the pending acquisition of our company by Supernus Pharmaceuticals, Inc. (the "Merger") does not close, to continue these activities, we may decide to raise additional funds through a combination of public equity offerings, debt financings, royalty financings, collaborations, strategic alliances, licensing arrangements, asset sales, and other marketing and distribution arrangements. Sufficient additional funding may not be available on acceptable terms, or at all, especially as a result of the economic downturn occurring and expected to continue as a result of the emergence of new variants and actions taken to contain the spread of COVID-19. If the Merger does not close and if adequate funds are not available in the future, we may need to delay, reduce the scope of, or put on hold our clinical studies, research and development programs, or commercialization efforts. The following table summarizes our cash flows for the periods indicated (in thousands): Nine Months Ended September 30, 2021 2020 Net cash (used in) provided by: Operating activities$ (36,486) $ (40,381) Investing activities (22,066) 25,030 Financing activities 65,515 380
Net increase (decrease) in cash and cash equivalents $ 6,963
Net Cash Used In Operating Activities Net cash used in operating activities was$36.5 million for the nine months endedSeptember 30, 2021 and consisted primarily of our net loss of$44.4 million and net changes in operating assets and liabilities of$8.4 million , partially offset by non-cash adjustments of$16.4 million . Changes in our operating assets and liabilities consisted primarily of: a decrease in accrued liabilities and other liabilities of$14.3 million mainly related to payment to Osmotica representing a patent litigation settlement, payout of the 2020 annual bonus, and release of a litigation settlement liability which amount was paid by insurance to the settlement class members; an increase in accounts receivable of$2.0 million due to higher unit sales and timing of receivable collections; offset by a decrease in prepaid expenses and other assets of$7.2 million mainly related to release of an insurance litigation recovery which amount was paid by insurance to the settlement class members. The non-cash adjustments consisted mainly of stock-based compensation of$5.5 million and a change in the fair value of the embedded derivative liability related to our Royalty-Backed Loan with HCR of$9.8 million .Net Cash Used In Investing Activities Net cash used in investing activities was$22.1 million for the nine months endedSeptember 30, 2021 , mainly as a result of purchases of available-for-sale securities, net of maturities, of$20.7 million , and the acquisition of OSMOLEX ER of$1.3 million . 29 -------------------------------------------------------------------------------- Table of Contents Net Cash Provided By Financing Activities Net cash provided by financing activities was$65.5 million for the nine months endedSeptember 30, 2021 , as a result of: cash proceeds of$59.3 million related to ourMarch 2021 follow-on public offering;$7.2 million related to the sale of common stock under a controlled equity offering; and$0.7 million related to the exercise of stock options and purchases of common stock under the Employee Stock Purchase Plan; offset in part by$1.7 million of principal payments on our Royalty-Backed Loan with HCR. Off-balance sheet arrangements Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities, or variable interest entities. Contractual obligations Our future non-cancelable contractual obligations were reported in our Annual Report on Form 10-K for the year endedDecember 31, 2020 that was filed with theSEC onFebruary 23, 2021 . There have been no material changes outside the ordinary course of our business to our future non-cancelable contractual obligations during the nine months endedSeptember 30, 2021 . 30
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