You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed consolidated
financial statements and notes thereto included elsewhere in this Quarterly
Report, and the consolidated financial statements and accompanying notes, as
well as Management's Discussion and Analysis of Financial Condition and Results
of Operations contained in our Annual Report on Form 10-K for the year ended
December 31, 2020. Certain of the information contained in this discussion and
analysis or set forth elsewhere in this Quarterly Report, including information
with respect to plans and strategy for our business, includes forward-looking
statements that involve risks and uncertainties. As a result of many factors,
including those factors set forth in the section entitled "Risk Factors," our
actual results could differ materially from the results described in or implied
by the forward-looking statements contained in the following discussion and
analysis. You should carefully read the section entitled "Risk Factors" to gain
an understanding of the material and other risks that could cause actual results
to differ materially from our forward-looking statements. Please also see the
section entitled "Cautionary Note Regarding Forward-Looking Statements."

Overview

introduction

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. Our "ready-made" pipeline of 11 small molecule
programs, which includes six clinical-stage product candidates, was developed
through over a decade of research and investment by Pfizer Inc., or Pfizer, and
was supported by an initial capital commitment from an affiliate of Bain Capital
and a keystone equity position from Pfizer. We are advancing our extensive and
diverse pipeline with numerous clinical trials underway, including three Phase 3
trials and an open-label safety extension trial for tavapadon in Parkinson's as
well as a Phase 2 trial in focal epilepsy and a Phase 1 trial in acute anxiety
for darigabat. In addition, in June 2021, we announced positive topline results
for CVL-231 in our Phase 1b trial in schizophrenia and plan to advance CVL-231
with a comprehensive Phase 2 development program. See "-Our Pipeline" below. We
have built a highly experienced team of senior leaders and neuroscience drug
developers who combine a nimble, results-driven biotech mindset with the proven
expertise of large pharmaceutical company experience and capabilities in drug
discovery and development.

Our portfolio of product candidates is based on a differentiated understanding
of the neurocircuitry of CNS diseases, as well as the key pillars of our
targeted approach to neuroscience: (i) receptor-drug interactions at the atomic
level to achieve targeted receptor subtype selectivity, (ii) orthosteric and
allosteric chemistry to achieve ideal receptor pharmacology and (iii) robust
packages of preclinical and clinical data that elucidate the key points of
differentiation for our compounds. Our rational design approach uses measured
and calculated structural and surface charge information from the target protein
combined with high-resolution crystallography data, computational homology
models, screening of single-residue mutant proteins, indirect solution-phase
imaging techniques and other biophysical measurements to glean key
molecular-level information about the interaction between a target protein and
our product candidates. These insights then drive structure-informed design of
subsequent molecules. Due to our understanding of the specificity and dynamic
range of neural networks and how to modulate them, we believe that our product

                                       22

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candidates have the potential to achieve optimal therapeutic activity while minimizing unintended side effects of currently available therapies.

Our pipeline

The following table summarizes our current portfolio of product candidates. This table does not include several additional preclinical programs with disease modifying potential that have not yet been disclosed.

                     [[Image Removed: img31186267_0.jpg]]

Below are our most advanced product candidates:

1.

CVL-231 is a positive allosteric modulator, or PAM, that selectively targets the
muscarinic acetylcholine 4 receptor subtype, or M4. We conducted a Phase 1b
trial of CVL-231 in schizophrenia, consisting of Part A, a multiple ascending
dose, or MAD, study and Part B, a pharmacodynamic, or PD, assessment. In June
2021, we announced positive topline results for the Phase 1b trial. Both doses
of CVL-231 demonstrated a clinically meaningful and statistically significant
improvement in PANSS total score at six weeks and were generally well-tolerated
compared with placebo. We plan to advance CVL-231 with a comprehensive Phase 2
development program for schizophrenia and to evaluate the potential of this
mechanism in other populations, including dementia-related psychosis.
2.
Darigabat (formerly known as CVL-865) is a PAM that selectively targets the
alpha-2/3/5 subunits of the GABAA receptor. In the second half of 2020, we
initiated a Phase 2 proof-of-concept trial, known as REALIZE, in patients with
drug-resistant focal onset seizures in epilepsy, or focal epilepsy. Data are
expected in the second half of 2022 for the Phase 2 focal epilepsy trial. We are
also conducting a Phase 1 proof-of-principle trial of darigabat in acute
anxiety. Data for the acute anxiety trial are expected by the end of the first
quarter of 2022.
3.
Tavapadon is a selective dopamine D1/D5 partial agonist that we are developing
for the treatment of early- and late-stage Parkinson's disease. We initiated a
registration-directed Phase 3 program for tavapadon beginning in January 2020,
which includes two trials in early-stage Parkinson's, known as TEMPO-1 and
TEMPO-2, one trial in late-stage Parkinson's, known as TEMPO-3, and an
open-label safety extension trial, known as TEMPO-4. We expect initial data from
our Phase 3 program to be available beginning in the first half of 2023.

                                       23

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4.

CVL-871 is a selective dopamine D1/D5 partial agonist specifically designed to
achieve a modest level of partial agonism, which we believe may be useful in
modulating the complex neural networks that govern cognition, motivation and
apathy behaviors in neurodegenerative diseases. In the second quarter of 2021,
the U.S. Food and Drug Administration, or the FDA, granted Fast Track
Designation for CVL-871 for the treatment of dementia-related apathy. We are
conducting a Phase 2a exploratory trial in dementia-related apathy, with data
expected in the second half of 2022.
5.
CVL-936 is a selective dopamine D3-preferring antagonist that we are developing
for the treatment of substance use disorder, or SUD. We initiated a Phase 1
single ascending dose, or SAD, trial in January 2020. We concluded dosing of
Cohort 1 of the Phase 1 SAD trial after receiving sufficient clinical data for
the intended purposes for this trial. We intend to conduct a multiple dose
non-clinical safety pharmacology study before additional Phase 1 SAD and MAD
evaluations.

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

We plan to advance the development of the remainder of our broad portfolio
across multiple neuroscience indications, including CVL-354, our selective kappa
opioid receptor antagonist, which we refer to as KORA, that we are developing in
major depressive disorder, or MDD, and SUD. We are conducting a Phase 1 SAD and
MAD trial of CVL-354 in healthy volunteers. We are also developing CVL-047, our
selective PDE4 inhibitor that spares the PDE4D subtype, for the treatment of MDD
and schizophrenia. We are also deploying the latest technologies, such as
artificial intelligence and DNA-encoded chemical libraries, to efficiently
identify new therapeutic molecules, including those with disease-modifying
potential. We believe that our targeted approach to neuroscience will enable us
to create a leading drug discovery and development platform to transform the
lives of patients living with neuroscience diseases.

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

Working environment

The biopharmaceutical industry is extremely competitive. We are subject to risks
and uncertainties common to clinical-stage companies in the biopharmaceutical
industry. These risks include, but are not limited to, the introduction of new
products, therapies, standards of care or 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. We are also dependent upon the services of
key personnel, including our Chief Executive Officer, executive team and other
highly skilled employees. Demand for experienced personnel in the pharmaceutical
and biotechnology industries is high and competition for talent is intense.
Please read the section entitled "Risk Factors" for additional information.

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

Risks and liquidity

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

                                       24
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Our product candidates, currently under development or that we may develop, will
require significant additional research and development efforts, including
extensive clinical testing and regulatory approval prior to commercialization.
These efforts require significant amounts of additional capital, adequate
personnel infrastructure and extensive compliance and reporting capabilities.
There can be no assurance that our research and development activities will be
successfully completed, that adequate protection for our licensed or developed
technology will be obtained and maintained, that products developed will obtain
necessary regulatory approval or that any approved products will be commercially
viable.

Until such time, if ever, as we can generate substantial product revenue, we
will need substantial additional funding to support our continuing operations
and pursue our growth strategy, and we may finance our operations through a
combination of additional private or public equity offerings, debt financings,
collaborations, strategic alliances, marketing, distribution or licensing
arrangements with third parties or through other sources of financing. To the
extent that we raise additional capital through the sale of private or public
equity or convertible debt securities, your ownership interest will be diluted,
and the terms of these securities may include liquidation or other preferences
that adversely affect your rights as a common stockholder. Debt financing and
preferred equity financing, if available, may involve agreements that include
covenants limiting or restricting our ability to take specific actions, such as
incurring additional debt, making acquisitions or capital expenditures or
declaring dividends. If we raise additional funds through collaborations,
strategic alliances or marketing, distribution or licensing arrangements with
third parties, we may have to relinquish valuable rights to our technologies,
future revenue streams, research programs or drug candidates, or grant licenses
on terms that may not be favorable to us. If we are unable to raise additional
funds through equity or debt financings or other arrangements when needed, we
may be required to delay, limit, reduce or terminate our research, product
development or future commercialization efforts, grant rights to develop and
market product candidates that we would otherwise prefer to develop and market
ourselves, obtain funds through arrangement with collaborators on terms
unfavorable to us or pursue merger or acquisition strategies, all of which could
adversely affect the holdings or the rights of our stockholders.

We have incurred significant operating losses since our inception and, as of
September 30, 2021, we had an accumulated deficit of $557.2 million and had not
yet generated revenues. 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 the unaudited condensed consolidated financial statements
included in this Quarterly Report.

We expect our expenses to increase significantly in the course of our day-to-day operations as we:

?
advance our clinical-stage product candidates through clinical development,
including as we advance these candidates into later-stage clinical trials;
?
experience an increase in headcount and associated costs as we expand our
research and development and establish a commercial infrastructure;
?
advance our preclinical stage product candidates into clinical development;
?
seek to identify, acquire and develop additional product candidates, including
through business development efforts to invest in or in-license other
technologies or product candidates;
?
hire additional clinical, quality control, medical, scientific and other
technical personnel to support our clinical operations;
?
expand our operational, financial and management systems and increase personnel
to support our operations;
?
meet the requirements and demands of being a public company;
?
maintain, expand and protect our intellectual property portfolio;
?
make milestone, royalty or other payments due under the Pfizer License Agreement
and any future in-license or collaboration agreements;
?
make milestone, royalty or other payments due under the Funding Agreements and
any future financing agreements or other agreements with third parties;
?
seek regulatory approvals for any product candidates that successfully complete
clinical trials; and
?
undertake any pre-commercialization activities to establish sales, marketing and
distribution capabilities for any product candidates for which we may receive
regulatory approval in regions where we choose to commercialize our products on
our own or jointly with third parties.

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Business combination transaction

On October 27, 2020, ARYA Sciences Acquisition Corp II, or ARYA, completed the
acquisition of Cerevel Therapeutics, Inc., or Old Cerevel, a private company,
pursuant to the Business Combination Agreement dated July 29, 2020, as amended
on October 2, 2020, or 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.

Upon the closing of the transactions contemplated by the Business Combination
Agreement, which we refer to as 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. 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., or
New Cerevel.

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 established in
the Business Combination Agreement (1.00 share of Old Cerevel for 2.854 shares
of New Cerevel), or the Exchange Ratio.

For additional information related to our operations, please read Note 1, Nature
of Operations, to our audited consolidated financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 2020, or our Annual
Report. For additional information related to the Business Combination
Transaction, please read Note 3, Business Combination, to our audited
consolidated financial statements included in our Annual Report.

Follow-up public offer

On July 7, 2021, we completed a 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.

Pfizer License Agreement

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

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

For more information on our Pfizer license agreement, please read Note 6, Pfizer License Agreement, to our audited consolidated financial statements included in our annual report.

Financing agreements

On April 12, 2021, we entered into funding agreements, or the Funding
Agreements, with NovaQuest Co-Investment Fund XVI, L.P., or NovaQuest, and BC
Pinnacle Holdings, LP, or Bain, pursuant to which NovaQuest and Bain will
provide up to $125.0 million, or the Total Funding Commitment, to support our
development of tavapadon for the treatment of Parkinson's disease over four
years, of which approximately $31.1 million (25% of the Total Funding
Commitment, net of $0.2 million of fees incurred by Bain and NovaQuest) was
received in April 2021.

For more information on our funding arrangements, please read Note 5, Funding liabilities, to our unaudited condensed consolidated financial statements included elsewhere in this quarterly report.

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Impact of the current COVID-19 pandemic

In March 2020, the World Health Organization declared the COVID-19 outbreak a
pandemic. The ongoing COVID-19 pandemic is evolving, and to date has led to the
implementation of various responses, including government-imposed quarantines,
travel restrictions and other public health safety measures.

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 have taken steps to identify and mitigate the adverse impacts on,
and risks to, our business posed by its spread and actions taken by governmental
and health authorities to address this pandemic; however, the spread of COVID-19
has caused us to modify our business practices, including implementing a
temporary work-from-home policy for all employees who are able to perform their
duties remotely and temporarily restricting all non-essential travel and
discouraging employee attendance at non-essential industry events and in-person
work-related meetings. We expect to continue to take actions as may be required
or recommended by government authorities or as we determine are in the best
interests of our employees and other business partners in light of COVID-19.

More specifically, the onset of the COVID-19 pandemic caused brief pauses in
patient screening and enrollment in our Phase 3 trials of tavapadon for the
treatment of Parkinson's (which we subsequently resumed in the second half of
2020), and we remain particularly vigilant about patient safety given the
elderly nature of this population. In addition, our Phase 1 trial of darigabat
in acute anxiety is being conducted at the Centre for Human Drug Research, a
single specialized site in the Netherlands. In July 2021, Dutch government
authorities reimposed restrictions due to the ongoing COVID-19 pandemic. As a
result of delays in patient enrollment caused by this COVID-19 guidance, data
for the acute anxiety trial are now expected by the end of the first quarter of
2022.

While we have taken measures to revise clinical trial protocols, the extent to
which COVID-19 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
COVID-19 or treat its impact, including vaccination campaigns, among others.

In addition, recurrences or additional waves of COVID-19 cases could cause other
widespread or more severe impacts depending on where infection rates are
highest. We cannot presently predict the scope and severity of any potential
business shutdowns or disruptions, but if we or any of the third parties with
whom we engage were to experience prolonged business shutdowns or other
disruptions, our ability to conduct our business in the manner and on the
timelines presently planned could be materially and negatively affected, which
could have a material adverse impact on our business, results of operations and
financial condition. The estimates of the impact on our business may change
based on 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 experienced any significant impairment in the carrying value 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 consolidated financial statements. audited.

Components of operating results

Income

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

Research and Development

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

?
employee-related expenses, consisting of salaries, benefits and equity-based
compensation for personnel engaged in our research and development activities;
?
expenses incurred in connection with the preclinical and clinical development of
our product candidates, including costs incurred under agreements with CROs,
investigative clinical trial sites and consultants and other third-party
organizations that conduct research and development activities on our behalf;
?
costs associated with preclinical studies and clinical trials, including
research materials;

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?
materials and supply costs associated with the manufacture of drug substance and
drug product for preclinical testing and clinical trials;
?
costs related to regulatory compliance requirements; and
?
certain indirect costs incurred in support of overall research and development
activities, including facilities, depreciation and technology expenses.

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

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

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

The length, cost and timing of the clinical trials and development of our product candidates will depend on a variety of factors, including:

?
per patient trial costs;
?
the number of patients that participate in the trials;
?
the number of sites included in the trials;
?
the countries in which the trials are conducted;
?
the length of time required to enroll eligible patients;
?
the number of doses that patients receive;
?
the drop-out or discontinuation rates of patients;
?
potential additional safety monitoring or other studies requested by regulatory
agencies;
?
the duration of patient follow-up; and
?
the efficacy and safety profile of our product candidates.

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

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General and administrative

We expense general and administrative costs as incurred. General and
administrative expenses consist primarily of salaries, benefits, equity-based
compensation and outsourced labor for personnel in executive, finance, human
resources, legal and other corporate administrative functions. General and
administrative expenses also include legal fees incurred relating to corporate
and patent matters, professional fees incurred for accounting, auditing, tax and
administrative consulting services, insurance costs, facilities and depreciation
expenses.

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

We expect that our general and administrative expenses will increase both in the
near-term and beyond as we continue to build general corporate infrastructure to
support organization.

Interest Income, Net

Net interest income consists primarily of interest earned on our cash, cash equivalents and restricted cash.

Other income (expenses), net

Other income (expense), net primarily consists of gains (losses) on the fair
value remeasurement of our financing liabilities and gains (losses) on the fair
value remeasurement of the private placement warrants until their cashless
exercise and settlement in September 2021. Other income (expense) also reflected
gains (losses) on the fair value remeasurement of the Equity Commitment and
Share Purchase Option prior to their termination upon completion of the Business
Combination Transaction in October 2020 as well as amounts for other
miscellaneous income and expense unrelated to our core operations.

As permitted under ASC 825, Financial Instruments, we elected the Fair Value
Option for our financing liabilities, wherein the financial instruments were
initially measured at their issue-date estimated fair value and subsequently
remeasured at estimated fair value on a recurring basis at each reporting period
date. 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. The estimated
fair value adjustment for our financing liabilities, as required by ASC
825-10-45-5, is recognized as a component of other comprehensive income with
respect to the portion of the fair value adjustment attributed to a change in
the instrument-specific credit risk, with the remaining amount of the fair value
adjustment recognized as other income (expense), net, in the consolidated
statement of operations.

The private placement warrants were determined to be free-standing financial
instruments that were reclassified from equity to other long-term liabilities on
March 31, 2021. We revalued the private placement warrants each reporting period
through their final cashless exercise and settlement in September 2021, with
increases or decreases in the fair value of these warrants recognized as an
adjustment to other income (expense), net in our consolidated statements of
operations and comprehensive loss. Changes in the fair value of the private
placement warrants resulted from changes to one or multiple inputs, 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.

The Equity Commitment and Share Purchase Option were free-standing financial
instruments that were recorded at their fair value on the Formation Transaction
Date. We revalued these instruments each reporting period and recorded increases
or decreases in their respective fair value as an adjustment to other income
(expense), net in our consolidated statements of operations and comprehensive
loss. Changes in the fair value of these financial instruments resulted from
changes to one or multiple inputs, including adjustments to the discount rates
and expected volatility and dividend yield as well as changes in the amount and
timing of the anticipated future funding required to settle these instruments
and the fair value of our preferred and common stock that were expected to be
exchanged to complete that additional funding. Discount rates in our valuation
models represent a measure of the credit risk associated with settling the
financial instruments. The expected dividend yield was assumed to be zero as we
have never paid dividends, nor do we have current plans to do so in the future.

Significant judgment is exercised in determining the appropriateness of the assumptions underlying the initial determination of fair value for each of these instruments and for each subsequent period.

Tax benefit (Provision), net

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

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We account for income taxes using the asset and liability method, which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the consolidated financial
statements or our tax returns. Deferred tax assets and liabilities are
determined based on difference between the financial statement carrying amounts
and tax bases of existing assets and liabilities and for loss and credit
carryforwards, which are measured using the enacted tax rates and laws in effect
in the years in which the differences are expected to reverse. The realization
of our deferred tax assets is dependent upon the generation of future taxable
income, the amount and timing of which are uncertain. Valuation allowances are
provided, if, based upon the weight of available evidence, it is more likely
than not that some or all of the deferred tax assets will not be realized. As of
September 30, 2021, we continue to maintain a full valuation allowance against
all of our deferred tax assets based on our evaluation of all available
evidence.

We file income tax returns in the U.S. federal tax jurisdiction and state
jurisdictions and may become subject to income tax audit and adjustments by
related tax authorities. Our initial tax return period for U.S. federal income
taxes was the 2018 period. We currently remain open to examination under the
statute of limitations by the Internal Revenue Service and state jurisdictions
for the 2020, 2019 and 2018 tax years. We record reserves for potential tax
payments to various tax authorities related to uncertain tax positions. The
nature of uncertain tax positions is subject to significant judgment by
management and subject to change, which may be substantial. These reserves are
based on a determination of whether and how much a tax benefit taken by us in
our tax filings or positions is more likely than not to be realized following
the resolution of any potential contingencies related to the tax benefit. We
develop our assessment of uncertain tax positions, and the associated cumulative
probabilities, using internal expertise and assistance from third-party experts.
As additional information becomes available, estimates are revised and refined.
Differences between estimates and final settlement may occur resulting in
additional tax expense. Potential interest and penalties associated with such
uncertain tax positions is recorded as a component of our income tax benefit
(provision), net. To date, no amounts are being presented as an uncertain tax
position.

Results of Operations

The following table summarizes our operating results:



                            For the Three Months Ended                       For the Nine Months Ended
                                   September 30,                                   September 30,
(In thousands)                 2021               2020        Change           2021               2020        Change
Operating expenses:
Research and
development               $       40,159       $   24,026          67 %    $     114,014       $   73,168          56 %
General and
administrative                    14,368           10,336          39 %           41,594           34,052          22 %
Total operating
expenses                          54,527           34,362          59 %          155,608          107,220          45 %
Loss from operations             (54,527 )        (34,362 )        59 %         (155,608 )       (107,220 )        45 %
Interest income, net                  13                1       1,200 %               38              210         (82 )%
Other income (expense),
net                               (7,545 )         (4,684 )        61 %          (10,709 )        (11,976 )       (11 )%
Loss before income
taxes                            (62,059 )        (39,045 )        59 %         (166,279 )       (118,986 )        40 %
Income tax benefit
(provision), net                       -                5        (100 )%               -               21        (100 )%
Net loss                  $      (62,059 )     $  (39,040 )        59 %    $    (166,279 )     $ (118,965 )        40 %




Research and Development

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



                                For the Three Months Ended                         For the Nine Months Ended
                                       September 30,                                     September 30,
(In thousands)                   2021                2020           Change            2021              2020         Change
Tavapadon                    $      13,792       $       7,603           81 %    $       37,013       $  22,376           65 %
CVL-231                              1,494               3,030          (51 )%           12,701           9,925           28 %
Darigabat                            4,139               2,553           62 %            14,139           7,653           85 %
CVL-871                              1,385                 201          589 %             3,838             689          457 %
CVL-936                                687                 439           56 %             1,005           2,110          (52 )%
Other research and
development programs                 3,038               1,529           99 %             7,769           4,616           68 %
Unallocated                          4,358               1,577          176 %             8,624           6,056           42 %
Personnel costs                      8,773               6,035           45 %            22,513          16,860           34 %
Equity-based compensation            2,493               1,059          135 %             6,412           2,883          122 %
Total research and
development                  $      40,159       $      24,026           67 %    $      114,014       $  73,168           56 %




                                       30
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For the three and nine months ended September 30, 2021, compared to the same
periods in 2020, the increases in research and development expense were
primarily due to the continued advancement of our tavapadon, darigabat and
CVL-871 programs as well as increased investment in our preclinical and
discovery research efforts. Decreased costs associated with CVL-231 reflect the
completion of the Phase 1b clinical trial in June 2021. The increases in
research and development expense for the comparative periods also reflect higher
personnel costs, including equity-based compensation, as we continue to develop
our organizational infrastructure to advance our pipeline. The increase for the
nine month comparative periods was partially offset by a reduction in costs for
the development of CVL-936 as we concluded dosing of Cohort 1 of the Phase 1 SAD
trial in the first quarter of 2020 after receiving sufficient clinical data for
the intended purposes for this trial.

General and Administrative



                                 For the Three Months Ended                          For the Nine Months Ended
                                        September 30,                                      September 30,
(In thousands)                    2021                2020          Change           2021                2020          Change
General and administrative    $      14,368       $      10,336          39 %    $      41,594       $      34,052          22 %




For the three and nine months ended September 30, 2021, compared to the same
periods in 2020, the increases in general and administrative expense were
primarily due to increased public company costs and higher personnel costs,
including equity-based compensation as we continued to grow our organization.
General and administrative expense for the nine months ended September 30, 2021,
also includes a $2.5 million net charge associated with the departure of certain
executives. The increase for the nine month comparative periods was partially
offset by the write-off of approximately $2.5 million of deferred financing
costs in June 2020 upon signing of the term sheet for the Business Combination
Transaction and a reduction in outsourced labor.

Interest Income, Net



                                  For the Three Months Ended                         For the Nine Months Ended
                                        September 30,                                      September 30,
(In thousands)                    2021                   2020        Change          2021                2020           Change
Interest income, net          $          13           $        1        1200 %    $       38         $         210          (82 )%




Interest income, net primarily consists of interest earned on our cash, cash
equivalents and restricted cash. The changes in the three and nine months ended
September 30, 2021, compared to the same period in 2020 are driven by changes in
our cash balances and market interest rates.

Other income (expenses), net

The following table summarizes other income (expenses), net:


                                 For the Three Months Ended                        For the Nine Months Ended
                                        September 30,                                    September 30,
(In thousands)                    2021                2020          Change           2021               2020        Change
Loss on fair value
remeasurement of Equity
Commitment                    $           -       $      (4,650 )      (100 )%   $           -       $  (11,300 )      (100 )%
Loss on fair value
remeasurement of Share
Purchase Option                           -                 (30 )      (100 )%               -             (670 )      (100 )%
Loss on fair value
remeasurement of financing
liability, related party             (2,919 )                 -          **             (3,415 )              -          **
Loss on fair value
remeasurement of financing
liability                            (2,919 )                 -          **             (3,415 )              -          **
Loss on fair value
remeasurement of private
placement warrants                   (1,711 )                 -          **             (3,881 )              -          **
Other, net                                4                  (4 )      (200 )%               2               (6 )      (133 )%

Other income (expenses), net $ (7,545) $ (4,684) 61% $ (10,709) $ (11,976) (11)%




** - Not meaningful

For the three and nine months ended September 30, 2021, other income (expense),
net primarily reflects net losses recognized on fair value remeasurement of our
financing liabilities and private placement warrants. The changes in fair value
remeasurement of our financing liabilities were primarily due to changes in our
discount rate and the passage of time. Changes in fair value remeasurement of
the private placement warrants were primarily due to changes in the fair values
of our common stock and public

                                       31

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warrants, as well as changes in the volatility implied by the market price of
our public warrants through their cashless exercise and settlement in September
2021.

For additional information related to the fair value of our financing
liabilities, please read Note 5, Financing Liabilities, and Note 6, Fair Value
Measurements, to our unaudited condensed consolidated financial statements
included elsewhere in this Quarterly Report. For additional information related
to the fair value of the private placement warrants, please read Note 6, Fair
Value Measurements, and Note 8, Stockholders' Equity, to our unaudited condensed
consolidated financial statements included elsewhere in this Quarterly Report.

For the three and nine months ended September 30, 2020, other income (expense),
net primarily reflects the net changes in fair value remeasurement of the Equity
Commitment and Share Purchase Option resulting from changes in the timing of the
anticipated future funding required in settlement of the Equity Commitment and
Share Purchase Option, as well as increases in the fair value of our preferred
and common stock expected to be exchanged for that additional funding. The
Equity Commitment and Share Purchase Option were free-standing financial
instruments that were recorded at fair value on the Formation Transaction Date.
We revalued these financial instruments each reporting period until their
termination upon the completion of our Business Combination Transaction in 2020.
For additional information related to our Equity Commitment and Share Purchase
Option, please read Note 7, Equity Commitment and Share Purchase Option, to our
audited consolidated financial statements included in our Annual Report.

Liquidity and capital resources

Sources of liquidity and capital

We have incurred significant operating losses since our inception, and we expect
to continue to incur significant and increasing expenses and operating losses
for the foreseeable future. Our net losses totaled $166.3 million and $119.0
million for the nine months ended September 30, 2021 and 2020, respectively, and
as of September 30, 2021, we had an accumulated deficit of $557.2 million. We
have not yet generated revenues.

Our cash and cash equivalents totaled $669.7 million as of September 30, 2021.
Until required for use in our business, we typically invest our cash reserves in
bank deposits, certificates of deposit, money market funds, commercial paper,
corporate notes, U.S. government instruments and other interest-bearing
marketable debt instruments in accordance with our investment policy. It is our
policy to mitigate credit risk in our cash reserves and marketable securities by
maintaining a well-diversified portfolio that limits the amount of exposure as
to institution, maturity, and investment type.

Prior to the Business Combination, our operations were funded primarily from the
issuance of convertible preferred stock, convertible common stock and common
stock. Upon the closing of the Business Combination Transaction in October 2020,
we received net proceeds totaling approximately $439.5 million.

On April 12, 2021, we entered into the Funding Agreements, pursuant to which
NovaQuest and Bain will provide up to $125.0 million in funding to support our
development of tavapadon for the treatment of Parkinson's disease over four
years, of which approximately $31.1 million (25% of the Total Funding
Commitment, net of $0.2 million of fees incurred by Bain and NovaQuest) was
received in April 2021.

On July 7, 2021, we completed a follow-on public offering of our common stock
pursuant to which we issued and sold 14,000,000 shares of our common stock at a
price to the public of $25.00 per share. The aggregate net proceeds from this
offering totaled approximately $328.3 million, after deducting underwriting
discounts and commissions of $21.0 million and offering expenses of
approximately $0.7 million.

Future financing needs

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

We have incurred significant operating expenses since our inception, and we
expect to continue to incur significant and increasing expenses and operating
losses for the foreseeable future. In the future, we will require additional
capital to meet operational needs and capital requirements for clinical trials,
other research and development expenditures, and business development
activities.

Our future financing needs will depend on many factors, including:

?
the scope, progress, results and costs of researching and developing our current
product candidates, as well as other additional product candidates we may
develop and pursue in the future;
?
the timing of, and the costs involved in, obtaining marketing approvals for our
product candidates and any other additional product candidates we may develop
and pursue in the future;
?
the number of future product candidates that we may pursue and their development
requirements;

                                       32
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?
subject to receipt of regulatory approval, the costs of commercialization
activities for our product candidates, to the extent such costs are not the
responsibility of any future collaborators, including the costs and timing of
establishing product sales, marketing, distribution and manufacturing
capabilities;
?
subject to receipt of regulatory approval, revenue, if any, received from
commercial sales of our product candidates or any other additional product
candidates we may develop and pursue in the future;
?
the achievement of milestones that trigger payments under the Pfizer License
Agreement and the Funding Agreements;
?
the royalty payments due under the Pfizer License Agreement and the Funding
Agreements;
?
the extent to which we in-license or acquire rights to other products, product
candidates or technologies;
?
our ability to establish collaboration arrangements for the development of our
product candidates on favorable terms, if at all;
?
our headcount growth and associated costs as we expand our research and
development and establish a commercial infrastructure;
?
the costs of preparing, filing and prosecuting patent applications, maintaining
and protecting our intellectual property rights, including enforcing and
defending intellectual property related claims; and
?
the costs of operating as a public company.

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

Our expectations with respect to our ability to fund current planned operations
is based on estimates that are subject to risks and uncertainties. Our operating
plan may change as a result of many factors currently unknown to us and there
can be no assurance that the current operating plan will be achieved in the time
frame anticipated by us, and we may need to seek additional funds sooner than
planned. If adequate funds are not available to us on a timely basis, we may be
required to delay, limit, reduce or terminate certain of our research, product
development or future commercialization efforts, obtain funds through
arrangements with collaborators on terms unfavorable to us, or pursue other
merger or acquisition strategies, all of which could adversely affect the
holdings or the rights of our stockholders.

For more information on the risks associated with our significant capital requirements, please read the section entitled “Risk Factors” included elsewhere in this quarterly report.

Warrants

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. The warrants became
exercisable beginning on June 9, 2021. Each whole warrant entitles the holder to
purchase one share of our common stock at an exercise price of $11.50 per share.

On July 30, 2021, we announced the redemption of all of our outstanding public
warrants with a redemption date of August 30, 2021, or the Redemption Date. Any
public warrants that remained outstanding as of the Redemption Date became void
and no longer exercisable and the holders of such public warrants became
entitled to receive the redemption price of $0.01 per public warrant. At any
time prior to the Redemption Date, the public warrants were able to be exercised
by the holders to purchase shares of our common stock at the exercise price of
$11.50 per share. An aggregate of 4,822,947 public warrants were exercised prior
to the Redemption Date for an equal number of shares of our common stock
resulting in gross proceeds of approximately $55.5 million. The 160,367 public
warrants that remained unexercised following the Redemption Date were redeemed
for the Redemption Price of $0.01 per public warrant. No public warrants
remained outstanding as of September 30, 2021.

In September 2021, the 166,333 private placement warrants were exercised and settled cashless in exchange for the issuance of 111,426 common shares. No private placement bonds were outstanding at September 30, 2021.

                                       33

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Working capital

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


                                      As of
                         September 30,       December 31,
(In thousands)               2021                2020          Change
Current assets          $       675,029     $      390,560          73 %
Current liabilities             (30,800 )          (29,548 )         4 %
Total working capital   $       644,229     $      361,012          78 %



The change in working capital at September 30, 2021 of December 31, 2020, reflects a net increase in total current assets of $ 284.5 million, partially offset by a net increase in total current liabilities of $ 1.3 million.

The net increase in total current assets was primarily driven by a net increase
in our cash and cash equivalents primarily consisting of $328.3 million of net
proceeds received from our follow-on offering, $55.5 million of net proceeds
received from exercises of public warrants, $31.1 million of net proceeds
received under the Funding Agreements and $6.3 million of proceeds received from
the exercise of stock options and purchases of stock under our employee stock
purchase plan, or ESPP, partially offset by $125.8 million of net cash flows
used in operating activities and $9.4 million of net cash flows used for the
purchase of property and equipment.

The net increase in current liabilities was primarily driven by increases in
accruals related to external research and development services, partially offset
by a decrease in accruals related to employee compensation and personnel costs
and accruals for the purchase of property and equipment.

Cash flow

The following table summarizes our treasury activity:


                                                   For the Nine Months Ended
                                                         September 30,
(In thousands)                                       2021              

2020 Change Net cash flows used in operating activities $ (125,802) $ (76,099)

           65 %
Net cash flows used in investing activities             (9,431 )        (11,341 )          (17 )%
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) (529)%

Cash flow used in operating activities

The net cash flows used in operating activities represent the receipts and payments related to all of our activities other than investing and financing activities. We anticipate that cash provided by financing activities will continue to be our primary source of funds to fund operating requirements and capital expenditures for the foreseeable future.

Net cash flow used in operating activities is calculated by adjusting our net loss for:

?
non-cash operating items such as depreciation and amortization, non-cash rent
expense, equity-based compensation, impairments and write-offs of deferred
charges;
?
changes in operating assets and liabilities reflect timing differences between
the receipt and payment of cash associated with transactions and when they are
recognized in results of operations; and
?
changes in the fair value remeasurement of the Equity Commitment and Share
Purchase Option, the financial liability, related party, the financial
liability, and the private placement warrants.

For the nine months ended September 30, 2021, cash used in operating activities
primarily reflects our net loss for the period of $166.3 million, adjusted for
net non-cash charges totaling $29.2 million and a net change of $11.3 million in
our net operating assets and liabilities. Our non-cash charges primarily
consisted of $17.5 million of equity-based compensation expense, $3.9 million
related to the final fair value remeasurement of private placement warrants
prior to their cashless exercise and settlement and $6.8 million related to the
fair value remeasurement of our financing liabilities. The net change in our
operating assets and liabilities was primarily due to an increase in operating
lease liabilities resulting from landlord reimbursement for tenant improvements,
an increase in accounts payable and accrued expenses related to operating
activities and a decrease in prepaids and other current assets primarily
resulting from the recognition of insurance premiums paid in advance.

                                       34

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For the nine months ended September 30, 2020, net cash used in operating
activities primarily reflected our net loss for the period of $119.0 million,
adjusted by non-cash charges totaling $25.1 million and a net change of $17.7
million in relation to our net operating assets and liabilities. Our non-cash
charges primarily consisted of net losses totaling $12.0 million recognized
related to the Equity Commitment and Share Purchase Option, $9.9 million of
equity-based compensation expense, and the $2.5 million write-off of deferred
costs related to our abandoned initial public offering. The net change in our
operating assets and liabilities was primarily due to an increase in accrued
expenses and other current liabilities, increase in operating lease liabilities
resulting from landlord reimbursement for tenant improvements, and a decrease in
prepaid expenses and other current assets.

Cash flows used in investing activities

For the nine months ended September 30, 2021, cash used in investing activities
reflected $9.4 million used for purchases of property and equipment, primarily
related to the build-out of our Cambridge, Massachusetts headquarters.

For the nine months ended September 30, 2020, cash used in investing activities
reflected $11.3 million used for purchases of property and equipment, primarily
related to the build-out of our Cambridge, Massachusetts headquarters.

Cash flow generated by financing activities

For the nine months ended September 30, 2021, net cash provided by financing
activities totaled $421.3 million, reflecting $328.3 million of net proceeds
received from our follow-on offering, $55.5 million of net proceeds received
from exercises of public warrants, $31.3 million of proceeds received under the
Funding Agreements and $6.3 million of proceeds received from stock option
exercises and purchases of stock under our ESPP.

For the nine months ended September 30, 2020, net cash provided by financing
activities included $25.0 million of proceeds from the issuance of Series A-1
Preferred Stock and Series A Common Stock offset by $1.7 million used for
deferred costs related to our abandoned initial public offering and other
financing activities and $2.5 million used for deferred costs related to our
business combination transaction with ARYA.

Contractual obligations and other commitments

Our contractual obligations consist primarily of our obligations under non-cancellable operating leases, contracts and other purchase obligations. We had no debt at September 30, 2021 Where December 31, 2020.

Our most significant contracts relate to agreements with CROs for clinical
trials and preclinical studies, CMOs and other service providers for operating
purposes, which we enter into in the normal course of business. These contracts
are generally cancelable at any time by us following a certain period after
notice and therefore, we believe that our non-cancelable obligations under these
agreements are not material. In addition, we have obligations with respect to
potential future royalties payable, contingent development, regulatory and
commercial milestone payments and amounts related to uncertain tax positions.
The timing and amount of such obligations are unknown or uncertain as of
September 30, 2021. For additional information relating to potential royalties
and milestone payments payable to Pfizer, see "Our Agreements with Licensors and
Stockholders-Pfizer License Agreement" in our Annual Report.

We completed the build-out and took occupancy of our corporate headquarters in
Cambridge, Massachusetts in the second quarter of 2021. As of September 30,
2021, we have no remaining obligations related to the original build-out of our
corporate headquarters.

Funding Agreements

On April 12, 2021, we entered into the Funding Agreements, pursuant to which we
will receive up to a combined total of up to $125.0 million, to support our
development of tavapadon for the treatment of Parkinson's disease. In return, we
agreed to pay to NovaQuest and Bain significant regulatory milestone, sales
milestone and royalty payments upon approval of tavapadon by the FDA that
collectively will not exceed $531.3 million. In addition, we have the option to
satisfy our payment obligations to NovaQuest and Bain upon the earlier of FDA
approval or May 1, 2025, by paying an amount equal to the Total Funding
Commitment multiplied by an initial factor of 3.00x. This factor will increase
ratably over time up to a maximum of 4.25x, less amounts previously paid to
NovaQuest and Bain.

For more information on our funding arrangements, please read Note 5, Funding liabilities, to our unaudited condensed consolidated financial statements included elsewhere in this quarterly report.

Research contract and manufacturing organizations

As of September 30, 2021 and December 31, 2020, we recorded accrued expenses of
approximately $10.6 million and $7.1 million, respectively, in our consolidated
balance sheets for expenditures incurred by CROs and CMOs.

                                       35

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Tax obligations

To date, we have not recognized any reserves related to uncertain tax positions.
As of September 30, 2021 and December 31, 2020, we had no accrued interest or
penalties related to uncertain tax positions.

Off-balance sheet provisions

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

Critical accounting conventions and estimates

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

The preparation of the consolidated financial statements in conformity with GAAP
requires us to make estimates, judgments and assumptions that may affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of expenses during the reporting periods. Our estimates are
based on our historical experience and on various other factors that we believe
are reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

Our most critical accounting policies and estimates were described under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations-Critical Accounting Policies and Estimates" in our Annual Report.
There have been no material changes to our critical accounting policies and
estimates described in our Annual Report except as described as follows:

Fair value option for financing 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 related 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.

The initial direct costs and expenses related to the instruments for which we have chosen the fair value option have been recognized in general and administrative expenses in income as they are 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 to our unaudited
condensed consolidated financial statements included elsewhere in this Quarterly
Report.

Emerging Growth Company and Smaller Reporting Company Status

We are currently an "emerging growth company" as defined in Section 2(a)(19) of
the Securities Act of 1933, or the Securities Act, as modified by the Jumpstart
Our Business Startups Act, or the JOBS Act, and a "smaller reporting company" as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or
the Exchange Act. As such, we are eligible for, have taken and intend to take
advantage of certain exemptions from various reporting requirements applicable
to other public companies that are not emerging growth companies and/or smaller
reporting companies for as long as we continue to be an emerging growth company
and/or a smaller reporting company, including (i) the exemption from the auditor
attestation requirements with respect to internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act, (ii) the exemptions from

                                       36

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say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and
(iii) reduced disclosure obligations regarding executive compensation in our
periodic reports and proxy statements.

In addition, the JOBS Act provides that an emerging growth company can take
advantage of an extended transition period for complying with new or revised
accounting standards. This allows an emerging growth company to delay the
adoption of certain accounting standards until those standards would otherwise
apply to private companies. We have elected to avail ourselves of this extended
transition period and, as a result, we may adopt new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-public companies instead of the dates required for other public
companies.

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.

Recent accounting positions

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

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