Filed Pursuant to Rule 424(b)(3)

Registration No. 333-250964

PROSPECTUS SUPPLEMENT NO. 10

(to prospectus dated March 25, 2021)

 

 

Up to 42,437,330 Shares of Common Stock

This prospectus supplement no. 10 (this “prospectus supplement”) amends and supplements the prospectus dated March 25, 2021 (as supplemented or amended from time to time, the “Prospectus”) which forms a part of our Registration Statement on Form S-1 (Registration Statement No. 333-250964). This prospectus supplement is being filed to update and supplement the information included or incorporated by reference in the Prospectus with the information contained in our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (the “SEC”) on November 10, 2021 (the “Form 10-Q”). Accordingly, we have attached the Form 10-Q to this prospectus supplement.

This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

Our common stock is listed on The NASDAQ Stock Market LLC under the symbol “CERE”. On November 9, 2021, the closing price of our common stock was $43.42 per share.

 

Investing in our securities involves risks that are described in the “Risk Factors” section beginning on page 10 of the Prospectus.

Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued under the Prospectus or determined if the Prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is November 10, 2021.

 

 

 

---

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to _________________

Commission File Number: 001-39311

 

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.

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
				Emerging growth company		☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 5, 2021, the registrant had 147,235,789 shares of common stock, par value $0.0001 per share, outstanding.

 

 

 

 

 

---

Table of Contents

 

		Page
PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	88
Item 3.	Defaults Upon Senior Securities	88
Item 4.	Mine Safety Disclosures	88
Item 5.	Other Information	88
Item 6.	Exhibits	89
Signatures		90

 

 

i

---

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. 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” and 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 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 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 section titled “Risk Factors” 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. Some of these risks and uncertainties may in the future be amplified by the ongoing COVID-19 pandemic and 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.

 

ii

---

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 risks described above should be read together with the text of the full risk factors described below in the section entitled “Risk Factors” and the other information set forth in this Quarterly Report, including our consolidated financial statements and the related notes, as well as in other documents that we file with the Securities Exchange Commission, or the SEC. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not precisely 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.

 

iii

---

 

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
		September 30, 2021				December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents		$	669,676			$	383,623
Prepaid expenses and other current assets			5,353				6,937
Total current assets			675,029				390,560
Property and equipment, net			28,404				24,165
Operating lease assets			23,576				24,459
Restricted cash			4,200				4,200
Other long-term assets			2,271				1,889
Total assets		$	733,480			$	445,273
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	5,445			$	4,993
Accrued expenses and other current liabilities			23,020				22,519
Operating lease liabilities, current portion			2,335				2,036
Total current liabilities			30,800				29,548
Operating lease liabilities, net of current portion			34,752				30,969
Financing liability, related party (Notes 5 and 6)			19,306				—
Financing liability (Notes 5 and 6)			19,306				—
Other long-term liabilities			236				236
Total liabilities			104,400				60,753
Commitments and contingencies (Notes 12 and 13)
Stockholders’ equity:
Preferred stock, $0.0001 par value: 10,000,000 shares authorized;     no shares issued and outstanding as of September 30, 2021 and     December 31, 2020			—				—
Common stock, $0.0001 par value: 500,000,000 shares authorized;   147,135,968 and 127,123,954 shares issued and outstanding     as of September 30, 2021 and December 31, 2020, respectively			15				13
Additional paid-in capital			1,186,787				775,417
Accumulated other comprehensive loss			(533	)			—
Accumulated deficit			(557,189	)			(390,910	)
Total stockholders’ equity			629,080				384,520
Total liabilities and stockholders’ equity		$	733,480			$	445,273

 

 

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

4

---

 

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 September 30,								For the Nine Months Ended September 30,
		2021				2020				2021				2020
Operating expenses:
Research and development		$	40,159			$	24,026			$	114,014			$	73,168
General and administrative			14,368				10,336				41,594				34,052
Total operating expenses			54,527				34,362				155,608				107,220
Loss from operations			(54,527	)			(34,362	)			(155,608	)			(107,220	)
Interest income, net			13				1				38				210
Other income (expense), net			(7,545	)			(4,684	)			(10,709	)			(11,976	)
Loss before income taxes			(62,059	)			(39,045	)			(166,279	)			(118,986	)
Income tax benefit (provision), net			—				5				—				21
Net loss		$	(62,059	)		$	(39,040	)		$	(166,279	)		$	(118,965	)
Net loss per share, basic and diluted		$	(0.43	)		$	(0.62	)		$	(1.25	)		$	(1.93	)
Weighted-average shares used in calculating net loss per share, basic and diluted			144,022,109				63,270,340				132,971,450				61,726,114
Comprehensive loss:
Net loss		$	(62,059	)		$	(39,040	)		$	(166,279	)		$	(118,965	)
Other comprehensive loss
Changes in fair value attributable to instrument-specific credit risk			(533	)			—				(533	)			—
Total other comprehensive loss			(533	)			—				(533	)			—
Comprehensive loss		$	(62,592	)		$	(39,040	)		$	(166,812	)		$	(118,965	)

 

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

5

---

 

CEREVEL THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(1)

(In thousands, except share amounts)

(Unaudited)

 

		Common stock								Additional paid-in				Accumulated other comprehensive				Accumulated				Total stockholders’
		Shares				Amount				capital				loss				deficit				equity
Balance at December 31, 2020			127,123,954			$	13			$	775,417			$	—			$	(390,910	)		$	384,520
Issuance of common stock under equity incentive plans related to vesting of RSUs			14,270				—				—				—				—				—
Issuance of common stock under equity incentive plans related to exercise of options			186,892				—				742				—				—				742
Reclassification of private placement warrants from equity to other long-term liabilities			—				—				(305	)			—				—				(305	)
Equity-based compensation expense			—				—				6,060				—				—				6,060
Net loss			—				—				—				—				(50,981	)			(50,981	)
Balance at March 31, 2021			127,325,116			$	13			$	781,914			$	—			$	(441,891	)		$	340,036
Issuance of common stock under equity incentive plans related to vesting of RSUs			14,270				—				—				—				—				—
Issuance of common stock under equity incentive plans related to exercise of options			204,684				—				1,394				—				—				1,394
Issuance of common stock under equity incentive plans related to ESPP issuances			40,589				—				435				—				—				435
Equity-based compensation expense			—				—				5,261				—				—				5,261
Net loss			—				—				—				—				(53,239	)			(53,239	)
Balance at June 30, 2021			127,584,659			$	13			$	789,004			$	—			$	(495,130	)		$	293,887
Issuance of common stock related to follow-on offering, net of offering costs (Note 1)			14,000,000				1				328,250				—				—				328,251
Issuance of common stock related to exercise of public warrants			4,822,947				1				55,462				—				—				55,463
Issuance of common stock related to cashless exercise of private placement warrants			111,426				—				4,186				—				—				4,186
Issuance of common stock under equity incentive plans related to vesting of RSUs			14,270				—				—				—				—				—
Issuance of common stock under equity incentive plans related to exercise of options			602,666				—				3,751				—				—				3,751
Equity-based compensation expense			—				—				6,134				—				—				6,134
Other comprehensive loss			—				—				—				(533	)			—				(533	)
Net loss			—				—				—				—				(62,059	)			(62,059	)
Balance at September 30, 2021			147,135,968			$	15			$	1,186,787			$	(533	)		$	(557,189	)		$	629,080

 

 

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

 

6

---

 

CEREVEL THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(1)

(In thousands, except share amounts)

(Unaudited)

 

		Common stock								Additional paid-in				Accumulated				Total stockholders’
		Shares				Amount				capital				deficit				equity
Balance at December 31, 2019			60,930,932			$	6			$	322,115			$	(244,298	)		$	77,823
Issuance of common stock under equity incentive plans related to vesting of RSUs			14,270				—				—				—				—
Equity-based compensation expense			—				—				2,970				—				2,970
Net loss			—				—				—				(53,208	)			(53,208	)
Balance at March 31, 2020			60,945,202			$	6			$	325,085			$	(297,506	)		$	27,585
Issuance of common stock under equity incentive plans related to vesting of RSUs			14,270				—				—				—				—
Equity-based compensation expense			—				—				3,423				—				3,423
Net loss			—				—				—				(26,717	)			(26,717	)
Balance at June 30, 2020			60,959,472			$	6			$	328,508			$	(324,223	)		$	4,291
Issuance of Series A-1 preferred stock and Series A common stock in exchange for cash			2,500,000				—				25,000				—				25,000
Partial settlement of Equity Commitment liability upon issuance of Series A-1 preferred stock and Series A common stock			—				—				5,530				—				5,530
Issuance of common stock under equity incentive plans related to vesting of RSUs			14,270				—				—				—				—
Equity-based compensation expense			—				—				3,472				—				3,472
Net loss			—				—				—				(39,040	)			(39,040	)
Balance at September 30, 2020			63,473,742			$	6			$	362,510			$	(363,263	)		$	(747	)

 

 

 

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

 

7

---

 

CEREVEL THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

		For the Nine Months Ended September 30,
		2021				2020
Cash flows from operating activities:
Net loss		$	(166,279	)		$	(118,965	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization			1,644				336
Non-cash rent expense under operating leases			(615	)			471
Equity-based compensation			17,455				9,864
Change in fair value of Equity Commitment and Share Purchase Option			—				11,970
Change in fair value of financing liability, related party			3,415				—
Change in fair value of financing liability			3,415				—
Change in fair value of private placement warrants			3,881				—
Write-off of deferred costs related to financing activities			—				2,485
Changes in operating assets and liabilities, net:
Prepaid expenses and other current assets			1,672				4,577
Operating lease asset			(14	)			(459	)
Other assets			(651	)			(243	)
Accounts payable			1,874				581
Accrued expenses and other liabilities			2,806				8,699
Operating lease liability			5,595				4,585
Net cash flows used in operating activities			(125,802	)			(76,099	)
Cash flows from investing activities:
Purchases of property and equipment			(9,431	)			(11,341	)
Net cash flows used in investing activities			(9,431	)			(11,341	)
Cash flows from financing activities:
Proceeds from issuance of common stock related to follow-on offering, net of offering costs (refer to Note 1)			328,251				—
Proceeds from the exercise of public warrants			55,463				—
Proceeds from the exercise of stock options and ESPP purchases			6,322				—
Proceeds from financing liability, related party			15,625				—
Proceeds from financing liability			15,625				—
Proceeds from issuance of Series A-1 preferred stock and Series A common stock with exchange			—				25,000
Deferred costs related to financing activities			—				(4,234	)
Net cash flows provided by financing activities			421,286				20,766
Net increase (decrease) in cash, cash equivalents and restricted cash			286,053				(66,674	)
Cash, cash equivalents and restricted cash, beginning of the period			387,823				83,682
Cash, cash equivalents and restricted cash, end of the period		$	673,876			$	17,008
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents		$	669,676			$	12,808
Restricted cash			4,200				4,200
Total cash, cash equivalents and restricted cash		$	673,876			$	17,008
Supplemental cash flow disclosures from non-cash operating, investing, and financing activities:
Operating lease assets obtained in exchange for operating lease liabilities		$	—			$	445
Fixed asset additions included in accounts payable and other current liabilities		$	753			$	4,485
Deferred unpaid transaction costs related to financing activities		$	—			$	2,538
Cashless exercise of private placement warrants		$	4,186			$	—
Partial settlement of Equity Commitment liability upon issuance of Series A-1 Preferred Stock and Series A Common Stock		$	—			$	5,530

 

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

8

---

 

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, or CNS, 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, epilepsy and Parkinson’s disease.

On October 27, 2020, ARYA Sciences Acquisition Corp II (ARYA) completed the acquisition of Cerevel Therapeutics, Inc. (Old Cerevel), a private company and our predecessor, pursuant to the Business Combination Agreement dated July 29, 2020, as amended on October 2, 2020 (the Business Combination Agreement). ARYA was incorporated as a Cayman Islands exempted company on February 20, 2020, and was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. Cerevel Therapeutics, Inc. was incorporated in Delaware on July 23, 2018, under the name Perception Holdco, Inc., which was subsequently changed to Cerevel Therapeutics, Inc. on October 23, 2018.

Our principal operations commenced on September 24, 2018 (Formation Transaction Date), when Old Cerevel licensed technology to a portfolio of pre-commercial neuroscience assets from Pfizer Inc. (Pfizer) in exchange for the issuance of Series A-2 Preferred Stock of Old Cerevel and obtained a $350.0 million equity commitment (the Equity Commitment), from BC Perception Holdings, LP (Bain Investor), an affiliate of Bain Capital, to develop the in-licensed assets in exchange for the issuance of Series A-1 Preferred Stock and Series A Common Stock of Old Cerevel. Bain Investor also received the option to purchase up to an additional 10.0 million shares of Old Cerevel at $10.00 per share, subject to Pfizer’s participation rights (the Share Purchase Option). On the Formation Transaction Date, we received an initial investment of $115.0 million in equity funding from Bain Investor to begin operations. During 2019 we received an additional investment of $60.1 million in equity funding from Bain Investor. Bain Investor contributed an additional $25.0 million in equity funding in July 2020 (the Additional Financing Shares).

Upon the closing of the transactions contemplated by the Business Combination Agreement (the Business Combination or the Business Combination Transaction), Old Cerevel became a wholly owned subsidiary of ARYA and ARYA was renamed Cerevel Therapeutics Holdings, Inc. and the Equity Commitment and the Share Purchase Option related to Old Cerevel were terminated. Upon completion of the Business Combination Transaction, and pursuant to the terms of the Business Combination Agreement, the existing shareholders of Old Cerevel exchanged their interests for shares of common stock of Cerevel Therapeutics Holdings, Inc. (New Cerevel). Net proceeds from this transaction totaled approximately $439.5 million.

We accounted for the Business Combination Transaction as a reverse recapitalization, which is the equivalent of Old Cerevel issuing stock for the net assets of ARYA, with ARYA treated as the acquired company for accounting purposes. The net assets of ARYA were stated at historical cost with no goodwill or other intangible assets recorded. Reported results from operations included herein prior to the Business Combination are those of Old Cerevel. The shares and corresponding capital amounts and loss per share related to Old Cerevel’s outstanding redeemable convertible preferred stock, redeemable convertible common stock, and common stock prior to the Business Combination Transaction have been retroactively restated to reflect the exchange ratio (the Exchange Ratio) established in the Business Combination Agreement (1.00 share of Old Cerevel for 2.854 shares of New Cerevel).

For additional information related to the Business Combination Transaction and the Additional Financing Shares, please read Note 3, Business Combination, to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 (our Annual Report). For additional information related to our license arrangement with Pfizer, please read Note 6, Pfizer License Agreement, to our audited consolidated financial statements included in our Annual Report. For additional information related to the Equity Commitment and the Share Purchase Option, please read Note 7, Equity Commitment and Share Purchase Option, to our audited consolidated financial statements included in our Annual Report.

Follow-on Public Offering

On July 7, 2021, we completed a follow-on public offering (the Follow-on 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.

9

---

 

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 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 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. Since our inception, we have incurred significant operating losses and, as of September 30, 2021, had an accumulated deficit of $557.2 million and had 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.

Prior to the Business Combination Transaction and the Follow-on Offering, our operations were funded primarily from the issuance of convertible preferred stock, convertible common stock and common stock. Upon the closing of the Business Combination Transaction in October 2020, we received net proceeds totaling approximately $439.5 million. Upon the closing of our Follow-on Offering in July 2021, we received net proceeds totaling approximately $328.3 million. We believe that our available cash resources as of September 30, 2021, of $669.7 million will enable us to fund our operating expense and capital expenditure requirements through at least twelve months from the issuance date of these financial statements. For additional information related to the Business Combination Transaction and the Follow-on Offering, please read Note 1, Nature of Operations.

Impact of the Ongoing COVID-19 Pandemic

We are closely monitoring the impact of the ongoing COVID-19 pandemic on all aspects of our business, including how it has impacted and may continue to impact our operations and the operations of our suppliers, vendors and business partners. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy and we cannot presently predict the scope and severity of any potential business shutdowns or disruptions.

The extent to which COVID-19 ultimately impacts our business, results of operations and financial condition will depend on future developments, which, despite progress in vaccination efforts, are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of COVID-19, such as new strains of the virus, including the Delta variant, which may impact rates of infection and vaccination efforts, developments or perceptions regarding the safety of vaccines, and the effectiveness of any additional preventative and protective actions to contain it or treat its impact. The estimates of the impact on our business may change based upon new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets.

We have not incurred any significant impairment losses in the carrying values of our assets as a result of the pandemic and we are not aware of any specific related event or circumstance that would require us to revise our estimates reflected in our unaudited condensed consolidated 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 Corporation, 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 (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 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 and nine months ended

10

---

 

September 30, 2021 and 2020, are not necessarily indicative of the results for the entire fiscal year or any other period. The unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2021 and 2020, have been prepared on the same basis as and should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report.

As a result of the Business Combination Transaction, the shares and corresponding capital amounts and loss per share related to Old Cerevel’s outstanding redeemable convertible preferred stock, redeemable convertible common stock and common stock prior to the Business Combination Transaction have been retroactively restated to reflect the Exchange Ratio established in the Business Combination Agreement. For additional information related to the Business Combination Transaction and the Exchange Ratio, please read Note 3, Business Combination, to our audited consolidated financial statements included in our Annual Report.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with 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 condensed consolidated financial statements, and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include, but are not limited to, the fair value of our financing liabilities, the fair value of the Equity Commitment and Share Purchase Option, the fair value of stock options, the accrual for research and development expense and the recoverability of our net deferred tax assets and the related valuation allowance. The impact on accounting estimates and judgments on our financial condition and results of operations due to COVID-19 has introduced additional uncertainties. 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 within our condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.

Common Stock Warrants and Derivative Financial Instruments

We account for our common stock purchase warrants and other freestanding derivative financial instruments based on an assessment of the specific terms of the instrument and applicable authoritative guidance in accordance with ASC 480, Distinguishing Liabilities from Equity (ASC 480), and review our common stock purchase warrants and other freestanding derivative financial instruments at each balance sheet date to determine whether a change in classification is required.

Our assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

We classify freestanding derivative financial instruments that are indexed in our own stock as:

Upon the consummation of the Business Combination Transaction, there were 4,983,314 public warrants and 166,333 private placement warrants (collectively, the warrants) outstanding. Each outstanding warrant of ARYA become one warrant to purchase one share of Cerevel Therapeutics Holdings, Inc. We determined that the 4,983,314 outstanding public warrants satisfied the criteria for classification as equity instruments at each reporting period. In certain circumstances, the identity of the holder may result in different settlement amounts, and therefore the private placement warrants are not considered indexed in our own stock in the manner contemplated by ASC Section 815-40-15. Accordingly, we classified the 166,333 private placement warrants as long-term liabilities within our condensed consolidated balance sheet. We did not recognize a liability in relation to the private placement warrants prior to March 31, 2021, as we previously determined that the fair value of these warrants were immaterial. We revalued the liability associated with the private placement warrants on a recurring basis each reporting period with changes in fair value of these warrants recognized as an adjustment to other income (expense), net in our condensed consolidated statements of operations and comprehensive loss through their cashless exercise and settlement in September 2021. No warrants remained outstanding as of September 30, 2021. Changes in the fair value of the private placement warrants resulted from changes to one or multiple inputs,

11

---

 

including adjustments to the discount rate, expected volatility and dividend yield as well as changes in the fair value of our common stock and public warrants.

Fair Value Option for Funding Agreements

We elected to account for our funding agreements and related financial liabilities described in Note 5, Financing Liabilities, in accordance with the fair value option permitted under ASC 825-10, Financial Instruments. A liability associated with each of our funding agreements was initially recognized at their estimated fair value within our condensed consolidated balance sheets. We revalue these financial instruments on a recurring basis each reporting period with subsequent changes in fair value, excluding the impact of the change in fair value attributable to instrument-specific credit risk, separately presented as a component of other income (expense), net in our condensed 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.

Changes in the fair value of our financing liabilities can result from changes to one or multiple inputs, including adjustments to the discount rate and achievement and timing of any cumulative sales-based and regulatory milestones or changes in the probability of certain clinical events and changes in the assumed probability associated with regulatory approval. These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market.

Upfront, direct costs and fees related to the instruments for which we have elected the fair value option were recognized in general and administrative expense in earnings as incurred.

The decision to elect the fair value option is determined on an instrument-by-instrument basis, must be applied to an entire instrument and is irrevocable once elected, but need not be applied to all similar instruments. Assets and liabilities measured at fair value pursuant to ASC 825-10 are required to be reported separately from those instruments measured using another accounting method.

For additional information related to our qualifying instruments that we have elected to account for under the fair value option, please read Note 5, Financing Liabilities, and Note 6, Fair Value Measurements.

Emerging Growth Company Status

We are currently an “emerging growth company” (EGC), as defined in Section 2(a)(19) of the Securities Act of 1933 (the Securities Act), as modified by the Jumpstart Our Business Startups Act of 2012 (JOBS Act) and we may choose to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. We may take advantage of these exemptions until the company is no longer an EGC under Section 107 of the JOBS Act, which provides that an EGC can take advantage of the extended transition period afforded by the JOBS Act for complying with new or revised accounting standards. We have elected to avail of this extended transition period for complying with new or revised accounting standards and as a result of this election, our consolidated financial statements may not be comparable to companies that comply with public company effective dates. We may take advantage of these exemptions until we no longer qualify as an EGC.

As of June 30, 2021, the last business day of our most recently completed second fiscal quarter, the market value of our common stock that was held by non-affiliates exceeded $700.0 million, and, as of December 31, 2021, we will have been public for more than one year and filed at least one annual report. As a result, we will lose our emerging growth company status and our smaller reporting company status as of the end of the current fiscal year ending December 31, 2021, and we will be subject to certain requirements that apply to other public companies but did not previously apply to us due to our status as an emerging growth company, including the provisions of Section 404(b) of the Sarbanes-Oxley Act, which require that our independent registered public accounting firm provides an attestation report on the effectiveness of our internal control over financial reporting.

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 the company as of the specified effective date. Unless otherwise discussed, the company believes that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

Collaborative Arrangements

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This standard clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer for a promised good or service that is distinct within the collaborative arrangement. The guidance also precludes entities from presenting amounts related to transactions with a collaborative arrangement participant that is not a customer as revenue, unless those transactions are directly related to third-party sales. We adopted this standard on January 1, 2021. The adoption of this standard did not have a material impact

12

---

 

on our consolidated financial statements as we have had no transactions applicable to this guidance; however, the standard may impact how we account for certain business transactions in the future.

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements (ASU 2016-13). The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. We adopted this standard on January 1, 2021. The adoption of this standard did not have a material impact on our consolidated financial statements.

Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. The standard simplifies various aspects of the income tax accounting guidance in Topic 740, including the elimination of exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. We adopted this standard effective January 1, 2021. The adoption of this standard did not have a material impact on our consolidated financial statements.

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 were made or became 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

On April 12, 2021 (the Effective Date), 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 will provide funding to support our development of tavapadon for the treatment of Parkinson’s disease.

Under the terms of the Funding Agreements, we will receive up to $62.5 million in funding from each of NovaQuest and Bain, for a combined total of up to $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, with $37.5 million (30% of the Total Funding Commitment), approximately $31.3 million (25% of the Total Funding Commitment) and $25.0 million (20% of the Total Funding Commitment) expected to be received on the first, second and third anniversaries of the Effective Date, respectively, subject to certain customary funding conditions.

In exchange, we agreed to pay to NovaQuest and Bain (1) upon approval of tavapadon by the FDA, a combined $187.5 million (1.5x of the Total Funding Commitment) (the Approval Milestone Payment), with 50% of the Approval Milestone Payment due within 30 days of FDA approval and 12.5% of the Approval Milestone Payment due on each of the first four anniversaries of FDA approval, (2) upon first reaching certain cumulative U.S. net sales thresholds, certain sales milestone payments and (3) combined tiered, mid-single digit to low-double digit royalties on annual net sales of tavapadon in the U.S.

At the time that NovaQuest and Bain collectively receive an aggregate of approximately $531.3 million (4.25x of the Total Funding Commitment), our payment obligations under the Funding Agreements will be fully satisfied. 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.

13

---

 

During the term of the Funding Agreements, the Company will use commercially reasonable efforts to develop and commercialize tavapadon in the United States, except that, upon the occurrence of certain significant safety, efficacy and regulatory technical failures of the program (each, a Technical Failure), the Company will have the right to terminate the development of tavapadon and, upon such termination, will not be obligated to make any payments to NovaQuest and Bain. If the Company suspends or terminates the development of tavapadon or fails to perform certain diligence obligations for any reason other than a Technical Failure, the Company will pay NovaQuest and Bain a combined amount equal to the total amount funded by NovaQuest and Bain up to the date of termination, plus 12% interest compounded annually.

We determined that each funding agreement represents a financial instrument that are 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 September 30, 2021, the estimated fair value of the financing liability related to potential amounts payable to Bain under the Bain Funding Agreement, which is reflected within our condensed consolidated balance sheet as financing liability, related party, totaled $19.3 million. As of September 30, 2021, the estimated fair value of the financing liability related to potential amounts payable to NovaQuest under the NovaQuest Funding Agreement, which is reflected within our condensed consolidated balance sheet as financing liability, totaled $19.3 million.

During the three months ended September 30, 2021, losses of $2.9 million and $2.9 million, respectively, were recognized as a charge to other income (expense), net within our condensed consolidated statements of operations and comprehensive loss, reflecting the change in fair value of the financing liabilities associated with the Bain and NovaQuest Funding Agreements. Losses of $3.4 million and $3.4 million, respectively, were recognized as a charge to other income (expense), net within our condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2021. We recognized unrealized losses of $0.5 million and $0.5 million, respectively, within other comprehensive income related to the change in fair value attributable to instrument-specific credit risk on the total financing liabilities for the three and nine months ended September 30, 2021. Changes in fair value attributable to instrument-specific credit risk were derived by benchmarking against the prior period credit spread to isolate the impact directly associated with the change in the credit spread utilized between periods. In addition, we recognized a charge to general and administrative expense of $0.6 million in the second quarter of 2021 for direct costs and fees incurred related to the Funding Agreements that cannot be deferred as a result of our election to apply the fair value option to the agreements.

For additional information related to our election to apply Fair Value Option to account for our Funding Agreements, please read Note 6, Fair Value Measurements.

6. Fair Value Measurements

The following table presents information about our financial assets and liabilities measured at fair value on a recurring basis and indicates the level of fair value hierarchy utilized to determine such fair values:

 

As of September 30, 2021 (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		$	669,676			$	—			$	—			$	669,676
Restricted cash—money market funds			4,200				—				—				4,200
Total Assets		$	673,876			$	—			$	—			$	673,876
Liabilities:
Private placement warrants		$	—			$	—			$	—			$	—
Financing liability, related party			—				—				19,306				19,306
Financing liability			—				—				19,306				19,306
Total Liabilities		$	—			$	—			$	38,612			$	38,612

 

As of December 31, 2020 (In thousands)