10-Q 1 d381839d10q.htm 10-Q 10-Q
Table of Contents
falseQ30001567514--12-31 0001567514 2022-01-01 2022-09-30 0001567514 2022-07-01 2022-09-30 0001567514 2021-07-01 2021-09-30 0001567514 2021-01-01 2021-09-30 0001567514 2022-01-07 2022-01-07 0001567514 2021-12-31 0001567514 2022-09-30 0001567514 2022-01-07 0001567514 2022-11-01 0001567514 2021-09-30 0001567514 2022-06-30 0001567514 2020-12-31 0001567514 2021-06-30 0001567514 itci:BristolMyersSquibbCompanyMember us-gaap:ProductMember 2022-09-30 0001567514 itci:TimeBasedRestrictedStockUnitsRSUMember 2022-09-30 0001567514 itci:VehicleFleetLeaseMember 2022-09-30 0001567514 itci:RealEstatesLeaseMember 2022-09-30 0001567514 us-gaap:PurchaseCommitmentMember itci:SiegfriedCampaignMember 2022-09-30 0001567514 itci:FDICCertificatesOfDepositMember 2022-09-30 0001567514 us-gaap:CorporateDebtSecuritiesMember 2022-09-30 0001567514 us-gaap:CommercialPaperMember 2022-09-30 0001567514 us-gaap:CertificatesOfDepositMember 2022-09-30 0001567514 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-09-30 0001567514 itci:ContractualMaturityMoreThanOneYearAndLessThanTwoYearsMember 2022-09-30 0001567514 itci:FDICCertificatesOfDepositMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 itci:FDICCertificatesOfDepositMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 itci:FDICCertificatesOfDepositMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 us-gaap:FairValueMeasurementsRecurringMember itci:FDICCertificatesOfDepositMember 2022-09-30 0001567514 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2022-09-30 0001567514 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2022-09-30 0001567514 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:CorporateDebtSecuritiesMember 2022-09-30 0001567514 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:CorporateDebtSecuritiesMember 2022-09-30 0001567514 us-gaap:CorporateDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2022-09-30 0001567514 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2022-09-30 0001567514 us-gaap:CertificatesOfDepositMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2022-09-30 0001567514 us-gaap:CertificatesOfDepositMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 us-gaap:CertificatesOfDepositMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 us-gaap:CertificatesOfDepositMember us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2022-09-30 0001567514 us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2022-09-30 0001567514 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-09-30 0001567514 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-09-30 0001567514 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2022-09-30 0001567514 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:MoneyMarketFundsMember 2022-09-30 0001567514 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember 2022-09-30 0001567514 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MoneyMarketFundsMember 2022-09-30 0001567514 us-gaap:FairValueInputsLevel3Member 2022-09-30 0001567514 us-gaap:CashAndCashEquivalentsMember 2022-09-30 0001567514 itci:LonzaCampaignMember us-gaap:PurchaseCommitmentMember 2021-12-31 0001567514 us-gaap:CorporateDebtSecuritiesMember 2021-12-31 0001567514 us-gaap:CommercialPaperMember 2021-12-31 0001567514 us-gaap:CertificatesOfDepositMember 2021-12-31 0001567514 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2021-12-31 0001567514 itci:ContractualMaturityMoreThanOneYearAndLessThanTwoYearsMember 2021-12-31 0001567514 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001567514 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001567514 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0001567514 us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001567514 us-gaap:CorporateDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001567514 us-gaap:CorporateDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001567514 us-gaap:CorporateDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0001567514 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2021-12-31 0001567514 us-gaap:CommercialPaperMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001567514 us-gaap:CommercialPaperMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001567514 us-gaap:CommercialPaperMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0001567514 us-gaap:CommercialPaperMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001567514 us-gaap:CertificatesOfDepositMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001567514 us-gaap:CertificatesOfDepositMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001567514 us-gaap:CertificatesOfDepositMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0001567514 us-gaap:CertificatesOfDepositMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001567514 us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001567514 us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0001567514 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2021-12-31 0001567514 us-gaap:USGovernmentAgenciesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001567514 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001567514 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MoneyMarketFundsMember 2021-12-31 0001567514 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0001567514 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0001567514 us-gaap:FairValueInputsLevel3Member 2021-12-31 0001567514 us-gaap:CashAndCashEquivalentsMember 2021-12-31 0001567514 us-gaap:GrantMember 2022-07-01 2022-09-30 0001567514 us-gaap:ProductMember 2022-07-01 2022-09-30 0001567514 us-gaap:CommonStockMember 2022-07-01 2022-09-30 0001567514 us-gaap:AdditionalPaidInCapitalMember 2022-07-01 2022-09-30 0001567514 us-gaap:RetainedEarningsMember 2022-07-01 2022-09-30 0001567514 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-07-01 2022-09-30 0001567514 us-gaap:RestrictedStockUnitsRSUMember 2022-07-01 2022-09-30 0001567514 itci:TotalShareholderReturnRestrictedStockUnitsMember 2022-07-01 2022-09-30 0001567514 us-gaap:EmployeeStockOptionMember 2022-07-01 2022-09-30 0001567514 us-gaap:GrantMember 2021-07-01 2021-09-30 0001567514 us-gaap:ProductMember 2021-07-01 2021-09-30 0001567514 us-gaap:CommonStockMember 2021-07-01 2021-09-30 0001567514 us-gaap:AdditionalPaidInCapitalMember 2021-07-01 2021-09-30 0001567514 us-gaap:RetainedEarningsMember 2021-07-01 2021-09-30 0001567514 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-07-01 2021-09-30 0001567514 us-gaap:EmployeeStockOptionMember 2021-07-01 2021-09-30 0001567514 us-gaap:RestrictedStockUnitsRSUMember 2021-07-01 2021-09-30 0001567514 itci:TotalShareholderReturnRestrictedStockUnitsMember 2021-07-01 2021-09-30 0001567514 us-gaap:RestrictedStockUnitsRSUMember 2022-01-01 2022-09-30 0001567514 itci:JanuaryTwoThousandAndTwentyInitialPublicOfferingMember 2022-01-01 2022-09-30 0001567514 itci:JanuaryTwoThousandAndTwentyInitialPublicOfferingMember us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-09-30 0001567514 us-gaap:CommonStockMember itci:JanuaryTwoThousandAndTwentyInitialPublicOfferingMember 2022-01-01 2022-09-30 0001567514 srt:MinimumMember itci:BristolMyersSquibbCompanyMember us-gaap:ProductMember 2022-01-01 2022-09-30 0001567514 us-gaap:ProductMember itci:BristolMyersSquibbCompanyMember srt:MaximumMember 2022-01-01 2022-09-30 0001567514 us-gaap:GrantMember 2022-01-01 2022-09-30 0001567514 us-gaap:ProductMember 2022-01-01 2022-09-30 0001567514 itci:BristolMyersSquibbCompanyMember us-gaap:ProductMember 2022-01-01 2022-09-30 0001567514 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-09-30 0001567514 us-gaap:CommonStockMember 2022-01-01 2022-09-30 0001567514 itci:TimeBasedRestrictedStockUnitsRSUMember 2022-01-01 2022-09-30 0001567514 us-gaap:RetainedEarningsMember 2022-01-01 2022-09-30 0001567514 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-09-30 0001567514 itci:CustomerThreeMember us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember 2022-01-01 2022-09-30 0001567514 itci:CustomerTwoMember us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember 2022-01-01 2022-09-30 0001567514 us-gaap:CustomerConcentrationRiskMember itci:CustomerOneMember us-gaap:AccountsReceivableMember 2022-01-01 2022-09-30 0001567514 us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember srt:MaximumMember 2022-01-01 2022-09-30 0001567514 itci:TwoThousandEighteenEquityIncentivePlanMember 2022-01-01 2022-09-30 0001567514 us-gaap:EmployeeStockOptionMember 2022-01-01 2022-09-30 0001567514 us-gaap:RestrictedStockUnitsRSUMember 2022-01-01 2022-09-30 0001567514 itci:TotalShareholderReturnRestrictedStockUnitsMember 2022-01-01 2022-09-30 0001567514 us-gaap:GrantMember 2021-01-01 2021-09-30 0001567514 us-gaap:ProductMember 2021-01-01 2021-09-30 0001567514 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-09-30 0001567514 us-gaap:CommonStockMember 2021-01-01 2021-09-30 0001567514 itci:TimeBasedRestrictedStockUnitsRSUMember 2021-01-01 2021-09-30 0001567514 us-gaap:RetainedEarningsMember 2021-01-01 2021-09-30 0001567514 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-09-30 0001567514 us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember itci:CustomerThreeMember 2021-01-01 2021-09-30 0001567514 itci:CustomerTwoMember us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember 2021-01-01 2021-09-30 0001567514 itci:CustomerOneMember us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember 2021-01-01 2021-09-30 0001567514 srt:MinimumMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2021-01-01 2021-09-30 0001567514 itci:BristolMyersSquibbCompanyMember us-gaap:ProductMember 2021-01-01 2021-09-30 0001567514 us-gaap:EmployeeStockOptionMember 2021-01-01 2021-09-30 0001567514 us-gaap:RestrictedStockUnitsRSUMember 2021-01-01 2021-09-30 0001567514 itci:TotalShareholderReturnRestrictedStockUnitsMember 2021-01-01 2021-09-30 0001567514 us-gaap:IPOMember 2022-01-07 2022-01-07 0001567514 stpr:NY 2018-09-30 0001567514 itci:BristolMyersSquibbCompanyMember us-gaap:ProductMember 2005-05-31 2005-05-31 0001567514 itci:ITCINationalDemocraticAllianceMemberMember itci:BristolMyersSquibbCompanyMember us-gaap:ProductMember 2020-01-01 2020-12-31 0001567514 itci:InducementAwardPlanMember 2019-12-31 0001567514 us-gaap:RestrictedStockUnitsRSUMember 2021-01-01 2021-12-31 0001567514 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-06-30 0001567514 us-gaap:RetainedEarningsMember 2022-06-30 0001567514 us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0001567514 us-gaap:CommonStockMember 2022-06-30 0001567514 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-09-30 0001567514 us-gaap:RetainedEarningsMember 2022-09-30 0001567514 us-gaap:AdditionalPaidInCapitalMember 2022-09-30 0001567514 us-gaap:CommonStockMember 2022-09-30 0001567514 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-06-30 0001567514 us-gaap:RetainedEarningsMember 2021-06-30 0001567514 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001567514 us-gaap:CommonStockMember 2021-06-30 0001567514 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-09-30 0001567514 us-gaap:RetainedEarningsMember 2021-09-30 0001567514 us-gaap:AdditionalPaidInCapitalMember 2021-09-30 0001567514 us-gaap:CommonStockMember 2021-09-30 0001567514 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001567514 us-gaap:RetainedEarningsMember 2021-12-31 0001567514 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001567514 us-gaap:CommonStockMember 2021-12-31 0001567514 us-gaap:RestrictedStockUnitsRSUMember 2021-12-31 0001567514 us-gaap:RestrictedStockUnitsRSUMember 2022-09-30 0001567514 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001567514 us-gaap:RetainedEarningsMember 2020-12-31 0001567514 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001567514 us-gaap:CommonStockMember 2020-12-31 iso4217:USD xbrli:shares xbrli:pure utr:Year itci:Segment iso4217:USD xbrli:shares
 
UNITED STATES
SECURITIES AND
E
XCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
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:
001-36274
 
 
INTRA-CELLULAR THERAPIES, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
36-4742850
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
   
430 East 29th Street
New York, New York
 
10016
(Address of principal executive offices)
 
(Zip Code)
(646)
440-9333
(Registrant’s telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock
 
ITCI
 
The Nasdaq Global Select Market
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  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2
of the Exchange Act.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated
filer
     Smaller reporting company  
       
         Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  
As of November 1, 2022, the registrant had 94,705,054 shares of common stock outstanding.
 
 
 


Table of Contents

Intra-Cellular Therapies, Inc.

Index to Form 10-Q

 

PART I: FINANCIAL INFORMATION

     1  
Item 1.  

FINANCIAL STATEMENTS

     1  
 

Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021

     1  
 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)

     2  
 

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021 (unaudited)

     3  
 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (unaudited)

     4  
 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)

     5  
 

Notes to Condensed Consolidated Financial Statements (unaudited)

     6  
Item 2.  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     12  
Item 3.  

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     21  
Item 4.  

CONTROLS AND PROCEDURES

     22  
PART II: OTHER INFORMATION      22  
Item 1.  

LEGAL PROCEEDINGS

     22  
Item 1A.  

RISK FACTORS

     22  
Item 2.  

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     23  
Item 3.  

DEFAULTS UPON SENIOR SECURITIES

     23  
Item 4.  

MINE SAFETY DISCLOSURES

     23  
Item 5.  

OTHER INFORMATION

     23  
Item 6.  

EXHIBITS

     24  
SIGNATURES      25  

In this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” and the “Company” mean Intra-Cellular Therapies, Inc. and our subsidiaries. “ITI” refers to our wholly-owned subsidiary ITI, Inc. and “ITI Limited” refers to our wholly-owned subsidiary ITI Limited.

 

i


Table of Contents
PART I: FINANCIAL INFORMATION
 
Item 1.
FINANCIAL STATEMENTS
Intra-Cellular Therapies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (in thousands except share and per share amounts)
 
 
  
September 30,
2022
 
 
December 31,
2021
 
 
  
(Unaudited)
 
 
 
 
Assets
  
     
 
     
Current assets:
  
     
 
     
Cash and cash equivalents
  
$
135,358
 
  $ 92,365  
Investment securities,
available-for-sale
  
 
493,383
 
    319,968  
Restricted cash
  
 
1,750
 
    1,400  
Accounts receivable, net
  
 
61,538
 
    20,156  
Inventory
  
 
23,597
 
    7,948  
Prepaid expenses and other current assets
  
 
44,130
 
    25,444  
    
 
 
   
 
 
 
Total current assets
  
 
759,756
 
    467,281  
Property and equipment, net
  
 
2,084
 
    1,791  
Right of use assets, net
  
 
20,073
 
    20,764  
Other assets
  
 
86
 
    86  
    
 
 
   
 
 
 
Total assets
  
$
781,999
 
  $ 489,922  
    
 
 
   
 
 
 
Liabilities and stockholders’ equity
                
Current liabilities:
                
Accounts payable
  
$
14,219
 
  $ 8,691  
Accrued and other current liabilities
  
 
14,850
 
    11,073  
Accrued customer programs
  
 
19,946
 
    5,964  
Accrued employee benefits
  
 
21,150
 
    20,897  
Lease liabilities, short-term
  
 
7,245
 
    6,732  
    
 
 
   
 
 
 
Total current liabilities
  
 
77,410
 
    53,357  
Lease liabilities
  
 
19,167
 
    18,675  
    
 
 
   
 
 
 
Total liabilities
  
 
96,577
 
    72,032  
Stockholders’ equity:
                
Common stock, $0.0001 par value: 175,000,000 shares authorized at September 30, 2022 and December 31, 2021; 94,701,662 and 81,886,965 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
  
 
9
 
    8  
Additional
paid-in
capital
  
 
2,124,369
 
    1,639,476  
Accumulated deficit
  
 
(1,433,460
    (1,221,230
Accumulated comprehensive loss
  
 
(5,496
    (364
    
 
 
   
 
 
 
Total stockholders’ equity
  
 
685,422
 
    417,890  
    
 
 
   
 
 
 
Total liabilities and stockholders’ equity
  
$
781,999
 
  $ 489,922  
    
 
 
   
 
 
 
See accompanying notes to these condensed consolidated financial statements.
 
1

Intra-Cellular Therapies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (in thousands except share and per share amounts) (Unaudited)
 
 
  
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 
 
  
        2022        
 
 
        2021        
 
 
        2022        
 
 
        2021        
 
Revenues
  
 
 
 
Product sales, net
  
$
71,870
 
  $ 21,606    
$
161,699
 
  $ 56,192  
Grant revenue
  
 
  
 
    601    
 
746
 
    1,940  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues
  
 
71,870
 
    22,207    
 
162,445
 
    58,132  
Operating expenses:
                
Cost of product sales
  
 
5,850
 
    2,001    
 
13,655
 
    5,496  
Selling, general and administrative
  
 
88,375
 
    70,498    
 
264,151
 
    192,933  
Research and development
  
 
33,274
 
    27,032    
 
100,853
 
    59,387  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
  
 
127,499
 
    99,531    
 
378,659
 
    257,816  
    
 
 
   
 
 
   
 
 
   
 
 
 
Loss from operations
  
 
(55,629
    (77,324  
 
(216,214
    (199,684
Interest income
  
 
2,122
 
    393    
 
3,990
 
    1,298  
    
 
 
   
 
 
   
 
 
   
 
 
 
Loss before provision for income taxes
  
 
(53,507
    (76,931  
 
(212,224
    (198,386
Income tax (expense) benefit
  
 
(1
    23    
 
(6
    (6
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss
  
$
(53,508
  $ (76,908  
$
(212,230
  $ (198,392
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per common share:
                
Basic & Diluted
  
$
(0.57
  $ (0.95  
$
(2.26
  $ (2.44
Weighted average number of common shares:
                
Basic & Diluted
  
 
94,516,794
 
    81,354,724    
 
93,809,124
 
    81,178,482  
See accompanying notes to these condensed consolidated financial statements.
 
2

Intra-Cellular Therapies, Inc. and S
ubsi
diaries
Condensed Consolidated Statements of Comprehensive Loss (in thousands) (Unaudited)
 
 
  
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 
 
  
        2022        
 
 
        2021        
 
 
        2022        
 
 
        2021        
 
Net loss
  
$
(53,508
  $ (76,908  
$
(212,230
  $ (198,392
Other comprehensive income:
                                
Unrealized loss on investment securities
  
 
(694
    (83  
 
(5,132
    (387
    
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive loss
  
$
(54,202
  $ (76,991  
$
(217,362
  $ (198,779
    
 
 
   
 
 
   
 
 
   
 
 
 
See accompanying notes to these condensed consolidated financial statements.
 
3

Intra-Cellular Therapies, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity (in thousands except share and per share amounts) (Unaudited)
 
 
  
 
Common Stock
 
  
Additional
Paid-in

Capital
 
  
Accumulated
Deficit
 
 
Accumulated
Comprehensive
(Loss) Income
 
 
Total
Stockholders’
Equity
 
 
  
Shares
 
  
Amount
 
Balance at June 30, 2021
     81,311,878      $ 8      $ 1,611,990      $ (1,058,588   $ 177     $ 553,587  
Exercise of stock options and issuances of restricted stock
     64,489                  591        —         —         591  
Stock issued for services
     1,039        —          39        —         —         39  
Share-based compensation
     —          —          9,530        —         —         9,530  
Net loss
     —          —          —          (76,908     —         (76,908
Other comprehensive loss
     —          —          —          —         (83     (83
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance at September 30, 2021
     81,377,406      $ 8      $ 1,622,150      $ (1,135,496   $ 94     $ 486,756  
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
 
  
 
Common Stock
 
  
Additional
Paid-in

Capital
 
  
Accumulated
Deficit
 
 
Accumulated
Comprehensive
(Loss) Income
 
 
Total
Stockholders’
Equity
 
 
  
Shares
 
  
Amount
 
Balance at December 31, 2020
     80,463,089      $ 8      $ 1,593,475      $ (937,104   $ 481     $ 656,860  
Exercise of stock options and issuances of restricted stock
     910,428                  3,605        —         —         3,605  
Stock issued for services
     3,889        —          145        —         —         145  
Share-based compensation
     —          —          24,925        —         —         24,925  
Net loss
     —          —          —          (198,392     —         (198,392
Other comprehensive loss
     —          —          —          —         (387     (387
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance at September 30, 2021
     81,377,406      $ 8      $ 1,622,150      $ (1,135,496   $ 94     $ 486,756  
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
  
 
Common Stock
 
  
Additional
Paid-in

Capital
 
  
Accumulated
Deficit
 
 
Accumulated
Comprehensive
Loss
 
 
Total
Stockholders’
Equity
 
 
  
Shares
 
  
Amount
 
Balance at June 30, 2022
    
94,367,233
    
$
9
 
  
$
2,106,942
 
  
$
(1,379,952
 
$
(4,802
 
$
722,197
 
Exercise of stock options and issuances of restricted stock
  
 
333,954
 
  
 
  
 
  
 
5,654
 
  
 
—  
 
 
 
—  
 
 
 
5,654
 
Stock issued for services
  
 
475
 
  
 
—  
 
  
 
22
 
  
 
—  
 
 
 
—  
 
 
 
22
 
Share-based compensation
  
 
—  
 
  
 
—  
 
  
 
11,751
 
  
 
—  
 
 
 
—  
 
 
 
11,751
 
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(53,508
 
 
—  
 
 
 
(53,508
Other comprehensive loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
(694
 
 
(694
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance at September 30, 2022
  
 
94,701,662
 
  
$
9
 
  
$
2,124,369
 
  
$
(1,433,460
 
$
(5,496
 
$
685,422
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
 
  
 
Common Stock
 
  
Additional
Paid-in

Capital
 
  
Accumulated
Deficit
 
 
Accumulated
Comprehensive
Loss
 
 
Total
Stockholders’
Equity
 
 
  
Shares
 
  
Amount
 
Balance at December 31, 2021
  
 
81,886,965
 
  
$
8
 
  
$
1,639,476
 
  
$
(1,221,230
 
$
(364
 
$
417,890
 
Common shares issued January 7, 2022
  
 
10,952,381
 
  
 
1
 
  
 
433,724
 
  
 
—  
 
 
 
—  
 
 
 
433,725
 
Exercise of stock options and issuances of restricted stock
  
 
1,861,061
 
  
 
—  
 
  
 
19,247
 
  
 
—  
 
 
 
—  
 
 
 
19,247
 
Stock issued for services
  
 
1,255
 
  
 
—  
 
  
 
68
 
  
 
—  
 
 
 
—  
 
 
 
68
 
Share-based compensation
  
 
—  
 
  
 
—  
 
  
 
31,854
 
  
 
—  
 
 
 
—  
 
 
 
31,854
 
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(212,230
 
 
—  
 
 
 
(212,230
Other comprehensive loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
(5,132
 
 
(5,132
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance at September 30, 2022
  
 
94,701,662
 
  
$
9
 
  
$
2,124,369
 
  
$
(1,433,460
 
$
(5,496
 
$
685,422
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
See accompanying notes to these condensed consolidated financial statements.
 
4

Intra-Cellular Therapies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)
 
 
  
Nine Months Ended September 30,
 
 
  
        2022        
 
 
        2021        
 
Cash flows used in operating activities
  
 
Net loss
  
$
(212,230
  $ (198,392
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation
  
 
513
 
    387  
Share-based compensation
  
 
31,854
 
    24,925  
Stock issued for services
  
 
68
 
    145  
Amortization of premiums and discounts on investment securities, net
  
 
(717
    (3,301
Changes in operating assets and liabilities:
                
Accounts receivable, net
  
 
(41,382
    (6,170
Inventory
  
 
(15,649
    (1,111
Prepaid expenses and other assets
  
 
(18,686
    (15,222
Accounts payable
  
 
5,528
 
    6,529  
Accrued and other current liabilities
  
 
3,777
 
    4,246  
Accrued customer programs
  
 
13,982
 
    1,779  
Accrued employee benefits
  
 
253
 
    (53
Lease liabilities, net
  
 
1,696
 
    (122
    
 
 
   
 
 
 
Net cash used in operating activities
  
 
(230,993
    (186,360
Cash flows (used in) provided by investing activities
                
Purchases of investments
  
 
(643,707
    (155,194
Maturities of investments
  
 
465,877
 
    384,353  
Purchases of property and equipment
  
 
(806
    (324
    
 
 
   
 
 
 
Net cash (used in) provided by investing activities
  
 
(178,636
    228,835  
Cash flows provided by financing activities
                
Proceeds of public offering, net
  
 
433,725
 
 
 
  
 
Proceeds from exercise of stock options
  
 
19,247
 
    3,605  
    
 
 
   
 
 
 
Net cash provided by financing activities
  
 
452,972
 
    3,605  
    
 
 
   
 
 
 
Net increase in cash, cash equivalents, and restricted cash
  
 
43,343
 
    46,080  
Cash, cash equivalents, and restricted cash at beginning of period
  
 
93,765
 
    61,446  
    
 
 
   
 
 
 
Cash, cash equivalents, and restricted cash at end of period
  
$
137,108
 
  $ 107,526  
    
 
 
   
 
 
 
N
on-cash investing and financing activities

Right of use assets under operating leases
  
$
5,375
 
  $ 8,918  
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows:
 
 
  
September 30,
 
 
  
2022
 
  
2021
 
Cash and cash equivalents
  
$
135,358
 
   $ 106,126  
Restricted cash
  
 
1,750
 
     1,400  
    
 
 
    
 
 
 
Total cash, cash equivalents and restricted cash
  
$
137,108
 
   $ 107,526  
    
 
 
    
 
 
 
See accompanying notes to these condensed consolidated financial statements.
 
5

Intra-Cellular Therapies, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2022
1. Organization
Intra-Cellular Therapies, Inc. (the “Company”), through its wholly-owned operating subsidiaries, ITI, Inc. (“ITI”) and ITI Limited, is a biopharmaceutical company focused on the discovery, clinical development and commercialization of innovative, small molecule drugs that address underserved medical needs primarily in neuropsychiatric and neurological disorders by targeting intracellular signaling mechanisms within the central nervous system (“CNS”). In December 2019, the U.S. Food and Drug Administration (“FDA”) approved CAPLYTA
®
(lumateperone) for the treatment of schizophrenia in adults (42mg/day). The Company initiated the commercial launch of CAPLYTA in late March 2020. In December 2021, the FDA approved CAPLYTA for the treatment of bipolar depression (42mg/day). Additionally, in April 2022, the FDA approved two new dosage strengths of CAPLYTA, 10.5 mg and 21 mg capsules, to provide dosage recommendations for patients concomitantly taking strong or moderate CYP3A4 inhibitors, and 21 mg for patients with moderate or severe hepatic impairment (Child-Pugh class B or C). The commercial launch of these special population doses occurred in August 2022. As used in these Notes to Condensed Consolidated Financial Statements, “CAPLYTA” refers to lumateperone approved by the FDA for the treatment of schizophrenia and bipolar depression in adults, and “lumateperone” refers to, where applicable, CAPLYTA as well as lumateperone for the treatment of indications beyond schizophrenia and bipolar depression. Lumateperone is in Phase 3 clinical development as a novel treatment for major depressive disorder.
On January 7, 2022, the Company completed a public offering of common stock in which the Company sold 10,952,381 shares of common stock at a public offering price of $42.00 per share for aggregate gross proceeds of $460.0 million. After deducting underwriting discounts, commissions and offering expenses, the net proceeds to the Company were approximately $433.7 million. In order to further its commercial activities and research projects and support its collaborations, the Company may require additional financing until such time, if ever, that revenue streams are sufficient to generate consistent positive cash flow from operations. The Company currently projects that its cash, cash equivalents and investments will be sufficient to fund operating expenses and capital expenditures for at least one year from the date that these financial statements are filed with the Securities and Exchange Commission (the “SEC”). Possible sources of funds include public or private sales of the Company’s equity securities, sales of debt or convertible debt securities, the incurrence of debt from commercial lenders, strategic collaborations, licensing a portion or all of the Company’s products, product candidates and technology and, to a much lesser extent, grant funding.
On January 6, 2020, the Company filed an automatic shelf registration statement on Form
S-3
with the SEC, which became effective upon filing, on which the Company registered for sale an unlimited amount of any combination of its common stock, preferred stock, debt securities, warrants, rights, and/or units from time to time and at prices and on terms that the Company may determine, so long as the Company continues to satisfy the requirements of a “well-known seasoned issuer” under SEC rules. This registration statement will remain in effect for up to three years from the date it became effective.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements of Intra-Cellular Therapies, Inc. and its wholly own subsidiaries have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP set forth in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). All intercompany accounts and transactions have been eliminated in consolidation. The Company currently operates in one operating segment. Operating segments are defined as components of an enterprise about which separate discrete information is available for the chief operating decision maker, or decision making group, in deciding how to allocate resources and assessing performance. The Company views its operations and manages its business in one segment, which is discovering, developing and commercializing drugs primarily for the treatment of neurological and psychiatric disorders.
Recent Accounting Pronouncements
Management has evaluated all accounting pronouncements issued through the date of the condensed consolidated financial statements and does not believe that any recently issued, but not yet effective, pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
 
6

Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although actual results could differ from those estimates, management does not believe that such differences would be material.
Significant Accounting Policies
The accounting policies used by the Company in its presentation of interim financial results are consistent with those presented in Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2021.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist of accounts receivable, net from customers and cash, cash equivalent and investments held at financial institutions. As of September 30, 2022, all of the Company’s accounts receivable, net arose from product sales in the United States. For the nine-month periods ended September 30, 2022 and 2021, respectively, 97% and 96% of sales were from three major wholesalers accounting for approximately 39%, 30%, and 28%, and 40%, 29%, and 27% of product sales, for the same periods, respectively. The percentage of the total net product sales by individual customers has not significantly changed since inception. All customers have standard payment terms which generally require payment within 60 days. As of September 30, 2022, the Company continues to believe that such customers are of high credit quality.
3. Investment Securities
Investment securities consisted of the following (in thousands):
 
 
  
September 30, 2022
 
 
  
Amortized
Cost
 
  
Unrealized
Gains
 
  
Unrealized
(Losses)
 
  
Estimated
Fair
Value
 
 
  
(Unaudited)
 
U.S. Government Agency Securities
   $ 183,278      $ 1      $ (2,070    $ 181,209  
FDIC Certificates of Deposit
     3,177                  (73      3,104  
Certificates of Deposit
     7,500                            7,500  
Commercial Paper
     125,043                  (372      124,671  
Corporate Notes/Bonds
     215,853                  (2,982      212,871  
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 534,851      $ 1      $ (5,497    $ 529,355  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
    
December 31, 2021
 
    
Amortized
Cost
    
Unrealized
Gains
    
Unrealized
(Losses)
    
Estimated
Fair
Value
 
U.S. Government Agency Securities
   $ 71,752      $         $ (100    $ 71,652  
Certificates of Deposit
     26,232        1                  26,233  
Commercial Paper
     55,955                  (36      55,919  
Corporate Notes/Bonds
     166,394        19        (249      166,164  
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 320,333      $ 20      $ (385    $ 319,968  
    
 
 
    
 
 
    
 
 
    
 
 
 
The Company has classified all of its investment securities as
available-for-sale,
including those with maturities beyond one year, as current assets on the condensed consolidated balance sheets based on the highly liquid nature of the investment securities and because these investment securities are considered available for use in current operations. As of September 30, 2022 and December 31, 2021, the Company held $90.7 million and $67.2 million, respectively, of
available-for-sale
investment securities with contractual maturity dates more than one year and less than two years.
 
7

The aggregate related fair value of investments with unrealized losses as of September 30, 2022 was $511.2 million, which consisted of $170.5 million from U.S. government agency securities, $3.1 million of certificates of deposit, $124.7 million of commercial paper, and $212.9 million of corporate notes/bonds. $108.2 million of the aggregate fair value of investments with unrealized losses as of September 30, 2022 has been held in a continuous unrealized loss position for over 12 months, with the remaining $403.0 million held in a continuous unrealized loss position for less than 12 months. As of September 30, 2022, $36.0 million of the commercial paper balance is listed as cash equivalents. As of December 31, 2021, the aggregate related fair value of investments with unrealized losses was $263.5 million. $9.5 million of the aggregate fair value of investments with unrealized losses as of December 31, 2021 has been held in a continuous unrealized loss position for over than 12 months, with the remaining $254.1 million held in a continuous unrealized loss position for less than 12 months.
The Company reviewed all of the investments which were in a loss position at the respective balance sheet dates, as well as the remainder of the portfolio. The Company has analyzed the unrealized losses and determined that market conditions were the primary factor driving these changes. After analyzing the securities in an unrealized loss position, the portion of these losses that relate to changes in credit quality is insignificant. The Company does not intend to sell these securities, nor is it more likely than not that the Company will be required to sell them prior to the end of their contractual terms. Furthermore, the Company does not believe that these securities expose the Company to undue market risk or counterparty credit risk.
4. Fair Value Measurements
The Company applies the fair value method under ASC Topic 820,
Fair Value Measurements and Disclosures
. The ASC Topic 820 hierarchy ranks the quality and reliability of inputs, or assumptions, used in the determination of fair value and requires assets and liabilities carried at fair value to be classified and disclosed in one of the following categories based on the lowest level input used that is significant to a particular fair value measurement:
 
   
Level 1—Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets and liabilities.
 
   
Level 2—Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in inactive markets. Related inputs can also include those used in valuation or other pricing models, such as interest rates and yield curves that can be corroborated by observable market data.
 
   
Level 3—Fair value is determined by inputs that are unobservable and not corroborated by market data. Use of these inputs involves significant and subjective judgments to be made by a reporting entity—e.g., determining an appropriate adjustment to a discount factor for illiquidity associated with a given security.
The Company has no assets or liabilities that were measured using prices with significant unobservable inputs (Level 3 assets and liabilities) as of September 30, 2022 or December 31, 2021. The carrying value of cash held in money market funds of approximately $47.1 million as of September 30, 2022 and $56.5 million as of December 31, 2021 is included in cash and cash equivalents on the condensed consolidated balance sheets and approximates market value based on quoted market prices or Level 1 inputs. The carrying value of cash held in commercial paper of approximately $36.0 million and $0 as of September 30, 2022 and December 31, 2021, respectively, is included in cash and cash equivalents.
The fair value measurements of the Company’s cash equivalents and
available-for-sale
investment securities are identified in the following tables (in thousands):
 
           
Fair Value Measurements at
Reporting Date Using
 
    
September 30,
2022
    
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Unobservable
Inputs
(Level 3)
 
Money Market Funds
   $ 47,122      $ 47,122      $         $     
U.S. Government Agency Securities
     181,209                  181,209            
FDIC Certificates of Deposit
     3,104                  3,104            
Certificates of Deposit
     7,500                  7,500            
Commercial Paper
     124,671                  124,671            
Corporate Notes/Bonds
     212,871                  212,871            
    
 
 
    
 
 
    
 
 
    
 
 
 
    
$
576,477
 
  
$
47,122
 
  
$
529,355
 
  
$
  
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
8

 
  
 
 
  
Fair Value Measurements at

Reporting Date Using
 
 
  
December 31,
2021
 
  
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
  
Significant
Other
Observable
Inputs
(Level 2)
 
  
Significant
Unobservable
Inputs
(Level 3)
 
Money Market Funds
   $ 56,539      $ 56,539      $         $     
U.S. Government Agency Securities
     71,652                  71,652            
Certificates of Deposit
     26,233                  26,233            
Commercial Paper
     55,919                  55,919            
Corporate Notes/Bonds
     166,164                  166,164            
    
 
 
    
 
 
    
 
 
    
 
 
 
    
$
376,507
 
  
$
56,539
 
  
$
319,968
 
  
$
  
 
    
 
 
    
 
 
    
 
 
    
 
 
 
5. Inventory
Inventory consists of the following (in thousands):
 
 
  
September 30,
2022
 
  
December 31,
2021
 
Raw materials
  
$
17,807
 
   $ 2,484  
Work in process
  
 
1,987
 
     2,407  
Finished goods
  
 
3,803
 
     3,057  
    
 
 
    
 
 
 
    
$
23,597
 
   $ 7,948  
    
 
 
    
 
 
 
Product costs incurred prior to receipt of the FDA approval on December 20, 2019 for CAPLYTA was expensed as research and development as incurred.
6. Right of Use Assets and Lease Liabilities
In 2014, the Company entered into a long-term lease with a related party, which, as amended, provided for a lease of useable laboratory and office space located in New York, New York. A member of the Company’s board of directors is the Executive Chairman of the parent company to the landlord under this lease. Concurrent with this lease, the Company entered into a license agreement to occupy certain vivarium-related space in the same facility for the same term and rent escalation provisions as the lease. This license has the primary characteristics of a lease and is characterized as a lease. In September 2018, the Company further amended the lease to obtain an additional office space beginning October 1, 2018 and to extend the term of the lease for previously acquired space. The lease, as amended, has a term of 14.3 years ending in May 2029.
On May 17, 2019, the Company entered into an agreement (the “Vehicle Lease”) with a company (the “Lessor”) to acquire motor vehicles for certain employees. The Vehicle Lease provides for individual leases for the vehicles, which at each lease commencement was determined to qualify for operating lease treatment. The Company began leasing vehicles under the Vehicle Lease in March 2020. The contractual period of each lease is 12 months, followed by
month-to-month
renewal periods. The Company estimates the lease term for each vehicle to be 30 months based on industry standards. As of September 30, 2022, the Company is required to maintain an irrevocable $1.75 million letter of credit that the Lessor may draw upon in the event the Company defaults on the Vehicle Lease, which has been recorded as restricted cash on the condensed consolidated balance sheet.
The Company has no other significant leases. In addition, no identified leases require allocations between lease and
non-lease
components.
 
9

Maturity analyses under the lease agreements are as follows (in thousands):
 
 
  
Real Estate
 
  
Vehicle
 
Three months ending December 31, 2022
   $ 902      $ 1,406  
Year ending December 31, 2023
     3,680        2,937  
Year ending December 31, 2024
     3,792        2,655  
Year ending December 31, 2025
     3,907        246  
Year ending December 31, 2026
     3,974            
Thereafter
     9,937            
    
 
 
    
 
 
 
Total
     26,192        7,244  
Less: Present value discount
     (6,747      (277
    
 
 
    
 
 
 
Total Lease liability
     19,445        6,967  
    
 
 
    
 
 
 
Less: Current portion
     (3,479      (3,766
    
 
 
    
 
 
 
Long-term lease liabilities
   $ 15,966      $ 3,201  
    
 
 
    
 
 
 
7. Commitments and Contingencies
License and Royalty Commitments
On May 31, 2005, the Company entered into a worldwide, exclusive License Agreement with Bristol-Myers Squibb Company (“BMS”), pursuant to which the Company holds a license to certain patents and
know-how
of BMS relating to lumateperone and other specified compounds. The agreement was amended on November 3, 2010. The licensed rights are exclusive, except BMS retains rights in specified compounds in the fields of obesity, diabetes, metabolic syndrome and cardiovascular disease. However, BMS has no right to use, develop or commercialize lumateperone and other specified compounds in any field of use. The Company has the right to grant sublicenses of the rights conveyed by BMS. The Company is obliged under the agreement to use commercially reasonable efforts to develop and commercialize the licensed technology. The Company is also prohibited from engaging in the clinical development or commercialization of specified competitive compounds.
Under the agreement, the Company has made payments of $10.75 million to BMS related to milestones achieved to date for lumateperone. Possible milestone payments remaining total $5.0 million. Under the agreement, the Company may be obliged to make other milestone payments to BMS for each licensed product of up to an aggregate of approximately $14.75 million. The Company is also obliged to make tiered single digit percentage royalty payments ranging between 59% on sales of licensed products. The Company is obliged to pay to BMS a percentage of
non-royalty
payments made in consideration of any sublicense.
The agreement extends, and royalties are payable, on a
country-by-country
and
product-by-product
basis, through the later of 10 years after first commercial sale of a licensed product in such country, expiration of the last licensed patent covering a licensed product, its method of manufacture or use, or the expiration of other government grants providing market exclusivity, subject to certain rights of the parties to terminate the agreement on the occurrence of certain events. On termination of the agreement, the Company may be obliged to convey to BMS rights in developments relating to a licensed compound or licensed product, including regulatory filings, research results and other intellectual property rights.
In September 2016, the Company transferred certain of its rights under the BMS agreement to its wholly owned subsidiary, ITI Limited. In connection with the transfer, the Company guaranteed ITI Limited’s performance of its obligations under the BMS agreement. The Company expensed approximately $8.1 million and $2.8 million, respectively, for the nine-month periods ended September 30, 2022 and 2021, in cost of product sales to satisfy its obligation under the BMS agreement.
Research and Other Commitments
As of September 30, 2022, the Company has committed to purchasing production campaigns for various raw materials and API from each of its supply vendors. The campaigns are expected to be received into inventory during 2022 through 2024. The Company has paid deposits of $19.8 million and $9.5 million as of September 30, 2022 and December 31, 2021, respectively, for the various campaigns, which are recorded within prepaid expenses and other current assets. Over the course of the vendors’ manufacturing period, the Company will remit payments to each vendor based on the payment plan within the executed agreements.
8. Share-Based Compensation
In 2020, the Company’s stockholders approved the Amended and Restated 2018 Equity Incentive Plan (the “Amended 2018 Plan”), which provides for the granting of up to 6,500,000 additional share-based awards, such as stock options, restricted common stock, RSUs and stock appreciation rights to employees, directors and consultants as determined by the Board of Directors. In December 2019, the Company adopted the 2019 Inducement Award Plan (the “2019 Inducement Plan”) for the grant of equity awards of up to 1,000,000 shares of common stock to newly hired employees.
 
10

Information regarding the stock options activity, including with respect to grants to employees, directors and consultants as of September 30, 2022, and changes during the nine-month period then ended, are summarized as follows:
 
 
  
Number of
Shares
 
  
Weighted-
Average
Exercise
Price
 
  
Weighted-
Average
Contractual
Life
 
Outstanding at December 31, 2021
     5,451,398      $ 21.09        6.1 years  
Options granted 2022
     604,701      $              
Options exercised 2022
     (1,097,488    $              
Options canceled or expired 2022
     (32,494    $              
  
 
 
 
  
 
 
 
  
 
 
 
Outstanding at September 30, 2022
     4,926,117      $ 26.12        6.0 years  
    
 
 
    
 
 
          
Vested and expected to vest at September 30, 2022
     4,926,117      $ 26.12           
    
 
 
    
 
 
          
Exercisable at September 30, 2022
     3,738,302      $ 20.24        5.2 years  
    
 
 
    
 
 
          
The fair value of the time based RSUs is based on the closing price of the Company’s common stock on the date of grant. Information regarding the time based RSU activity and changes during the nine-month period ended September 30, 2022 is summarized as follows:
 
    
Number of
Shares
    
Weighted-Average
Grant Date
Fair Value Per Share
    
Weighted-
Average
Contractual
Life
 
Outstanding at December 31, 2021
     1,529,652      $ 26.95        1.5 years  
Time based RSUs granted in 2022
     590,863      $              
Time based RSUs vested in 2022
     (763,574    $              
Time based RSUs cancelled in 2022
     (56,244    $              
    
 
 
    
 
 
          
Outstanding at September 30, 2022
     1,300,697      $ 42.75        1.1 years  
    
 
 
    
 
 
          
The Company recognized
non-cash
share-based compensation expense related to time based RSUs for the nine months ended September 30, 2022 and 2021 of approximately $16.6 million and $12.3 million, respectively. As of September 30, 2022, there was approximately $41.4 million of unrecognized compensation costs estimated related to unvested time based RSUs.
9. Loss Per Share
The following awards were excluded in the calculation of diluted loss per share because their effect could be anti-dilutive as applied to the loss from operations for the three and nine months ended September 30, 2022 and 2021:
 
 
  
Three and Nine
Months Ended

September 30,
 
 
  
2022
 
  
2021
 
Stock options
     4,926,117        5,952,252  
RSUs
     1,398,204        1,601,273  
TSR RSUs
     97,507        68,598  
 
11


Table of Contents
Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto that appear elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed on March 1, 2022. In addition to historical information, the following discussion and analysis includes forward-looking information that involves risks, uncertainties and assumptions. Our actual results and the timing of events could differ materially from those anticipated by these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” in our Annual Report on Form 10-K filed on March 1, 2022, as updated from time to time in our subsequent periodic and current reports filed with the SEC.

Overview

We are a biopharmaceutical company focused on the discovery, clinical development and commercialization of innovative, small molecule drugs that address underserved medical needs primarily in neuropsychiatric and neurological disorders by targeting intracellular signaling mechanisms within the central nervous system, or CNS. In December 2019, CAPLYTA® (lumateperone) was approved by the U.S. Food and Drug Administration, or FDA, for the treatment of schizophrenia in adults (42mg/day) and we initiated the commercial launch of CAPLYTA in late March 2020 and employed a national sales force. In December 2021, CAPLYTA was approved by the FDA for the treatment of bipolar depression in adults (42mg/day). CAPLYTA is the only FDA-approved treatment for depressive episodes associated with bipolar I or II disorder (bipolar depression) in adults as monotherapy and as adjunctive therapy with lithium or valproate. We initiated the commercial launch of CAPLYTA for the treatment of bipolar depression in late December 2021. In support of the commercial launch of lumateperone for the treatment of bipolar depression, we have expanded our sales force. In addition, in April 2022, the FDA approved two new dosage strengths of CAPLYTA, 10.5 mg and 21 mg capsules, to provide dosage recommendations for patients concomitantly taking strong or moderate CYP3A4 inhibitors, and 21 mg for patients with moderate or severe hepatic impairment (Child-Pugh class B or C). We initiated the commercial launch of these special population doses in August 2022. As used in this report, “CAPLYTA” refers to lumateperone approved by the FDA for the treatment of schizophrenia in adults and for the treatment of bipolar depression in adults, and “lumateperone” refers to, where applicable, CAPLYTA as well as lumateperone for the treatment of indications beyond schizophrenia and bipolar depression.

Lumateperone is in Phase 3 clinical development as a novel treatment for major depressive disorder, or MDD. Patient enrollment in Study 501 and Study 502, our global Phase 3 clinical trials evaluating lumateperone 42 mg as an adjunctive therapy to antidepressants for the treatment of MDD is ongoing. We expect to file an sNDA with the FDA for approval of lumateperone as an adjunctive therapy to antidepressants for the treatment of MDD in 2024. In the first quarter of 2020, as part of our lumateperone bipolar depression clinical program, we initiated our third monotherapy Phase 3 study, Study 403, evaluating lumateperone as monotherapy in the treatment of major depressive episodes associated with bipolar I or bipolar II disorder. Following the positive results in our adjunctive study that was part of our bipolar depression clinical program, Study 402, we amended Study 403 to evaluate major depressive episodes with mixed features in bipolar disorder in patients with bipolar I or bipolar II disorder and mixed features in patients with MDD. We expect to complete clinical conduct in Study 403 in late 2022 and, following completion of data analysis, we expect to report topline results in the first quarter of 2023. Following completion of Study 403, we intend to discuss the results with the FDA to determine whether this study will provide supportive data for a potential future regulatory filing for this indication.

We have also initiated a Phase 3 study evaluating lumateperone for the prevention of relapse in patients with schizophrenia. The study is being conducted in five phases consisting of a screening phase, a 6-week, open-label run-in phase during which all patients will receive 42 mg of lumateperone per day, a 12-week, open-label stabilization phase during which all patients will receive 42 mg of lumateperone per day; a double-blind treatment phase, 26 weeks in duration, during which patients receive either 42 mg of lumateperone per day or placebo (1:1 ratio) and a 2-week safety follow-up phase. This study is being conducted in accordance with our post approval marketing commitment to the FDA in connection with the approval of CAPLYTA for the treatment of schizophrenia as is typical for antipsychotics.

Within the lumateperone portfolio, we are also developing a long-acting injectable, or LAI, formulation to provide more treatment options to patients suffering from mental illness. We have completed the preclinical development of an LAI formulation, and we have conducted a Phase 1 single ascending dose study with this formulation. This study evaluated the pharmacokinetics, safety and tolerability of lumateperone LAI in patients with stable symptoms of schizophrenia. We have been exploring alternate sites of injection with this formulation as well as progressing other formulations. This will assist us in evaluating dosing strategies and formulation for our efficacy studies. The goal of our program is to develop LAI formulations that are effective, safe and well-tolerated with treatment durations of one month and longer. Given the encouraging tolerability data to date with oral lumateperone, we believe that an LAI option, in particular, may lend itself to being an important formulation choice for certain patients.

 

12


Table of Contents

We are developing ITI-1284-ODT-SL for the treatment of agitation in patients with dementia, the treatment of dementia-related psychosis and for the treatment of certain depressive disorders in the elderly. ITI-1284-ODT-SL is a deuterated form of lumateperone, a new molecular entity formulated as an oral disintegrating tablet for sublingual administration. ITI-1284-ODT-SL is formulated as an oral solid dosage form that dissolves almost instantly when placed under the tongue, allowing for ease of use in the elderly and may be particularly beneficial for patients who have difficulty swallowing conventional tablets. Phase 1 single and multiple ascending dose studies in healthy volunteers and healthy elderly volunteers (> than 65 years of age) evaluated the safety, tolerability and pharmacokinetics of ITI-1284-ODT-SL. In these studies, there were no reported serious adverse events in either age group. In the elderly cohort, reported adverse events were infrequent with the most common adverse event being transient dry mouth (mild). Based on these results, we have initiated our program evaluating ITI-1284-ODT-SL for the treatment of agitation in patients with probable Alzheimer’s disease. We are in discussions with the FDA regarding the non-clinical toxicological profile of ITI-1284-ODT-SL. The FDA has informed us that they do not believe the deuterated and undeuterated forms of lumateperone are identical. As a result, the non-clinical data from lumateperone may not be broadly applied to ITI-1284-ODT-SL and we are conducting additional toxicology studies. We expect to commence clinical conduct in a Phase 2 study in agitation in patients with probable Alzheimer’s disease in 2023. Additional studies in dementia-related psychosis and certain depressive disorders in the elderly are also planned for 2023. We are continuing with Phase 1 studies with ITI-1284-ODT-SL including drug-drug interaction studies.

We have another major program that has yielded a portfolio of compounds that selectively inhibit the enzyme phosphodiesterase type 1, or PDE1. PDE1 enzymes are highly active in multiple disease states and our PDE1 inhibitors are designed to reestablish normal function in these disease states. Abnormal PDE1 activity is associated with cellular proliferation and activation of inflammatory cells. Our PDE1 inhibitors ameliorate both of these effects in animal models. We intend to pursue the development of our phosphodiesterase, or PDE, program, for the treatment of aberrant immune system activation in several CNS and non-CNS conditions with a focus on diseases where excessive PDE1 activity has been demonstrated and increased inflammation is an important contributor to disease pathogenesis. Our potential disease targets include heart failure, immune system regulation, neurodegenerative diseases, cancers and other non-CNS disorders. Lenrispodun (ITI-214) is our lead compound in this program. Following the favorable safety and tolerability results in our Phase 1 program, we initiated our development program for lenrispodun for Parkinson’s disease and conducted a Phase 1/2 clinical trial of lenrispodun in patients with Parkinson’s disease to evaluate safety and tolerability in this patient population, as well as motor and non-motor exploratory endpoints. In this study lenrispodun was generally well-tolerated with a favorable safety profile and clinical signs consistent with improvements in motor symptoms and dyskinesias. We have initiated our Phase 2 clinical program with lenrispodun for Parkinson’s disease, and expect to commence patient enrollment in the first quarter of 2023. In addition, we have conducted a Phase 1/2 translational study of single ascending doses of lenrispodun in patients with chronic systolic heart failure with reduced ejection fraction. In this study, lenrispodun improved cardiac output by increasing heart contractility and decreasing vascular resistance. Agents that both increase heart contractility (inotropism) and decrease vascular resistance (vasodilation) are called inodilators. Inodilators in current clinical use are associated with the development of arrhythmias, which are abnormal heart rhythms that, when serious, can impair heart function and lead to mortality. Lenrispodun, which acts through a novel mechanism of action, was not associated with arrhythmias in this study and was generally well-tolerated in all patients.

We also have a development program with our ITI-333 compound as a potential treatment for substance use disorders, pain and psychiatric comorbidities including depression and anxiety. There is a pressing need to develop new drugs to treat opioid addiction and for safe, effective, non-addictive treatments to manage pain. ITI-333 is a novel compound that uniquely combines activity as an antagonist at serotonin 5-HT2A receptors and a partial agonist at µ-opioid receptors. These combined actions support the potential utility of ITI-333 in the treatment of opioid use disorder and associated comorbidities (e.g., depression, anxiety, sleep disorders) without opioid-like safety and tolerability concerns. We have conducted a Phase 1 single ascending dose study evaluating the safety, tolerability and pharmacokinetics of ITI-333 in healthy volunteers. In this study ITI-333 achieved plasma exposures at or above those required for efficacy and was generally safe and well-tolerated. We have commenced a neuroimaging study to investigate brain occupancy for receptors that play a role in substance use disorder and also have applicability for pain. The results of this study will support the dose selection for future studies. We have received a grant from the National Institute on Drug Abuse under the Helping to End Addiction Long-term Initiative, or NIH HEAL Initiative, that we expect will fund a significant portion of the early stage clinical development costs associated with this program.

We have assembled a management team with significant industry experience to lead the commercialization of our product and the discovery, development and potential commercialization of our product candidates. We complement our management team with a group of scientific and clinical advisors that includes recognized experts in the fields of schizophrenia, bipolar depression and other CNS disorders.

COVID-19

In December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019, or COVID-19, surfaced in Wuhan, China. Since then, SARS-CoV-2 and COVID-19 have spread to countries worldwide, including the United States. The

 

13


Table of Contents

COVID-19 pandemic continues to evolve, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures. As a result of the COVID-19 pandemic, we may continue to experience disruptions, which could severely impact our business, including our ability to successfully commercialize our only commercial product, CAPLYTA, in the United States, and could negatively impact our sales of CAPLYTA. Our commercial organization, sales force and medical organization have had, and, depending on the severity and duration of the pandemic, may continue to have significantly reduced personal interactions with physicians and customers and may need to continue to conduct many promotional activities virtually, and we may elect to cease in-person interactions with physicians and customers entirely for some period of time in the interest of employee and community safety. In addition, the pandemic may continue to impact the willingness of patients to visit their healthcare provider. Business interruptions from the current or future pandemics may also adversely impact the third parties we rely on to sufficiently manufacture CAPLYTA and to produce our product candidates in quantities we require, which may impair the commercialization and our research and development activities.

We conduct clinical trials for our product candidates in many countries and regions, including the United States and Europe, and may expand to other geographies. Timely enrollment of, completion of and reporting on our clinical trials is dependent upon these global clinical trial sites which are, or in the future may be, adversely affected by the COVID-19 pandemic or other pandemics. Some factors from the COVID-19 pandemic that have or may adversely affect the timing and conduct of our clinical trials and adversely impact our business generally, include but are not limited to, delays or difficulties in clinical site initiation, patient enrollment, diversion of healthcare resources away from clinical trials to pandemic concerns, limitations on travel, regulatory delays and supply chain disruptions.

The COVID-19 pandemic continues to evolve, and the severity and duration of the pandemic remain uncertain. The extent to which the pandemic impacts our business, including our commercial results, clinical trials, and preclinical studies will depend on future developments, which are highly uncertain.

Results of Operations

The following discussion summarizes the key factors our management believes are necessary for an understanding of our financial statements.

Revenues

Net revenues from product sales consist of sales of CAPLYTA, which was approved by the FDA for the treatment of schizophrenia in adults in December 2019 and for the treatment of bipolar depression in adults in December 2021. In addition, in April 2022, the FDA approved two new dosage strengths of CAPLYTA for certain patients. We initiated the commercial launch of CAPLYTA in late March 2020. During the three and nine months ended September 30, 2022, net sales increased to approximately $71.9 million and $162.4 million, respectively, from approximately $22.2 million and $58.1 million for the three and nine months ended September 30, 2021, respectively.

Expenses

The process of researching, developing and commercializing drugs for human use is lengthy, unpredictable and subject to many risks. We are unable, with certainty, to estimate either the costs or the timelines in which those costs will be incurred. The costs associated with the commercialization of CAPLYTA are substantial and will be incurred prior to our generating sufficient revenue to offset these costs. Costs for the clinical development of lumateperone-related projects, including for the treatment of MDD, consumes and, together with our other anticipated clinical development programs, will continue to consume a large portion of our current, as well as projected, resources. We intend to pursue other disease indications that lumateperone may address, but there are significant costs associated with pursuing FDA approval for those indications, which would include the cost of additional clinical trials.

Our PDE, ITI-1284 and ITI-333 development programs are currently in clinical stage development. Our other programs are still in the preclinical stages and will require extensive funding not only to complete preclinical testing, but also to commence and complete clinical trials. Expenditures that we incur on these programs will be subject to availability of funding in addition to the funding required for the advancement of lumateperone. Any failure or delay in the advancement of lumateperone could require us to re-allocate resources from our other programs to the advancement of lumateperone, which could have a material adverse impact on the advancement of these other programs and on our results of operations.

Our operating expenses are comprised of (i) costs of product sales; (ii) selling expenses; (iii) general and administrative expenses; and (iv) research and development expenses.

Costs of product sales are comprised of:

 

   

direct costs of formulating, manufacturing and packaging drug product;

 

14


Table of Contents
   

overhead costs consisting of labor, customs, share-based compensation, shipping, outside inventory management and other miscellaneous operating costs; and

 

   

royalty payments on product sales.

Selling expenses are incurred in three major categories:

 

   

salaries and related benefit costs of a dedicated sales force;

 

   

sales operation costs; and

 

   

marketing, promotional and advertising expenses.

General and administrative expenses are incurred in three major categories:

 

   

salaries and related benefit costs;

 

   

patent, legal, and professional costs; and

 

   

office and facilities overhead.

Research and development costs are comprised of:

 

   

fees paid to external parties who provide us with contract services, such as pre-clinical testing, manufacturing and related testing, clinical trial activities and license milestone payments; and

 

   

internal recurring costs, such as costs relating to labor and fringe benefits, materials, supplies, facilities and maintenance.

Product sold through September 30, 2022 consisted of drug product that was previously charged to research and development expense prior to FDA approval of CAPLYTA and other direct, indirect, and overhead costs required to make final product for sale. Because the Company’s policy does not allow for the capitalization of pre-approval product, the cost of drug product sold is lower than it would have been and has a positive impact on our cost of product sales for the three and nine-month periods ended September 30, 2022 and 2021. We expect to continue to have this favorable impact on cost of product sales and related product gross margins until our sales of CAPLYTA include drug product that is manufactured entirely after the FDA approval. We expect that this will be the case for the near-term and, as a result, our cost of product sales will be less than we anticipate it will be in future periods. In addition, inflation generally may affect us by increasing clinical trial and other operational costs. To date, inflation has not had a material impact on our business, but if the global inflationary trends continue, we expect appreciable increases in clinical trial, selling, labor, and other operating costs.

We expect that research and development expenses will increase as we proceed with our clinical trials including, increased manufacturing of drug product for clinical trials and pre-clinical development activities. We also expect that our selling, general and administrative costs will increase from prior periods primarily due to costs associated with promotional activities to support the commercial sales of CAPLYTA as well as costs associated with building and maintaining infrastructure, which will include hiring additional personnel and increasing technological capabilities. We granted significant share-based awards in 2021 and 2022. We expect to continue to grant share-based awards in the future due to our growing employee base, which will increase our share-based compensation expense in future periods.

The following table sets forth our revenues, operating expenses, interest income and income tax (expense) benefit for the three and nine-month periods ended September 30, 2022 and 2021 (in thousands):

 

     For the Three Months
Ended September 30,
     For the Nine Months
Ended September 30,
 
     2022      2021      2022      2021  
     (Unaudited)      (Unaudited)  

Revenues

           

Product sales, net

   $ 71,870      $ 21,606      $ 161,699      $ 56,192  

Grant revenue

     —          601        746        1,940  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues, net

     71,870        22,207        162,445        58,132  
  

 

 

    

 

 

    

 

 

    

 

 

 

Expenses

           

Cost of product sales

     5,850        2,001        13,655        5,496  

Selling, general and administrative

     88,375        70,498        264,151        192,933  

Research and development

     33,274        27,032        100,853        59,387  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total costs and expenses

     127,499        99,531        378,659        257,816  
  

 

 

    

 

 

    

 

 

    

 

 

 

Loss from operations

     (55,629      (77,324      (216,214      (199,684

Interest income

     2,122        393        3,990        1,298  

Income tax (expense) benefit

     (1      23        (6      (6
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss

   $ (53,508    $ (76,908    $ (212,230    $ (198,392
  

 

 

    

 

 

    

 

 

    

 

 

 

 

15


Table of Contents

Comparison of Three and Nine-Month Periods Ended September 30, 2022 and September 30, 2021

Product sales, net

Net product sales were approximately $71.9 million and $161.7 million, respectively, for the three and nine-month periods ended September 30, 2022 and $21.6 million and $56.2 million for the three and nine-month periods ended September 30, 2021, respectively. Net product revenue in 2021 was comprised of sales of CAPLYTA for the treatment of schizophrenia, while net product revenue in 2022 was comprised of sales of CAPLYTA for the treatment of schizophrenia and bipolar depression.

Cost of Product Sales

Cost of product sales was approximately $5.9 million and $13.7 million, respectively, for the three and nine-month periods ended September 30, 2022, compared to $2.0 million and $5.5 million, respectively, for the three and nine-month periods ended September 30, 2021. Cost of product sales consisted primarily of product royalty fees, overhead and direct costs. Drug product costs, including certain direct, indirect, and overhead costs, for product sales through September 30, 2022 were previously charged to research and development expense prior to FDA approval in December 2019 and are not a component of cost of product sales. This minimal cost drug product had a positive impact on our cost of product sales and related product gross margins for the three and nine-month periods ended September 30, 2022 and 2021.

We will continue to have a lower cost of product sales that excludes the cost of the drug product that was incurred prior to FDA approval until our sales of CAPLYTA include drug product that is entirely manufactured after the FDA approval. We expect that this will be the case for the near-term and, as a result, our cost of product sales will be less than we anticipate it will be in future periods.

Selling, General and Administrative Expenses

Selling, general and administrative costs for the three-month period ended September 30, 2022 were $88.4 million as compared to $70.5 million in the three-month period ended September 30, 2021, which represents an increase of 25%.

Selling costs were $68.1 million for the three-month period ended September 30, 2022 as compared to selling costs of $52.6 million in the same period in 2021, which represents an increase of 29%. This increase is primarily due to increases of marketing and advertising expenses of approximately $8.1 million, sales related labor costs of approximately $6.1 million, and approximately $1.3 million in travel and other costs. Salaries, bonuses and related benefit costs for our sales and marketing functions for the three months ended September 30, 2022 and 2021 constituted approximately 34% and 32%, respectively, of our selling costs.

General and administrative expenses were $20.3 million in the three-month period ended September 30, 2022 as compared to $17.9 million for the same period in 2021, an increase of 13%. This increase is due to increases in labor related costs of approximately $0.7 million, stock-based compensation of approximately $0.7 million, franchise related taxes of approximately $0.5 million, and insurance and other expenses of approximately $0.5 million. Salaries, bonuses and related benefit costs for our general and administrative functions for the three months ended September 30, 2022 and 2021 constituted approximately 58% and 57%, respectively, of our general and administrative costs.

Selling, general and administrative costs for the nine-month period ended September 30, 2022 were $264.2 million as compared to $192.9 million in the nine month period ended September 30, 2021, which represents an increase of 37%, which was due to an increase in selling, marketing, and advertising expenses and an increase in general and administrative expenses.

Selling costs were $205.4 million for the nine-month period ended September 30, 2022 as compared to $143.0 million in the same period in 2021, or an increase of 44%. This increase is primarily due to increases in commercialization costs of approximately $35.4 million, sales related labor costs of approximately $20.5 million and travel and other sales related expenses of approximately $6.5 million. Salaries, bonuses and related benefit costs for our sales and marketing functions for the nine months ended September 30, 2022 and 2021 constituted approximately 35% and 35%, respectively, of our selling costs.

 

16


Table of Contents

General and administrative expenses for the nine months ended September 30, 2022 were $58.7 million as compared to $50.0 million for the same period in 2021, an increase of 17%. This increase is due to increases in stock compensation expense of approximately $2.7 million, labor related expense of approximately $2.4 million, IT related services of approximately $1.5 million, franchise related taxes of approximately $0.9 million, and the remainder for insurance, lease expense, and other administrative expenses. Salaries, bonuses and related benefit costs for our general and administrative functions for the nine months ended September 30, 2022 and 2021 constituted approximately 56% and 56%, respectively, of our general and administrative costs.

We expect selling, general and administrative costs to increase in 2022 as compared to 2021. We are expanding marketing, promotional, and advertising costs and increasing efforts to educate physicians, expand market access, and enhance our administrative infrastructure.

Research and Development Expenses

The following tables set forth our research and development expenses for the three and nine-month periods ended September 30, 2022 and 2021 (in thousands):

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2022      2021      2022      2021  

External costs

     21,428        17,679        66,584        33,554  

Internal costs

     11,846        9,353        34,269        25,833  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total research and development expenses

   $ 33,274      $ 27,032      $ 100,853      $ 59,387  
     Three Months Ended September 30,      Nine Months Ended September 30,  
     2022      2021      2022      2021  

Lumateperone costs

     17,104        16,676        56,555        35,924  

Non-lumateperone project costs

     9,991        5,797        27,120        11,584  

Stock based compensation

     4,682        3,183        12,560        8,367  

Overhead and other

     1,497        1,376        4,618        3,512  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total research and development expenses

   $ 33,274      $ 27,032      $ 100,853      $ 59,387  
  

 

 

    

 

 

    

 

 

    

 

 

 

Research and development expenses increased to $33.3 million for the three-month period ended September 30, 2022 as compared to $27.0 million for the three-month period ended September 30, 2021, representing an increase of approximately $6.3 million, or 23%. This increase is due primarily to an increase of $4.2 million non lumateperone projects including the ITI-1284, ITI-214, and ITI-333 programs, among others, $1.5 million for stock based compensation, $0.4 million for lumateperone clinical trial and other costs, and $0.2 million in overhead expenses. Internal costs increased by approximately $2.5 million for the period due primarily to labor related costs and share-based compensation.

Research and development expenses increased to $100.9 million for the nine-month period ended September 30, 2022 as compared to $59.4 million for the nine-month period ended September 30, 2021, representing an increase of approximately 70%. This increase is due primarily to an increase of approximately $20.6 million for lumateperone costs, an increase of approximately $15.6 million for other projects including the ITI-1284, ITI-214, and ITI-333 programs, among others, an increase of approximately $4.2 million for stock based compensation, and an increase of approximately $1.1 million for overhead costs. Internal costs increased by approximately $8.4 million for the period due primarily to labor related costs and stock based compensation.

As the development of lumateperone and non-lumateperone programs progress, we anticipate research and development costs will increase due primarily to pre-clinical testing and conducting ongoing and planned clinical trials during the next several years. We are also required to complete non-clinical testing to obtain FDA approval and manufacture materials needed for clinical trial use, which includes non-clinical testing of the drug product, and manufacturing of drug product in anticipation of possible additional FDA approvals of lumateperone for indications beyond schizophrenia and bipolar depression.

We currently have several projects, in addition to lumateperone, that are in the research and development stages. We have used internal resources and incurred expenses not only in relation to the development of lumateperone, but also in connection with these additional projects as well, including our PDE program. We have not, however, reported these costs on a project-by-project basis, as these costs are broadly spread among these projects. The external costs for these projects have been modest and are reflected in the table above in this section “—Research and Development Expenses.”

 

17


Table of Contents

The research and development process necessary to develop a pharmaceutical product for commercialization is subject to extensive regulation by numerous governmental authorities in the United States and other countries. This process typically takes years to complete and requires the expenditure of substantial resources. The steps required before a drug may be marketed in the United States generally include the following:

 

   

completion of extensive pre-clinical laboratory tests, animal studies, and formulation studies in accordance with the FDA’s Good Laboratory Practice, or GLP, regulations;

 

   

submission to the FDA of an Investigational New Drug application, or IND, for human clinical testing, which must become effective before human clinical trials may begin;

 

   

performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each proposed indication;

 

   

submission to the FDA of a New Drug Application, or NDA, after completion of all clinical trials;

 

   

satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the active pharmaceutical ingredient, or API, and finished drug product are produced and tested to assess compliance with current Good Manufacturing Practices, or cGMPs;

 

   

satisfactory completion of FDA inspections of clinical trial sites to assure that data supporting the safety and effectiveness of product candidates has been generated in compliance with Good Clinical Practices; and

 

   

FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the United States.

The successful development of our product candidates and the approval process requires substantial time, effort and financial resources, and is uncertain and subject to a number of risks. We cannot be certain that any of our product candidates will prove to be safe and effective, will meet all of the applicable regulatory requirements needed to receive and maintain marketing approval, or will be granted marketing approval on a timely basis, if at all. Data from pre-clinical studies and clinical trials are susceptible to varying interpretations that could delay, limit or prevent regulatory approval or could result in label warnings related to or recalls of approved products. We, the FDA, or other regulatory authorities may suspend clinical trials at any time if we or they believe that the subjects participating in such trials are being exposed to unacceptable risks or if such regulatory agencies find deficiencies in the conduct of the trials or other problems with our product candidates. Other risks associated with our product candidates are described in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as updated by the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and from time to time in our other periodic and current reports filed with the SEC.

Liquidity and Capital Resources

From inception through September 30, 2022, we have financed the Company primarily through the issuance of public and private offerings of our common stock and other securities, and to a far lesser extent, through proceeds from grants from government agencies and foundations. From the date of approval of CAPLYTA through September 30, 2022, we have collected approximately $267.4 million from product sales, which we believe will increase going forward. We do not believe that grant revenue will be a significant source of funding in the future.

On January 7, 2022, we completed a public offering of common stock in which we sold 10,952,381 shares of common stock at a public offering price of $42.00 per share for aggregate gross proceeds of $460.0 million. After deducting underwriting discounts, commissions and offering expenses, the net proceeds to the Company were approximately $433.7 million.

As of September 30, 2022, we had a total of approximately $630.5 million in cash and cash equivalents, available-for-sale investment securities and restricted cash, and approximately $77.4 million of short-term liabilities consisting entirely of liabilities from operations. In the nine months ended September 30, 2022, we used approximately $370 million in cash for operating costs. During this period, we collected $163.3 million from product sales, $4.0 million of interest income, and we paid approximately $29.0 million related to our customer program liabilities which resulted in $231.8 million of net cash used for operations and equipment. The use of cash was primarily for selling and marketing costs in connection with our commercialization of CAPLYTA, conducting clinical trials and non-clinical testing, funding recurring operating expenses, and product manufacturing.

 

18


Table of Contents

Based on our current operating plans, we expect that our existing cash, cash equivalents, marketable securities, and product sales will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months from the filing date of this quarterly report. During that time, we expect that our expenses will increase, primarily due to the continued commercialization of CAPLYTA for the treatment of schizophrenia and bipolar depression; the development of lumateperone in our late-stage clinical programs; the development of our other product candidates, including ITI-1284 and ITI-214; and infrastructure expansion and general operations.

For the first nine months of 2022, we used approximately $370 million for operating costs. We expect to spend up to an additional $130 million in the fourth quarter, totaling approximately $500 million for 2022. The fourth quarter spend will be used to continue the marketing and commercialization of CAPLYTA, lumateperone clinical development including clinical trial conduct, regulatory activities, manufacturing and inventory production, expansion of our administrative infrastructure and other development activities. Our other development activities will include efforts relating to our ITI-1284, ITI-214 and ITI-333 programs, among others. However, the COVID-19 pandemic may negatively impact our commercialization of CAPLYTA, our ability to complete our ongoing or planned nonclinical and clinical trials, our ability to obtain approval of any product candidates from the FDA or other regulatory authorities, and our workforce and therefore our research, development and commercialization activities. This may ultimately have a material adverse effect on our liquidity, although we are unable to make any prediction with certainty given the rapidly changing nature of the pandemic and governmental and other responses to it.

We seek to balance the level of cash, cash equivalents and investments on hand with our projected needs and to allow us to withstand periods of uncertainty relative to the availability of funding on favorable terms. Subject to our ability to generate significant revenues from operations, we may need to satisfy our future cash needs through public or private sales of our equity securities, sales of debt securities, incurrence of debt from commercial lenders, strategic collaborations, licensing a portion or all of our product candidates and technology and, to a lesser extent, grant funding. On January 6, 2020, we filed an automatic shelf registration statement on Form S-3 with the SEC, which became effective upon filing, on which we registered for sale an unlimited amount of any combination of its common stock, preferred stock, debt securities, warrants, rights, and/or units from time to time and at prices and on terms that we may determine, so long as we continue to satisfy the requirements of a “well-known seasoned issuer” under SEC rules. This registration statement will remain in effect for up to three years from the date it became effective.

We cannot be sure that future funding will be available to us when we need it on terms that are acceptable to us, or at all. We sell securities and incur debt when the terms of such transactions are deemed favorable to us and as necessary to fund our current and projected cash needs. The amount of funding we raise through sales of our common stock or other securities depends on many factors, including, but not limited to, the magnitude of sales of CAPLYTA, the status and progress of our product development programs, projected cash needs, availability of funding from other sources, our stock price and the status of the capital markets. Due to the volatile nature of the financial markets, equity and debt financing may be difficult to obtain. Additionally, the uncertain market conditions and continued effects of COVID-19 may limit our ability to access any financing. In addition, any unfavorable results in the commercialization of CAPLYTA and unfavorable development or delay in the progress of our lumateperone program could have a material adverse impact on our ability to raise additional capital.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

If adequate funds are not available to us on a timely basis, we may be required to: (1) delay, limit, reduce or terminate non-clinical studies, clinical trials or other clinical development activities for one or more of our product candidates, including our lead product candidate lumateperone, ITI-214, and our other product candidates; (2) delay, limit, reduce or terminate our discovery research or pre-clinical development activities; (3) enter into licenses or other arrangements with third parties on terms that may be unfavorable to us or sell, license or relinquish rights to develop or commercialize our product candidates, technologies or intellectual property at an earlier stage of development and on less favorable terms than we would otherwise agree; or (4) limit or reduce commercialization efforts related to CAPLYTA.

Our cash is maintained in checking accounts, money market accounts, money market mutual funds, U.S. government agency securities, certificates of deposit, commercial paper, corporate notes and corporate bonds at major financial institutions. Due to the recent history of low interest rates available for these instruments, we have been earning limited interest income. During the nine months ended September 30, 2022, however, interest rates have risen which is increasing interest income. This increase in interest rates has, however, resulted in approximately $5.5 million of unrealized loss on investments during the nine months ended September

 

19


Table of Contents

30, 2022. Due to the short-term nature of these investments and our intention to hold these investments to maturity, we do not expect to recognize these losses. Even with the rise or further potential rise in interest rates, we do not expect interest income to be a significant source of funding over the next several quarters. In addition, our investment portfolio historically has not been adversely impacted by problems in the credit markets, but there can be no assurance that our investment portfolio will not be adversely affected in the future.

In 2014, we entered into a lease of 16,753 square feet of useable laboratory and office space located at 430 East 29th Street, New York, New York 10016. In September 2018, we further amended the lease to obtain an additional 15,534 square feet of office space beginning October 1, 2018 and to extend the term of the lease for previously acquired space. The lease, as amended, has a term of 14.3 years ending in May 2029. On May 17, 2019, we entered into a vehicle fleet lease with a company to acquire motor vehicles for certain employees. The vehicle fleet lease provides for individual leases for the vehicles, which at each lease commencement was determined to qualify for operating lease treatment. We began leasing vehicles under the vehicle fleet lease in March 2020. Restricted cash of $1.75 million and $1.4 million, respectively, on our condensed consolidated balance sheet as of September 30, 2022 and December 31, 2021 relates to a letter of credit issued as part of the vehicle fleet lease.

Critical Accounting Policies and Estimates

Our critical accounting policies are those policies which require the most significant judgments and estimates in the preparation of our condensed consolidated financial statements. We evaluate our estimates, judgments, and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. A summary of our critical accounting policies is presented in Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to our critical accounting policies during the nine months ended September 30, 2022.

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses for the periods presented. Judgments must also be made about the disclosure of contingent liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management makes estimates and exercises judgment in research and development, including clinical trial accruals. Actual results may differ from those estimates and under different assumptions or conditions.

Recently Issued Accounting Pronouncements

We review new accounting standards to determine the expected financial impact, if any, that the adoption of each such standard will have. For the recently issued accounting standards that we believe may have an impact on our financial statements, see “Recent Accounting Pronouncements” in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, and “Recently Issued Accounting Standards” in Note 2 to our audited consolidated financial statements and “Recently Issued Accounting Pronouncements” in Part II, Item 7, in our Annual Report on Form 10-K for the year ended December 31, 2021 filed on March 1, 2022.

Certain Factors That May Affect Future Results of Operations

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other important factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about: the accuracy of our estimates regarding expenses, revenues, uses of cash, cash equivalents and investment securities, capital requirements and the need for additional financing; our expectations regarding our commercialization of CAPLYTA, including the impact of COVID-19 on the commercialization of CAPLYTA and our ability to adapt our approach as appropriate; the duration and severity of the COVID-19 pandemic and its impact on our business; the supply and availability of and demand for our product; the initiation, cost, timing, progress and results of our development activities, non-clinical studies and clinical trials; the timing of and our ability to obtain and maintain regulatory approval, or submit an application for regulatory approval, of lumateperone and our other existing product candidates, any product candidates that we may develop, and any related restrictions, limitations, and/or warnings in the label of any approved product candidates; our plans to research, develop and commercialize lumateperone and our other current and future product candidates; the election by any collaborator to pursue research, development and commercialization activities; our ability to obtain future reimbursement and/or

 

20


Table of Contents

milestone payments from our collaborators; our ability to attract collaborators with development, regulatory and commercialization expertise; our ability to obtain and maintain intellectual property protection for our product candidates; our ability to successfully commercialize lumateperone and our other product candidates; the performance of our third-party suppliers and manufacturers and our ability to obtain alternative sources of raw materials; our ability to obtain additional financing; our use of the proceeds from our securities offerings; our exposure to investment risk, interest rate risk, inflation risk and capital market risk; and our ability to attract and retain key scientific, management, or sales and marketing personnel.

Words such as “may,” “anticipate,” “estimate,” “expect,” “may,” “project,” “intend,” “plan,” “believe,” “potential,” “predict,” “project,” “likely,” “will,” “would,” “could,” “should,” “continue” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, the following: there are no guarantees that CAPLYTA will be commercially successful; we may encounter issues, delays or other challenges in commercializing CAPLYTA; the COVID-19 pandemic may negatively impact our commercial plans and sales for CAPLYTA; the COVID-19 pandemic may negatively impact the conduct of, and the timing of enrollment, completion and reporting with respect to, our clinical trials; whether CAPLYTA receives adequate reimbursement from third-party payors; the degree to which CAPLYTA receives acceptance from patients and physicians for its approved indications; challenges associated with execution of our sales activities, which in each case could limit the potential of our product; results achieved in CAPLYTA in the treatment of schizophrenia and bipolar depression following commercial launch of the product may be different than observed in clinical trials, and may vary among patients; any other impacts on our business as a result of or related to the COVID-19 pandemic; challenges associated with supply and manufacturing activities, which in each case could limit our sales and the availability of our product; impacts on our business, including on the commercialization of CAPLYTA and our clinical trials, as a result of the conflict in Ukraine; risks associated with our current and planned clinical trials; we may encounter unexpected safety or tolerability issues with CAPLYTA following commercial launch for the treatment of schizophrenia or bipolar depression or in ongoing or future trials and other development activities; our other product candidates may not be successful or may take longer and be more costly than anticipated; product candidates that appeared promising in earlier research and clinical trials may not demonstrate safety and/or efficacy in larger-scale or later clinical trials or in clinical trials for other indications; our proposals with respect to the regulatory path for our product candidates may not be acceptable to the FDA; our reliance on collaborative partners and other third parties for development, commercialization, manufacturing or supply of our product and product candidates; risks related to inflation and global supply chain disruptions on our business; and the other risk factors detailed under the heading “Risk Factors” in our most recent Annual Report on Form 10-K, as updated under the heading “Risk Factors” from time to time in our subsequent periodic and current reports filed with the SEC.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report on Form 10-Q or in any document incorporated by reference might not occur. Stockholders are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable to the Company or to any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

 

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Sensitivity. As of September 30, 2022, we had cash, cash equivalents, marketable securities and restricted cash of approximately $630.5 million consisting of cash deposited in a highly rated financial institution in the United States and in a short-term U.S. Treasury money market fund, as well as high-grade corporate bonds and commercial paper. The primary objective of our investment activities is to preserve our capital for the purpose of funding operations and we do not enter into investments for trading or speculative purposes. We believe that we do not have material exposure to high-risk investments such as mortgage-backed securities, auction rate securities or other special investment vehicles within our money-market fund investments. We believe that we do not have any material exposure to changes in fair value as a result of changes in interest rates, although the recent increase in interest rates has resulted in our unrealized loss on investments, net, as of September 30, 2022 of approximately $5.5 million and an unrealized loss on investments, net, as of December 31, 2021 totaling approximately $0.4 million. We plan on holding those investments to maturity, and should interest rates continue to rise, there would be no recognition of impairment required. Declines in interest rates, however, would reduce future investment income.

Inflation Risk. Inflation generally may affect us by increasing clinical trial and other operational costs. To date, inflation has not had a material impact on our business, but if the global inflationary trends continue, we expect appreciable increases in clinical trial, selling, labor, and other operating costs. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases of our product. Our inability or failure to do so could adversely affect our business, financial condition and results of operations.

 

21


Table of Contents

Capital Market Risk. Although we receive product revenues from commercial sales of CAPLYTA, we continue to depend on funds raised through other sources. One possible source of funding is through further equity offerings. Our ability to raise funds in this manner depends upon capital market forces affecting our stock price.

 

Item 4.

CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective at a reasonable assurance level to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Controls. There were no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the three months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

 

Item 1.

LEGAL PROCEEDINGS

On July 8, 2022, a purported shareholder derivative complaint was filed in the Supreme Court for the State of New York against the directors serving on the Company’s board of directors and the Company as a nominal defendant alleging breach of fiduciary duty and unjust enrichment alleging that compensation awarded to the director defendants for service on the board of directors was excessive. We believe that the complaint is without merit. At present, we are unable to estimate potential losses, if any, related to the lawsuit.

 

Item 1A.

RISK FACTORS

There have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022, except as set forth below for the following risk factor which was previously included in our Quarterly Report on Form 10-Q for the quarters ended June 30, 2022 and March 31, 2022.

We rely on third parties to conduct our clinical trials and perform data collection and analysis, which may result in costs and delays that prevent us from successfully commercializing our product candidates.

Although we design and manage our current preclinical studies and clinical trials, we do not now have the ability to conduct clinical trials for our product candidates on our own. In addition to our collaborators, we rely on contract research organizations, medical institutions, clinical investigators, and contract laboratories to perform data collection and analysis and other aspects of our clinical trials. In addition, we also rely on third parties to assist with our preclinical studies, including studies regarding biological activity, safety, absorption, metabolism, and excretion of product candidates.

Our preclinical activities or clinical trials may be delayed, suspended, or terminated if: the quality or accuracy of the data obtained by the third parties on whom we rely is compromised due to their failure to adhere to our clinical protocols or regulatory requirements or if for other reasons, these third parties do not successfully carry out their contractual duties or fail to meet regulatory obligations or expected deadlines, or these third parties need to be replaced.

If the third parties on whom we rely fail to perform, our development costs may increase, our ability to obtain regulatory approval, and consequently, to commercialize our product candidates may be delayed or prevented altogether. We currently use several contract research organizations to perform services for our preclinical studies and clinical trials. While we believe that there are numerous alternative sources to provide these services, in the event that we seek such alternative sources, we may not be able to enter into replacement arrangements without delays or incurring additional expenses.

 

22


Table of Contents

Further, we are currently conducting clinical trials for our product candidates in many countries, including the United States and Europe, including Russia and Ukraine, and may expand to other geographies. Timely enrollment of, completion of and reporting on our clinical trials is dependent upon these global clinical trial sites which are, or in the future may be, adversely affected by political instability or conflict. For example, in connection with Studies 501, 502 and 503 for MDD and Study 403 for major depressive episodes with mixed features in bipolar disorder, we have third-party clinical sites located in Ukraine and Russia, which are experiencing significant conflict. Political instability and conflict in Ukraine and Russia, and any other areas in the world where we have clinical operations, may delay our trials and negatively affect our business and operations in those regions.

 

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

Not applicable.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the quarter ended September 30, 2022.

 

Item 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

 

Item 4.

MINE SAFETY DISCLOSURES

Not applicable.

 

Item 5.

OTHER INFORMATION

Not applicable.

 

23


Table of Contents
Item 6.

EXHIBITS

 

Exhibit

Number

  

Exhibit Description

  

Filed

Herewith

  

Incorporated by

Reference herein

from Form

or Schedule

  

Filing Date

    

SEC File/

Reg. Number

 
  10.1    License Agreement dated as of May 31, 2005 by and between Bristol-Myers Squibb Company and Intra-Cellular Therapies, Inc.*       X      8/9/2022        001-36274  
  31.1    Certification of the Registrant’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    X         
  31.2    Certification of the Registrant’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    X         
  32    Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    X         
101    The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021 (audited), (ii) Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2022 and 2021, (iii) Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2022 and 2021, (iv) Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and nine months ended September 30, 2022 and 2021, (v) Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2022 and 2021, and (vi) Notes to Condensed Consolidated Financial Statements (unaudited).    X         
104    Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).    X         

 

*

Certain confidential portions of this Exhibit were omitted by means of marking such portions with brackets (“[***]”) because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.

 

24


Table of Contents

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.

 

    INTRA-CELLULAR THERAPIES, INC.
Date: November 3, 2022    

By:

 

 

/s/ Sharon Mates, Ph.D.

      Sharon Mates, Ph.D.
      Chairman, President and Chief Executive Officer
Date: November 3, 2022    

By:

 

 

/s/ Lawrence J. Hineline

      Lawrence J. Hineline
      Senior Vice President of Finance and Chief Financial Officer

 

25