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UNITED STATES

SECURITIES AND EXCHANGE 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 March 31, 2024


☐	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: 001-39311

CEREVEL THERAPEUTICS HOLDINGS, INC.

(Exact name of Registrant as specified in its Charter)


Delaware	85-3911080
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

222 Jacobs Street, Suite 200 Cambridge, MA	02141
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (844) 304-2048

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, par value $0.0001 per share

    CERE

    The Nasdaq Stock Market LLC

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, 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.

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 April 26, 2024, the registrant had 182,194,722 shares of common stock, par value $0.0001 per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION	36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	91
Item 3.	Defaults Upon Senior Securities	91
Item 4.	Mine Safety Disclosures	91
Item 5.	Other Information	91
Item 6.	Exhibits	91
Signatures		93

INTRODUCTORY NOTE

On December 6, 2023, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with AbbVie Inc., a Delaware corporation, or AbbVie, Symphony Harlan LLC, a Delaware limited liability company and a wholly owned subsidiary of AbbVie, or Intermediate Holdco, and Symphony Harlan Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of Intermediate Holdco, or Merger Sub, pursuant to which, and on the terms and subject to the conditions thereof, at the effective time of the Merger, or the Effective Time, Merger Sub will merge with and into Cerevel, with Cerevel surviving as a wholly owned subsidiary of AbbVie, which we refer to as the Merger.

Under the terms of the proposed transaction, among other things, AbbVie will acquire all outstanding shares of Cerevel for $45.00 per share in cash. The transaction values Cerevel at a total equity value of approximately $8.8 billion. The boards of directors of both companies have approved the transaction, and Cerevel’s stockholders approved the transaction at a special meeting held on February 16, 2024. This transaction is expected to close in the middle of 2024, subject to regulatory approvals and other customary closing conditions.

The foregoing description of the Merger Agreement and the transactions contemplated thereunder is not complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which is filed as an exhibit to the Current Report on Form 8-K, filed with the SEC on December 7, 2023, and incorporated herein by reference.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q, or this Quarterly Report, may constitute “forward-looking statements” for purposes of the federal securities laws, including the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would,” “can,” “target,” “future” or the negative of these terms or similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report may include, for example, statements about:

•

the structure, timing and ability to consummate the Merger;

•

any anticipated effects of the Merger’s announcement, pendency or completion on the value of our common stock;

•

our or AbbVie’s ability to obtain any required regulatory approvals in connection with the Merger;

•

any potential future costs or benefits of the Merger, including relating to expenses, restrictions on the conduct of our business, diversion of our management’s attention, ability to retain or hire employees, maintenance of relationships with collaborators, vendors and other business partners and payment of termination fees;

•

the outcome of any legal proceedings that have been or may be instituted against us and others relating to the Merger;

•

the format, objectives, likelihood of success, cost and timing of our clinical trials and other product development activities, including the design of clinical trials and preclinical studies, the timing of initiation and completion of clinical trials and related preparatory work, our ability to collect and interpret clinical trial data and the timing and outcome of regulatory interactions, including whether trials meet the criteria to serve as registrational;

•

our ability to recruit and enroll suitable patients in our clinical trials;

•

the potential attributes and benefits of our product candidates;

•

our ability to obtain and maintain regulatory approval for our product candidates, and any related restrictions, limitations or warnings on the label of an approved product candidate;

•

our ability to obtain funding for our operations, including funding necessary to complete further development, approval and, if approved, commercialization of our product candidates;

•

the period over which we anticipate our available financial resources will enable us to fund our operating expense and capital expenditure requirements;

•

the potential for our business development efforts to maximize the potential value of our portfolio;

•

our ability to identify, in-license or acquire additional product candidates;

•

our ability to maintain our license agreement with Pfizer;

•

our ability to compete with other companies currently marketing or engaged in the development of treatments for the indications that we are pursuing for our product candidates;

•

our ability to obtain and maintain intellectual property protection for our product candidates and the duration of such protection;

•

our ability to contract with and rely on third parties to assist in conducting our clinical trials and manufacturing our product candidates;

•

the size and growth potential of the markets for our product candidates, and our ability to serve those markets, either alone or in partnership with others;

•

the rate and degree of market acceptance of our product candidates, if approved;

•

the pricing and reimbursement of our product candidates, if approved;

•

regulatory developments in the United States and foreign countries;

•

the impact of laws, regulations, accounting standards, regulatory requirements, judicial decisions and guidance issued by authoritative bodies;

•

our ability to attract and retain key scientific, medical, commercial or management personnel;

•

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•

our future financial performance;

iii

•

our ability to recognize the anticipated benefits of the tavapadon financing transaction and other financing and business development transactions;

•

our ability to satisfy our payment obligations, remain in compliance with covenants under the 2027 Notes (as defined below), to service the interest on or to refinance the 2027 Notes or to make cash payments in connection with any conversion of the 2027 Notes, to the extent required;

•

the effect of adverse market or macroeconomic conditions, including, among others, inflation, interest rates and economic uncertainty, market volatility resulting from global political or economic developments, war, international hostilities and terrorism, any future public health epidemics or outbreaks of infectious disease, the residual post-COVID environment and other factors on any of the foregoing or other aspects of our business operations, including but not limited to our clinical trials and other product development activities, healthcare systems and the global economy as a whole; and

•

other risks and uncertainties, including those listed under the section titled “Risk Factors.”

The forward-looking statements contained in this Quarterly Report are based on current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions or important factors that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in the sections titled “Summary of Material Risks Associated with Our Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. There may be additional risks that we consider immaterial, or which are unknown. It is not possible to predict or identify all such risks. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

You should read this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This Quarterly Report contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed as exhibits to this Quarterly Report. Unless the context otherwise requires, reference in this Quarterly Report to the terms “Cerevel,” “the Company,” “we,” “us,” “our,” and similar designations refer to Cerevel Therapeutics Holdings, Inc. and, where appropriate, our consolidated subsidiaries.

We may from time to time provide estimates, projections and other information concerning our industry, the general business environment, and the markets for certain diseases, including estimates regarding the potential size of those markets and the estimated incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events, circumstances or numbers, including actual disease prevalence rates and market size, may differ materially from the information reflected in this Quarterly Report. Unless otherwise expressly stated, we obtained the industry, market and competitive position data from our internal estimates and research, as well as from independent market research, industry and general publications and surveys, governmental agencies and publicly available information in addition to research, surveys and studies conducted by third parties that have not been independently verified which may, in the future, prove not to have been accurate.

SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

Our business is subject to numerous risks and uncertainties that you should be aware of before making an investment decision, including those highlighted in the section entitled “Risk Factors.” These risks include, but are not limited to, the following:

•

The conditions under the Merger Agreement to our and AbbVie’s consummation of the Merger may not be satisfied at all or in the anticipated timeframe.

•

The announcement of, or a failure to consummate, the Merger could negatively impact our business, financial condition, results of operations or our stock price.

•

The successful development of pharmaceutical products is highly uncertain.

•

We are a clinical-stage biopharmaceutical company with a limited operating history. We have incurred significant financial losses since our inception and anticipate that we will continue to incur significant financial losses for the foreseeable future.

•

We will need substantial additional funding, and if we are unable to raise capital when needed, we could be forced to delay, reduce or terminate our product discovery and development programs or commercialization efforts.

•

Due to the significant resources required for the development of our pipeline, and depending on our ability to access capital, we must prioritize the development of certain product candidates over others. Moreover, we may fail to expend our limited resources on product candidates or indications that may have been more profitable or for which there is a greater likelihood of success.

•

Our business is highly dependent on the success of our product candidates. If we are unable to successfully complete clinical development, obtain regulatory approval for or commercialize one or more of our product candidates, or if we experience delays in doing so, our business will be materially harmed.

•

The regulatory approval processes of the U.S. Food and Drug Administration, or the FDA, and comparable foreign authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

•

If our clinical trials fail to replicate positive results from earlier preclinical studies or clinical trials conducted by us or third parties, we may be unable to successfully develop, obtain regulatory approval for or commercialize our product candidates.

•

We may incur unexpected costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

•

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

•

Even if any of our product candidates receives regulatory approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, in which case we may not generate significant revenues or become profitable.

•

Competitive products may reduce or eliminate the commercial opportunity for our product candidates, if approved. If our competitors develop technologies or product candidates more rapidly than we do, or their technologies or product candidates are more effective or safer than ours, our ability to develop and successfully commercialize our product candidates may be adversely affected.

•

We depend heavily on our executive officers, third-party consultants and others and our ability to compete in the biotechnology and pharmaceutical industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. The loss of their services or our inability to hire and retain such personnel would materially harm our business.

•

BC Perception Holdings, LP, or Bain Investor, and Pfizer Inc., or Pfizer, have significant influence over us, and may have interests different from yours.

•

We rely on third parties to assist in conducting our clinical trials. If they do not perform satisfactorily, we may not be able to obtain regulatory approval or commercialize our product candidates, or such approval or commercialization may be delayed, and our business could be substantially harmed.

•

We depend and expect in the future to continue to depend on in-licensed intellectual property. Such licenses impose obligations on our business, and if we fail to comply with those obligations, we could lose license rights, which would substantially harm our business.

The risks described above should be read together with the text of the full risk factors discussed in the section entitled “Risk Factors” and the other information set forth in this Quarterly Report, including our unaudited condensed consolidated financial statements and the related notes, as well as in other documents that we file with the Securities and Exchange Commission, or the SEC. The risks summarized above or described in full elsewhere in this Quarterly Report are not the only risks that we face. Additional risks and uncertainties not presently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations and future growth prospects.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CEREVEL THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts and per share data)

(Unaudited)


	As of
	March 31, 2024			December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	320,436		$	416,465
Marketable securities		525,858			574,500
Prepaid expenses and other current assets		13,283			15,973
Total current assets		859,577			1,006,938
Marketable securities		218,591			185,199
Property and equipment, net		24,929			25,647
Operating lease assets		19,667			20,125
Restricted cash		1,960			1,960
Other long-term assets		2,619			3,429
Total assets	$	1,127,343		$	1,243,298
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,839		$	11,863
Accrued expenses and other current liabilities		69,750			76,912
Operating lease liabilities, current portion		3,515			3,404
Total current liabilities		84,104			92,179
Operating lease liabilities, net of current portion		26,866			27,786
Financing liability, related party (Notes 5, 7 and 15)		56,999			56,082
Financing liability (Notes 5 and 7)		56,999			56,082
2027 convertible senior notes, net (Note 6)		337,920			337,424
Total liabilities		562,888			569,553
Commitments and contingencies (Notes 13 and 14)
Stockholders’ equity:
Preferred stock, $0.0001 par value: 10,000,000 shares authorized; no shares issued and outstanding as of March 31, 2024 and December 31, 2023		—			—
Common stock, $0.0001 par value: 500,000,000 shares authorized; 181,888,631 and 181,362,064 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		18			18
Additional paid-in capital		2,098,035			2,072,553
Accumulated other comprehensive income (loss)		(1,089	)		1,771
Accumulated deficit		(1,532,509	)		(1,400,597	)
Total stockholders’ equity		564,455			673,745
Total liabilities and stockholders’ equity	$	1,127,343		$	1,243,298

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CEREVEL THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share amounts and per share data)

(Unaudited)


	For the Three Months Ended March 31,
	2024			2023
Operating expenses:
Research and development	$	106,425		$	78,181
General and administrative		36,231			21,370
Total operating expenses		142,656			99,551
Loss from operations		(142,656	)		(99,551	)
Interest income, net		14,455			9,076
Interest expense		(2,652	)		(2,636	)
Other income (expense), net (including related party amounts), (Notes 5, 7 and 15)		(921	)		(11,090	)
Loss before income taxes		(131,774	)		(104,201	)
Income tax benefit (provision), net		(138	)		(85	)
Net loss	$	(131,912	)	$	(104,286	)
Net loss per share, basic and diluted	$	(0.73	)	$	(0.67	)
Weighted-average shares used in calculating net loss per share, basic and diluted		181,610,675			156,648,365

Comprehensive loss:
Net loss	$	(131,912	)	$	(104,286	)
Other comprehensive income (loss):
Changes in fair value attributable to instrument-specific credit risk (including related party amounts), (Notes 5, 7 and 15)		(920	)		(906	)
Unrealized gains (losses) on securities available-for-sale		(1,940	)		1,497
Total other comprehensive income (loss)		(2,860	)		591
Comprehensive loss	$	(134,772	)	$	(103,695	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CEREVEL THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)


	Common stock				Additional paid-in		Accumulated other comprehensive			Accumulated			Total stockholders’
	Shares		Amount		capital		income (loss)			deficit			equity
Balance at December 31, 2023		181,362,064	$	18	$	2,072,553	$	1,771		$	(1,400,597	)	$	673,745
Issuance of common stock under equity incentive plans related to vesting of restricted stock units (RSUs)		105,384		—		—		—			—			—
Issuance of common stock under equity incentive plans related to exercise of options		421,183		—		4,550		—			—			4,550
Equity-based compensation expense		—		—		20,932		—			—			20,932
Other comprehensive loss		—		—		—		(2,860	)		—			(2,860	)
Net loss		—		—		—		—			(131,912	)		(131,912	)
Balance at March 31, 2024		181,888,631	$	18	$	2,098,035	$	(1,089	)	$	(1,532,509	)	$	564,455

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CEREVEL THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)


	Common stock				Additional paid-in		Accumulated other comprehensive		Accumulated			Total stockholders’
	Shares		Amount		capital		income (loss)		deficit			equity
Balance at December 31, 2022		156,502,285	$	16	$	1,485,880	$	3,097	$	(967,755	)	$	521,238
Issuance of common stock under equity incentive plans related to exercise of options		257,824		—		1,574		—		—			1,574
Equity-based compensation expense		—		—		12,592		—		—			12,592
Other comprehensive income		—		—		—		591		—			591
Net loss		—		—		—		—		(104,286	)		(104,286	)
Balance at March 31, 2023		156,760,109	$	16	$	1,500,046	$	3,688	$	(1,072,041	)	$	431,709

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CEREVEL THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	For the Three Months Ended March 31,
	2024			2023
Cash flows from operating activities:
Net loss	$	(131,912	)	$	(104,286	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization		1,541			1,321
Adjustments to operating lease expense		(335	)		(280	)
Equity-based compensation		20,932			12,592
Change in fair value of financing liabilities (including related party amounts), (Notes 5, 7 and 15)		914			11,082
Non-cash interest expense		496			480
Amortization of premiums and accretion of discounts on marketable securities		(6,126	)		(5,206	)
Other non-cash items		—			(8	)
Changes in operating assets and liabilities, net:
Prepaid expenses and other current assets		3,674			(147	)
Other assets		(413	)		(440	)
Accounts payable		(1,194	)		(2,768	)
Accrued expenses and other liabilities		(7,246	)		(7,263	)
Net cash flows used in operating activities		(119,669	)		(94,923	)
Cash flows from investing activities:
Purchases of marketable securities		(122,649	)		(187,631	)
Maturities and redemptions of marketable securities		142,085			298,750
Purchases of property and equipment		(271	)		(336	)
Net cash flows provided by investing activities		19,165			110,783
Cash flows from financing activities:
Proceeds from issuance of common stock related to follow-on offering, net of offering costs		(75	)		—
Proceeds from the exercise of stock options		4,550			1,574
Deferred costs related to financing activities		—			(139	)
Net cash flows provided by financing activities		4,475			1,435
Net increase (decrease) in cash, cash equivalents and restricted cash		(96,029	)		17,295
Cash, cash equivalents and restricted cash, beginning of the period		418,425			138,388
Cash, cash equivalents and restricted cash, end of the period	$	322,396		$	155,683
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	320,436		$	153,816
Restricted cash		1,960			1,867
Total cash, cash equivalents and restricted cash	$	322,396		$	155,683
Supplemental disclosure of cash flow information:
Cash paid for interest	$	4,313		$	4,289
Cash paid for income taxes	$	207		$	—
Supplemental cash flow disclosures from non-cash investing and financing activities:
Fixed asset additions included in accounts payable and other current liabilities	$	441		$	779

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CEREVEL THERAPEUTICS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Operations

Unless the context otherwise requires, references in these notes to “Cerevel,” “the company,” “we,” “us” and “our” and any related terms are intended to mean Cerevel Therapeutics Holdings, Inc. and its consolidated subsidiaries.

We are a clinical-stage biopharmaceutical company pursuing a targeted approach to neuroscience that combines a deep understanding of disease-related biology and neurocircuitry of the brain with advanced chemistry and central nervous system target receptor selective pharmacology to discover and design new therapies. We seek to transform the lives of patients through the development of new therapies for neuroscience diseases, including schizophrenia, Alzheimer’s disease psychosis, epilepsy, panic disorder and Parkinson’s disease. We are advancing our extensive and diverse pipeline with numerous clinical trials underway or planned, including one completed and two ongoing Phase 3 trials and an open-label extension trial for tavapadon in Parkinson’s, two ongoing Phase 2 trials and an open-label extension trial for emraclidine in schizophrenia, an ongoing Phase 2 proof-of-concept trial and an open-label extension trial for darigabat in focal epilepsy and an ongoing Phase 2 proof-of-concept trial for darigabat in panic disorder.

On December 6, 2023, we entered into an Agreement and Plan of Merger (the Merger Agreement) with AbbVie Inc., a Delaware corporation (AbbVie), Symphony Harlan LLC, a Delaware limited liability company and a wholly owned subsidiary of AbbVie (Intermediate Holdco), and Symphony Harlan Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of Intermediate Holdco (Merger Sub), pursuant to which, and on the terms and subject to the conditions thereof, at the effective time of the Merger (the Effective Time), Merger Sub will merge with and into Cerevel, with Cerevel surviving as a wholly owned subsidiary of AbbVie, which we refer to as the Merger.

For additional information on our formation, please read Note 1, Nature of Operations, to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 (our Annual Report).

2. Risks and Liquidity

We are subject to risks and uncertainties common to clinical-stage companies in the biopharmaceutical industry. These risks include, but are not limited to, the introduction of new products, therapies, standards of care or new technological innovations, our ability to obtain and maintain adequate protection for our in-licensed technology, data or other intellectual property and proprietary rights and compliance with extensive government regulation and oversight. In addition, we are dependent upon the services of our employees, including key personnel, consultants, third-party contract research organizations (CROs), third-party contract manufacturing organizations (CMOs) and other third-party organizations.

Our product candidates, currently under development or that we may develop, will require significant additional research and development efforts, including extensive clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting capabilities. There can be no assurance that our research and development activities will be successfully completed, that adequate protection for our licensed or developed technology will be obtained and maintained, that products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable.

Our unaudited condensed consolidated financial statements have been prepared on the basis of continuity of operations, the realization of assets and the satisfaction of liabilities in the ordinary course of business. We have incurred significant operating losses since our inception and, as of March 31, 2024, we have not yet generated revenues. In addition, we anticipate that our expenses will increase significantly in connection with our ongoing activities to support our research, discovery and clinical development efforts and we expect to continue to incur significant expenses and operating losses for the foreseeable future.

We have funded our operations primarily with the net proceeds received from the issuance of preferred stock, common stock and convertible senior notes, net proceeds from the consummation of our Business Combination (as defined in Note 15, Related Party Transactions, to these unaudited condensed consolidated financial statements), and our Funding Agreements (as defined in Note 5, Financing Liabilities, to these unaudited condensed consolidated financial statements). We believe that our available cash, cash equivalents and marketable securities as of March 31, 2024, will enable us to fund our operating expense and capital expenditure requirements through at least 12 months from the issuance date of these financial statements.

3. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include those of the company and its subsidiaries, Cerevel Therapeutics, Inc., Cerevel Therapeutics, LLC and Cerevel MA Securities Corp., after elimination of all intercompany accounts and transactions. The accompanying unaudited condensed consolidated financial statements and notes hereto have been prepared in conformity with the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting and, therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) as set forth in the Financial Accounting Standards Board’s (FASB) accounting standards codification. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the FASB.

In the opinion of management, all adjustments necessary for a fair statement of the financial information, which are of a normal and recurring nature, have been made for the interim periods reported. Results of operations for the three months ended March 31, 2024 and 2023, are not necessarily indicative of the results for the entire fiscal year or any other period. Our unaudited condensed consolidated financial statements for the three months ended March 31, 2024 and 2023, have been prepared on the same basis as and should be read in conjunction with our audited consolidated financial statements and notes included in our Annual Report.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions made in the accompanying unaudited condensed consolidated financial statements include, but are not limited to, the fair value of our financing liabilities, the fair value of equity-based awards and the accrual for research and development expense. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances change. Actual results could differ materially from those estimates.

Restricted Cash

In connection with our entering into the lease agreement for our headquarters in Cambridge, MA, in July 2019, we were required to provide a security deposit in the form of a letter of credit. We have classified this amount as restricted cash in our condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023. Restricted cash was classified as a non-current asset as the associated lease term expires more than 12 months from March 31, 2024.

For additional information related to our other significant accounting policies, please read Note 4, Summary of Significant Accounting Policies, to our audited consolidated financial statements included in our Annual Report.

Recent Accounting Guidance

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, we do not believe that the impact of recently issued standards that are not yet effective will have a material impact on our consolidated financial statements or related disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and by extending the disclosure requirements to entities with a single reportable segment. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

4. Pfizer License Agreement

In August 2018, we entered into a license agreement with Pfizer (the Pfizer License Agreement) pursuant to which we were granted an exclusive, sublicensable, worldwide license under certain Pfizer patent rights, and a non-exclusive, sublicensable, worldwide license under certain Pfizer know-how to develop, manufacture and commercialize certain compounds and products, which currently constitute substantially all of our asset portfolio, in the field of treatment, prevention, diagnosis, control and maintenance of all diseases and disorders in humans, subject to the terms and conditions of the Pfizer License Agreement.

Under the Pfizer License Agreement, we are solely responsible for the development, manufacture, regulatory approval and commercialization of compounds and products in the field and we will pay Pfizer tiered royalties on the aggregate net sales during each calendar year, determined on a product-by-product basis, with respect to products under the Pfizer License Agreement, and we may pay potential milestone payments to Pfizer based on the successful achievement of certain regulatory and commercial milestones. To date, no regulatory or commercial approval milestone payments or royalty payments have been made or become due under this agreement.

For additional information related to our Pfizer License Agreement, please read Note 6, Pfizer License Agreement, to our audited consolidated financial statements included in our Annual Report.

5. Financing Liabilities

Funding Agreements

In April 2021, we entered into a funding agreement with NovaQuest Co-Investment Fund XVI, L.P. (NovaQuest and the NovaQuest Funding Agreement) and a funding agreement with BC Pinnacle Holdings, LP (Bain, the Bain Funding Agreement and, together with the NovaQuest Funding Agreement, the Funding Agreements), pursuant to which NovaQuest and Bain (the Funding Investors) committed to provide funding to support our development of tavapadon for the treatment of Parkinson’s disease.

Under the terms of the Funding Agreements, we received $62.5 million in funding from each of NovaQuest and Bain, for a combined total of $125.0 million in funding (the Total Funding Commitment), of which approximately $31.1 million (25% of the Total Funding Commitment, net of $0.2 million of fees incurred by Bain and NovaQuest) was received in April 2021, $37.5 million (30% of the Total Funding Commitment) was received in April 2022, $31.3 million (25% of the Total Funding Commitment) was received in April 2023 and $25.0 million (20% of the Total Funding Commitment) was received in April 2024.

In return, we agreed to pay to NovaQuest and Bain significant regulatory milestone, sales milestone and royalty payments upon approval of tavapadon by the FDA that collectively will not exceed $531.3 million. In addition, we have the option to satisfy our payment obligations to NovaQuest and Bain upon the earlier of FDA approval or May 1, 2025, by paying an amount equal to the Total Funding Commitment multiplied by an initial factor of 3.00x. This factor will increase ratably over time up to a maximum of 4.25x, less amounts previously paid to NovaQuest and Bain.

We determined that each funding agreement represents a financial instrument that is considered to be a debt host containing embedded redemption features due to certain contingencies related to repayment. We elected to account for the Funding Agreements in accordance with the fair value option as permitted under ASC 825, Financial Instruments.

As of March 31, 2024 and December 31, 2023, the estimated fair value of the financing liability related to potential amounts payable to Bain under the Bain Funding Agreement, which is reflected in our condensed consolidated balance sheets as financing liability, related party, totaled approximately $57.0 million and $56.1 million, respectively. As of March 31, 2024 and December 31, 2023, the estimated fair value of the financing liability related to potential amounts payable to NovaQuest under the NovaQuest Funding Agreement, which is reflected in our condensed consolidated balance sheets as financing liability, totaled approximately $57.0 million and $56.1 million, respectively.

Changes in estimated fair value of the financing liabilities in our unaudited condensed consolidated statements of operations and comprehensive loss are summarized as follows:


	For the Three Months Ended March 31,
(In thousands)	2024			2023
Financing liability, related party
Change in fair value recognized in other income (expense), net	$	(457	)	$	(5,541	)
Change in fair value attributable to instrument-specific credit risk recognized in other comprehensive income (loss)		(460	)		(453	)
Financing liability
Change in fair value recognized in other income (expense), net	$	(457	)	$	(5,541	)
Change in fair value attributable to instrument-specific credit risk recognized in other comprehensive income (loss)		(460	)		(453	)

Changes in fair value attributable to instrument-specific credit risk recognized in other comprehensive income (loss) were derived by benchmarking the current credit spread against the prior period credit spread to isolate the impact directly associated with the change in the credit spread utilized between periods. As of March 31, 2024, accumulated other comprehensive loss from changes in fair value attributable to instrument-specific credit risk was $0.1 million, and as of March 31, 2023, accumulated other comprehensive income from changes in fair value attributable to instrument-specific credit risk was $5.1 million.

For additional information related to our Funding Agreements, please read Note 8, Financing Liabilities, to our audited consolidated financial statements included in our Annual Report.

6. 2027 Convertible Senior Notes

In August 2022, we completed the offering of $345.0 million aggregate principal amount of 2.50% Convertible Senior Notes due 2027 (the 2027 Notes). The aggregate net proceeds from the 2027 Notes offering totaled approximately $334.8 million, after deducting the initial purchasers’ discounts of $9.5 million and other offering expenses of approximately $0.7 million. We accounted for the debt issuance costs as a debt discount for accounting purposes, which was recorded as a reduction in the carrying value of the debt in our condensed consolidated balance sheet and is being amortized to interest expense using the effective interest method over the expected life of the 2027 Notes, or approximately their five-year term.

The 2027 Notes accrue interest at a rate of 2.50% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2023. As of March 31, 2024 and December 31, 2023, accrued interest on the 2027 Notes of $1.1 million and $3.2 million was included in accrued expenses and other current liabilities in our condensed consolidated balance sheets, respectively.

The 2027 Notes mature on August 15, 2027, unless earlier converted, redeemed or repurchased. We will settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, subject to terms and conditions provided in the indenture between us and U.S. Bank Trust Company, National Association, as trustee (the Indenture).

Holders of 2027 Notes may convert all or any portion of their Notes at their option at any time prior to the close of business on the business day immediately preceding May 15, 2027, only in the following circumstances: (i) During any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on December 31, 2022, if the last reported sale price per share of our common stock exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. (ii) During the five consecutive business days immediately after any 10 consecutive trading day period (the Measurement Period) in which the trading price per $1,000 principal amount of notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day. (iii) Upon the occurrence of certain corporate events or distributions on our common stock, as defined in the Indenture. (iv) If we call the 2027 Notes for redemption.

From and after May 15, 2027, noteholders may convert their notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The initial conversion rate is 21.5633 shares of common stock per $1,000 principal amount of the 2027 Notes, which represents an initial conversion price of approximately $46.38 per share of common stock, or a total of approximately 7,439,338 shares. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events outlined within the Indenture. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

We may not redeem the 2027 Notes at any time before August 20, 2025, and no sinking fund is required to be provided for the 2027 Notes. The 2027 Notes will be redeemable, in whole or in part (subject to certain limitations), at our option at any time, on or

after August 20, 2025, and on or before the 50th scheduled trading day immediately before the maturity date, under certain circumstances defined within the Indenture.

The net carrying amount of the 2027 Notes included in our condensed consolidated balance sheets consisted of the following:


	As of
(In thousands)	March 31, 2024			December 31, 2023
Principal amount	$	345,000		$	345,000
Unamortized debt discount		(7,080	)		(7,576	)
Net carrying amount	$	337,920		$	337,424

The following table sets forth the total interest expense related to the 2027 Notes recognized in interest expense in our unaudited condensed consolidated statements of operations and comprehensive loss for the periods presented:


	For the Three Months Ended March 31,
(In thousands)	2024			2023
Contractual interest expense	$	2,156		$	2,156
Amortization of debt issuance costs		496			480
Total interest expense	$	2,652		$	2,636
Effective interest rate		3.1	%		3.1	%

Future minimum payments under the 2027 Notes as of March 31, 2024, are as follows (in thousands):


Fiscal year ended December 31, 2024(1)	$	4,312
Fiscal year ended December 31, 2025		8,625
Fiscal year ended December 31, 2026		8,625
Fiscal year ended December 31, 2027		353,625
Thereafter		—
Total future payments	$	375,187
Less: amounts representing interest		(30,187	)
Total principal amount	$	345,000

(1) For the nine months ended December 31, 2024.

For additional information related to our 2027 Convertible Senior Notes, please read Note 9, 2027 Convertible Senior Notes, to our audited consolidated financial statements included in our Annual Report.

7. Fair Value Measurements

The tables below present information about our assets and liabilities that are measured and carried at fair value on a recurring basis and indicate the level within the fair value hierarchy of the inputs we utilized to determine such fair values:


As of March 31, 2024 (In thousands)	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash equivalents
Money market funds	$	319,557	$	—	$	—	$	319,557
Marketable securities (current)
U.S. government treasuries		120,501		—		—		120,501
U.S. government agencies		—		136,397		—		136,397
Corporate debt securities		—		9,967		—		9,967
Commercial paper		—		258,993		—		258,993
Marketable securities (non-current)
U.S. government treasuries		166,313		—		—		166,313
U.S. government agencies		—		52,278		—		52,278
Restricted cash
Money market account		1,960		—		—		1,960
Total assets	$	608,331	$	457,635	$	—	$	1,065,966
Liabilities:
Financing liability, related party	$	—	$	—	$	56,999	$	56,999
Financing liability		—		—		56,999		56,999
Total liabilities	$	—	$	—	$	113,998	$	113,998


As of December 31, 2023 (In thousands)	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash equivalents
Money market funds	$	415,681	$	—	$	—	$	415,681
Marketable securities (current)
U.S. government treasuries		43,538		—		—		43,538
U.S. government agencies		—		201,058		—		201,058
Corporate debt securities		—		9,982		—		9,982
Commercial paper		—		319,922		—		319,922
Marketable securities (non-current)
U.S. government treasuries		125,040		—		—		125,040
U.S. government agencies		—		60,159		—		60,159
Restricted cash
Money market account		1,960		—		—		1,960
Total assets	$	586,219	$	591,121	$	—	$	1,177,340
Liabilities:
Financing liability, related party	$	—	$	—	$	56,082	$	56,082
Financing liability		—		—		56,082		56,082
Total liabilities	$	—	$	—	$	112,164	$	112,164

We have not recognized any impairments of our assets measured and carried at fair value during the three months ended March 31, 2024.

There have been no changes in valuation techniques, inputs utilized or transfers between fair measurement levels in the periods presented. The fair value of our Level 2 instruments were determined using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly. We validate the prices provided by our third-party pricing services by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances. After completing our

validation procedures, we did not adjust or override any fair value measurements provided by our pricing services as of March 31, 2024 and December 31, 2023.

The carrying amounts reflected in our condensed consolidated balance sheets for our cash and cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate fair value due to the short-term nature of these assets and liabilities. As of March 31, 2024, our financing liabilities represented our only Level 3 assets or liabilities carried at fair market value. Changes in the fair value remeasurement of our financing liabilities can result from changes in one or multiple inputs, including adjustments to discount rates, changes in the expected achievement or timing of any sales-based, development or regulatory milestones, changes in the amount or timing of expected net cash flows, changes in the probability or timing of certain clinical events, or changes in the assumed probability or timing associated with regulatory approval. These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market.

Marketable Securities

The estimated fair value and amortized cost of our available-for-sale marketable debt securities, by contractual maturity and security type, are summarized as follows:


As of March 31, 2024 (In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Due in one year or less
U.S. government treasuries	$	120,543	$	43	$	(85	)	$	120,501
U.S. government agencies		136,511		14		(128	)		136,397
Corporate debt securities		9,966		1		—			9,967
Commercial paper		258,967		53		(27	)		258,993
Due after one year through two years
U.S. government treasuries		167,047		—		(734	)		166,313
U.S. government agencies		52,391		13		(126	)		52,278
Total marketable securities	$	745,425	$	124	$	(1,100	)	$	744,449


As of December 31, 2023 (In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Due in one year or less
U.S. government treasuries	$	43,487	$	71	$	(20	)	$	43,538
U.S. government agencies		201,217		74		(233	)		201,058
Corporate debt securities		9,954		28		—			9,982
Commercial paper		319,713		239		(30	)		319,922
Due after one year through two years
U.S. government treasuries		124,581		459		—			125,040
U.S. government agencies		59,783		379		(3	)		60,159
Total marketable securities	$	758,735	$	1,250	$	(286	)	$	759,699

We had no realized gains or losses recognized on the sale or maturity of marketable securities during the three months ended March 31, 2024 and 2023. To date, we have not recognized any allowances for credit losses or impairments in relation to our available-for-sale marketable securities as these marketable securities are comprised of high credit quality, investment grade securities that we do not intend or expect to be required to sell prior to their anticipated recovery, and the decline in fair value of these securities is attributable to factors other than credit losses. All marketable securities with unrealized losses presented in the previous tables have been in a continuous unrealized loss position for less than 12 months or the loss is not material. Based on our evaluation, we determined credit losses related to marketable securities were immaterial for the three months ended March 31, 2024.

The weighted average maturity of our marketable securities as of March 31, 2024 and December 31, 2023 was approximately eight months.

Financing Liabilities

Upon execution of the Funding Agreements, we determined that the agreements qualified for election under the fair value option and initially measured the financial instruments at their issue-date estimated fair value. We revalue the related financial liabilities on a recurring basis at each reporting period.

As of March 31, 2024, the financing liability, related party and financing liability each totaled approximately $57.0 million. We determined their respective estimated fair values using a Monte Carlo simulation model under the income approach determined by using probability assessments of the expected future cash receipts and expected future cash payments and a discount rate of approximately 10.0% and 9.0% as of March 31, 2024 and December 31, 2023, respectively. The probability assessments of the

expected future cash receipts and expected future payments and the timing of expected future repayments are based on significant inputs that are not observable in the market and are subject to remeasurement at each reporting date.

The following table provides a rollforward of the estimated fair value associated with our total financing liabilities:


	For the Three Months Ended March 31,
(In thousands)	2024
Beginning balance, total financing liabilities	$	112,164
Funding commitment received		—
Change in fair value recognized in other (income) expense, net		914
Change in fair value attributable to instrument-specific credit risk recognized in other comprehensive (income) loss		920
Ending balance, total financing liabilities	$	113,998

For additional information related to the fair value of our financing liability and financing liability, related party, please read Note 5, Financing Liabilities, to these unaudited condensed consolidated financial statements.

2027 Convertible Senior Notes

The fair value of the 2027 Notes, which were issued in August 2022, may differ from the carrying value. The fair value is determined utilizing prices for the 2027 Notes observed in market trading. As the market for the trading of the 2027 Notes is not considered to be an active market, the estimate of fair value is considered a Level 2 measurement. As of March 31, 2024, the estimated fair value of the 2027 Notes, which have an aggregate carrying value of $337.9 million, was $386.6 million. As of December 31, 2023, the 2027 Notes had an aggregate carrying value and estimated fair value of $337.4 million and $382.0 million, respectively.

For additional information related to the 2027 Notes, please read Note 6, 2027 Convertible Senior Notes, to these unaudited condensed consolidated financial statements.

8. Financial Statement Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	As of
(In thousands)	March 31, 2024		December 31, 2023
Prepaid clinical trial services	$	1,076	$	1,717
Prepaid research and development expenses		868		1,821
Prepaid insurance		1,935		2,608
Other prepaid expenses		4,364		3,973
Interest receivable		4,963		5,291
Other		77		563
Prepaid expenses and other current assets	$	13,283	$	15,973

Property and Equipment, Net

Property and equipment, net consisted of the following:


	As of
(In thousands)	March 31, 2024			December 31, 2023
Computer equipment and software	$	1,045		$	1,045
Furniture and fixtures		459			459
Laboratory equipment		13,240			13,212
Leasehold improvements		23,481			23,481
Construction in progress		699			16
Less: Accumulated depreciation		(13,995	)		(12,566	)
Property and equipment, net	$	24,929		$	25,647

Other Long-Term Assets

Other long-term assets consisted of the following:


	As of
(In thousands)	March 31, 2024		December 31, 2023
Other prepaid expenses, net of current portion	$	904	$	1,886
Deferred expenses associated with financing activities		122		122
Other		1,593		1,421
Other long-term assets	$	2,619	$	3,429

As of March 31, 2024 and December 31, 2023, other prepaid expenses, net of current portion, primarily consisted of deposits paid under certain CRO agreements that will be held until the completion and close-out of the related clinical trials with our CROs which are anticipated to end more than 12 months from the balance sheet date.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:


	As of
(In thousands)	March 31, 2024		December 31, 2023
Accrued external research and development services	$	50,867	$	51,300
Accrued compensation and personnel costs		6,944		19,423
Accrued property and equipment		200		—
Accrued professional fees and consulting services		9,145		1,786
Accrued interest		1,078		3,234
Other		1,516		1,169
Accrued expenses and other current liabilities	$	69,750	$	76,912

Other Income (Expense), net

Other income (expense), net consisted of the following:


	For the Three Months Ended March 31,
(In thousands)	2024			2023
Loss on fair value remeasurement of financing liability, related party	$	(457	)	$	(5,541	)
Loss on fair value remeasurement of financing liability		(457	)		(5,541	)
Other, net		(7	)		(8	)
Other income (expense), net	$	(921	)	$	(11,090	)

9. Stockholders’ Equity

Preferred Stock

Pursuant to the terms of our certificate of incorporation, we have 10,000,000 authorized shares of preferred stock, par value $0.0001 per share, all of which shares of preferred stock are undesignated. Our board of directors or any authorized committee thereof is expressly authorized, without further action by our stockholders, to issue such shares of preferred stock from time to time on terms it may determine, to divide shares of preferred stock into one or more series and to fix the designations, preferences, privileges and restrictions of preferred stock. There were no issued and outstanding shares of preferred stock as of March 31, 2024 and December 31, 2023.

Common Stock

Pursuant to the terms of our certificate of incorporation, we have 500,000,000 authorized shares of common stock, par value $0.0001 per share. There were 181,888,631 and 181,362,064 shares of common stock issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.

Voting

The holders of our common stock are entitled to one vote for each share of common stock held of record by such holder on all matters voted upon by our stockholders, provided, however, that, except as otherwise required in our certificate of incorporation or by applicable law, the holders of our common stock are not entitled to vote on any amendment to our certificate of incorporation (or on any amendment to a certificate of designations of any series of preferred stock) that relates solely to the terms of one or more outstanding series of preferred stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon, and there is no cumulative voting.

Dividends

Subject to any other provisions of our certificate of incorporation, holders of our common stock are entitled to receive ratably, in proportion to the number of shares of common stock held by them, such dividends and other distributions in cash, stock or property when, as and if declared thereon by our board of directors from time to time out of our assets or funds legally available therefor. No dividends have been declared to date.

ATM Program

In November 2021, we entered into an open market sales agreement with Jefferies LLC, as sales agent, to provide for the issuance and sale of up to $250.0 million of our common stock from time-to-time in “at-the-market” offerings (the ATM Program). As of March 31, 2024, no sales had been made pursuant to the ATM Program.

10. Equity-Based Compensation

Equity-based Compensation Expense

The following table summarizes equity-based compensation expense included in our unaudited condensed consolidated statements of operations and comprehensive loss:


	For the Three Months Ended March 31,
(In thousands)	2024		2023
Research and development	$	9,477	$	6,339
General and administrative		11,455		6,253
Total equity-based compensation expense included in total operating expense	$	20,932	$	12,592

The following table summarizes equity-based compensation expense by award type included in our unaudited condensed consolidated statements of operations and comprehensive loss:


	For the Three Months Ended March 31,
(In thousands)	2024		2023
Stock options	$	13,069	$	11,663
Restricted stock units		6,568		703
Performance restricted stock units		1,295		—
Employee stock purchase plan		—		226
Total equity-based compensation expense included in total operating expense	$	20,932	$	12,592

Stock Options

There were no stock options granted during the three months ended March 31, 2024. Stock options granted during the three months ended March 31, 2023 had a weighted average grant-date fair value of $26.21 and the assumptions that we used to determine the fair value of stock options granted to employees for the three months ended March 31, 2023, are summarized as follows, presented on a weighted average basis:


Risk free interest rate	3.76	%
Expected term (in years)	6.08
Expected volatility	90.5	%
Expected dividend yield	0.0	%

As of March 31, 2024, total unrecognized equity-based compensation expense relating to stock options outstanding was $91.9 million, which is expected to be recognized over a weighted average period of 2.3 years.

The following table summarizes our stock option activity for the three months ended March 31, 2024:


	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in millions)
Outstanding at December 31, 2023		17,151,253		$	16.64		6.92	$	441.9
Granted		—			—
Exercised		(421,183	)		10.80
Forfeited, canceled or expired		(15,190	)		30.38
Outstanding at March 31, 2024		16,714,880		$	16.77		6.71	$	426.2
Options vested and expected to vest as of March 31, 2024		16,714,880		$	16.77		6.71	$	426.2
Options exercisable as of March 31, 2024		11,898,484		$	12.66		6.14	$	352.3

The aggregate intrinsic value represents the difference between the closing stock price of our common stock and the exercise price of in-the-money options. Our closing stock price as reported on the Nasdaq Stock Market as of March 28, 2024, the last trading day of the quarter, was $42.27.

Restricted Stock Units

The following table summarizes our restricted stock unit activity for the three months ended March 31, 2024:


	Restricted Stock Units
	Number of Units			Weighted- Average Grant Date Fair Value
Non-vested at December 31, 2023		703,142		$	31.13
Granted		2,435,011			42.24
Vested		(105,384	)		34.37
Forfeited		(3,512	)		38.74
Non-vested at March 31, 2024		3,029,257		$	39.94

As of March 31, 2024, total unrecognized equity-based compensation expense relating to restricted stock unit awards was $113.7 million, which is expected to be recognized over a weighted average period of 3.7 years.

Performance Restricted Stock Units

There were no performance restricted stocks units (PSUs) granted during the three months ended March 31, 2024 or 2023. In the second quarter of 2023, we granted 320,742 PSUs. The number of PSUs granted represents the target number of units that are eligible to vest at the end of a four-year performance period, subject to the grantee’s continued service through the end of the performance period. The PSUs will be settled in shares at the end of the four-year performance period and are equity-classified. For additional information related to our PSUs, please read Note 14, Equity-based Compensation, to our audited consolidated financial statements included in our Annual Report.

As of March 31, 2024, total unrecognized equity-based compensation expense relating to our PSUs was $16.6 million, which is expected to be recognized over a weighted average period of 3.2 years.

11. Net Loss Per Share

The following table sets forth the computation of the basic and diluted net loss per share:


	For the Three Months Ended March 31,
(In thousands, except share amounts and per share data)	2024			2023
Numerator:
Net loss	$	(131,912	)	$	(104,286	)
Denominator:
Weighted-average shares used in calculating net loss per share, basic and diluted		181,610,675			156,648,365
Net loss per share, basic and diluted	$	(0.73	)	$	(0.67	)

Since we were in a loss position for all periods presented, diluted net loss per share is the same as basic net loss per share as the inclusion of all potential dilutive securities would have been anti-dilutive. The shares in the table below were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:


	As of
	March 31, 2024		March 31, 2023
Stock options outstanding		16,714,880		18,419,224
Restricted stock units outstanding		3,029,257		559,117
Performance restricted stock units outstanding(1)		320,742		—
ESPP Shares issuable		—		32,410
Common stock issuable upon conversion of the 2027 Notes		7,439,338		7,439,338
Total		27,504,217		26,450,089

(1) Performance restricted stock units reflect the target number of shares eligible to be earned at the time of grant.

For additional information related to the performance restricted stock units, please read Note 10, Equity-Based Compensation, to these unaudited condensed consolidated financial statements. For additional information related to the conversion of the 2027 Notes, please read Note 6, 2027 Convertible Senior Notes, to these unaudited condensed consolidated financial statements.

12. Income Taxes

For the three months ended March 31, 2024 and 2023, we did not record income tax benefits for net operating losses incurred or for the research and development tax credits generated in each period due to the uncertainty of realizing a benefit from those items. Our tax provision and the resulting effective tax rate for interim periods is determined based upon our estimated annual effective tax rate, adjusted for the effect of discrete items arising during the interim quarterly period. The impact of such inclusions could result in a higher or lower effective tax rate during a particular quarterly period, based upon the mix and timing of actual earnings or losses versus annual projections. In each quarterly period, we update our estimate of the annual effective tax rate, and if the estimated annual tax rate changes, a cumulative adjustment is made in that quarter.

We have evaluated the positive and negative evidence bearing upon our ability to realize our deferred tax assets, which primarily consist of net operating loss carryforwards, research and development tax credits and capitalized research and development costs. We have considered our history of cumulative net losses, estimated future taxable income and prudent and feasible tax planning strategies, and have concluded that it is more likely than not that we will not realize the benefits of our deferred tax assets. As a result, as of March 31, 2024 and December 31, 2023, we have recorded a full valuation allowance against our net deferred tax assets.

13. Legal Proceedings

We, from time to time, may be subject to various legal proceedings and claims that may arise in the ordinary course of business. Except as described below, we were not subject to any material legal proceedings as of March 31, 2024, and, to the best of our knowledge, no material legal proceedings are currently pending or threatened.

In January and February of 2024, in connection with the Merger, three purported stockholders of the Company commenced actions against the Company and its board members challenging the adequacy of disclosures in the Company’s proxy statement relating to the Merger in the United States District Courts for the Southern District of New York and District of Delaware. The three actions are captioned Travers v. Cerevel Therapeutics Holdings, Inc., et al., Case No. 1:24-cv-00493 (S.D.N.Y.), Scott v. Cerevel Therapeutics Holdings, Inc., et al., Case No. 1:24-cv-00099-UNA (D. Del.), and Dixon v. Cerevel Therapeutics Holdings, Inc., et al., Case No. 1:24-cv-00100-UNA (D. Del.). A number of other purported stockholders sent letters and/or draft complaints to the Company alleging similar deficiencies as those noted above, and one purported stockholder issued a demand letter seeking inspection of the Company’s books and records pursuant to 8 Del. C. § 220. The Company believes it has substantial defenses to these claims. An estimate of the possible loss or range of losses cannot be made at this time and no liability has been recorded as of March 31, 2024 and December 31, 2023.

14. Commitments and Contingencies

As of March 31, 2024, we have several ongoing clinical studies in various clinical trial stages. Our most significant contracts relate to agreements with CROs for clinical trials and preclinical studies and CMOs for the manufacturing of drug substance, which we enter into in the normal course of business. The contracts with CROs and CMOs are generally cancellable, with notice, at our option.

Guarantees and Indemnification Obligations

We enter into standard indemnification obligations in the ordinary course of business. Pursuant to these obligations, we indemnify and agree to reimburse the indemnified party for certain losses and costs incurred by the indemnified party. The term of these indemnification obligations is generally perpetual after execution of the agreement. In addition, we have entered into indemnification obligations with members of our board of directors and our executive officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or executive officers. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited. To date, we have not incurred any losses or any material costs related to these indemnification obligations and no claims with respect thereto were outstanding. We do not believe that the outcome of any claims under indemnification arrangements will have a material effect on our financial position, results of operations and cash flows, and we have not accrued any liabilities related to such obligations in our unaudited condensed consolidated financial statements as of March 31, 2024 and December 31, 2023.

Obligations Contingent upon the Merger

We will be obligated to make significant contingent payments upon the consummation of the Merger. As the Merger was not deemed to be probable of being achieved as of March 31, 2024, we have not accrued any liabilities related to such contingent obligations in our condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023.

15. Related Parties

As of March 31, 2024 and December 31, 2023, Pfizer held 27,349,211 shares of our common stock and had nominated two members to our board of directors. For information related to our license agreement with Pfizer, please read Note 4, Pfizer License Agreement, to these unaudited condensed consolidated financial statements.

As of March 31, 2024 and December 31, 2023, Bain Investor held 65,679,781 shares of our common stock and had nominated six members to our board of directors, with two such representatives that were required to be independent and were subject to Pfizer’s prior written consent.

NDA Filing Support Services

In January 2024, we entered into an agreement with Pfizer pursuant to which Pfizer will provide us with New Drug Application (NDA) filing support services consisting of data and document sharing, submission package support and report generation. As of March 31, 2024, $0.2 million of expenses have been incurred pursuant to this agreement. All such expenses incurred are included in accrued expenses and other liabilities and accounts payable as of March 31, 2024.

Research Collaboration and License Agreement

In June 2022, we entered into a research collaboration and license agreement with Pfizer, pursuant to which we will collaborate to identify, screen and evaluate compounds directed at certain targets for neuroscience diseases using Pfizer’s chemical library. Under the terms of the agreement, we will be required to reimburse Pfizer for certain research services and make a contingent development milestone payment and single-digit royalty payments on net sales of products containing one or more compounds derived from the collaboration. No amounts have been incurred under the agreement to date.

Funding Agreement

In April 2021, we entered into a funding agreement with Bain, pursuant to which Bain committed to provide $62.5 million in funding (the Bain Funding Commitment) to support our development of tavapadon for the treatment of Parkinson’s disease over four years, of which approximately $15.5 million (25% of the Bain Funding Commitment, net of $0.1 million of fees incurred by Bain) was received in April 2021, approximately $18.8 million (30% of the Bain Funding Commitment) was received in April 2022, approximately $15.6 million (25% of the Bain Funding Commitment) was received in April 2023, and approximately $12.5 million (20% of the Bain Funding Commitment) was received in April 2024. For additional information related to our funding agreement with Bain, please read Note 5, Financing Liabilities, to these unaudited condensed consolidated financial statements.

Management Agreement

Following the closing of the business combination in October 2020 pursuant to which ARYA Sciences Acquisition Corp II (ARYA) acquired Cerevel Therapeutics, Inc., with Cerevel Therapeutics, Inc. becoming a wholly-owned subsidiary of ARYA and ARYA being renamed Cerevel Therapeutics Holdings, Inc. (the Business Combination), we entered into a management agreement with Bain Capital Private Equity, LP and Bain Capital Life Sciences, LP, providing for the expense reimbursement and indemnification of such entities. No amounts have been incurred under the management agreement to date.

For additional information related to the Business Combination, please read Note 3, Business Combination, to our audited consolidated financial statements included in our Annual Report.

16. Subsequent Events

We have completed an evaluation of all subsequent events after the unaudited balance sheet date of March 31, 2024, through May 8, 2024, the issuance date of these financial statements, to ensure that these unaudited condensed consolidated financial statements include appropriate disclosure of material events both recognized in these unaudited condensed consolidated financial statements as of March 31, 2024, and material events which occurred subsequently but were not recognized in these unaudited condensed consolidated financial statements. We have concluded that no such subsequent events other than the following have occurred that require disclosure:

Funding Agreement Receipts

Pursuant to the Funding Agreements, we received the last funding payment of $25.0 million (20% of the Total Funding Commitment) in April 2024. For additional information related to our Funding Agreements, please read Note 5, Financing Liabilities, to these unaudited condensed consolidated financial statements.

Jacobs Street Sublease

In April 2024, we entered into a sublease for additional space in our corporate headquarters location at 222 Jacobs Street, Cambridge, Massachusetts with an initial term of 3.5 years. The sublease provides for an additional approximate 49,000 square feet of office space to bring the total space at our corporate headquarters to approximately 110,000 square feet. Under the terms of the sublease, the aggregate base rent payments will total approximately $7.6 million over the initial term, excluding certain operating and tax expenses, parking and utilities. We also have the option to extend the sublease for an additional two-year term.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report, and the audited consolidated financial statements and accompanying notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the year ended December 31, 2023, or our Annual Report. Certain of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the sections entitled “Summary of Material Risks Associated with Our Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section entitled “Risk Factors” to gain an understanding of the material and other risks that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Business Overview

Introduction

Our portfolio of product candidates is based on a differentiated approach to addressing neuroscience diseases, which incorporates three key pillars: (1) targeted neurocircuitry, where we seek to unlock new treatment opportunities by precisely identifying and targeting the neurocircuit that underlies a given neuroscience disease, (2) targeted receptor subtype selectivity, where we selectively target the receptor subtype(s) related to the disease physiology to minimize undesirable off-target effects while maximizing activity and (3) differentiated pharmacology, where we design full and partial agonists, antagonists and allosteric modulators to precisely fine-tune the receptor pharmacology and neurocircuit activity to avoid over-activation or over-suppression of the endogenous physiologic range. In addition, our portfolio is supported by robust data packages and rigorous clinical trial execution designed to elucidate the key points of differentiation for our compounds. We believe that this science-driven approach is critical to achieving optimal therapeutic activity while minimizing unintended side effects of currently available therapies.

Behind our portfolio stands a team with a multi-decade track record of drug approvals and commercial success. This track record has been driven by their extensive experience with empirically-driven clinical trial design and implementation, a history of successful interactions with regulatory agencies and relationships with global key opinion leaders. We believe that the distinctive combination of our management team and our pipeline has the potential to bring the next generation of transformative neuroscience therapies to patients.

The Merger

On December 6, 2023, we entered into the Merger Agreement with AbbVie, Intermediate Holdco and Merger Sub, pursuant to which, and on the terms and subject to the conditions thereof, at the Effective Time, Merger Sub will merge with and into Cerevel, with Cerevel surviving as a wholly owned subsidiary of AbbVie.

Our Pipeline

The following table summarizes our current portfolio of programs. This table does not include multiple additional preclinical programs that have not yet been disclosed.

Our Lead Programs

Emraclidine is a positive allosteric modulator, or PAM, that selectively targets the muscarinic acetylcholine 4 receptor subtype, or M4. In June 2021, we announced positive topline results for a Phase 1b trial of emraclidine in schizophrenia, consisting of Part A, a multiple ascending dose, or MAD, assessment and Part B, a pharmacodynamic, or PD, assessment. Emraclidine demonstrated a clinically meaningful and statistically significant improvement in the Positive and Negative Syndrome Scale, or PANSS, total score at six weeks and was generally well tolerated compared with placebo at the two dose levels evaluated in Part B. We initiated two Phase 2 clinical trials in schizophrenia, known as the EMPOWER trials, in June 2022 and a 52-week open-label extension trial to begin development of the required safety database in September 2022. In parallel, we are also prioritizing nonclinical and clinical safety pharmacology studies, including hepatic and renal insufficiency studies, along with other registration-enabling activities. In December 2022, we announced data from an eight-week ambulatory blood pressure monitoring trial providing clear evidence that emraclidine does not induce an increase in blood pressure with chronic dosing in people living with schizophrenia.

In addition, we plan to evaluate the potential of this mechanism in other populations, including Alzheimer’s disease psychosis. We initiated a Phase 1 trial evaluating the safety, tolerability and pharmacokinetics, or PK, in elderly healthy volunteers in December 2022 to support the future development of emraclidine in Alzheimer’s disease psychosis. In the fourth quarter of 2022,

the FDA granted Fast Track Designation for emraclidine for the treatment of hallucinations and delusions associated with Alzheimer’s disease psychosis.

Darigabat is a PAM that selectively targets the alpha-2/3/5 subunits of the GABAA receptor. In the second half of 2020, we initiated a Phase 2 proof-of-concept trial, known as REALIZE, in patients with drug-resistant focal onset seizures, or focal epilepsy.

In February 2022, we announced positive topline results for a Phase 1 trial of darigabat in a panic symptoms model in healthy volunteers. Both doses of darigabat demonstrated clinically meaningful and statistically significant anxiolytic activity compared with placebo in this proof-of-principle trial. Darigabat was generally well tolerated, with no serious adverse events and no discontinuations in the darigabat cohorts. We initiated a Phase 2 proof-of-concept trial of darigabat in panic disorder, known as ADAPT, in July 2023.

Tavapadon is a selective dopamine D1/D5 receptor partial agonist that we are developing for the treatment of Parkinson’s disease. We initiated a registration-directed Phase 3 program for tavapadon beginning in January 2020, which includes two trials as monotherapy in early-stage Parkinson’s, known as TEMPO-1 and TEMPO-2, one trial as adjunctive therapy in late-stage Parkinson’s, known as TEMPO-3, and an open-label extension trial, known as TEMPO-4.

In April 2024, we announced positive topline results for the Phase 3 TEMPO-3 trial that evaluated the efficacy, safety and tolerability of tavapadon as an adjunctive therapy to levodopa, L-dopa, in adults. The trial met its primary endpoint – patients treated with tavapadon adjunctive to L-dopa experienced a clinically meaningful and statistically significant increase of 1.1 hours in total “on” time without troublesome dyskinesia compared to those treated with L-dopa and placebo (1.7 hours vs. 0.6 hours, p <0.0001). A statistically significant reduction in “off” time, the key secondary endpoint, was also observed for the tavapadon treatment arm. Tavapadon was generally well tolerated. The safety profile observed in the TEMPO-3 trial was consistent with prior clinical trials of tavapadon. The majority of adverse events reported were mild to moderate in severity.

CVL-871 is a selective dopamine D1/D5 receptor partial agonist specifically designed to achieve a modest level of partial agonism, which we believe may be useful in modulating the complex neural networks that govern cognition, motivation and apathy behaviors in neurodegenerative diseases. In the second quarter of 2021, the FDA granted Fast Track Designation for CVL-871 for the treatment of dementia-related apathy. We are conducting a Phase 2a exploratory trial in dementia-related apathy.

We believe that our lead programs have target product profiles that may enable them to become backbone therapies in their respective lead indications, either replacing standards of care as monotherapies or enhancing treatment regimens as adjunct to existing therapies. Results from the clinical trials mentioned above will guide the potential development of our product candidates in additional indications with similar neurocircuitry deficits.

Our Other Programs

In addition to the lead programs described above, we plan to further characterize and appropriately advance our early clinical and preclinical pipeline across multiple potential neuroscience indications. Our other programs include:

•

CVL-354, our selective kappa opioid receptor antagonist, or KORA, for the treatment of major depressive disorder, or MDD, and substance use disorder;

•

our selective PDE4 inhibitor (PDE4D-sparing) program for the treatment of psychiatric, neuroinflammatory and other disorders; and

•

our selective M4 agonist program for the treatment of psychiatric and neurological indications.

We are also pursuing other undisclosed targets, including those with disease-modifying potential for leading neuroscience diseases. These programs include those initiated by Pfizer as well as others developed internally through the application of human genetic analyses and new technology platforms, such as artificial intelligence and DNA-encoded chemical libraries, to establish novel chemical lead series that are designed to enable better understanding of therapeutic potential.

Business Environment

The biopharmaceutical industry is extremely competitive. We are subject to risks and uncertainties common to clinical-stage companies in the biopharmaceutical industry. These risks include, but are not limited to, the uncertainty surrounding introduction of new products, therapies, standards of care or technological innovations, our ability to obtain and maintain adequate protection for our in-licensed technology, data or other intellectual property and proprietary rights and compliance with extensive government regulation and oversight. We are also dependent upon the services of key personnel, including our President and Chief Executive Officer, executive team and other highly skilled employees. Demand for experienced personnel in the pharmaceutical and biotechnology industries is high and competition for talent is intense. Please read the section entitled “Risk Factors” for additional information.

We face potential competition from many different sources, including pharmaceutical and biotechnology companies, academic institutions and governmental agencies, as well as public and private research institutions. Many of our competitors are working to develop or have commercialized products similar to those we are developing and have considerable experience in undertaking clinical trials and in obtaining regulatory approval to market pharmaceutical products. Our competitors may also have significantly greater financial resources, established presence in the market, expertise in research and development, manufacturing, preclinical and clinical testing, obtaining regulatory approvals and reimbursement and marketing approved products. Other smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as global supply chain disruptions, global trade disputes and/or political instability, including due to war, international hostilities or terrorism. Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks. Additionally, rising inflation rates may affect us by increasing operating expenses, such as employee-related costs and clinical trial expenses, and as a result negatively impacting our results of operations.

Risks and Liquidity

Product development is very expensive and involves a high degree of risk. Only a small number of research and development programs result in the commercialization of a product. We will not generate revenue from product sales unless and until we successfully complete clinical development, obtain regulatory approval for and successfully commercialize the product candidates we are developing or may develop. We currently do not have any product candidates approved for commercial sale. In addition, we operate in an environment of rapid change in technology. We are also dependent upon the services of our employees, consultants, third-party contract research organizations, or CROs, third-party contract manufacturing organizations, or CMOs, and other third-party organizations.

Our product candidates, currently under development or that we may develop, will require significant additional research and development efforts, including extensive clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting capabilities. There can be no assurance that our research and development activities will be successfully completed, that adequate protection for our licensed or developed technology will be obtained and maintained, that products developed will obtain necessary regulatory approval or that any approved products will be commercially viable or successful.

We believe that our available financial resources will enable us to fund our operating expense and capital expenditure requirements through at least 12 months from the issuance date of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. Our estimate may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

In the future, we will require additional capital to meet operational needs and capital requirements. We do not have any committed external source of liquidity. Until such time, if ever, as we can generate substantial product revenue, we will need substantial additional funding to support our continuing operations and pursue our growth strategy, and we may finance our operations through a combination of additional private or public equity offerings, debt financings, collaborations, strategic alliances, marketing, distribution or licensing arrangements with third parties or through other sources of financing. We have historically raised funding through the sale of equity or debt securities and intend to consider future opportunities to raise additional funding when market conditions are favorable for us to do so. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. However, the trading prices for our common stock and for other biopharmaceutical companies have been highly volatile. As a result, we may face difficulties raising capital through sales of our equity or debt securities or such sales may be on unfavorable terms. Similarly, adverse market or macroeconomic conditions or market volatility resulting from global economic developments, political unrest, including due to war, international hostilities or terrorism, high inflation, the post-COVID environment, future public health epidemics or other factors, could materially and adversely affect our ability to consummate an equity or debt financing on favorable terms, or at all. To the extent that we raise additional capital through the sale of private or public equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates,

or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, obtain funds through arrangement with collaborators on terms unfavorable to us or pursue other strategies, all of which could adversely affect the holdings or the rights of our stockholders.

We have incurred significant operating losses since our inception and, as of March 31, 2024, we have not yet generated revenues. We have funded our operations primarily with the net proceeds received from the issuance of preferred stock, common stock and convertible senior notes, net proceeds from the consummation of our Business Combination (as defined herein) and our Funding Agreements.

In addition, we anticipate that our expenses will increase substantially if, and as, we:

•

advance our clinical-stage product candidates through clinical development, including as we advance these candidates into later-stage clinical trials;

•

seek regulatory approvals for any product candidates that successfully complete clinical trials;

•

hire additional clinical, quality control, medical, scientific and other technical personnel to support the clinical development of our product candidates;

•

experience an increase in headcount as we expand our research and development organization and market development and pre-commercial planning activities;

•

undertake any pre-commercial or commercial activities to establish sales, marketing and distribution capabilities;

•

advance our preclinical-stage product candidates into clinical development;

•

seek to identify, acquire and develop additional product candidates, including through business development efforts to invest in or in-license other technologies or product candidates;

•

maintain, expand and protect our intellectual property portfolio;

•

make milestone, royalty or other payments due under the Pfizer License Agreement and any future in-license or collaboration agreements; and

•

make milestone, royalty, interest or other payments due under the Funding Agreements, our 2027 convertible senior notes, or the 2027 Notes, and any future financing or other arrangements with third parties.

Components of Operating Results

Revenues

We have not generated any revenues since our inception and do not expect to generate any revenues from the sale of products in the near future, if at all. If our development efforts for our current product candidates or additional product candidates that we may develop in the future are successful and can be commercialized, we may generate revenue in the future from product sales. Additionally, we may enter into collaboration and license agreements from time to time that provide for certain payments due to us. Accordingly, we may generate revenue from payments from such collaboration or license agreements in the future.

Research and Development

We support our drug discovery and development efforts through the commitment of significant resources to our preclinical and clinical development activities. Our research and development expense includes:

•

employee-related expenses, consisting of salaries, benefits and equity-based compensation for personnel engaged in our research and development activities;

•

expenses incurred in connection with the preclinical and clinical development of our product candidates, including costs incurred under agreements with CROs and investigative clinical trial sites;

•

expenses incurred with consultants and other third parties who supplement our internal capabilities and conduct research and development activities on our behalf;

•

costs associated with research materials and supplies and services associated with our laboratory;

•

materials and supply costs associated with the manufacture of drug substance and drug product for preclinical testing and clinical trials; and

•

certain indirect costs incurred in support of overall research and development activities, including facilities, depreciation and technology expenses.

We expense research and development expenses as incurred. Payments we make for research and development services prior to the services being rendered are recorded as prepaid assets in our consolidated balance sheets and are expensed as the services are provided. We estimate and accrue the value of goods and services received from CROs, CMOs and other third parties each reporting period based on estimates of the level of services performed and progress in the period when we have not received an invoice from such organizations. When evaluating the adequacy of accrued liabilities, we analyze progress of the studies or clinical trials, including the phase of completion of events, invoices received and contracted costs. We reassess and adjust our accruals as actual costs become known or as additional information becomes available. Our historical accrued estimates have not been materially different from actual costs.

Our external research and development expenses for our clinical stage product candidates are tracked on a program-by-program basis and consist primarily of fees, reimbursed materials and other costs paid to consultants, contractors, CROs and CMOs. External research and developments costs that directly support our discovery activities and preclinical programs are classified within other research and development programs. Program costs for the periods presented do not reflect an allocation of expenses associated with personnel costs, equity-based compensation expense, activities that benefit multiple programs or indirect costs incurred in support of overall research and development, such as technology and facilities-related costs.

We expect that our annual research and development expenses will increase substantially in connection with our planned preclinical and clinical development activities as we continue to invest in activities to develop our product candidates and preclinical programs. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size, scope and duration of later-stage clinical trials. Furthermore, the process of conducting the necessary clinical trials to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we cannot accurately estimate or know the nature, timing and costs that will be necessary to complete the preclinical and clinical development for any of our product candidates or when and to what extent we may generate revenue from the commercialization and sale of any of our product candidates or achieve profitability.

The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include without limitation:

•

per patient trial costs;

•

the number of patients that participate in the trials;

•

the number of sites included in the trials;

•

the countries in which the trials are conducted;

•

the length of time required to enroll eligible patients;

•

the number of doses that patients receive;

•

the drop-out or discontinuation rates of patients;

•

potential additional safety monitoring or other studies requested by regulatory agencies;

•

the duration of patient follow-up;

•

the efficacy and safety profile of our product candidates; and

•

the impact of adverse macroeconomic, labor and other market conditions on our supply chain and clinical trial operations and timelines.

Changes in any of these assumptions could significantly impact the cost and timing associated with the development of our product candidates. Additionally, future competition and commercial and regulatory factors beyond our control may also impact our clinical development programs and plans.

General and Administrative

We expense general and administrative costs as incurred. General and administrative expenses consist primarily of salaries, benefits and equity-based compensation for personnel in executive, finance, human resources, market research and development, legal and other corporate functions. General and administrative expenses also include legal fees incurred relating to corporate and patent matters, expenses directly associated with the Merger, professional fees incurred for auditing, consulting services, market development and pre-commercial planning activities, and insurance costs, facilities-related costs and depreciation expenses.

We estimate and accrue for services provided by third parties related to the above expenses by monitoring the status of services provided and receiving estimates from our service providers. We reassess and adjust our accruals as actual costs become known or as additional information becomes available.

We expect that our annual general and administrative expenses will increase as we continue to build general corporate infrastructure to support the growth of our organization as we expand our research and development organization and market development and pre-commercial planning activities.

Interest Income, Net

Interest income consists of interest earned on our cash, cash equivalents, marketable securities and restricted cash.

Interest Expense

Interest expense consists of interest charged on the outstanding principal balance of the 2027 Notes and amortization of debt issuance costs utilizing the effective interest method over the expected term of the 2027 Notes.

Other Income (Expense), Net

Other income (expense), net primarily consists of gains (losses) on the fair value remeasurement of our financing liabilities. Other income (expense), net also reflects amounts for other miscellaneous income and expense unrelated to our core operations.

As permitted under ASC 825, Financial Instruments, we elected the fair value option for our financing liabilities, wherein the financial instruments were initially measured at their issue-date estimated fair value and are subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. Changes in the fair value of our financing liabilities, excluding the impact of the change in fair value attributable to instrument-specific credit risk, are separately presented as a component of other income (expense), net in our consolidated statements of operations and comprehensive loss. The portion of the fair value adjustment attributed to a change in the instrument-specific credit risk is recognized and separately presented as a component of other comprehensive income (loss). Changes in the fair value of our financing liabilities can result from changes to one or multiple inputs, including changes to discount rates, changes in the expected achievement or timing of any sales-based, development or regulatory milestones, changes in the amount or timing of expected net cash flows, changes in the probability or timing of certain clinical events, or changes in the assumed probability or timing associated with regulatory approval.

Significant judgment is employed in determining the appropriateness of the assumptions underlying the initial fair value determination for each of these instruments and for each subsequent period through their settlement or termination.

Income Tax Benefit (Provision), Net

To date, we have not recorded any significant amounts related to income tax expense, we have not recognized any reserves related to uncertain tax positions, nor have we recorded any income tax benefits for net operating losses incurred to date or for our research and development tax credits.

We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our consolidated financial statements or our tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax bases of existing assets and liabilities and for loss and credit carryforwards, which are measured using the enacted tax rates and laws in effect in the years in which the differences are expected to reverse. The realization of our deferred tax assets is dependent upon the generation of future taxable income, the amount and timing of which are uncertain. Valuation allowances are provided, if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of March 31, 2024, we continue to maintain a full valuation allowance against all of our net deferred tax assets based on our evaluation of all available evidence.

We file income tax returns in the U.S. federal tax jurisdiction and state jurisdictions and may become subject to income tax audits and adjustments by related tax authorities. Our initial tax return period for U.S. federal income taxes was the 2018 period. We currently remain open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions for the 2022, 2021 and 2020 tax years. To the extent we have loss and credit carryforwards, the tax years in which the carryforward was generated may still be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period. We record reserves for potential tax payments to various tax authorities related to uncertain tax positions. The nature of uncertain tax positions is subject to significant judgment by management and subject to change, which may be substantial. These reserves are based on a determination of whether and how much a tax benefit taken by us in our tax filings or positions is more likely than not to be realized following the resolution of any potential contingencies related to the tax benefit. We develop our assessment of uncertain tax positions, and the associated cumulative probabilities, using internal expertise and assistance from third-party experts. As additional information becomes available, estimates are revised and refined. Differences between estimates and final settlement

may occur resulting in additional tax expense. Potential interest and penalties associated with such uncertain tax positions is recorded as a component of our income tax benefit (provision), net. To date, no amounts are being presented as an uncertain tax position.

Results of Operations

The following table summarizes our results of operations:


	For the Three Months Ended March 31,
(In thousands)	2024			2023			Change
Operating expenses:
Research and development	$	106,425		$	78,181			36	%
General and administrative		36,231			21,370			70	%
Total operating expenses		142,656			99,551			43	%
Loss from operations		(142,656	)		(99,551	)		43	%
Interest income, net		14,455			9,076			59	%
Interest expense		(2,652	)		(2,636	)		1	%
Other income (expense), net		(921	)		(11,090	)		(92	)%
Loss before income taxes		(131,774	)		(104,201	)		26	%
Income tax benefit (provision), net		(138	)		(85	)		62	%
Net loss	$	(131,912	)	$	(104,286	)		26	%

Research and Development

The following table summarizes the components of research and development expense:


	For the Three Months Ended March 31,
(In thousands)	2024		2023		Change
Tavapadon	$	15,556	$	14,479		7	%
Emraclidine		38,322		21,971		74	%
Darigabat		4,753		5,547		(14	)%
CVL-871		1,018		944		8	%
Other research and development programs		8,369		5,093		64	%
Unallocated		7,334		5,678		29	%
Personnel costs		21,596		18,130		19	%
Equity-based compensation		9,477		6,339		50	%
Total research and development	$	106,425	$	78,181		36	%

For the three months ended March 31, 2024, compared to the same period in 2023, the increase in research and development expense was primarily due to the continued advancement of our emraclidine program as well as an increase in personnel costs and equity-based compensation as we continue to expand capabilities to advance our pipeline. For the comparative period, the increase in our emraclidine program primarily reflects the advancement of our two ongoing Phase 2 trials, our open-label extension trial and registration-enabling activities in schizophrenia and our ongoing Phase 1 trial to support future development in Alzheimer’s disease psychosis. The increase in other research and development programs for the comparative period primarily reflects the timing of early-stage research and development activities.

General and Administrative


	For the Three Months Ended March 31,
(In thousands)	2024		2023		Change
General and administrative	$	36,231	$	21,370		70	%

For the three months ended March 31, 2024, compared to the same period in 2023, the increase in general and administrative expense primarily reflects approximately $8.8 million of expenses directly associated with the Merger incurred in the first quarter of 2024. The increase for the comparative period also reflects higher equity-based compensation and other personnel-related costs.

Interest Income, Net


	For the Three Months Ended March 31,
(In thousands)	2024		2023		Change
Interest income, net	$	14,455	$	9,076		59	%

Interest income, net consists of interest earned on our cash, cash equivalents, marketable securities and restricted cash. For the three months ended March 31, 2024, compared to the same period in 2023, the increase in interest income, net, was primarily due to higher average comparable cash, cash equivalent and marketable security balances and higher returns earned on our marketable securities.

Interest Expense


	For the Three Months Ended March 31,
(In thousands)	2024			2023			Change
Interest expense	$	(2,652	)	$	(2,636	)		1	%

Interest expense consists of interest accrued on the principal balance of the 2027 Notes issued in August 2022 and the amortization of debt issuance costs. For additional information related to the 2027 Notes, please read Note 6, 2027 Convertible Senior Notes, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Other Income (Expense), Net

The following table summarizes the components of other income (expense), net:


	For the Three Months Ended March 31,
(In thousands)	2024			2023			Change
Loss on fair value remeasurement of financing liability, related party	$	(457	)	$	(5,541	)		(92	)%
Loss on fair value remeasurement of financing liability		(457	)		(5,541	)		(92	)%
Other, net		(7	)		(8	)		(13	)%
Other income (expense), net	$	(921	)	$	(11,090	)		(92	)%

For the three months ended March 31, 2024 and 2023, other income (expense), net primarily reflects net losses recognized on the fair value remeasurement of our financing liabilities associated with the Funding Agreements that were entered into in April 2021. For the three months ended March 31, 2024, the net loss in the fair value remeasurement of our financing liabilities was primarily due to the passage of time, partially offset by changes in market inputs, including discount rates. For the three months ended March 31, 2023, the net loss in the fair value remeasurement of our financing liabilities was primarily due to the passage of time and changes in market inputs, including discount rates.

For additional information related to the fair value of our financing liabilities associated with the Funding Agreements, please read Note 5, Financing Liabilities, and Note 7, Fair Value Measurements, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Liquidity and Capital Resources

Sources of Liquidity and Capital

We have incurred significant operating losses since our inception, and we expect to continue to incur significant and increasing expenses and operating losses for the foreseeable future. Our net losses totaled $131.9 million and $104.3 million for the three months ended March 31, 2024 and 2023, respectively and as of March 31, 2024, we have not yet generated revenues.

Our cash, cash equivalents and marketable securities totaled $1,064.9 million as of March 31, 2024. Until required for use in our business, we typically invest our cash in money market funds and investment grade short to intermediate-term fixed income securities. We attempt to minimize credit risk related to our cash, cash equivalents and marketable securities by maintaining balances primarily in custodial accounts only with accredited financial institutions and maintaining a well-diversified portfolio that limits the amount of exposure as to institution, maturity and investment type.

In October 2020, ARYA Sciences Acquisition Corp II, or ARYA, completed the acquisition of Cerevel Therapeutics, Inc., a private company, pursuant to the Business Combination Agreement dated July 29, 2020, as amended on October 2, 2020. We refer to this transaction as the Business Combination. Net proceeds from the Business Combination totaled approximately $439.5 million.

Upon closing of the Business Combination, Cerevel Therapeutics, Inc. became a wholly owned subsidiary of ARYA and ARYA was renamed Cerevel Therapeutics Holdings, Inc., and the then existing stockholders of Cerevel Therapeutics, Inc. exchanged their equity interests of Cerevel Therapeutics, Inc. for shares of common stock of Cerevel Therapeutics Holdings, Inc. Prior to the Business Combination, our operations were funded primarily from the issuance of convertible preferred stock, convertible common stock and common stock.

Upon the consummation of the Business Combination, there were 4,983,314 public warrants and 166,333 private placement warrants, or collectively, the warrants, outstanding. Each outstanding warrant of ARYA became one warrant to purchase one share of our common stock. Each whole warrant entitled the holder to purchase one share of our common stock at an exercise price of $11.50 per share. The warrants became exercisable beginning on June 9, 2021. In July 2021, we announced the redemption of all of the outstanding public warrants with a redemption date of August 30, 2021, or the Redemption Date. An aggregate of 4,822,947 public warrants were exercised prior to the Redemption Date for an equal number of shares of our common stock resulting in gross proceeds of approximately $55.5 million. The 160,367 public warrants that remained unexercised following the Redemption Date were redeemed for the redemption price of $0.01 per public warrant. In September 2021, the 166,333 private placement warrants were cashless exercised and settled in exchange for the issuance of 111,426 shares of our common stock.

In April 2021, we entered into a funding agreement, or the NovaQuest Funding Agreement, with NovaQuest Co-Investment Fund XVI, L.P., or NovaQuest, and a funding agreement, or the Bain Funding Agreement, with BC Pinnacle Holdings, LP, or Bain, pursuant to which NovaQuest and Bain committed to provide $125.0 million in funding, or the Total Funding Commitment, to support our development of tavapadon for the treatment of Parkinson’s disease over four years, of which approximately $31.1 million (25% of the Total Funding Commitment, net of $0.2 million of fees incurred by Bain and NovaQuest) was received in April 2021, $37.5 million (30% of the Total Funding Commitment) was received in April 2022, $31.3 million (25% of the Total Funding Commitment) was received in April 2023 and $25.0 million (20% of the Total Funding Commitment) was received in April 2024. We refer to the NovaQuest Funding Agreement and the Bain Funding Agreement, collectively, as the Funding Agreements and NovaQuest and Bain, collectively, as the Funding Investors.

In July 2021, we completed a follow-on public offering of our common stock pursuant to which we issued and sold 14,000,000 shares of our common stock at a price to the public of $25.00 per share. The aggregate net proceeds from this offering totaled approximately $328.3 million, after deducting underwriting discounts and commissions of $21.0 million and offering expenses of approximately $0.7 million.

In November 2021, we entered into an open market sales agreement with Jefferies LLC, as sales agent, to provide for the issuance and sale of up to $250.0 million of our common stock from time-to-time in “at-the-market” offerings, or the ATM Program. As of March 31, 2024, no sales had been made pursuant to the ATM Program.

In August 2022, we completed a follow-on public offering of our common stock pursuant to which we issued and sold 7,250,000 shares of our common stock at a price to the public of $35.00 per share. The aggregate net proceeds from this offering totaled approximately $238.3 million, after deducting underwriting discounts and commissions of $14.6 million and offering expenses of approximately $0.9 million.

In August 2022, we completed the offering of $345.0 million aggregate principal amount of the 2027 Notes pursuant to, and which are governed by, an indenture, or the Indenture, between us and U.S. Bank Trust Company, National Association, as trustee, or the Trustee, in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The aggregate net proceeds from the 2027 Notes offering totaled approximately $334.8 million, after deducting the initial purchasers’ discounts of $9.5 million and other offering expenses of approximately $0.7 million.

In October 2023, we completed a follow-on public offering of our common stock pursuant to which we issued and sold an aggregate of 22,687,417 shares of our common stock, including the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $22.81 per share. The aggregate net proceeds from this offering totaled approximately $498.9 million, after deducting underwriting discounts and commissions of $18.3 million and offering expenses of approximately $0.3 million.

Future Funding Requirements

Our primary use of cash is to fund operating expenses, primarily related to our research and development activities. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses.

We have incurred significant operating expenses since our inception, and we expect to continue to incur significant and increasing expenses and operating losses for the foreseeable future.

Our future funding requirements will depend on many factors, including:

•

the timing of and ability to consummate the Merger;

•

the scope, progress, results and costs of researching and developing our current product candidates, as well as other additional product candidates we may develop and pursue in the future;

•

the timing of, and the costs involved in, obtaining marketing approvals for our product candidates and any other additional product candidates we may develop and pursue in the future;

•

the number of future product candidates that we may pursue and their development requirements;

•

subject to receipt of regulatory approval, the costs of commercialization activities for our product candidates, to the extent such costs are not the responsibility of any future collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

•

subject to receipt of regulatory approval, revenue, if any, received from commercial sales of our product candidates or any other additional product candidates we may develop and pursue in the future;

•

the achievement of milestones that trigger payments under the Pfizer License Agreement and the Funding Agreements;

•

the royalty payments due under the Pfizer License Agreement and the Funding Agreements;

•

the extent to which we in-license or acquire rights to other products, product candidates or technologies;

•

our ability to establish collaboration arrangements for the development of our product candidates on favorable terms, if at all;

•

the settlement method used for the outstanding 2027 Notes;

•

our headcount growth and associated costs as we expand our research and development and market development and pre-commercial planning activities;

•

the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights, including enforcing and defending intellectual property related claims; and

•

the costs of operating as a public company.

Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the total amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials and preclinical studies.

Our expectations with respect to our ability to fund current planned operations are based on estimates that are subject to risks and uncertainties. Our operating plan may change as a result of many factors currently unknown to us and there can be no assurance that the current operating plan will be achieved in the time frame anticipated by us, and we may need to seek additional funds sooner than planned.

The announcement of, or a failure to consummate, the Merger could negatively impact our business, financial condition, results of operations or our stock price. For additional information on risks associated with our substantial capital requirements, please read the sections entitled “—Risks and Liquidity” and “Risk Factors” included elsewhere in this Quarterly Report.

Working Capital

The following table summarizes our total working capital, defined as current assets less current liabilities:


	As of
(In thousands)	March 31, 2024			December 31, 2023			Change
Current assets	$	859,577		$	1,006,938			(15	)%
Current liabilities		(84,104	)		(92,179	)		(9	)%
Total working capital	$	775,473		$	914,759			(15	)%

The decrease in working capital at March 31, 2024 from December 31, 2023, reflects a net decrease in total current assets of $147.4 million partially offset by a net decrease in total current liabilities of $8.1 million.

The net decrease in total current assets was primarily driven by net cash flows used in operating activities, as discussed in further detail below.

The net decrease in current liabilities was primarily due to decreases in accrued expenses and other current liabilities, primarily related to the timing of payments associated with accrued employee compensation and other personnel costs as well as accrued interest on the 2027 Notes, partially offset by increases in accrued professional fees and consulting services associated with the Merger.

Cash Flows

The following table summarizes our sources and uses of cash:


	For the Three Months Ended March 31,
(In thousands)	2024			2023			Change
Net cash flows used in operating activities	$	(119,669	)	$	(94,923	)		26	%
Net cash flows provided by investing activities		19,165			110,783			(83	)%
Net cash flows provided by financing activities		4,475			1,435			212	%
Net increase (decrease) in cash, cash equivalents and restricted cash	$	(96,029	)	$	17,295			(655	)%

Cash Flows Used in Operating Activities

Net cash flows used in operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities.

Net cash flows used in operating activities is derived by adjusting our net loss for:

•

non-cash items such as depreciation and amortization, adjustments to operating lease expense, equity-based compensation, amortization of debt issuance costs, amortization of premiums and accretion of discounts on marketable securities and changes in the fair value remeasurement of our financing liabilities; and

•

changes in operating assets and liabilities reflecting timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations.

For the three months ended March 31, 2024, cash used in operating activities reflects our net loss for the period of $131.9 million, adjusted for net non-cash adjustments totaling $17.4 million and a net change of $5.2 million in our net operating assets and liabilities. Our non-cash adjustments primarily consisted of $20.9 million of equity-based compensation expense, partially offset by $6.1 million of net accretion of discounts on marketable securities. The net changes in our operating assets and liabilities primarily reflect a net decrease in accrued expenses and other liabilities, partially offset by a net decrease in prepaid expenses and other current assets. The net decrease in accrued expenses and other liabilities was primarily related to the timing of payments associated with accrued employee compensation and other personnel costs as well as accrued interest on the 2027 Notes, partially offset by increases in accrued professional fees and consulting services associated with the Merger. The net decrease in prepaid expenses and other current assets was primarily related to the recognition of expenses for research and development expenses and clinical trial services.

For the three months ended March 31, 2023, cash used in operating activities reflects our net loss for the period of $104.3 million, adjusted for net non-cash adjustments totaling $20.0 million and a net change of $10.6 million in our net operating assets and liabilities. Our non-cash adjustments primarily consisted of $12.6 million of equity-based compensation expense and $11.1 million associated with the change in fair value of financing liabilities associated with the Funding Agreements. The net changes in our operating assets and liabilities primarily reflects decreases in accrued expenses and other liabilities and accounts payable. The net decrease in accrued expenses and other liabilities was primarily related to the timing of payments associated with accrued employee compensation and other personnel costs as well as accrued interest on the 2027 Notes, offset by increases in accruals related to external research and development services.

Cash Flows Provided by Investing Activities

For the three months ended March 31, 2024, net cash provided by investing activities reflected $142.1 million of maturities and redemptions of marketable securities, partially offset by $122.6 million used for purchases of marketable securities and $0.3 million used for purchases of property and equipment.

For the three months ended March 31, 2023, net cash provided by investing activities reflected $298.8 million of maturities and redemptions of marketable securities, partially offset by $187.6 million used for purchases of marketable securities and $0.3 million used for purchases of property and equipment.

Cash Flows Provided by Financing Activities

For the three months ended March 31, 2024, net cash provided by financing activities primarily reflected $4.6 million of proceeds received from the exercise of stock options.

For the three months ended March 31, 2023, net cash provided by financing activities primarily reflected $1.6 million of proceeds received from the exercise of stock options.

We expect cash provided by financing activities will continue to be our primary source of funds to finance operating needs and capital expenditures for the foreseeable future.

Contractual Obligations and Other Commitments

Our contractual obligations primarily consist of our obligations under non-cancellable operating leases, convertible debt obligations, contracts and other purchase obligations.

Our most significant contracts relate to agreements with CROs for clinical trials and preclinical studies, CMOs and other service providers for operating purposes, which we enter into in the normal course of business. These contracts are generally cancelable at any time by us following a certain period after notice and therefore, we believe that our non-cancelable obligations under these agreements are not material. In addition, we have obligations with respect to potential future royalties payable, contingent development, regulatory and commercial milestone payments and potential amounts related to uncertain tax positions. The timing and amount of such obligations are unknown or uncertain as of March 31, 2024.

Pfizer License Agreement

In August 2018, we entered into a license agreement with Pfizer, or the Pfizer License Agreement, pursuant to which we were granted an exclusive, sublicensable, worldwide license under certain Pfizer patent rights, and a non-exclusive, sublicensable, worldwide license under certain Pfizer know-how to develop, manufacture and commercialize certain compounds and products, which currently constitute substantially all of our asset portfolio, in the field of treatment, prevention, diagnosis, control and maintenance of all diseases and disorders in humans, subject to the terms and conditions of the Pfizer License Agreement.

Under the Pfizer License Agreement, we are solely responsible for the development, manufacture, regulatory approval and commercialization of compounds and products in the field and we will pay Pfizer tiered royalties on the aggregate net sales during each calendar year, determined on a product-by-product basis, with respect to products under the Pfizer License Agreement, and we may pay potential milestone payments to Pfizer, based on the successful achievement of certain regulatory and commercial milestones. To date, no regulatory or commercial approval milestone payments or royalty payments have been made or become due under this agreement.

For additional information related to the Pfizer License Agreement, please read Note 4, Pfizer License Agreement, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Funding Agreements

In April 2021, we entered into the Funding Agreements, pursuant to which we received a combined total of $125.0 million to support our development of tavapadon for the treatment of Parkinson’s disease, of which approximately $31.1 million (25% of the Total Funding Commitment, net of $0.2 million of fees incurred by Bain and NovaQuest) was received in April 2021, $37.5 million (30% of the Total Funding Commitment) was received in April 2022, $31.3 million (25% of the Total Funding Commitment) was received in April 2023 and $25.0 million (20% of the Total Funding Commitment) was received in April 2024. In return, we agreed to pay NovaQuest and Bain significant regulatory milestone, sales milestone and royalty payments upon approval of tavapadon by the FDA that collectively will not exceed $531.3 million. In addition, we have the option to satisfy our payment obligations to NovaQuest and Bain upon the earlier of FDA approval or May 1, 2025, by paying an amount equal to the Total Funding Commitment multiplied by an initial factor of 3.00x. This factor will increase ratably over time up to a maximum of 4.25x, less amounts previously paid to NovaQuest and Bain.

In conjunction with the Funding Agreements, we also entered into security agreements with the Funding Investors pursuant to which we granted the Funding Investors a security interest in the assets material to the development and commercialization of tavapadon in the United States to secure our obligations under the Funding Agreements.

For additional information related to our Funding Agreements, please read Note 5, Financing Liabilities, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

2027 Convertible Senior Notes

In August 2022, we completed the offering of $345.0 million aggregate principal amount of the 2027 Notes pursuant to, and which are governed by the Indenture between us and the Trustee, in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

The 2027 Notes accrue interest at a rate of 2.50% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2023. The 2027 Notes mature on August 15, 2027, unless earlier converted, redeemed or

repurchased. We will settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

The 2027 Notes are our senior, unsecured obligations and are (i) equal in right of payment with our existing and future senior, unsecured indebtedness; (ii) senior in right of payment to our existing and future indebtedness that is expressly subordinated to the 2027 Notes in right of payment; (iii) effectively subordinated to our future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries.

For additional information related to the 2027 Notes, please read Note 6, 2027 Convertible Senior Notes, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Management Agreement

In connection with the Business Combination, we entered into a management agreement with Bain Capital Private Equity, LP and Bain Capital Life Sciences, LP, providing for the expense reimbursement and indemnification of such entities. To date, no amounts have been incurred under the management agreement.

Contract Research and Manufacturing Organizations

As of March 31, 2024 and December 31, 2023, we recorded accrued expenses of approximately $44.4 million and $45.0 million, respectively, in our condensed consolidated balance sheets for expenditures incurred by CROs and CMOs.

Tax Related Obligations

To date, we have not recognized any reserves related to uncertain tax positions. As of March 31, 2024 and December 31, 2023, we had no accrued interest or penalties related to uncertain tax positions.

Obligations Contingent upon the Merger

We will be obligated to make significant contingent payments upon consummation of the Merger. As the Merger was not deemed probable of being achieved as of March 31, 2024, we have not accrued any liabilities related to such contingent obligations in our condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023.

Off-balance sheet arrangements

We have not entered into any off-balance sheet arrangements and do not have holdings in any variable interest entities.

Critical Accounting Policies and Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP.

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our most critical accounting policies and estimates are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report, and a discussion of some of the significant estimates and assumptions made in our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report is set forth in Note 3, Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. There have been no changes to our critical accounting policies and estimates described in our Annual Report that have materially impacted operating results for the three months ended March 31, 2024.

Recent Accounting Pronouncements

For a discussion of new accounting standards and their expected impact on our consolidated financial statements or disclosures, please read Note 3, Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The primary objectives of our investment activities are to ensure liquidity and to preserve capital. We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities, which are affected by changes in the general level of U.S. interest rates.

We had cash, cash equivalents and marketable securities of $1,064.9 million and $1,176.2 million as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024 and December 31, 2023, these balances consisted of bank deposits, highly liquid money market funds and investment grade short to intermediate-term fixed income securities.

Interest Rate Sensitivity

The fair value of our marketable securities is subject to change as a result of potential changes in market interest rates. The potential change in fair value for interest rate sensitive instruments has been assessed on a hypothetical 100 basis point adverse movement across all maturities. As of March 31, 2024, we estimate that such hypothetical 100 basis point adverse movement would result in a hypothetical loss in fair value of approximately $4.9 million to our interest rate sensitive instruments. As of December 31, 2023, we estimate that such hypothetical 100 basis point adverse movement would result in a hypothetical loss in fair value of approximately $4.8 million to our interest rate sensitive instruments. Fluctuations in interest rates have not been significant for us in any periods presented.

The 2027 Notes bear interest at a fixed rate and therefore have minimal exposure to changes in interest rates. However, because these interest rates are fixed, we may be paying a higher interest rate, relative to market, in the future if our credit rating improves or other circumstances change. Our cash flows on this debt obligation are not subject to variability as a result of changes in interest rates.

Equity Price Risk

The 2027 Notes include conversion and settlement provisions that are based on the price of our common stock at conversion or maturity of the 2027 Notes. The number of shares of common stock and/or amount of cash we may be required to pay upon conversion or maturity of the 2027 Notes is determined by the price of our common stock. The fair value of the 2027 Notes is dependent on the price and volatility of our common stock and will generally increase or decrease as the market price of our common stock changes.

Foreign Currency Exchange Risk

We currently do not have significant exposure to foreign currencies as we hold no foreign exchange contracts, option contracts, or other foreign hedging arrangements. Further, our operating activities are predominately denominated in U.S. dollars. Fluctuations in exchange rates have not been significant for us in any periods presented.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in the reports 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. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, who serve as our principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2024. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2024.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the quarter ended March 31, 2024, 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.

The information required with respect to this item can be found in Note 13, Legal Proceedings, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report and is incorporated by reference into this Item 1.

In the future, we may become party to legal matters and claims arising in the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows.

Item 1A. Risk Factors.

Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with the other information in this Quarterly Report, including our unaudited condensed consolidated financial statements and the related notes included in this Quarterly Report and in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our securities. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may have a material adverse effect on our business, reputation, revenue, financial condition, results of operations and future prospects, in which event the market price of our common stock could decline, and you could lose part or all of your investment. Unless otherwise indicated, reference in this section and elsewhere in this Quarterly Report to our business being adversely affected, negatively impacted or harmed will include an adverse effect on, or a negative impact or harm to, the business, reputation, financial condition, results of operations, revenue and our future prospects. The material and other risks and uncertainties summarized elsewhere in this Quarterly Report and described below are not intended to be exhaustive and are not the only ones we face. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations. This Quarterly Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See the section titled “Cautionary Note Regarding Forward-Looking Statements.”

Risks Related to the Merger

The conditions under the Merger Agreement to our and AbbVie’s consummation of the Merger may not be satisfied at all or in the anticipated timeframe.

On December 6, 2023, we entered into the Merger Agreement with AbbVie, Intermediate Holdco and Merger Sub, pursuant to which Merger Sub will be merged with and into Cerevel, with Cerevel surviving the merger as a wholly owned subsidiary of AbbVie.

Cerevel’s stockholders approved the Merger at a special meeting held on February 16, 2024. Consummation of the Merger is subject to the receipt of certain regulatory approvals; the expiration or termination of any applicable waiting period (and extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; obtaining all waivers and approvals under certain other specified antitrust laws, as applicable; the absence of any law or order by any governmental authority that would make illegal or otherwise prohibit or prevent the Merger; and other conditions specified in the Merger Agreement. As a result, there can be no assurance that the Merger will be consummated. These conditions are described in more detail in the Merger Agreement, which is filed as an exhibit to the Current Report on Form 8-K, filed with the SEC on December 7, 2023, and incorporated herein by reference.

We intend to pursue all required approvals in accordance with the Merger Agreement. However, no assurance can be given that the required approvals will be obtained and, even if all such approvals are obtained, no assurance can be given to the terms, conditions and timing of the approvals or that they will satisfy the terms of the Merger Agreement.

Furthermore, we and our board of directors have been named as defendants in lawsuits brought by purported holders of our common stock challenging our board of directors’ actions in connection with the Merger and seeking, among other things, injunctive relief to enjoin the defendants from completing the Merger on the agreed-upon terms. See Note 13, Legal Proceedings to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for more information regarding such lawsuits. If a settlement or other resolution is not reached in the lawsuits and the plaintiffs secure injunctive relief prohibiting, delaying, or otherwise adversely affecting our ability to consummate the Merger, then such injunctive or other relief may prevent the Merger from becoming effective within the expected timeframe or at all. Further, whether or not any plaintiff’s claim is successful, this type of litigation may result in significant costs and divert management’s attention and resources, which could adversely affect the operation of our business.

The announcement of, or a failure to consummate, the Merger could negatively impact our business, financial condition, results of operations or our stock price.

Our announcement of having entered into the Merger Agreement could cause a material disruption to our business and there can be no assurance that the conditions to the consummation of the Merger will be satisfied. The Merger Agreement may also be terminated by us and/or AbbVie in certain specified circumstances, as described below. We are subject to several risks as a result of the announcement of the Merger Agreement, including, but not limited to, the following:

•

if the Merger is not completed within the expected timeframe, or at all, the share price of our common stock will change to the extent that the current market price of our common stock reflects an assumption that the Merger will be consummated;

•

certain costs related to the Merger, including the fees and/or expenses of our legal, accounting and financial advisors must be paid even if the Merger is not completed;

•

pursuant to the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to the completion of the Merger, which restrictions could adversely affect our ability to realize certain of our business strategies or take advantage of certain business opportunities;

•

the attention of our management may be directed towards the consummation of the Merger and related matters, and their focus may be diverted from the day-to-day business operations of our company, including from other opportunities that might otherwise be beneficial to us;

•

our inability to retain existing key employees or hire new capable employees, given the uncertainty regarding our future, in order to execute on our continuing business operations;

•

a failure to complete the Merger within the proposed timeframe, or at all, may result in negative publicity and/or a negative impression of us in the investment community or business community generally;

•

difficulties maintaining relationships with collaborators, vendors, and other business partners;

•

third parties may determine to terminate and/or attempt to renegotiate their relationship with us as a result of the Merger, whether pursuant to the terms of their existing agreements with us or otherwise;

•

upon termination of the Merger Agreement by us or AbbVie under specified circumstances, we would be required to pay a termination fee of approximately $283.1 million; and

•

we could be subject to litigation related to any failure to complete the Merger.

In addition, our executive officers and directors may have interests in the Merger that are different from, or are in addition to, those of our stockholders generally. These interests include without limitation the following:

•

most members of our board of directors and each of our executive officers holds outstanding Cerevel equity awards;

•

each of our executive officers is party to an employment agreement and/or is a participant in a severance program that provides for severance payments and benefits upon a qualifying termination in connection with a change in control (referred to as a “sales event” therein), which includes the Merger;

•

each of our non-employee directors is subject to a compensation policy that provides upon the occurrence of a “sale event” (including the Merger), all equity retainer awards granted to non-employee directors will become fully vested and exercisable;

•

each of our execu

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Cerevel Therapeutics Holdings, Inc. 10-Q