What changed in this filing

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Item 1. Financial Statements

2022-08-02 compared with 2022-05-03 · 172 added, 108 removed, 312 unchanged (47% of the section changed)

6 unchanged sentences

Cash and cash equivalents

Investments, short-term

Trade receivables, net

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Restricted cash

Investments, long-term

Intangible assets, net

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Common stock— $ 0.00001 par value;

500,000,000 shares authorized at March 31, 2022 and December 31, 2021, respectively;

59,030,148 shares and 58,825,769 issued and outstanding at March 31, 2022 and December 31, 2021, respectively

500,000,000 shares authorized at June 30, 2022 and December 31, 2021, respectively;

59,117,749 shares and 58,825,769 issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid in capital

Accumulated other comprehensive income (loss)

Accumulated deficit

7 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net product revenues

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Income tax expense

Net income and comprehensive income

Unrealized loss on investments

Comprehensive income

EARNINGS PER SHARE:

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(In thousands, except share and per share data)

comprehensive

stockholders’

income (loss)

Balance as of December 31, 2021

Unrealized loss on investments

Exercise of options

Stock-based compensation

Balance as of June 30, 2022

comprehensive

stockholders’

income (loss)

Balance as of March 31, 2022

Unrealized loss on investments

Exercise of options

Stock-based compensation

Balance as of June 30, 2022

stockholders’

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Stock-based compensation

Balance as of June 30, 2021

stockholders’

Balance as of March 31, 2021

Exercise of options

Stock-based compensation

Balance as of June 30, 2021

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

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(In thousands, except share and per share data)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

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Debt issuance costs amortization

Non-cash lease expense

Other non-cash expenses

Change in operating assets and liabilities:

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CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of investment securities

Purchase of property and equipment

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Net cash provided by financing activities

NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period

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ORGANIZATION AND DESCRIPTION OF BUSINESS

Harmony Biosciences Holdings, Inc.

(the “Company”) was founded in July 2017 as Harmony Biosciences II, LLC, a Delaware limited liability company, and the Company converted to a Delaware corporation named Harmony Biosciences II, Inc.

in September 2017.

In February 2020, the Company changed its name to Harmony Biosciences Holdings, Inc.

The Company is a holding company and has no operations.

Harmony Biosciences Holdings, Inc., and its consolidated subsidiary (the “Company”) was founded in July 2017 as Harmony Biosciences II, LLC, a Delaware limited liability company.

The Company converted to a Delaware corporation named Harmony Biosciences II, Inc.

in September 2017 and, in February 2020, the Company changed its name to Harmony Biosciences Holdings, Inc.

The Company’s operations are conducted in its wholly owned subsidiary, Harmony Biosciences, LLC (“Harmony”), which was formed in May 2017.

The Company is a commercial-stage, rare disease pharmaceutical company focused on developing and commercializing innovative therapies for patients living with rare neurological diseases who have unmet medical needs.

The Company is a commercial-stage pharmaceutical company focused on developing and commercializing innovative therapies for patients living with rare neurological diseases as well as patients living with other neurological diseases who have unmet medical needs.

The Company is headquartered in Plymouth Meeting, Pennsylvania.

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In August 2020, the Company completed its initial public offering (“IPO”) of common stock, in which it sold 6,151,162 shares, including 802,325 shares pursuant to the underwriters’ over-allotment option.

The shares were sold at an IPO price of $ 24.00 per share for net proceeds of approximately $ 135,435 , after deducting underwriting discounts and commissions and offering expenses of approximately $ 12,193 payable by the Company.

The shares were sold at a price of $ 24.00 per share for net proceeds of approximately $ 135,435 , after deducting underwriting discounts and commissions and offering expenses of approximately $ 12,193 payable by the Company.

Upon the closing of the IPO, all outstanding shares of the Company’s convertible preferred stock were automatically converted into shares of common stock and the accrued dividend payable to holders of the convertible preferred stock was paid out in shares of common stock, resulting in a total of 42,926,630 shares of common stock being issued to former holders of the Company’s convertible preferred stock.

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The unaudited condensed consolidated financial statements have been prepared as though the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company has an accumulated deficit of $ 432,113 and $ 453,598 , as of March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022, the Company had cash and cash equivalents of $ 224,499 .

The Company believes that its existing cash and cash equivalents on hand as of March 31, 2022, as well as additional cash generated from operating and financing activities will meet its operational liquidity needs and fund its planned investing activities for the next twelve months from the date of issuance of these unaudited condensed consolidated financial statements.

The Company had an accumulated deficit of $ 408,582 and $ 453,598 , as of June 30, 2022 and December 31, 2021, respectively.

As of June 30, 2022, the Company had cash and cash equivalents of $ 236,533 .

The Company believes that its existing cash and cash equivalents on hand as of June 30, 2022, as well as additional cash generated from operating and financing activities will meet its operational liquidity needs and fund its planned investing activities for the next twelve months from the date of issuance of these unaudited condensed consolidated financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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All intercompany accounts and transactions have been eliminated in consolidation.

The unaudited condensed consolidated balance sheet as of March 31, 2022, the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, and the unaudited condensed consolidated

statements of operations and comprehensive income and the unaudited condensed consolidated statements of shareholders’ equity for the three months ended March 31, 2022 and 2021, are unaudited.

The balance sheet as of March 31, 2021 was derived from audited financial statements as of and for the year ended December 31, 2021.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements as of and for the year ended December 31, 2021, and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of March 31, 2022, and the results of its operations and its cash flows for the three months ended March 31, 2022 and 2021.

The unaudited condensed consolidated balance sheet as of June 30, 2022, the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021, and the unaudited condensed consolidated statements

of operations and comprehensive income and the unaudited condensed consolidated statements of shareholders’ equity for the three and six months ended June 30, 2022 and 2021, are unaudited.

The balance sheet as of June 30, 2022 was derived from audited financial statements as of and for the year ended December 31, 2021.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements as of and for the year ended December 31, 2021, and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2022, and the results of its operations and its cash flows for the six months ended June 30, 2022 and 2021.

The unaudited condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year.

Certain information and note disclosures of the Company normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted under the SEC’s rules and regulations.

Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted under the SEC’s rules and regulations.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the unaudited condensed consolidated financial statements, including the notes thereto, and elsewhere in this report.

Uncertainties related to the magnitude and duration of COVID-19, the extent to which it will impact our estimated future financial results, worldwide macroeconomic conditions including interest rates, employment rates, consumer spending and health insurance coverage, the speed of the anticipated recovery and governmental and business reactions to the pandemic have increased the complexity of developing these estimates, including the carrying amounts of long-lived assets, and the intangible asset.

Actual results may differ significantly from our estimates, including as a result of COVID-19.

Fair Value of Financial Instruments

The Company’s unaudited condensed consolidated financial statements include cash, cash equivalents, restricted cash, accounts payable, and accrued liabilities, all of which are short term in nature and, accordingly, approximate fair value.

It is the Company’s policy, in general, to measure non-financial assets and liabilities at fair value on a nonrecurring basis.

The instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (such as evidence of impairment), which, if material, are disclosed in the accompanying footnotes.

The Company measures certain assets and liabilities at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures .

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date.

The guidance in ASC 820 outlines a valuation framework and creates a fair value hierarchy that serves to increase the consistency and comparability of fair value measurements and the related disclosures.

In determining fair value, the Company maximizes the use of quoted prices and observable inputs.

Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources.

The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities.

Level 3—Valuations based on unobservable inputs and models that are supported by little or no market activity.

Actual results may differ significantly from estimates, which include rebates due pursuant to commercial and government contracts, accrued research and development expenses, stock-based compensation expense and income taxes.

Uncertainties related to the magnitude and duration of COVID-19, the extent to which it will impact our future financial results, worldwide macroeconomic conditions including interest rates, employment rates, consumer spending and health insurance coverage, the speed of the anticipated recovery and governmental and business reactions to the pandemic have increased the complexity of developing estimates and assumptions used in the preparation of the unaudited condensed consolidated financial statements, including the carrying amounts of long-lived assets, and the intangible asset.

Actual results may differ significantly from our estimates as a result of COVID-19.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents and restricted cash consist of cash and, if applicable, highly liquid investments with an original maturity of three months or less when purchased, including investments in Money Market Funds.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheet that equal the amount reflected in the statements of cash flows.

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Restricted cash includes amounts required to be held as a security deposit in the form of letters of credit for the Company’s credit card program and the fleet program.

The Company’s investments consist of debt securities that are classified as available-for-sale.

The short-term and long-term investments are carried at fair value and unrealized gains and losses are recorded as a component of accumulated comprehensive income in stockholders’ equity.

The amortization of premiums and accretion of discounts adjust the carrying value of investments and are recorded in interest expense, net, on the unaudited condensed consolidated statements of operations and comprehensive income.

Interest income and realized gains and losses, if any, are also recorded in interest expense, net, on the unaudited condensed consolidated statement of operations and comprehensive income.

Realized gains and losses that result from the sale of investments are determined on a specific identification basis.

At each reporting period, the Company reviews any unrealized losses position to determine if the decline in the fair value of the underlying investments is a result of credit losses or other factors.

If the assessment indicates that a credit loss exists, any impairment is recognized as an allowance for credit losses in our consolidated statement of operations.

Concentrations of Risk

Substantially all of the Company’s cash and money market funds are held with a single financial institution.

Due to its size, the Company believes this financial institution represents minimal credit risk.

Substantially all of the Company’s cash and money market funds are held in two financial institutions.

Due to their size, the Company believes these financial institutions represent minimal credit risk.

Deposits may exceed the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation for U.S.

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The Company is also subject to credit risk from its trade receivables related to its product sales.

The Company monitors its exposure within accounts receivable and records a reserve against uncollectible accounts receivable as necessary.

The Company extends credit to specialty pharmaceutical distribution companies within the United States.

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Historically, the Company has not experienced credit losses on its accounts receivable.

As of March 31, 2022, three customers accounted for 100 % of gross accounts receivable;

The Company monitors its exposure within accounts receivable and would record a reserve against uncollectible accounts receivable if necessary As of June 30, 2022, three customers accounted for 100 % of gross accounts receivable;

Caremark LLC (“CVS Caremark”), which accounted for 38 % of gross accounts receivable;

Accredo Health Group, Inc.

PANTHERx Specialty Pharmacy LLC (“Pantherx”, which accounted for 34 % of gross accounts receivable:

and, Accredo Health Group, Inc.

(“Accredo”), which accounted for 28 % of gross accounts receivable.

and PANTHERx Specialty Pharmacy LLC (“Pantherx”), which accounted for 30 % of gross accounts receivable.

As of December 31, 2021, three customers accounted for 100 % of gross accounts receivable;

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and CVS Caremark, which accounted for 29 % of gross accounts receivable.

For the three months ended March 31, 2022, three customers accounted for 100 % of gross product revenues;

For the six months ended June 30, 2022, three customers accounted for 100 % of gross product revenues;

CVS Caremark accounted for 39 % of gross product revenues;

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and Accredo accounted for 29 % of gross product revenues.

For the three months ended March 31, 2021 three customers accounted for 100 % of gross product revenues;

Pantherx accounted for 38 % of gross product revenues CVS Caremark accounted for 35 % of gross product revenues;

For the six months ended June 30, 2021 three customers accounted for 100 % of gross product revenues;

CVS Caremark accounted for 37 % of gross product revenues;

Pantherx accounted for 35 % of gross product revenues;

and Accredo accounted for 28 % of gross product revenues.

The Company depends on a single source supplier for its product and active pharmaceutical ingredient.

Agreement Related to Intellectual Property

In August 2021, the Company entered into an asset purchase agreement with ConSynance Therapeutics, Inc.

to acquire HBS-102 (formerly referred to as “CSTI-100”), a potential first-in-class molecule with a novel mechanism of action.

Under the terms of the agreement, the Company acquired full development and commercialization rights globally, with the exception of Greater China, for $ 3,500 .

The Company accounted for the transaction as an asset acquisition as substantially all of the fair value of the assets acquired was concentrated in a single identified asset.

Additionally, there are payments due upon the achievement of certain milestones including $ 1,750 for preclinical milestones, $ 19,000 for development milestones, $ 44,000 for regulatory milestones and $ 110,000 for sales milestones.

Recently Issued Accounting Pronouncements

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2020-04, Reference Rate Reform (Topic 848) , which provides guidance related to reference rate reform.

The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

reference rates.

The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022.

The Company is currently evaluating the impact of the transition from LIBOR to alternative reference rates but does not expect a significant impact to its condensed consolidated financial statements.

The carrying value and amortized cost of the Company’s available-for-sale debt securities, summarized by major security type of security, consisted of the following:

June 30, 2022

Commercial paper

Corporate debt securities

government securities

Total short-term investments

Corporate debt securities

government securities

Total long-term investments

The Company classifies investments with an original maturity of less than one year as current and investments with an original maturity date of greater than one year as noncurrent on its unaudited condensed consolidated balance sheet.

The investments classified as noncurrent have maturity dates ranging from 1 - 2 years .

FAIR VALUE MEASUREMENTS

It is the Company’s policy, in general, to measure non-financial assets and liabilities at fair value on a nonrecurring basis.

The Company measures certain assets and liabilities at fair value based on the fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels based on the source of inputs as follows:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities.

Level 3—Valuations based on unobservable inputs and models that are supported by little or no market activity.

Money market funds are classified as Level 1 fair value instruments.

Investments in available-for-sale debt securities are classified as Level 2 and carried at fair value, which we estimate utilizing a third-party pricing service.

The pricing service utilizes industry standard valuation models whereby all significant inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, bids, offers, or other market-related data, are observable.

We validate valuations obtained from third-party services by understanding the models that are used and obtaining market values from other pricing sources.

The Company did not classify any assets or liabilities as Level 3 as of June 30, 2022 or December 31, 2021.

The Company’s assets measured at fair value consisted of the following:

June 30, 2022

December 31, 2021

Cash equivalents

Commercial paper

Corporate debt securities

government securities

Inventory, net consisted of the following:

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This event triggered a milestone payment of $ 75,000 under the provisions of the License Agreement (defined below) which the Company capitalized as an intangible asset.

The Company determined a useful life of 10 years for such intangible asset, and, as of March 31, 2022 the remaining useful life was 7.5 years.

The Company determined a useful life of 10 years for such intangible asset, and, as of June 30, 2022 the remaining useful life was 7.3 years.

In October 2020, the Company received FDA approval for the New Drug Application (“NDA”) for WAKIX for the treatment of cataplexy in adult patients with narcolepsy.

This event triggered a milestone payment of $ 100,000 under the provisions of the License Agreement which the Company capitalized as an intangible asset and paid in January of 2021.

The Company determined a useful life of 9 years for such intangible asset, and, as of March 31, 2022 the remaining useful life was 7.5 years.

In February 2022, the Company attained $ 500,000 in aggregate net sales of WAKIX in the United States.

This event triggered a final $ 40,000 payment under the provisions of the License Agreement which the

Company capitalized as an intangible asset and paid in March of 2022.

The Company determined a useful life of 7.6 years for such intangible asset, and, as of March 31, 2022 the remaining useful life was 7.5 years.

Amortization expense was $ 5,082 and $ 4,579 for the three months ended March 31, 2022 and 2021, respectively, and is recorded in general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive income (loss).

The Company expects the future annual amortization expense for the unamortized intangible assets to be as follows:

This event triggered a milestone payment of $ 100,000 under the provisions of the License Agreement which the Company capitalized as an intangible asset

and paid in January of 2021.

The Company determined a useful life of 9 years for such intangible asset, and, as of June 30, 2022 the remaining useful life was 7.3 years.

In February 2022, the Company attained $ 500,000 in life-to-date aggregate net sales of WAKIX in the United States.

This event triggered a final $ 40,000 payment under the provisions of the License Agreement which the Company capitalized as an intangible asset and paid in March of 2022.

The Company determined a useful life of 7.6 years for such intangible asset, and, as of June 30, 2022 the remaining useful life was 7.3 years.

Amortization expense was $ 5,961 and $ 4,629 for the three months ended June 30, 2022 and 2021, respectively, and $ 11,043 and $ 9,208 for the six months ended June 30, 2022 and 2021, respectively, and is recorded in general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive income.

Future amortization expense relating to unamortized intangible assets as of June 30, 2022 for the periods indicated below consists of the following:

Years ending December 31,

2022 (Excluding the three months ended March 31, 2022)

2022 (Excluding the six months ended June 30, 2022)

The gross carrying amount and net book value of the intangible assets is as follows:

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Net Book Value

LICENSE AGREEMENT

LICENSE AND ASSET PURCHASE AGREEMENTS

In July 2017, Harmony entered into the License Agreement (“the License Agreement”) with Bioprojet Société Civile de Recherche (“Bioprojet”) whereby Harmony acquired the exclusive right to commercialize the pharmaceutical compound pitolisant for the treatment, and/or prevention, of narcolepsy, obstructive sleep apnea, idiopathic hypersomnia, and Parkinson’s disease as well as any other indications unanimously agreed by the parties in the United States and its territories.

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The License Agreement also requires a fixed trademark royalty and a tiered royalty based on net sales, which is payable to Bioprojet on a quarterly basis.

The Company incurred $ 13,672 and $ 9,547 for the three months ended March 31, 2022 and 2021, respectively, for sales-based, trademark and tiered royalties recognized as cost of product sold.

As of March 31, 2022 and December 31, 2021, the Company had accrued $ 13,650 and $ 16,396 , respectively, for sales-based, trademark and tiered royalties.

The Company incurred $ 17,125 and $ 11,812 for the three months ended June 30, 2022 and 2021, respectively, and $ 30,797 and $ 21,359 for the six months ended June 30, 2022 and 2021,

respectively, for sales-based, trademark and tiered royalties recognized as cost of product sold.

As of June 30, 2022 and December 31, 2021, the Company had accrued $ 17,125 and $ 16,396 , respectively, for sales-based, trademark and tiered royalties.

Agreement Related to Intellectual Property

In August 2021, the Company entered into an asset purchase agreement with ConSynance Therapeutics, Inc.

(the “APA”) to acquire HBS-102 (formerly referred to as “CSTI-100”), a potential first-in-class molecule with a novel mechanism of action.

Under the terms of the APA, the Company acquired full development and commercialization rights globally, with the exception of Greater China, for $ 3,500 .

The Company accounted for the transaction as an asset acquisition as substantially all of the fair value of the assets acquired was concentrated in a single identified asset.

Additionally, there are payments due under the APA upon the achievement of certain milestones including $ 1,750 for preclinical milestones, $ 19,000 for development milestones, $ 44,000 for regulatory milestones and $ 110,000 for sales milestones.

ACCRUED EXPENSES

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In August 2021, the Company entered into the Blackstone Credit Agreement that provides for (i) a senior secured term loan facility in an aggregate original principal amount of $ 200,000 (the “Initial Term Loan”) and (ii) a senior secured delayed draw term loan facility in an aggregate principal amount up to $ 100,000 (the “DDTL” and, together with the Initial Term Loan, the “Loans”).

The DDTL will be available to draw down through August 9, 2022.

The DDTL was initially available to draw down through August 9, 2022.

In August 2022, the Company entered into an agreement to extend the expiration date of the DDTL to August 9, 2023, for which the Company will pay a ticking fee at a rate of 1 % per annun on the undrawn portion of the DDTL, commencing on August 10, 2022.

The repayment schedule for the Initial Term Loan consists of quarterly $ 500 principal payments, which commenced on December 31, 2021 and increasing to quarterly $ 5,000 principal payments beginning on March 31, 2024, with a $ 145,500 payment due on the maturity date of August 9, 2026 (“Maturity Date”).

Interest is payable quarterly, which commenced on November 9, 2021 and continues through the Maturity Date.

The Initial Loan bears interest at a per annum rate equal to LIBOR, subject to a 1.00 % floor, plus 6.50 %.

The net cash received related to the Initial Term Loan as a result of the transaction, less debt issuance costs of $ 8,151 , was $ 191,849 .

The Initial Term Loan bears interest at a per annum rate equal to LIBOR, subject to a 1.00 % floor, plus 6.50 %.

Net cash received related to the Initial Term Loan as a result of the transaction, less debt issuance costs of $ 8,151 , was $ 191,849 .

The debt issuance costs related to the Initial Term Loan will be amortized as additional interest expense over the five-year loan term of the Blackstone Credit Agreement.

In addition, the Company paid $ 1,000 in debt issuance costs relating the DDTL, which are recorded in other current assets within the unaudited condensed consolidated balance sheet.

The fair value of the Initial Term Loan as of March 31, 2022 was $ 169,966 .

The fair value of the Initial Term Loan as of June 30, 2022 was $ 142,459 .

Long-term debt, net consists of the following:

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Long-term debt, net

Future minimum payments relating to long term debt, net as of March 31, 2022 for the periods indicated below consists of the following:

Future minimum payments relating to long-term debt, net as of June 30, 2022, for the periods indicated below consists of the following:

Years ending December 31,

2022 (Excluding the three months ended March 31, 2022)

Interest expense related to the Company’s long term debt, net, which is included in interest expense, net in the unaudited condensed consolidated statements of operations and comprehensive income (loss), consists of the following:

2022 (Excluding the six months ended June 30, 2022)

Interest expense related to the Company’s long-term debt, net, is included in interest expense, net in the unaudited condensed consolidated statements of operations and comprehensive income and consists of the following:

Three Months Ended

Six Months Ended

Interest on principal balance

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Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future lease payments using our incremental borrowing rate.

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Leases with an initial term of 12

months or less are not recorded on the balance sheet.

Our leases have remaining lease terms of less than 1 year to 3 years , some of which may include the option to extend or terminate the leases.

The Company recorded operating lease costs of $ 385 and $ 264 for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, the weighted-average remaining lease term for operating leases was 2.3 years and the weighted-average discount rate for operating leases was 3.8 %.

The Company recorded operating lease costs of $ 392 and $ 293 for the three months ended June 30, 2022 and 2021, respectively, and $ 777 and $ 557 for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, the weighted-average remaining lease term for operating leases was 2.1 years and the weighted-average discount rate for operating leases was 3.8 %.

Supplemental balance sheet information related to operating leases was as follows:

Classification

March 31, 2022

June 30, 2022

December 31, 2021

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Supplemental cash flow information related to operating leases was as follows:

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

Operating cash flows from operating leases

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(1) Including the balance recognized on January 1, 2021, upon adoption of ASU No.

Future payments under noncancelable operating leases with initial terms of one year or more as of March 31, 2022 consisted of the following:

Future payments under noncancelable operating leases with initial terms of one year or more as of June 30, 2022 consisted of the following:

Years ending December 31,

2022 (Excluding the three months ended March 31, 2022)

2022 (Excluding the six months ended June 30, 2022)

Total lease payments

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The Company accrues such liabilities when they are known, if they are deemed probable and can be reasonably estimated.

As of March 31, 2022, there were no claims or suits outstanding.

As of June 30, 2022, there were no material claims or suits outstanding.

STOCKHOLDERS’ EQUITY

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RSUs vest over the vesting period specified in the applicable award agreement, at achievement of a performance requirement, or upon change of control (as defined in the applicable plan).

As of March 31, 2022, there were 5,089,156 shares of common stock reserved for issuance under the 2020 Plan.

As of June 30, 2022, there were 5,003,096 shares of common stock available for issuance under the 2020 Plan.

The number of shares that may be issued under the 2020 Plan will automatically increase on January 1 of each year in an amount equal to the lesser of (i) 4.0 % of the shares of the Company’s common stock outstanding on December 31 of the preceding year or (ii) an amount determined by the Company’s board of directors.

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Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2022:

The following table summarizes stock option activity for the six months ended June 30, 2022:

Awards outstanding—December 31, 2021

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Awards forfeited

Awards outstanding—March 31, 2022

Awards outstanding—June 30, 2022

Stock Appreciation Rights

The following table summarizes SARs activity for the three months ended March 31, 2022:

The following table summarizes SARs activity for the six months ended June 30, 2022:

Awards outstanding—December 31, 2021

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Awards forfeited

Awards outstanding—March 31, 2022

Awards outstanding—June 30, 2022

Restricted Stock Units

The following table summarizes RSU activity for the three months ended March 31, 2022:

The following table summarizes RSU activity for the six months ended June 30, 2022:

Awards outstanding—December 31, 2021

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Awards forfeited

Awards outstanding—March 31, 2022

As of March 31, 2022 and December 31, 2021, stock awards issued under the 2017 and 2020 Plans of 1,225,948 and 1,285,432 common shares, respectively, were vested.

Awards outstanding—June 30, 2022

As of June 30, 2022 and December 31, 2021, stock awards issued under the 2017 and 2020 Plans of 1,314,082 and 1,285,432 common shares, respectively, were vested.

Value of Stock Options and SARs

The Company has valued awards for each of the plans included herein using the Black-Scholes option-pricing model.

The Company values options and SARs using the Black-Scholes option-pricing model.

The Company lacks sufficient historical company-specific volatility information.

Therefore, the Company estimates expected stock volatility based on historical volatility of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price.

For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.

For options with service-

based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.

For SARs, the expected term is based upon the weighting of certain future events.

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Treasury yield curve in effect at the time of grant of the award for the time periods approximately equal to the expected term of the award.

Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

An expected dividend yield of 0 % is based on the fact that the Company has never paid cash dividends and does not expect to do so in the foreseeable future.

The assumptions used to value the awards are summarized in the following table.

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The fair value of RSUs is equal to the value of the Company’s common stock on the grant date.

The weighted average per share fair value of awards issued under the 2017 Plan and 2020 Plan was $ 16.94 and $ 12.82 on March 31, 2022 and December 31, 2021, respectively.

The weighted average per share fair value of awards issued under the 2017 Plan and 2020 Plan was $ 17.19 and $ 12.82 on June 30, 2022 and December 31, 2021, respectively.

Stock-Based Compensation

Stock-based compensation expense, net for the three months ended March 31, 2022 and 2021, was recorded in the unaudited condensed consolidated statements of operations and comprehensive income in the following line items:

Three Months Ended March 31,

Stock-based compensation expense, net for the three and six months ended June 30, 2022 and 2021, was recorded in the unaudited condensed consolidated statements of operations and comprehensive income in the following line items:

Three Months Ended June 30,

Six Months Ended June 30,

Research and development expense

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Options and RSUs issued under the 2017 Plan and 2020 Plan are included in stockholder’s equity, and SARs are included in other non-current liabilities, in the Company’s unaudited condensed consolidated balance sheet.

As of March 31, 2022, the total unrecognized stock-based compensation expense related to Options and RSUs was $ 95,566 .

As of June 30, 2022, the total unrecognized stock-based compensation expense related to Options and RSUs was $ 90,381 .

Such amount will be recognized in the Company’s consolidated statement of operations over a weighted average period of 3.3 years.

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The total number of shares reserved for issuance under the ESPP was initially 629,805 , which will automatically increase on January 1 of each year in an amount equal to the lesser of (i) 1.0 % of the shares of the Company’s common stock outstanding on December 31 of the preceding year or (ii) an amount determined by the Company’s board of directors.

It is intended that the ESPP meet the requirements for an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

For the three months ended March 31, 2022, there were no shares issued under the ESPP.

The discount on the ESPP for the three months ended March 31, 2022 was $ 94 and is recorded within stock-based compensation expense.

It is intended that the ESPP meet the requirements for an “employee stock purchase plan” under Section 423 of

the Internal Revenue Code.

For both the three and six months ended June 30, 2022, there were 14,889 shares issued under the ESPP.

There were no shares issued under the ESPP for the three and six months ended June 30, 2021.

The discount on the ESPP for the three and six months ended June 30, 2022 was $ 91 and $ 185 , respectively, and $ 23 for both the three and six months ended June 30, 2021, and is recorded within stock-based compensation expense.

EARNINGS PER SHARE

The Company has reported net income for both the three months ended March 31, 2022 and 2021.

The Company reported net income for the three and six months ended June 30, 2022 and 2021.

Diluted net income per common share is computed under the treasury stock method by using the weighted average number of shares of common stock outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of stock options, stock appreciation rights, restricted stock units and warrants.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net income per common share - basic

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Securities outstanding that are included in the computation above, utilizing the treasury stock method are as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Stock options, SARs, and RSUs to purchase common stock

Potential common shares issuable upon exercise of stock options, and exercise of warrants that were excluded from the computation of diluted weighted-average shares outstanding as well as the warrant fair value adjustments excluded from the numerator are as follows:

Three Months Ended March 31,

Potential common shares issuable that were excluded from the computation of diluted weighted-average shares outstanding, as well as the warrant fair value adjustments excluded from the numerator, are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Stock options, SARs, and RSUs to purchase common stock

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In addition, the Company had participated in certain transactions with separate related parties that also share common ownership with the Company, primarily related to combined employee health plans.

The Company incurred $ 71 for each of the three months ended March 31, 2022 and 2021, in expenses to this related party, which are included in general and administrative expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

As of March 31, 2022 and December 31, 2021, there were no amounts due to or due from related parties included in the unaudited condensed consolidated balance sheets.

The Company incurred $ 71 for each of the three months ended June 30, 2022 and 2021, and $ 142 for each of the six months ended June 30, 2022 and 2021, in expenses to this related party, which are included in general and administrative expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

As of June 30, 2022 and December 31, 2021, there were no amounts due to or due from related parties included in the unaudited condensed consolidated balance sheets.

SUBSEQUENT EVENTS

On July 31, 2022, Harmony entered into that certain License and Commercialization Agreement (the “2022 LCA”) with Bioprojet whereby Harmony obtained exclusive rights to manufacture, use and commercialize one or more new products based on pitolisant, in the United States and Latin America, with the potential to add additional indications and formulations upon agreement of both parties.

Harmony will pay an upfront, non-refundable $ 30,000 licensing fee as well as additional payments of up to $ 150,000 due under the 2022 LCA upon the achievement of certain future development and sales-based milestones.

In addition, there are certain payments due upon achievement of development milestones for new indications and formulations agreed upon by both parties.

The 2022 LCA also requires a fixed trademark royalty and a tiered royalty based on net sales upon commercialization, which will be payable to Bioprojet on a quarterly basis.

The closing of the 2022 LCA is contingent upon clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements