What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-02 compared with 2022-05-03 · 82 added, 73 removed, 233 unchanged (40% of the section changed)

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

● our ability to identify additional products or product candidates with significant commercial potential that are consistent with our commercial objectives;

● our ability to identify and/or acquire additional products or product candidates with significant commercial potential that are consistent with our commercial objectives;

● our commercialization, marketing and manufacturing capabilities and strategy;

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Company Overview

We are 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.

We are 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.

Our product, WAKIX (pitolisant), is a first-in-class molecule with a novel mechanism of action (“MOA”) specifically designed to increase histamine signaling in the brain by binding to H 3 receptors.

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commercial launch was initiated in November 2019.

In October 2020, WAKIX was approved by the FDA for the treatment of cataplexy

in adult patients with narcolepsy.

In October 2020, WAKIX was

approved by the FDA for the treatment of cataplexy in adult patients with narcolepsy.

WAKIX is the first-and-only approved product for patients with narcolepsy that is not scheduled as a controlled substance by the U.S.

Drug Enforcement Administration (the “DEA”).

We are currently considering label expansion for WAKIX in narcolepsy in pediatric patients and have engaged with the FDA in pursuit of pediatric exclusivity.

Our strategic partner, Bioprojet has evaluated in pediatric patients with narcolepsy and completed a Phase 3 trial.

We are working with Bioprojet to assess the data from the Phase 3 trial to inform how best to advance the pediatric narcolepsy program.

We believe that our strategic decision to assess this data is the most prudent and thoughtful path forward for pediatric narcolepsy from a development and financial perspective.

In the meantime, we continue to evaluate regulatory strategies with regard to obtaining pediatric exclusivity.

Regarding pediatric narcolepsy and a pediatric indication for WAKIX, our partner, Bioropjet, has completed a Phase 3 trial in pediatric patients with narcolepsy.

Bioprojet recently submitted the data to the European Medical Agency (“EMA”) seeking approval for a pediatric narcolepsy indication.

The EMA’s decision on Bioprojet’s pediatric narcolepsy submission could help inform our strategy toward submitting the data to the FDA.

In the meantime, we are committed to obtaining pediatric exclusivity for WAKIX and plan to submit a request for a pediatric written request later this year.

We believe that pitolisant’s ability to regulate histamine gives it the potential to provide therapeutic benefit in other rare neurological diseases that are mediated through H 3 receptors and histamine signaling.

Beyond narcolepsy, we are initially focusing on the treatment of EDS associated with Prader-Willi Syndrome (“PWS”) and myotonic dystrophy, otherwise known as dystrophia myotonica (“DM”).

In December 2020, we initiated a Phase 2 proof-of-concept clinical trial to evaluate pitolisant for the treatment of EDS and other key symptoms in patients with PWS and anticipate topline results from this trial in the second half of 2022.

We are taking a mechanism-based approach to managing the life cycle of pitolisant and have identified idiopathic hypersomnia (“IH”), another central disorder of hypersomnolence like narcolepsy, as our next potential new indication for WAKIX.

In April, we initiated a Phase 3 registrational trial (the “INTUNE Study”) to evaluate the efficacy and safety of pitolisant in adult patients with IH.

We are focusing our development efforts on other rare neurological disorders in which EDS is a prominent symptom, including Prader-Willi Syndrome (“PWS”) and myotonic dystrophy, otherwise known as dystrophia myotonica (“DM”).

In December 2020, we initiated a Phase 2 proof-of-concept clinical trial to evaluate pitolisant for the treatment of EDS and other key symptoms in patients with PWS and are on track for topline results from this trial in the fourth quarter of 2022.

In June 2021, we initiated a Phase 2 clinical trial to evaluate pitolisant for the treatment of EDS, fatigue and cognitive dysfunction in adult patients with DM1 and anticipate topline results from this trial in 2023.

In addition to these clinical programs, we have initiated a Phase 3 registrational trial to evaluate the efficacy and safety of pitolisant in adult patients with idiopathic hypersomnia (“IH”).

We also seek to expand our pipeline through the acquisition of additional assets that focus on addressing the unmet needs of patients with rare neurological diseases and are targeting assets that will allow us to further leverage the expertise and infrastructure that we have successfully built at Harmony so we can optimize the benefit of internal synergies.

We also seek to expand our pipeline through the acquisition of additional assets that focus on addressing the unmet needs of patients living with rare neurological diseases as well as patients living with other neurological diseases who have unmet medical needs.

We are targeting assets that will allow us to further leverage the expertise and infrastructure that we have successfully built at Harmony so we can optimize the benefit of internal synergies.

Consistent with this objective, on August 4, 2021, we acquired HBS-102, a Melanin-concentrating hormone receptor 1 (MCHR1) antagonist previously developed as CSTI-100/ALB-127258(a)/ALB-127258 (the “Compound”), along with intellectual property and other assets related to the development, manufacture, and commercialization of the Compound from ConSynance Therapeutics, Inc.

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We are currently on track to begin a preclinical proof-of-concept study to assess the effect of HBS-102 on hyperphagia, weight gain, and other metabolic parameters in a mouse model of PWS later in 2022.

Pitolisant was developed by Bioprojet and approved by the European Medicines Agency (“EMA”) in 2016 for the treatment of narcolepsy in adult patients with or without cataplexy and in 2021 for the treatment of EDS in adult patient with obstructive sleep apnea.

Pitolisant was developed by Bioprojet and approved by the EMA in 2016 for the treatment of narcolepsy in adult patients with or without cataplexy and in 2021 for the treatment of EDS in adult patient with obstructive sleep apnea.

We acquired an exclusive license to develop, manufacture and commercialize pitolisant in the United States pursuant to our license agreement with Bioprojet (as amended, the “Bioprojet License Agreement”) in July 2017.

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In February 2020, we changed our name to Harmony Biosciences Holdings, Inc.

Our operations to date have consisted of building and staffing our organization, acquiring the rights to pitolisant, raising capital, opening an investigational new drug applications (“IND”) for pitolisant in narcolepsy, conducting an Expanded Access Program (“EAP”) for pitolisant for appropriate patients with narcolepsy in the United States, preparing and submitting our NDA for pitolisant, gaining NDA approval for WAKIX for the treatment of EDS or cataplexy in adult patients with narcolepsy, and

launching and commercializing WAKIX in the United States.

Our operations to date have consisted of building and staffing our organization, acquiring the rights to pitolisant, raising capital, opening an investigational new drug

applications (“IND”) for pitolisant in narcolepsy, conducting an Expanded Access Program (“EAP”) for pitolisant for appropriate patients with narcolepsy in the United States, preparing and submitting our NDA for pitolisant, gaining NDA approval for WAKIX for the treatment of EDS or cataplexy in adult patients with narcolepsy, and launching and commercializing WAKIX in the United States.

In addition, we have opened INDs for the development of WAKIX/pitolisant in PWS, DM and IH and have initiated clinical trials in pursuit of potential new indications in those rare disease patient populations.

Commercial Performance Metrics

As of March 31, 2022, we continue to see growth in unique healthcare professional (“HCP”) prescribers of WAKIX.

The average number of patients on WAKIX for the three months ended March 31, 2022 was approximately 3,900.

Additionally, as of March 31, 2022, we have secured formulary access for more than 80% of all insured lives (Commercial, Medicare and Medicaid) in the United States.

As of June 30 2022, we continue to see growth in unique healthcare professional (“HCP”) prescribers of WAKIX.

The average number of patients on WAKIX for the three months ended June 30, 2022 was approximately 4,300.

Additionally, as of June 30, 2022, we have secured formulary access for more than 80% of all insured lives (Commercial, Medicare and Medicaid) in the United States.

Within these covered lives, we have observed favorable access to WAKIX subsequent to the expanded approval of WAKIX for the treatment of cataplexy in adult patients with narcolepsy in October 2020.

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Access to HCPs for our sales team is still limited and despite the opening up of the economy, we are still in a transition phase and expect continued, but decreasing, pressure on top line demand in future quarters as the challenges presented by COVID-19 begin to subside.

During the pandemic, elevated unemployment and the corresponding loss of health insurance caused some eligible patients to shift from commercial insurance to free drug and patient assistance programs, which impacted our ability to convert demand into revenue.

impacted our ability to convert demand into revenue.

Given the high unemployment rates and resulting loss of employer-sponsored insurance coverage, some patients also shifted from commercial payor coverage to government payor coverage, which may have impacted, and may continue to impact, our net revenue.

We currently expect to have adequate supply of WAKIX into the second quarter of 2023, with additional API on-hand inventory to support at least 36 months beyond this time frame.

We currently expect to have adequate supply of WAKIX into the fourth quarter of 2023, with additional API on-hand inventory to support at least 36 months beyond this time frame.

We continue to work closely with our third-party manufacturers, distributors and other partners to manage our supply chain activities and mitigate potential disruptions to our product supplies as a result of the COVID-19 pandemic.

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As a result of some challenges that we have experienced due to the COVID-19 pandemic, we have taken measures and put contingency plans in place in order to advance our clinical development programs.

We implemented remote and virtual approaches to clinical trials, including the ability to perform screening remotely and allow electronic signatures on informed consent forms, using telemedicine for remote clinic visits to perform efficacy assessments and sending out licensed HCPs to each patient to collect safety assessments (e.g.

labs, electrocardiograms) as required by the protocols.

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The COVID-19 pandemic has also affected, and may continue to affect, our business operations and financial results.

for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time.

The extent of the impact of the COVID-19 pandemic or the potential impact of a reemergence or outbreak of the pandemic on our ability to generate sales of, and revenues from, our approved products, our clinical development and regulatory efforts, our corporate development objectives and the value of and market for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time.

Corporate Responsibility Impact

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Financial Operations Overview

Total revenue consists of net sales of WAKIX.

Net sales represent the gross sales of WAKIX less provisions for product sales discounts and allowances, which includes trade allowances, rebates to government and commercial entities, and discounts.

Although we expect net sales to increase over time, the provisions for product sales discounts and allowances may fluctuate based on the mix of sales to different customer segments and/or changes in our estimates.

Net product sales includes gross sales of WAKIX less provisions for sales discounts and allowances, which includes trade allowances, rebates to government and commercial entities, and discounts.

Although we expect net sales to increase over time, the provisions for sales discounts and allowances may fluctuate based on the mix of sales to different customer segments and/or changes in our estimates.

Cost of Product Sales

Cost of product sales includes manufacturing and distribution costs, the cost of the drug substance, FDA program fees, royalties due to third parties on net product sales, freight, shipping, handling, storage costs and salaries of employees involved with production.

We began capitalizing inventory upon FDA approval of WAKIX.

Our cost of product sales is increasing moderately as we continue to ramp up production and sales infrastructure to meet expected demand for WAKIX.

The shelf life of our product is three years from date of manufacture, with the earliest expiration of current inventory expected to be April 2023.

The shelf life of WAKIX is three years from date of manufacture, with the earliest expiration of current inventory expected to be May 2023.

We regularly review our inventory levels and expect write-offs from time to time.

We will continue to assess our inventory levels in future periods as demand for WAKIX and the rate of inventory turnover evolves.

We will continue to assess inventory levels in future periods as demand for WAKIX and the rate of inventory turnover evolves.

Research and Development Expenses

Our research and development expenses generally include development programs for potential new indications for pitolisant in patients with PWS, DM and IH.

We also have research and development expenses related to our team of Medical Science Liaisons (“MSLs”) who interact with key opinion leaders, with a focus on

the science, the role of histamine in sleep-wake state stability and the novel mechanism of action of pitolisant.

Research and development expenses generally include development programs for potential new indications for pitolisant in patients with IH, PWS and DM.

We also incur research and development expenses related to our team of Medical Science Liaisons (“MSLs”) who interact with key opinion leaders, with a focus on the science, the role of histamine in sleep-wake state stability and the novel mechanism of action of pitolisant.

In addition, our MSLs support our market access team with clinical data presentations to payors upon request and our clinical development team to identify potential clinical trial sites.

Research and development costs are expensed as incurred.

We have significantly increased our research and development efforts as we advance our clinical programs in PWS, DM and IH and assess other product candidates to expand our pipeline.

We have significantly increased our research and development efforts as we advance our clinical programs in IH, PWS and DM and assess other product candidates to expand our pipeline.

Research and development expenses also include:

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● manufacturing costs in connection with producing materials for use in conducting clinical trials;

● costs related to packaging and labeling clinical supplies;

● costs related to packaging and labelling of clinical supplies;

● other third-party expenses (i.e., consultants, advisors) directly attributable to the development of our product candidates;

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● the sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials;

● the impact of the COVID-19 pandemic, including any future resurgence or new variants, on the ability to initiate new clinical trials and/or maintain the continuity of ongoing clinical trials that could be impacted by future shelter-in-place orders and needs of the health care system to focus on managing patients affected by COVID-19;

be impacted by future shelter-in-place orders and needs of the health care system to focus on managing patients affected by COVID-19;

● receiving Bioprojet ’ s consent to pursue additional indications for pitolisant;

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Sales and Marketing Expenses

Our sales and marketing expenses have primarily related to the market development and commercialization activities of WAKIX for the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy.

Market development and commercial activities account for a significant portion of the overall company operating expenses and are expensed as they are incurred.

Our sales and marketing expenses primarily relate to the market development and commercialization activities of WAKIX for the treatment of EDS and cataplexy in adult patients with narcolepsy.

Market development and commercial activities account for a significant portion of our operating expenses and are expensed as incurred.

We expect our sales and marketing expenses to increase in the near- and mid-term to support our indications for the treatment of EDS or cataplexy in adult patients with narcolepsy and to expand our portfolio with the anticipated growth from potential additional indications.

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patient claims and prescription data), data warehouse development and data management.

In addition, these expenses include external costs such as website development, media placement fees, agency fees for patient, medical education and promotional expenses, market research, analysis of secondary data, conference fees, consulting fees and travel expenses.

In addition, sales and marketing expenses include external costs such as website development, media placement fees, agency fees for patient, medical education and promotional expenses, market research, analysis of secondary data, conference fees and consulting fees.

General and Administrative Expenses

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We are also party to a right-of-use agreement with Paragon whereby we have access to and the right to use certain office space leased by Paragon in Chicago, Illinois.

For the three months ended March 31, 2022, we paid $0.1 million pursuant to this agreement.

For the three and six months ended June 30, 2022, we paid $0.1 million and $0.2 million, respectively, pursuant to this agreement.

Interest Expense, Net

Interest expense, net consists primarily of interest expense on debt facilities and amortization of debt issuance costs offset by interest income earned on our cash balances.

Interest expense, net consists primarily of interest expense on debt facilities, amortization of debt issuance costs and amortization of premiums on our debt securities, partially offset by interest income earned on our cash and investment balances and accretion of discounts on our debt securities.

Results of Operations

The following table sets forth selected items in our unaudited condensed consolidated statements of operations for the periods presented:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

Net product revenue

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Net Product Revenue

Net product revenue increased by $25.6 million, or 43.0%, for the three months ended March 31, 2022 compared to the same period in 2021.

The increase was due to the growth in the average number of patients on WAKIX.

Net product revenue increased by $33.2 million, or 45.0%, for the three months ended June 30, 2022 and increased by $58.8 million, or 44.1%, for the six months ended June 30, 2022, compared to the same periods in 2021.

The increase in both comparable periods was due to the growth in the average number of patients on WAKIX and price increases.

Cost of Product Sales

Cost of product sales increased by $4.3 million, or 41.4%, for the three months ended March 31, 2022 compared to the same period in 2021.

The increase was due to higher sales of WAKIX.

Cost of product sales increased by $6.3 million, or 49.1%, for the three months ended June 30, 2022 and increased by $10.5 million, or 45.6%, for the six months ended June 30, 2022, compared to the same periods in 2021.

The increase in both comparable periods was due to higher sales of WAKIX.

Cost of product sales is primarily comprised of the royalty to Bioprojet.

Research and Development Expenses

Research and development expenses increased by $2.9 million, or 62.0%, for the three months ended March 31, 2022 as compared to the same period in 2021.

The increase was due to clinical development work associated with PWS, DM and IH and an increase to stock compensation associated with new awards.

Research and development expenses increased by $6.2 million, or 95.0%, for the three months ended June 30, 2022, and increased by $9.1 million, or 81.1%, for the six months ended June 30, 2022, compared to the same periods in 2021.

The increase in both comparable periods was due to clinical development work associated with PWS, DM and IH and increased personnel costs.

Sales and Marketing Expenses

Sales and marketing expenses increased by $2.1 million, or 13.4% for the three months ended March 31, 2022 as compared to the same period in 2021.

The increase was primarily due to patient engagement and marketing activities driven by our commercialization of WAKIX and an increase to stock-compensation expense associated with new awards.

Sales and marketing expenses increased by $3.1 million, or 18.4%, for the three months ended June 30, 2022, and increased by $5.2 million, or 16.0%, for the six months ended June 30, 2022, compared to the same periods in 2021.

The increase in both comparable periods was primarily due to patient engagement and marketing activities driven by our commercialization of WAKIX and increased personnel costs related to sales force expansion.

General and Administrative Expenses

General and administrative expenses increased by $3.3 million, or 22.9% for the three months ended March 31, 2022 as compared to the same period in 2021.

This increase was primarily due to an increase to stock compensation associated with new awards and an increase in intangible asset amortization as a result

of the $40.0 million milestone payment upon attaining $500.0 million in aggregate net sales of WAKIX in the United States.

General and administrative expenses increased by $7.9 million, or 55.0%, for the three months ended June 30, 2022 and increased by $11.2 million, or 38.8%, for the six months ended June 30, 2022, as compared to the same periods in 2021.

The increase in both comparable periods was primarily due to an increase to stock compensation associated with new awards, an increase in intangible asset amortization as a result of the $40.0 million milestone payment upon attaining $500.0 million in life-to-date aggregate net sales of WAKIX in the United States and an increase in personnel costs.

Interest Expense, Net

Interest expense decreased by $3.0 million, or 41.5%, for the three months ended March 31, 2022 as compared to the same period in 2021 primarily due to lower interest rates as a result of entering into the Blackstone Credit Agreement in August 2021, partially offset by an increase in amortization of deferred financing costs.

Interest expense decreased by $3.3 million, or 45.7%, for the three months ended June 30, 2022 and decreased by $6.3 million, or 43.6%, for the six months ended June 30, 2022, compared to the same periods in 2021 primarily due to lower interest rates as a result of entering into the Blackstone Credit Agreement in August 2021, partially offset by an increase in amortization of deferred financing costs.

For interim periods, we estimate the annual effective income tax rate and apply the estimated rate to the year-to-date income or loss before income taxes.

The effective income tax rate was 8.1% and 0.0% for the three months ended March 31, 2022 and 2021, respectively.

The effective income tax rate was 19.5% and 12.3% for the three months ended June 30, 2022 and 2021, respectively, and 14.4% and 8.4% for the six months ended June 30, 2022 and 2021, respectively.

The increase in the effective income tax rate for both comparable periods was primarily driven by an increase in taxable income.

Currently, we have recorded a full valuation allowance against our net deferred tax assets, primarily related to federal and state net operating losses.

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From our inception through our IPO, we received aggregate proceeds of $345.0 million from sales of our convertible preferred stock.

On August 21, 2020, we completed the IPO of our common stock, in which we sold 6,151,162 shares of our common stock, including 802,325 shares of our common stock pursuant to the underwriters’ over-allotment option.

In August 2020, we completed the IPO of our common stock, in which we sold 6,151,162 shares of our common stock, including 802,325 shares of our common stock pursuant to the underwriters’ over-allotment option.

The shares were sold at a price of $24.00 per share for net proceeds of approximately $135.4 million.

As of March 31, 2022, we had cash, cash equivalents and restricted cash of $225.2 million and accumulated deficit of $432.1 million.

As of March 31, 2022, we had outstanding debt of $199.0 million.

As of June 30, 2022, we had cash, cash equivalents, restricted cash and investments of $259.7 million and accumulated deficit of $408.6 million.

As of June 30, 2022, we had outstanding debt of $198.5 million.

We have invested a portion of our available cash in money market funds, U.S.

government and agency securities, corporate bonds and commercial paper in accordance with our investment policy.

Our investment policy defines allowable investments and establishes guidelines relating to credit quality, diversification, and maturities of our investments to preserve principal and maintain liquidity.

All investment securities have a credit rating of at least A-2/P-2/F2 from at least two National Recognized Statistical Rating Organizations.

Our investment portfolio may be adversely impacted by future disruptions in the credit markets.

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

We believe that our anticipated cash from operating and financing activities, including as a result of potential availability under the DDTL (defined below), and existing cash and cash equivalents will enable us to meet our operational liquidity needs and fund our planned investing activities for the next 12 months.

We believe that our anticipated cash from operating and financing activities, including as a result of potential availability under the DDTL (defined below), existing cash and cash equivalents and investments will enable us to meet our operational liquidity needs and fund our planned investing activities for the next

We have based this estimate on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we expect.

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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 $200.0 million (the “Initial Term Loan”) and (ii) a senior secured delayed draw term loan facility in an aggregate principal amount up to $100.0 million (the “DDTL” and, together with the Initial Term Loans, 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.

We used substantially all of the proceeds from the Blackstone Credit Agreement, and the related sale of our common stock, to repay the balance of the OrbiMed Credit Agreement.

The repayment schedule for the Initial Loan consists of quarterly $0.5 million principal payments commencing on December 31, 2021 and increasing to quarterly $5 million payments beginning on March 31, 2024, with a $145.5 million payment due on the maturity date of August 9, 2026 (“Maturity Date”).

payable quarterly commencing on November 9, 2021 and continuing 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 Loans are guaranteed by our subsidiary Harmony Biosciences, LLC.

Interest is payable quarterly commencing on November 9, 2021 and continuing through the Maturity Date.

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

The Loans are guaranteed by our subsidiary Harmony Biosciences, LLC.

The Blackstone Credit Agreement contains affirmative and negative covenants, including limitations on our ability, among other things, to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions and enter into affiliate transactions, in each case, subject to certain exceptions.

In addition, the Blackstone Credit Agreement contains a financial covenant that requires us to maintain at all times cash and cash equivalents in certain deposit accounts in an amount at least equal to $10.0 million.

The Company is in compliance with all covenants as of March 31, 2022.

The Company is in compliance with all covenants as of June 30 2022.

Agreement Related to Intellectual Property

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In January 2021, we made the $100.0 million Cataplexy Milestone Payment in full to Bioprojet.

In addition, we made a final $40.0 million milestone payment to Bioprojet in March 2022 upon WAKIX attaining $500.0 million in aggregate net sales in the United States.

The following table sets forth a summary of our cash flows for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

In addition, we made a final $40.0 million milestone payment to Bioprojet in March 2022 upon WAKIX attaining $500.0 million in life-to-date aggregate net sales in the United States.

The following table sets forth a summary of our cash flows for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

Selected cash flow data

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Operating Activities

Net cash provided by operating activities for the three months ended March 31, 2022 consisted of our net income of $21.5 million adjusted for non-cash items of $5.2 million related to intangible amortization and depreciation and $4.9 million related to stock-based compensation expense.

Net cash provided by operating activities for the six months ended June 30, 2022 consisted of our net income of $45.0 million adjusted for non-cash items of $11.3 million related to intangible amortization and depreciation and $12.3 million related to stock-based compensation expense.

Net working capital excluding cash decreased by $7.5 million.

Net cash provided by operating activities for the three months ended March 31, 2021 consisted of our net income of $7.4 million adjusted for non-cash items of $4.7 million related to intangible amortization and depreciation and $3.3 million related to stock-based compensation expense.

Net cash provided by operating activities for the six months ended June 30, 2021 consisted of our net income of $21.5 million adjusted for non-cash items of $9.4 million related to intangible amortization and depreciation and $7.2 million related to stock-based compensation expense.

Net working capital excluding cash decreased by $8.7 million.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2022 was $40.0 million, which was primarily attributable to a final $40.0 million milestone payment associated with the Bioprojet License Agreement.

Net cash used in investing activities for the three months ended March 31, 2021 was $100.0 million, which was primarily attributable to the $100.0 million milestone payment associated with the Bioprojet License Agreement.

Net cash used in investing activities for the six months ended June 30, 2022 was $62.5 million, which was primarily attributable to a final $40.0 million milestone payment associated with the Bioprojet License Agreement and $22.4 million in purchases of debt securities.

Net cash used in investing activities for the six months ended June 30, 2021 was $100.2 million, which was primarily attributable to the $100.0 million milestone payment associated with the Bioprojet License Agreement.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2022 was $1.4 million, which primarily consisted of $1.9 million in proceeds from exercised options offset by $0.5 million in principal payments associated with the Blackstone Credit Agreement.

There were no significant financing activities for the three months ended March 31, 2021.

Net cash provided by financing activities for the six months ended June 30, 2022 was $2.1 million, which primarily consisted of $3.1 million in proceeds from exercised options offset by $1.0 million in principal payments associated with the Blackstone Credit Agreement.

Net cash provided by financing activities for the six months ended June, 2021 was $0.7 million related to proceeds from exercised options.

Critical Accounting Estimates

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Significant estimates include assumptions used in the determination of some of our costs incurred under our services type agreements and which costs are charged to research and development and general and administrative expense.

We base our estimates on 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.

We base our estimates on 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.

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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 2. Management’s Discussion and Analysis