Intra-Cellular Therapies, Inc. - Quarter Report: 2022 March (Form 10-Q)

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

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

Delaware		36-4742850
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
430 East 29th Street New York, New York		10016
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		ITCI		The Nasdaq Global Select Market

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

PART I: FINANCIAL INFORMATION					1
Item 1.		FINANCIAL STATEMENTS			1
		Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021			1
		Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (unaudited)			2
		Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2022 and 2021 (unaudited)			3
		Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (unaudited)			4
		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)			5
		Notes to Condensed Consolidated Financial Statements (unaudited)			6
Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			12
Item 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			22
Item 4.		CONTROLS AND PROCEDURES			22
PART II: OTHER INFORMATION					23
Item 1.		LEGAL PROCEEDINGS			23
Item 1A.		RISK FACTORS			23
Item 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			23
Item 3.		DEFAULTS UPON SENIOR SECURITIES			23
Item 4.		MINE SAFETY DISCLOSURES			23
Item 5.		OTHER INFORMATION			23
Item 6.		EXHIBITS			24
SIGNATURES					25

Item 1.

FINANCIAL STATEMENTS

		March 31, 2022				December 31, 2021
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	129,295			$	92,365
Investment securities, available-for-sale			642,553				319,968
Restricted cash			1,400				1,400
Accounts receivable, net			32,832				20,156
Inventory			7,893				7,948
Prepaid expenses and other current assets			34,369				25,444
Total current assets			848,342				467,281
Property and equipment, net			2,185				1,791
Right of use assets, net			17,967				20,764
Other assets			86				86
Total assets		$	868,580			$	489,922
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	11,649			$	8,691
Accrued and other current liabilities			12,258				11,073
Accrued customer programs			10,888				5,964
Lease liabilities, short-term			7,636				6,732
Accrued employee benefits			16,643				20,897
Total current liabilities			59,074				53,357
Lease liabilities			16,756				18,675
Total liabilities			75,830				72,032
Stockholders’ equity:
Common stock, $0.0001 par value: 175,000,000 and 100,000,000 shares authorized at March 31, 2022 and December 31, 2021, respectively; 94,020,425 and 81,886,965 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively			9				8
Additional paid-in capital			2,089,418				1,639,476
Accumulated de f icit			(1,293,349	)			(1,221,230	)
Accumulated comprehensive loss			(3,328	)			(364	)
Total stockholders’ equity			792,750				417,890
Total liabilities and stockholders’ equity		$	868,580			$	489,922

		Three Months Ended March 31,
		2022				2021
Revenues
Product sales, net		$	34,755			$	15,579
Grant revenue			241				299
Total revenues			34,996				15,878
Operating expenses:
Cost of product sales			3,155				1,455
Research and development			29,043				15,058
Selling, general and administrative			75,460				52,584
Total operating expenses			107,658				69,097
Loss from operations			(72,662	)			(53,219	)
Interest income			548				484
Loss before provision for income taxes			(72,114	)			(52,735	)
Income tax expense			5				5
Net loss		$	(72,119	)		$	(52,740	)
Net loss per common share:
Basic & Diluted		$	(0.78	)		$	(0.65	)
Weighted average number of common shares:
Basic & Diluted			92,604,290				80,946,450

		Three Months Ended March 31,
		2022				2021
Net loss		$	(72,119	)		$	(52,740	)
Other comprehensive (loss):
Unrealized loss on investment securities			(2,964	)			(234	)
Comprehensive loss		$	(75,083	)		$	(52,974	)

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We are a biopharmaceutical company focused on the discovery, clinical development and commercialization of innovative, small molecule drugs that address underserved medical needs primarily in neuropsychiatric and neurological disorders by targeting intracellular signaling mechanisms within the central nervous system, or CNS. In December 2019, CAPLYTA (lumateperone) was approved by the U.S. Food and Drug Administration, or FDA, for the treatment of schizophrenia in adults (42mg/day) and we initiated the commercial launch of CAPLYTA in late March 2020. In support of our commercialization efforts, we employ a national sales force. In December 2021, CAPLYTA was approved by the FDA for the treatment of bipolar depression in adults (42mg/day). CAPLYTA is the only treatment for depressive episodes associated with bipolar I or II disorder (bipolar depression) in adults as monotherapy and as adjunctive therapy with lithium or valproate. We initiated the commercial launch of CAPLYTA for the treatment of bipolar depression in late December 2021. In support of the commercial launch of lumateperone for the treatment of bipolar depression, we have expanded our sales force from approximately 240 sales representatives to approximately 320 sales representatives. In addition, in April 2022, the FDA approved two new dosage strengths of CAPLYTA, 10.5 mg and 21 mg capsules, to provide dosage recommendations for patients concomitantly taking strong or moderate CYP3A4 inhibitors, and 21 mg for patients with moderate or severe hepatic impairment (Child-Pugh class B or C). As used in this report, “CAPLYTA” refers to lumateperone approved by the FDA for the treatment of schizophrenia in adults and for the treatment of bipolar depression in adults, and “lumateperone” refers to, where applicable, CAPLYTA as well as lumateperone for the treatment of indications beyond schizophrenia and bipolar depression.

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

We are developing for the treatment of behavioral disturbances in patients with dementia, the treatment of dementia-related psychosis and for the treatment of certain depressive disorders in the elderly. is a deuterated form of lumateperone, a new molecular entity formulated as an oral disintegrating tablet for sublingual administration. is formulated as an oral solid dosage form that dissolves almost instantly when placed under the tongue, allowing for ease of use in the elderly and may be particularly beneficial for patients who have difficulty swallowing conventional tablets. Phase 1 single and multiple ascending dose studies in healthy volunteers and healthy elderly volunteers (> than 65 years of age) evaluated the safety, tolerability and pharmacokinetics of In these studies, there were no reported serious adverse events in either age group. In the elderly cohort, reported adverse events were infrequent with the most common adverse event being transient dry mouth (mild). Based on these results, we have initiated our program evaluating for the treatment of agitation in patients with probable Alzheimer’s disease. We are in discussions with the FDA regarding the toxicological profile of The FDA has informed us that they do not believe the deuterated and undeuterated forms of lumateperone are identical. As a result, the data from lumateperone may not be broadly applied to and we may be required to conduct additional toxicology studies in species. This could delay the commencement of our clinical program. We expect to commence clinical conduct in this program in 2022. Additional studies in dementia-related psychosis and certain depressive disorders in the elderly are also planned for late 2022 or early 2023.

We have another major program that has yielded a portfolio of compounds that selectively inhibit the enzyme phosphodiesterase type 1, or PDE1. PDE1 enzymes are highly active in multiple disease states and our PDE1 inhibitors are designed to reestablish normal function in these disease states. Abnormal PDE1 activity is associated with cellular proliferation and activation of inflammatory cells. Our PDE1 inhibitors ameliorate both of these effects in animal models. We intend to pursue the development of our phosphodiesterase, or PDE, program, for the treatment of aberrant immune system activation in several CNS with a focus on diseases where excessive PDE1 activity has been demonstrated and increased inflammation is an important contributor to disease pathogenesis. Our potential disease targets include heart failure, immune system regulation, neurodegenerative diseases, cancers and is our lead compound in this program. Following the favorable safety and tolerability results in our Phase 1 program, we initiated our development program for lenrispodun for Parkinson’s disease and commenced patient enrollment in the third quarter of 2017 in a Phase 1/2 clinical trial of lenrispodun in patients with Parkinson’s disease to evaluate safety and tolerability in this patient population, as well as motor endpoints. In the fourth quarter of 2018, we announced that the Phase 1/2 clinical trial of lenrispodun had been completed and topline results demonstrated lenrispodun was generally well-tolerated with a favorable safety profile and clinical signs consistent with improvements in motor symptoms and dyskinesias. We have initiated our Phase 2 clinical program with lenrispodun for Parkinson’s disease and expect to commence patient enrollment in the first half of 2022. In addition, in the second quarter of 2020, we announced topline results from Phase 1/2 translational study of single ascending doses of lenrispodun in patients with chronic systolic heart failure with reduced ejection fraction. In this study, lenrispodun improved cardiac output by increasing heart contractility and decreasing vascular resistance. Agents that both increase heart contractility (inotropism) and decrease vascular resistance (vasodilation) are called inodilators. Inodilators in current clinical use are associated with the development of arrhythmias, which are abnormal heart rhythms that, when serious, can impair heart function and lead to mortality. Lenrispodun, which acts through a novel mechanism of action, was not associated with arrhythmias in this study and was generally well-tolerated in all patients.

We also have a development program with as a potential treatment for substance use disorders, pain and psychiatric comorbidities including depression and anxiety. There is a pressing need to develop new drugs to treat opioid addiction and for safe, effective, treatments to manage pain. is a novel compound that uniquely combines activity as an antagonist at and a partial agonist at µ-opioid receptors. These combined actions support the potential utility the treatment of opioid use disorder and associated comorbidities (e.g., depression, anxiety, sleep disorders) without opioid-like safety and tolerability concerns. In December 2020, we initiated a Phase 1 single ascending dose study evaluating the safety, tolerability and pharmacokinetics of in healthy volunteers. This study was recently completed and achieved plasma exposures at or above those required for efficacy and was generally safe and well-tolerated. We have received a grant from the National Institute on Drug Abuse under the Helping to End Addiction Long-term Initiative, or NIH HEAL Initiative, that we expect will fund a significant portion of the early stage clinical development costs associated with this program.

In December 2019, a novel strain of which causes coronavirus disease 2019, or surfaced in Wuhan, China. Since then, and have spread to countries worldwide, including the United States. The pandemic continues to evolve, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures. As a result of the pandemic, or similar pandemics, we may experience disruptions that could severely impact our business, including our ability to successfully commercialize our only commercial product, CAPLYTA, in the United States, and these disruptions could negatively impact our sales of CAPLYTA. Depending on the severity of the pandemic, our commercial organization, sales force and medical organization may have significantly reduced personal interactions with physicians and customers and may need to conduct many promotional activities virtually, and we may elect to cease interactions with physicians and customers entirely for some period of time in the interest of employee and community safety. In addition, this could result in a decrease in the number of patient visits to healthcare providers. Business interruptions from the current or future pandemics may also adversely impact the third parties we rely on to sufficiently manufacture CAPLYTA and to produce our product candidates in quantities we require, which may impair the commercialization and our research and development activities.

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

In response to the pandemic, in March 2020, the FDA announced its intention to temporarily postpone most inspections of foreign manufacturing facilities and products, as well as routine surveillance inspections of domestic manufacturing facilities, and it also provided guidance regarding the conduct of clinical trials, which has been further updated several times since that time. In the FDA noted it was continuing to ensure timely reviews of applications for medical products during the pandemic in line with its user fee performance goals and conducting mission-critical domestic and foreign inspections to ensure compliance of manufacturing facilities with FDA quality standards. The FDA subsequently publicized its development and use of an internal rating system, called the Advisory Rating system, to assist in determining when and where it is safest to conduct such inspections based on data about the virus’s trajectory in a given country, state and locality and the rules and guidelines that are put in place by foreign, state and local governments. As of October 2021, FDA is either continuing to, on a basis, conduct only “mission-critical” inspections, or, where possible to do so safely, resuming prioritized domestic inspections, which generally include inspections, or PAIs. Foreign PAIs that are not deemed mission-critical remain postponed, while those deemed mission-critical will be considered for inspection on a basis. FDA will use similar data to inform resumption of other prioritized operations abroad as it becomes feasible and advisable to do so.

During the global response to the pandemic, moreover, there have been strategic redeployments of government resources to priority projects, including FDA and EMA resources and staff, which could have an impact on the timeline for review and approval of new marketing applications. Over the course of the pandemic, FDA’s new drug review programs continued to meet key performance goals related to working with applicants and approving NDAs and NDA supplements, although the agency has also stated that the uncertainty of the situation may make it difficult to sustain that level of performance indefinitely. The FDA may not be able to maintain its normal pace with respect to new drug applications and delays or setbacks are possible in the future. The FDA has told industry that it intends to be as transparent as possible about its workload and performance metrics as the situation evolves, and also that it intends to communicate proactively with applicants during the review cycle regarding the need for a inspection and whether such PAI is considered “mission-critical.”

including but not limited to whether the candidate has been granted breakthrough therapy designation and whether the candidate is intended to treat or prevent a serious disease or medical condition for which there is no other appropriate substitute. Regulatory authorities outside the United States, including but not limited to the EMA, may adopt similar restrictions or other policy measures in response to pandemic.

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

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

Product sold through March 31, 2022 consisted of drug product that was previously charged to research and development expense prior to FDA approval of CAPLYTA and other direct, indirect, and overhead costs required to make final product for sale. Because the Company’s policy does not allow for the capitalization of product, the cost of drug product sold is lower than it would have been and has a positive impact on our cost of product sales for the three-month periods ended March 31, 2022 and 2021. The Company’s reported cost of product sales as a percentage of product sales, net was 9.1% or approximately $3.2 million for the three-month period ended March 31, 2022, as compared to 9.3% or approximately $1.5 million for the three-month period ended March 31, 2021, of which more than half related to royalty payments accrued to BMS.

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

Research and development expenses increased to $29.0 million for the three-month period ended March 31, 2022 as compared to $15.1 million for the three-month period ended March 31, 2021, representing an increase of approximately $13.9 million, or 93%. This increase is due primarily to an increase of $8.9 million for lumateperone clinical trial and other costs, and approximately $5.3 million for other projects including the and programs, among others, and is offset by a decrease of approximately $0.3 million of overhead costs. Internal costs increased by approximately $2.0 million for the period due primarily to labor related costs and share-based compensation.

As the development of lumateperone and progress, we anticipate research and development costs to increase moderately due primarily to testing and conducting ongoing and planned Phase 1, 2, 3 and other clinical trials in the next several years. We are also required to complete testing to obtain FDA approval and manufacture material needed for clinical trial use, which includes testing of the drug product, and manufacturing of drug product in anticipation of possible additional FDA approvals of lumateperone for indications beyond schizophrenia and bipolar depression.

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

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

As of March 31, 2022, we had a total of approximately $773.2 million in cash and cash equivalents, investment securities and restricted cash, and approximately $59.1 million of short-term liabilities consisting entirely of liabilities from operations, including approximately $7.6 million of short-term lease obligations. In the three months ended March 31, 2022, we spent approximately $116.8 million in cash for operations and equipment. During this period, we collected $32.7 million from product sales and $0.5 million of interest income, resulting in net cash used of $82.8 million. The use of cash was primarily for selling and marketing costs in connection with our commercialization of CAPLYTA, conducting clinical trials and testing, funding recurring operating expenses, and product manufacturing.

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

For the remainder of 2022, we expect to spend up to $385 million primarily relating to the marketing and commercialization of CAPLYTA, lumateperone clinical development including clinical trial conduct, regulatory activities, manufacturing and inventory production, expansion of our administrative infrastructure and other development activities. Our other development activities will include efforts relating to our lenrispodun programs, among others. However, pandemic may negatively impact our commercialization of CAPLYTA, our ability to complete our ongoing or planned nonclinical and clinical trials, our ability to obtain approval of any product candidates from the FDA or other regulatory authorities, and our workforce and therefore our research, development and commercialization activities. This may ultimately have a material adverse effect on our liquidity, although we are unable to make any prediction with certainty given the rapidly changing nature of the pandemic and governmental and other responses to it.

We may require additional financing in the future to continue to fund our operations. We believe that we have the funding in place to commercialize CAPLYTA in patients with schizophrenia and bipolar depression. We also plan to fund additional clinical trials of lumateperone for the treatment of depressive disorders and other CNS disorders; preclinical and clinical development of our long acting injectable development program; clinical development of continued clinical development of our PDE product candidates, including lenrispodun; research and preclinical development of our other product candidates. We have incurred losses in every year since inception with the exception of 2011, when we received an fee and a milestone payment related to a license agreement that has been terminated. These losses have resulted in significant cash used in operations.

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

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

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

In 2014, we entered into a long-term lease with a related party which, as amended, provided for a lease of 16,753 square feet of useable laboratory and office space located at 430 East 29th Street, New York, New York 10016. Concurrent with this lease, we entered into a license agreement to occupy certain vivarium related space in the same facility for the same term, rent and escalation provisions as the lease. This license has the primary characteristics of a lease and is characterized as a lease in accordance with ASU for accounting purposes. In September 2018, we further amended the lease to obtain an additional 15,534 square feet of office space beginning October 1, 2018 and to extend the term of the lease for previously acquired space. The lease, as amended, has a term of 14.3 years ending in May 2029. In February 2019, we entered into a long-term lease for 3,164 square feet of office space in Towson, Maryland beginning March 1, 2019. The Towson lease had a term of 3.2 years ending in April 2022. In April 2022, we amended the lease to obtain an additional 736 square feet of office space beginning May 1, 2022 and to extend the term of the lease for the previously acquired space. The Towson lease, as amended, has a term of four years ending in April 2026. On May 17, 2019, we entered into a vehicle fleet lease with a company to acquire motor vehicles for certain employees. The vehicle fleet lease provides for individual leases for the vehicles, which at each lease commencement was determined to qualify for operating lease treatment. We began leasing vehicles under the vehicle fleet lease in March 2020. Restricted cash of $1.4 million on our condensed consolidated balance sheet as of March 31, 2022 and 2021 relates to a letter of credit issued as part of the vehicle fleet lease.

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

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

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other important factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about: the accuracy of our estimates regarding expenses, revenues, uses of cash, cash equivalents and investment securities, capital requirements and the need for additional financing; our expectations regarding our commercialization of CAPLYTA, including the impact of on the commercialization of CAPLYTA and our ability to adapt our approach as appropriate; the duration and severity of the pandemic and its impact on our business; the supply and availability of and demand for our product; the initiation, cost, timing, progress and results of our development activities, studies and clinical trials; the timing of and our ability to obtain and maintain regulatory approval, or submit an application for regulatory approval, of lumateperone and our other existing product candidates, any product candidates that we may develop, and any related restrictions, limitations, and/or warnings in the label of any approved product candidates; our plans to research, develop and commercialize lumateperone and our other current and future product candidates; the election by any collaborator to pursue research, development and commercialization activities; our ability to obtain future reimbursement and/or milestone payments from our collaborators; our ability to attract collaborators with development, regulatory and commercialization expertise; our ability to obtain and maintain intellectual property protection for our product candidates; our ability to successfully commercialize lumateperone and our other product candidates; the performance of our third-party suppliers and manufacturers and our ability to obtain alternative sources of raw materials; our ability to obtain additional financing; our use of the proceeds from our securities offerings; our exposure to investment risk, interest rate risk and capital market risk; and our ability to attract and retain key scientific, management, or sales and marketing personnel.

Words such as “may,” “anticipate,” “estimate,” “expect,” “may,” “project,” “intend,” “plan,” “believe,” “potential,” “predict,” “project,” “likely,” “will,” “would,” “could,” “should,” “continue” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, the following: there are no guarantees that CAPLYTA will be commercially successful; we may encounter issues, delays or other challenges in commercializing CAPLYTA; the pandemic may negatively impact our commercial plans and sales for CAPLYTA; the pandemic may negatively impact the conduct of, and the timing of enrollment, completion and reporting with respect to, our clinical trials; whether CAPLYTA receives adequate reimbursement from third-party payors; the degree to which CAPLYTA receives acceptance from patients and physicians for its approved indications; challenges associated with execution of our sales activities, which in each case could limit the potential of our product; results achieved in CAPLYTA in the treatment of schizophrenia and bipolar depression following commercial launch of the product may be

different than observed in clinical trials, and may vary among patients; any other impacts on our business as a result of or related to the pandemic; challenges associated with supply and manufacturing activities, which in each case could limit our sales and the availability of our product; impacts on our business, including on the commercialization of CAPLYTA and our clinical trials, as a result of the conflict in Ukraine; risks associated with our current and planned clinical trials; we may encounter unexpected safety or tolerability issues with CAPLYTA following commercial launch for the treatment of schizophrenia or bipolar depression or in ongoing or future trials and other development activities; our other product candidates may not be successful or may take longer and be more costly than anticipated; product candidates that appeared promising in earlier research and clinical trials may not demonstrate safety and/or efficacy in larger-scale or later clinical trials or in clinical trials for other indications; our proposals with respect to the regulatory path for our product candidates may not be acceptable to the FDA; our reliance on collaborative partners and other third parties for development, commercialization, manufacturing or supply of our product and product candidates; and the other risk factors detailed under the heading “Risk Factors” in our most recent Annual Report on Form as updated under the heading “Risk Factors” from time to time in our subsequent periodic and current reports filed with the SEC.

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

 As of March 31, 2022, we had cash, cash equivalents, marketable securities and restricted cash of approximately $773.2 million consisting of cash deposited in a highly rated financial institution in the United States and in a short-term U.S. Treasury money market fund, as well as high-grade corporate bonds and commercial paper. The primary objective of our investment activities is to preserve our capital for the purpose of funding operations and we do not enter into investments for trading or speculative purposes. We believe that we do not have material exposure to high-risk investments such as mortgage-backed securities, auction rate securities or other special investment vehicles within our money-market fund investments. We believe that we do not have any material exposure to changes in fair value as a result of changes in interest rates, although the recent increase in interest rates has resulted in our unrealized loss on investments, net, as of March 31, 2022 of approximately $3.3 million and an unrealized loss on investments, net, as of December 2021 totaling approximately $0.4 million. We plan on holding those investments to maturity, and should interest rates rise, there would be no recognition of impairment required. Declines in interest rates, however, would reduce future investment income.

. Inflation generally may affect us by increasing our cost of labor and clinical trial costs. We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases of our product. Our inability or failure to do so could adversely affect our business, financial condition and results of operations.

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

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

(b). There were no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the three months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Except as set forth below, there have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022.