What changed in this filing

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Item 1. Financial Statements

2022-11-01 compared with 2022-08-02 · 136 added, 109 removed, 375 unchanged (40% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

September 30,

CURRENT ASSETS:

11 unchanged sentences

Intangible assets, net

Deferred tax asset

Other noncurrent assets

16 unchanged sentences

Common stock— $ 0.00001 par value;

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

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

59,304,408 shares and 58,825,769 issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid in capital

9 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net product revenues

6 unchanged sentences

Operating income

Other expense, net

Loss on debt extinguishment

Other expense (income), net

Interest expense, net

Income before income taxes

Income tax expense

Income (loss) before income taxes

Income tax benefit (expense)

Unrealized loss on investments

13 unchanged sentences

Unrealized loss on investments

Issuance of common stock

Exercise of options

Stock-based compensation

Balance as of June 30, 2022

Balance as of September 30, 2022

comprehensive

1 unchanged sentence

income (loss)

Balance as of March 31, 2022

Balance as of June 30, 2022

Unrealized loss on investments

Issuance of common stock

Exercise of options

Stock-based compensation

Balance as of June 30, 2022

Balance as of September 30, 2022

stockholders’

Balance as of December 31, 2020

Issuance of common stock

Exercise of stock options

Stock-based compensation

Balance as of June 30, 2021

Balance as of September 30, 2021

stockholders’

Balance as of March 31, 2021

Balance as of June 30, 2021

Issuance of common stock

Exercise of options

Stock-based compensation

Balance as of June 30, 2021

Balance as of September 30, 2021

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

3 unchanged sentences

(In thousands, except share and per share data)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

4 unchanged sentences

Debt issuance costs amortization

Deferred taxes

Investment securities interest income

Loss on debt extinguishment

Other non-cash expenses

8 unchanged sentences

Purchase of investment securities

Proceeds from maturities and sales of investment securities

Purchase of property and equipment

2 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

Common stock issuance costs

Proceeds from long term debt

Debt issuance costs

Extinguishment of debt

Extinguishment of debt exit fees

Principal repayment of long term debt

25 unchanged sentences

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 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.

The Company had an accumulated deficit of $ 320,639 and $ 453,598 , as of September 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022, the Company had cash, cash equivalents and investments of $ 316,043 .

The Company believes that its existing cash and cash equivalents on hand as of September 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

2 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

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 balance sheet as of September 30, 2022, the unaudited condensed consolidated statements of cash flows for the nine months ended September 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 nine months ended September 30, 2022 and 2021, are unaudited.

The balance sheet as of September 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 September 30, 2022, and the results of its operations and its cash flows for the nine months ended September 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.

10 unchanged sentences

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.

September 30,

Cash and cash equivalents

20 unchanged sentences

Historically, the Company has not experienced credit losses on its 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;

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

Caremark LLC (“CVS Caremark”), which accounted for 47 % of gross accounts receivable;

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

and, Accredo Health Group, Inc.

Accredo Health Group, Inc.

(“Accredo”), which accounted for 30 % of gross accounts receivable;

and, PANTHERx Specialty Pharmacy LLC (“Pantherx”, which accounted for 23 % of gross accounts receivable.

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

2 unchanged sentences

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

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

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

CVS Caremark accounted for 40 % of gross product revenues;

1 unchanged sentence

and Accredo accounted for 30 % of gross product revenues.

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

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

CVS Caremark accounted for 36 % of gross product revenues;

1 unchanged sentence

and Accredo accounted for 28 % of gross product revenues.

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

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

Recently Issued Accounting Pronouncements

2 unchanged sentences

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.

transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative 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

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

September 30, 2022

Commercial paper

9 unchanged sentences

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.

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

These non-financial assets and liabilities 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 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:

5 unchanged sentences

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.

We validate valuations obtained from third-party services by obtaining market values from other pricing sources.

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

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

June 30, 2022

September 30, 2022

December 31, 2021

4 unchanged sentences

Inventory, net consisted of the following:

September 30,

Raw materials

6 unchanged sentences

In August 2019, the Company received FDA approval of WAKIX ® (pitolisant) for the treatment of excessive daytime sleepiness (“EDS”) in adult patients with narcolepsy.

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 June 30, 2022 the remaining useful life was 7.3 years.

This event triggered a milestone payment of $ 75,000 under the provisions of the 2017 LCA (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 September 30, 2022, the remaining useful life was 7.0 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 June 30, 2022 the remaining useful life was 7.3 years.

This event triggered a milestone payment of $ 100,000 under the provisions of the 2017 LCA 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 September 30, 2022, the remaining useful life was 7.0 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:

This event triggered a final $ 40,000 payment under the provisions of the 2017 LCA 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 September 30, 2022, the remaining useful life was 7.0 years.

Amortization expense was $ 5,962 and $ 4,573 for the three months ended September 30, 2022 and 2021, respectively, and $ 17,005 and $ 13,781 for the nine months ended September 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 September 30, 2022 for the periods indicated below consists of the following:

Years ending December 31,

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

2022 (Excluding the nine months ended September 30, 2022)

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

September 30,

Gross Carrying Amount

2 unchanged sentences

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.

In July 2017, Harmony entered into a License Agreement (“the 2017 LCA”) 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.

A milestone payment of $ 50,000 was due upon acceptance by the FDA of pitolisant’s NDA, which was achieved in February 2019 and was expensed within research and development for the year ended December 31, 2019.

4 unchanged sentences

A final $ 40,000 milestone payment was paid to Bioprojet in March 2022 upon WAKIX attaining $ 500,000 in aggregate net sales in the United States.

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 $ 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.

The 2017 LCA 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 $ 20,944 and $ 13,202 for the three months ended September 30, 2022 and 2021, respectively, and $ 51,741 and $ 34,561 for the nine months ended September 30, 2022 and 2021, respectively, for sales-based, trademark and tiered royalties recognized as cost of product sold.

As of September 30, 2022 and December 31, 2021, the Company had accrued $ 20,944 and $ 16,396 , respectively, for sales-based, trademark and tiered royalties.

On July 31, 2022, Harmony entered into a 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 initial, non-refundable $ 30,000 licensing fee and additional payments of up to $ 155,000 are potentially 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 as 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.

Upon the closing of the 2022 LCA on September 28, 2022, the $ 30,000 licensing fee was recorded in research and development within the unaudited condensed consolidated statement of operations and comprehensive loss for the three and nine months ended September 30, 2022.

Agreement Related to Intellectual Property

6 unchanged sentences

Accrued expenses consist of the following:

September 30,

Royalties due to third parties

3 unchanged sentences

Professional fees, consulting, and other services

Licensing fee

Other expenses

Credit Agreements

Blackstone Credit Agreement

1 unchanged sentence

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.

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 annum on the undrawn portion of the DDTL, which commenced 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.

payable quarterly, which commenced on November 9, 2021, and continues 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 %.

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.

Net cash received from 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 are being 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 June 30, 2022 was $ 142,459 .

The fair value of the Initial Term Loan as of September 30, 2022 was $ 149,226 .

Long-term debt, net consists of the following:

September 30,

Liability component - principal

3 unchanged sentences

Long-term debt, net

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

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

Years ending December 31,

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

2022 (Excluding the nine months ended September 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

Nine Months Ended

September 30,

Interest on principal balance

6 unchanged sentences

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 $ 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 %.

The Company recorded operating lease costs of $ 378 and $ 359 for the three months ended September 30, 2022 and 2021, respectively, and $ 1,155 and $ 916 for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, the weighted-average remaining lease term for operating leases was 1.9 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

June 30, 2022

September 30, 2022

December 31, 2021

7 unchanged sentences

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

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

Operating cash flows from operating leases

1 unchanged sentence

(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 June 30, 2022 consisted of the following:

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

Years ending December 31,

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

2022 (Excluding the nine months ended September 30, 2022)

Total lease payments

4 unchanged sentences

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

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

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

STOCKHOLDERS’ EQUITY

9 unchanged sentences

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

As of September 30, 2022, there were 4,932,502 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.

5 unchanged sentences

Stock Options

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

The following table summarizes stock option activity for the nine months ended September 30, 2022:

Awards outstanding—December 31, 2021

2 unchanged sentences

Awards forfeited

Awards outstanding—June 30, 2022

Awards outstanding—September 30, 2022

Stock Appreciation Rights

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

The following table summarizes SARs activity for the nine months ended September 30, 2022:

Awards outstanding—December 31, 2021

2 unchanged sentences

Awards forfeited

Awards outstanding—June 30, 2022

Awards outstanding—September 30, 2022

Restricted Stock Units

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

The following table summarizes RSU activity for the nine months ended September 30, 2022:

Awards outstanding—December 31, 2021

2 unchanged sentences

Awards forfeited

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.

Awards outstanding—September 30, 2022

As of September 30, 2022 and December 31, 2021, stock awards issued under the 2017 and 2020 Plans of 1,753,234 and 1,285,432 common shares, respectively, were vested.

Value of Stock Options and SARs

9 unchanged sentences

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

September 30,

Dividend yield

5 unchanged sentences

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 $ 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 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,

The weighted average per share fair value of awards issued under the 2017 Plan and 2020 Plan was $ 17.60 and $ 12.82 on September 30, 2022 and December 31, 2021, respectively.

Stock-Based Compensation Expense

Stock-based compensation expense, net for the three and nine months ended September 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 September 30,

Nine Months Ended September 30,

Research and development expense

1 unchanged sentence

General and administrative expense

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

Stock-based compensation expense, net related to Options and RSUs issued under the 2017 Plan and 2020 Plan is included in stockholder’s equity, and a liability for SARs is included in other non-current liabilities, in the Company’s unaudited condensed consolidated balance sheet.

As of September 30, 2022, the total unrecognized stock-based compensation expense related to Options and RSUs was $ 83,981 .

Such amount will be recognized in the Company’s consolidated statement of operations over a weighted average period of 3.1 years.

4 unchanged sentences

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 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.

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 nine months ended September 30, 2022, there were 14,889 shares issued under the ESPP.

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

The discount on the ESPP was $ 86 and $ 60 for the three months ended September 30, 2022 and 2021, respectively, and $ 271 and $ 80 for the nine months ended September 30, 2022 and 2021, respectively, and is recorded within stock-based compensation expense.

EARNINGS PER SHARE

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.

In addition, the Company analyzes the potential dilutive effects of the outstanding convertible preferred stock under the ‘if-converted’ method when calculating diluted earnings per share, in which it is assumed that the outstanding convertible preferred stock converts into common stock at the beginning of the period or when issued if later.

The Company reports the more dilutive of the approaches (treasury stock or ‘if converted’) as its diluted net income per share during the period.

Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding.

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, the potential dilutive effects of stock options, stock appreciation rights, restricted stock units and warrants.

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net income per common share - basic

3 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Stock options, SARs, and RSUs to purchase common stock

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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Stock options, SARs, and RSUs to purchase common stock

As of September 30, 2022 and December 31, 2021, our deferred tax assets were primarily the result of acquired in-process research and development costs, operating loss carryforwards, deferred research and development costs, disallowed interest, inventory, and accrued rebates.

A valuation allowance of $ 96,366 was recorded against our net deferred tax asset balance as of December 31, 2021.

We recorded a tax benefit of $ 74,474 as a discrete item in the three and nine months ended September 30, 2022 related to the release of a

valuation allowance on certain deferred tax assets, net, which had accumulated through December 31, 2021.

We also recorded a tax benefit of $ 21,892 as a component to our current year effective tax rate in the three and nine months ended September 30, 2022, related to deferred tax assets, net which were utilized in the current period.

As of each reporting date, the Company considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.

As of September 30, 2022, in part because in the current quarter we achieved three years of cumulative pretax income, which is a positive indication of the Company’s ability to generate sufficient future taxable income, the Company determined that there was sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes are realizable and, therefore, released the valuation allowance accordingly.

RELATED-PARTY TRANSACTIONS

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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 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.

The Company incurred $ 71 for each of the three months ended September 30, 2022 and 2021, and $ 213 for each of the nine months ended September 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 September 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.

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