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Item 1A. Risk Factors

2023-02-21 compared with 2022-02-28 · 135 added, 195 removed, 953 unchanged (26% of the section changed)

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You should carefully consider the risks and uncertainties described below and the other information included or incorporated by reference in this Annual Report on Form 10-K before making an investment in our common stock.

Our business, financial condition, results of operations, or

prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common stock could decline and you could lose all or part of your investment.

Our business, financial condition, results of operations, or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common stock could decline and you could lose all or part of your investment.

This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties.

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The principal risks and uncertainties affecting our business include the following:

● We have incurred significant losses in several periods since our inception.

● We have only recently begun generating revenue from product sales.

● We have a limited operating history and history of commercializing drugs, which may make it difficult for you to evaluate the success of our business to date and assess our future viability.

● We have limited capital and may need to raise additional capital to meet our business needs.

● Raising additional funds by issuing securities may cause dilution to existing shareholders, raising additional funds through debt financings may involve restrictive covenants, and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights to our technologies or product candidates.

● Our auditor has previously expressed substantial doubt about our ability to continue as a going concern and we may be unable to remain a going concern.

● We have made and we may be required to make significant payments in the future to Bioprojet under our licensing and collaboration agreements for pitolisant.

● We are substantially dependent on our ability to successfully commercialize WAKIX, which is currently our only approved product.

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● We rely on our license agreement with Bioprojet to provide rights to the core intellectual property relating to pitolisant, and any termination or loss of significant rights under the agreement would adversely affect our development and/or commercialization of pitolisant.

● The ongoing COVID-19 pandemic may result in disruptions to our commercialization, clinical trials, manufacturing and other business operations, which could have a material adverse effect on our business, financial condition, operating results, cash flows and prospects.

● Public health pandemics, including the COVID-19 pandemic, may result in disruptions to our commercialization, clinical trials, manufacturing and other business operations, which could have a material adverse effect on our business, financial condition, operating results, cash flows and prospects.

● We have a limited operating history and history of commercializing drugs, which may make it difficult for you to evaluate the success of our business to date and assess our future viability.

● We have made and we may be required to make significant payments in the future to Bioprojet under our licensing and collaboration agreements for pitolisant.

● Because a number of companies compete with us, many of which have greater resources than we do, and because we face rapid changes in science in our industry, we cannot be certain that our products will be accepted in the marketplace or capture market share.

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● If we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose intellectual property rights that are necessary for developing and protecting our current and future product candidates.

● We no longer qualify as an “emerging growth company” and will be required to comply with certain provisions of the Sarbanes-Oxley Act.

We can no longer take advantage of the reduced disclosure requirements applicable to emerging growth companies.

● We no longer qualify as an “emerging growth company” and will be required to comply with certain provisions of the Sarbanes-Oxley Act.

We can no longer take advantage of the reduced disclosure requirements applicable to emerging growth companies.

● Our directors, officers and principal stockholders beneficially own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

● Future sales of our common stock in the public market, including sales by our directors, officers, or significant shareholders, could cause our share price to fall.

Risks Related to Our Financial Condition and Capital Requirements

We have incurred significant losses in several periods since our inception.

Investment in pharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to gain regulatory approval or fail to become commercially viable.

We have only recently begun to generate revenue from product sales and have incurred losses in each year since our inception for several periods.

Our ability to generate revenue and achieve profitability depends on our ability to successfully commercialize WAKIX for the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy, and to successfully develop and obtain the regulatory approvals necessary to commercialize pitolisant for other indications.

We may incur losses in the future, and these losses could increase as we commercialize WAKIX and as we continue to develop and potentially commercialize pitolisant for other indications.

We have only recently begun generating revenue from product sales.

Other than WAKIX, we do not currently have any products that are available for commercial sale.

Our net income was $34.6 million and our net loss was $36.9 million for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, we had an accumulated deficit of $453.6 million.

Our ability to remain profitable depends on our ability to generate revenue.

We generated net product revenues of $305.4 million and $159.7 million for the years ended December 31, 2021 and 2020, respectively.

Successful commercialization will require achievement of many key milestones, including demonstrating safety and efficacy in clinical trials, obtaining regulatory approval, including marketing approval for these product candidates, manufacturing, marketing and selling those products for which we, or any of our future collaborators, may obtain regulatory approval, satisfying any post-marketing requirements and obtaining reimbursement for our products from private insurance or government payors.

Because of the uncertainties and risks associated with these

activities, we are unable to accurately and precisely predict the timing and amount of revenues, the extent of any future losses.

We and any future collaborators may never succeed in these activities and, even if we do, or any future collaborators do, we may never generate revenues that are large enough for us to sustain profitability or increase profitability on a quarterly or annual basis.

Our failure to remain profitable may depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations.

If we suffer future losses as we have in the past, investors may not receive any return on their investment and may lose their entire investment.

We have a limited operating history and history of commercializing drugs, which may make it difficult for you to evaluate the success of our business to date and assess our future viability.

We commenced operations in 2017, and our operations to date have been largely focused on staffing our company, business planning, raising capital, acquiring the rights to pitolisant, seeking registration in the United States for our product WAKIX, which is approved for the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy, the commercialization of WAKIX, manufacturing WAKIX on a commercial scale, and preparing to develop pitolisant for other potential indications.

This has included preparing the application for regulatory approval and other activities that were required for us to obtain approval of our NDA, and activities related to commercializing WAKIX.

WAKIX is our only drug candidate for which we have obtained regulatory approval.

Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a longer history of successfully developing and commercializing drugs.

We expect our financial condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control.

We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors.

We have limited capital and may need to raise additional capital in order to sustain profitability.

As of December 31, 2021, we had an accumulated deficit of $453.6 million, and available cash and cash equivalents and restricted cash of $235.1 million.

We have $199.5 million of debt outstanding under our Credit Agreement with Blackstone.

We believe that our anticipated cash from operating and financing activities and existing cash and cash equivalents will enable us to meet our operational liquidity needs and fund our planned investing activities for the next twelve months.

This estimate is based on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we currently expect.

Because the length of time and activities associated with the successful development of our product candidates is highly uncertain, we are unable to estimate with certainty the actual funds we will require for development and any approved marketing and commercialization activities.

To fund future operations to the point at which we are able to generate positive cash flow from sales of WAKIX or other potential product candidates, we may need to raise significant additional capital.

The amount and timing of future funding requirements will depend on many factors, including, but not limited to:

● the results of our commercialization of WAKIX;

● the cost of sales, marketing and distribution capabilities for our product candidates in regions where those product candidates are approved and where we choose to commercialize our products on our own;

● the effect of competing technological and market developments;

● the cost and timing of manufacturing activities;

● the payment of royalties and milestone payments to Bioprojet;

● the outcome, timing and cost of meeting regulatory requirements established by the FDA and other regulatory authorities;

● the willingness of the FDA and other comparable regulatory authorities to accept our clinical trial designs, as well as data from our completed and planned clinical trials and preclinical studies and other work, as the basis for the review and approval of pitolisant for other potential indications or of any other product candidates;

● the potential expansion of our current development programs to seek new indications for pitolisant, potential new development programs for additional indications, and related general and administrative support;

● the initiation, progress, timing, and results of our clinical trials through all phases of development for pitolisant as a treatment for other indications and any other product candidates;

● the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights, in-licensed or otherwise;

● the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against us for pitolisant or future product candidates;

● the cost of acquiring rights to other pharmaceutical products in the future to further develop and commercialize;

● the cost of general operating expenses;

● the costs of operating as a public company.

We have no committed source of additional capital other than our Credit Agreement with Blackstone and we may seek to fund our operations through public or private equity offerings, debt financings, collaborations, licensing arrangements or other sources, or any combination of the foregoing.

We cannot assure you that anticipated additional financing will be available to us on favorable terms, or at all.

Although we have been successful in obtaining financing through the issuance of our equity securities and debt facilities, we cannot assure you that we will be able to do so in the future.

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us to fund our clinical development and commercialization of pitolisant for other indications, if approved, and other business activities, we could be forced to significantly delay, scale back, or discontinue the development or commercialization of our product candidates or curtail or cease our operations.

Raising additional funds by issuing securities may cause dilution to existing shareholders, raising additional funds through debt financings may involve restrictive covenants, and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights to our technologies or product candidates.

We expect that significant additional capital will be needed in the future to continue our planned operations.

Until such time, if ever, that we can generate sufficient product revenue from the sale of WAKIX, we may need to finance our cash needs through a combination of equity offerings, debt financings, including our Credit Agreement, strategic alliances and license and development agreements or other collaborations.

To the extent that we raise additional capital by issuing equity securities, our existing shareholders’ ownership may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that could adversely affect the rights of a common shareholder.

Additionally, any agreements for future debt or preferred equity financings, if available, may involve covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely affect our ability to conduct our business.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise develop and market ourselves.

Our auditor has previously expressed substantial doubt about our ability to continue as a going concern and we may be unable to remain a going concern.

In light of our recurring losses, accumulated deficit and negative cash flow as described in our notes to our consolidated financial statements, we had previously concluded there was substantial doubt regarding our ability to continue as a going concern and the report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2019 contained an explanatory paragraph communicating this matter.

Our financial statements did not include any adjustments that may have been necessary in the event we were unable to continue as a going concern.

Had we been unable to establish to the satisfaction of our independent registered public accounting firm that our expected operational performance and liquidity would be sufficient to allow for the removal of this going concern qualification, we would have needed to significantly modify our operational plans for us to continue as a going concern.

We believe that our anticipated cash from operating and financing activities and existing cash and cash equivalents, will enable us to meet our operational liquidity needs and fund our planned investing activities for the next twelve months.

We have made and may be required in the future to make significant payments to Bioprojet under our licensing and collaboration agreements for pitolisant.

Under our agreements with Bioprojet, we are subject to significant obligations, including payment obligations upon the achievement of specified milestones and payments based on product sales, as well as other material obligations.

Certain of the milestone payments payable by us under these agreements were paid prior to our commercialization of WAKIX.

Upon the Cataplexy Milestone Trigger Date, we became obligated to make the $100.0 million Cataplexy Milestone Payment to Bioprojet, which we paid in January 2021.

In October 2020, we made a payment to Bioprojet of $2.0 million to extend the Cataplexy Milestone Payment due date to within 90 days of the Cataplexy Milestone Trigger Date.

In addition, we are subject to a milestone payment of $40.0 million upon the attainment of aggregate net sales of WAKIX in the United States of $500.0 million subsequent to the date of NDA approval by the FDA pursuant to the Bioprojet License Agreement.

There can be no assurance that we will have the funds necessary to make such payments in the future, or be able to raise such funds when needed, on terms acceptable to us, or at all.

If we fail to comply with our payment obligations, Bioprojet has the right to terminate the license agreement, in which event we would not be able to develop, manufacture or market WAKIX or any other pitolisant-based product candidate.

Furthermore, if we are forced to raise additional funds to make such payments, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts.

Our ability to utilize our net operating loss carryforwards may be limited.

As of December 31, 2021, we had U.S.

federal and state net operating loss carryforwards of approximately $98.1 million and $120.1 million, respectively.

As of December 31, 2020, we had U.S.

federal and state net operating loss carryforwards of approximately $159.4 million and $157.7 million, respectively.

Our ability to utilize our federal net operating loss carryforwards may be limited under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).

The limitations apply if we experience an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in the ownership of our equity by certain stockholders over a rolling three-year period.

Similar provisions of state tax law may also apply to limit the use of our state net operating loss carryforwards.

We have not assessed whether such an ownership change has previously occurred.

If we have experienced an ownership change at any time since our incorporation, we may already be subject to limitations on our ability to utilize our existing net operating loss carryforwards to offset taxable income.

In addition, future changes in our stock ownership, which may be outside of our control, may trigger an ownership change and, consequently, the limitations under Section 382 of the Code.

As a result, if or when we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset such taxable income may be subject to limitations, which could adversely affect our future cash flows.

Our Blackstone Credit Agreement contains restrictive and financial covenants that may limit our operating flexibility.

dissolve, amend certain material agreements, enter into sale and leaseback transactions, enter into various other specified transactions, or change our name, location, or executive office without notice.

We, therefore, may not be able to engage in any of the foregoing transactions unless we obtain the consent of the lenders, or in certain cases Blackstone on their behalf, or prepay the outstanding amount under the Blackstone Credit Agreement.

The Blackstone Credit Agreement also 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.

Our obligations under the Blackstone Credit Agreement are secured by all of our assets, with certain exceptions.

We may not be able to generate sufficient cash flow or sales to meet the financial covenants or pay the principal and interest under the Blackstone Credit Agreement.

Furthermore, our future working capital, borrowings or equity financing could be unavailable to repay or refinance the amounts outstanding under the Blackstone Credit Agreement.

In the event of a liquidation, the lenders under the facility would be repaid all outstanding principal and interest prior to distribution of assets to unsecured creditors, and the holders of our common stock would receive a portion of any liquidation proceeds only if all of our creditors then existing, including the lenders under the Blackstone Credit Agreement, were first repaid in full.

Our failure to comply with the covenants or other terms of the Blackstone Credit Agreement, including as a result of events beyond our control, could result in a default under the Blackstone Credit Agreement that could materially and adversely affect the ongoing viability of our business.

Blackstone and the other Lenders may elect to accelerate the repayment of all unpaid principal of the Loans, accrued interest and other amounts owed under the Blackstone Credit Agreement upon consummation of a specified change of control transaction or the occurrence of certain events of default (as specified in the Blackstone Credit Agreement), including, among other things:

● our default in a payment obligation under the Blackstone Credit Agreement;

● our breach of the restrictive covenants or other terms of the Blackstone Credit Agreement;

● our breach of reporting obligations;

● our failure to properly maintain the collateral;

● the termination or materially adverse amendment of a permit or authorization related to one of our products that is not revoked within 90 days;

● a specified change of control transaction occurring under the License Agreement;

● with respect to WAKIX or another material product, a governmental authority (i) asserting that such product lacks a material authorization, which assertion is not withdrawn or resolved within 90 days or (ii) taking certain regulatory actions resulting in a discontinuance, withdrawal or delay of such product which would reasonably be expected to last for more than 90 days;

● a recall that would reasonably be expected to result in a material adverse effect;

● our entry into a settlement agreement with a government authority resulting in liability greater than $2.0 million;

● our material breach under or the early termination of one of our key intellectual property licensing or supply chain agreements;

● certain specified insolvency and bankruptcy-related events.

Subject to any applicable cure period set forth in the Blackstone Credit Agreement, all amounts outstanding with respect to the Loans (principal and accrued interest), as well as any applicable prepayment premiums or interest “make-whole” payments, would become due and payable, and upon the occurrence of a payment event of default and following acceleration of the Loans, all past due obligations shall bear interest at a default interest rate that is 2.00% higher than the

otherwise applicable rate.

Our assets or cash flow may not be sufficient to fully repay our obligations under the Loans if the obligations thereunder are accelerated upon any events of default.

Further, if we are unable to repay, refinance or restructure our obligations under the Loans, the Administrative Agent on behalf of the Lenders could proceed to protect and enforce their rights under the Blackstone Credit Agreement and other loan documents by exercising such remedies (including foreclosure on the assets securing our obligations under the Blackstone Credit Agreement and the other loan documents) as are available to the Administrative Agent and the Lenders and in respect thereof under applicable law, either by suit in equity or by action at law, or both, whether for specific performance of any covenant or other agreement contained in the Blackstone Credit Agreement or other loan documents or in aid of the exercise of any power granted in the Blackstone Credit Agreement or other loan documents.

Such repayment could have a material adverse effect on our business, operating results and financial condition.

We have never paid dividends on our common stock and we do not intend to pay dividends for the foreseeable future.

Consequently, any gains from an investment in our common stock will likely depend on whether the price of our common stock increases .

We have never declared or paid any dividends on our common stock and do not intend to pay any dividends in the foreseeable future.

We anticipate that we will retain all of our future earnings for use in the operation of our business and for general corporate purposes.

Any determination to pay dividends in the future will be at the discretion of our board of directors.

Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

Furthermore, our Blackstone Credit Agreement contains negative covenants that limit our ability to pay dividends.

Risks Related to Our Business

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If we are not able to generate substantial revenue from the sale of approved products, we may never become profitable.

The commercial adoption of WAKIX and any other product candidates we develop will depend on the degree of their market acceptance.

Even with the requisite approvals from the FDA and other regulatory authorities, the commercial adoption of WAKIX for the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy, and any other indications and product candidates we may develop, will depend on the degree of their acceptance by physicians, patients, third-party payors and others in the medical community.

The continued commercial adoption of WAKIX and any other product candidates we develop will depend on the degree of their market acceptance.

Even with the requisite approvals from the FDA and other regulatory authorities, the continued commercial adoption of WAKIX for the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy, and any other indications and product candidates we may develop, will depend on the degree of their acceptance by physicians, patients, third-party payors and others in the medical community.

If WAKIX or any other product candidates we develop do not achieve an adequate level of market acceptance, we may not generate significant product revenues or any profits from operations.

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Additionally, the potentially addressable patient population for WAKIX or any future product candidate we develop may be limited or may not be amenable to treatment with WAKIX or such future product candidate, and new patients may become increasingly difficult to identify or gain access to, which would adversely affect our results of operations and our business.

We rely on our license agreement with Bioprojet to provide rights to the core intellectual property relating to pitolisant, and any termination or loss of significant rights under the agreement would adversely affect our development and/or commercialization of pitolisant.

We rely on our license agreements with Bioprojet to provide rights to the core intellectual property relating to pitolisant, and any termination or loss of significant rights under the agreement would adversely affect our development and/or commercialization of pitolisant.

We have licensed our core intellectual property relating to pitolisant from Bioprojet.

If, for any reason, our license and commercialization agreement with Bioprojet is terminated or we otherwise lose those rights, it would materially adversely affect our business.

Pursuant to our license and commercialization agreement, we obtained intellectual property rights in connection with the commercialization of pitolisant in the United States and its territories, commonwealths and protectorates, including Puerto Rico, which includes an exclusive license to use certain intellectual property owned by Bioprojet related to clinically developing and commercializing the pitolisant product candidate for narcolepsy, obstructive sleep apnea, idiopathic hypersomnia and Parkinson’s Disease.

Under the license agreement, Bioprojet is responsible for conducting all preclinical studies and clinical trials necessary for achieving and maintaining regulatory approval in the United States for narcolepsy and cataplexy indications, including all costs and expenses.

If, for any reason, our license and commercialization agreements with Bioprojet are terminated or we otherwise lose those rights, it would materially adversely affect our business.

Pursuant to our license and commercialization agreements, we obtained intellectual property rights in connection with the commercialization of pitolisant in the United States and its territories, commonwealths and

protectorates, including Puerto Rico, which includes an exclusive license to use certain intellectual property owned by Bioprojet related to clinically developing and commercializing the pitolisant product candidate for narcolepsy, obstructive sleep apnea, idiopathic hypersomnia and Parkinson’s Disease.

Under the license agreements, Bioprojet is responsible for conducting all preclinical studies and clinical trials necessary for achieving and maintaining regulatory approval in the United States for narcolepsy and cataplexy indications, including all costs and expenses.

We are responsible for all other costs associated with other development and regulatory activities, unless Bioprojet otherwise agrees to participate in funding such activities.

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Our ability to pursue indications other than the ones specifically enumerated in the license agreement is also contingent on mutual agreement of Bioprojet and us as to those indications and such agreement may be withheld at Bioprojet’s discretion.

If Bioprojet denies consent for us to conduct clinical trials or

pursue any such other indication for any reason, we will not have the right under our license and commercialization agreement to commercialize our product for such indication.

If Bioprojet denies consent for us to conduct clinical trials or pursue any such other indication for any reason, we will not have the right under our license and commercialization agreement to commercialize our product for such indication.

In such event, Bioprojet may pursue commercialization of such indication for itself in our territory, or it may license the right to commercialize such indication in our territory to third parties, including our competitors.

Our license and commercialization agreement also imposes on us obligations relating to exclusivity, territorial rights, development, commercialization, funding, payment, diligence, sublicensing, insurance, intellectual property protection and other matters.

For example, under the Bioprojet License Agreement, we cannot, directly or indirectly, develop, market, sell, promote or file an NDA with respect to any product that would compete with pitolisant in the field.

Our license and commercialization agreements also imposes on us obligations relating to exclusivity, territorial rights, development, commercialization, funding, payment, diligence, sublicensing, insurance, intellectual property protection and other matters.

For example, under the 2017 LCA and 2022 LCA, we cannot, directly or indirectly, develop, market, sell, promote or file an NDA with respect to any product that would compete with pitolisant in the field.

If we breach any material obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages to Bioprojet, and Bioprojet may have the right to terminate our license, which would result in us being unable to develop, manufacture and sell pitolisant and would materially adversely affect our business.

The ongoing COVID-19 pandemic may result in disruptions to our commercialization, clinical trials, manufacturing and other business operations, which could have a material adverse effect on our business, financial condition, operating results, cash flows and prospects.

The outbreak of COVID-19, which has been declared a global pandemic by the World Health Organization, has spread across the globe and is impacting worldwide economic activity.

Public health pandemics, including the COVID-19 pandemic, may result in disruptions to our commercialization, clinical trials, manufacturing and other business operations, which could have a material adverse effect on our business, financial condition, operating results, cash flows and prospects.

A public health epidemic, including COVID-19, poses the risk that we or our employees, contractors, suppliers, distributors and other partners, as well as physicians treating narcolepsy patients, may be prevented from conducting business and patient-care activities for an indefinite period of time, including due to shutdowns and quarantines that may be requested or mandated by governmental authorities.

Beginning in March 2020, we transitioned our field-based sales, market access, and medical employees to remote work and suspended work-related travel and in-person customer interactions with healthcare professionals and customers.

Some of these activities have resumed in moderation following the establishment of proper protocols and procedures as COVID-19 restrictions have been revised.

Our increased reliance on personnel working from home may negatively impact productivity or disrupt, delay or otherwise adversely impact our business.

Beginning in March 2020, we had increased reliance on personnel working from home which may negatively impact productivity or disrupt, delay or otherwise adversely impact our business.

In addition, remote working could increase our cyber security risk.

General protective measures put into place at various governmental levels, including quarantines, travel restrictions and business shutdowns, may also negatively affect our operations.

The responses to the COVID-19 pandemic may have had an impact on demand for WAKIX as a result of a reduced ability of prescribers to diagnose narcolepsy patients given the limitations in access to sleep testing, the reduced ability to see patients due to cancelled appointments and the reprioritization of healthcare resources toward treating COVID-19.

The COVID-19 pandemic has affected our ability to access HCPs, and has caused fewer patients visits to their HCP, resulting in fewer prescriptions being written.

The COVID-19 pandemic is leading to high unemployment and corresponding loss of insurance, resulting in more eligible patients taking advantage of patient assistance and/or free good programs, which is impacting our ability to convert demand to revenue and the corresponding revenue growth rate in possible future quarters will be adversely impacted by the ongoing COVID-19 pandemic.

The continued spread of COVID-19 and the measures taken by the governments of countries affected, particularly the United States and France, could also disrupt the supply chain and the manufacture or shipment of WAKIX and of drug substance and finished drug product.

For example, the COVID-19 pandemic affected our ability to access HCPs, and caused fewer patients to visit their HCP, resulting in fewer prescriptions being written.

Additionally, the effects of COVID-19 disrupted the supply chain and could disrupt the manufacturing or shipment of WAKIX and of drug substance and finished drug product.

For example, we may face supply chain and manufacturing limitations or difficulties as resources are shifted toward vaccine manufacturing and distribution.

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Any of the foregoing factors could have a material adverse impact on our business, financial condition, operating results, cash flows and prospects.

The extent to which COVID-19 impacts our operations and those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, additional or modified government actions, new information which emerges concerning the severity of COVID-19 and the actions taken to contain the virus or treat its impact, among others.

In particular, the speed of the continued spread of COVID-19 globally, and the magnitude of interventions to contain the spread of the virus, will determine the impact of the pandemic on our operations.

The extent to which COVID-19 or any future pandemics impact our operations and those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, additional or modified government actions, the severity of the pandemic, speed of the spread of a virus, and the actions taken to contain the virus or treat its impact, among others.

We may not be successful in our efforts to identify, in-license or acquire, discover, develop or commercialize additional product candidates, or identify other indications for pitolisant beyond EDS or cataplexy in adult patients with narcolepsy.

Although a substantial amount of our effort will focus on the commercialization of WAKIX for the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy, we also may seek to identify, in-license or acquire, discover, develop and commercialize additional product candidates in the rare neurological disorders field, and to identify other indications for pitolisant beyond the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy.

acquire, discover, develop and commercialize additional product candidates in the rare neurological disorders field, and to identify other indications for pitolisant beyond the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy.

We cannot assure you that our efforts to do so will be successful.

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Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

If we are unable to reach agreements with suitable third parties on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own

If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms, or at all.

If we fail to enter into relationships or do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates, bring them to market and generate revenue from sales of drugs or continue to develop our technology, and our business may be materially and adversely affected.

generate revenue from sales of drugs or continue to develop our technology, and our business may be materially and adversely affected.

We expect to rely on third parties to conduct our clinical trials for pitolisant and any future product candidate that we decide to develop.

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As a result, delays may occur, which can materially affect our ability to meet our desired clinical development timelines.

Though we carefully manage our relationships with our CROs, there can be no assurance that we will not

encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

If we experience delays in meeting or fail to meet the regulatory requirements for commercialization of our current or future potential product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenues will be materially impaired.

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There can be no assurance that replacements would be available to us on a timely basis, on acceptable terms or at all.

While we currently maintain a robust supply of raw material inventory and an 18 month supply of finished good inventory to ensure product availability, any interruption in the supply of a drug substance or other material or in the manufacture of WAKIX could have a material adverse effect on our business, financial condition, operating results and prospects.

While we currently maintain a robust supply of raw material inventory and an 18 month supply of finished goods inventory

to ensure product availability, any interruption in the supply of a drug substance or other material or in the manufacture of WAKIX could have a material adverse effect on our business, financial condition, operating results and prospects.

Additionally, although we are ultimately responsible for ensuring compliance with regulatory requirements such as cGMPs, we are dependent on our contract suppliers and manufacturers for day-to-day compliance with cGMP for production of both drug substances and finished products.

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We may need to increase the size and capabilities of our organization based on business need, and we may experience difficulties in managing our growth.

We commenced operations in 2017 and, as of December 31, 2021, had approximately 180 employees.

We commenced operations in 2017 and, as of December 31, 2022, had 200 employees.

As we advance the development of pitolisant in other indications and commercialize WAKIX as a treatment for EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy, we must continue to grow the size of the organization.

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Any unplanned event, such as flood, fire, explosion, earthquake, extreme weather condition, medical epidemics, power shortage, telecommunication failure or other natural or manmade accidents or incidents that result in us being unable to fully utilize our facilities, the manufacturing facilities of our third-party contract manufacturers or our or their distribution networks, may have a material and adverse effect on our ability to operate our business, particularly on a daily basis, and have significant negative consequences on our financial and operating conditions.

Loss of access to these facilities may

result in increased costs, or interruptions in the commercialization of WAKIX or our business operations.

Loss of access to these facilities may result in increased costs, or interruptions in the commercialization of WAKIX or our business operations.

Natural disasters could further disrupt our operations, and have a material and adverse effect on our business, financial condition, results of operations and prospects.

If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our research facilities, the manufacturing facilities of our third-party contract manufacturers or our or their distribution networks, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.

If a natural disaster, power outage or other event occurred that prevented us from using all or a

significant portion of our headquarters, that damaged critical infrastructure, such as our research facilities, the manufacturing facilities of our third-party contract manufacturers or our or their distribution networks, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.

The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event.

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If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs.

For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory

approval efforts and significantly increase our costs to recover or reproduce the data.

Moreover, if a real or perceived security breach affects our systems (or those of our third party providers or suppliers) or results in the loss of or accidental, unlawful or unauthorized access to, use of, release of or other processing of personally identifiable information or clinical trial data, our reputation could be materially damaged.

For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

Moreover, if a real or perceived security breach affects our systems (or those of our third-party providers or suppliers) or results in the loss of or accidental, unlawful or unauthorized access to, use of, release of or other processing of personally identifiable information or clinical

trial data, our reputation could be materially damaged.

In addition, such a breach may require notification to governmental agencies, the media or individuals pursuant to applicable data privacy and security laws.

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federal healthcare programs or healthcare programs in other jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.