What changed in this filing

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Item 1. Financial Statements

2023-08-01 compared with 2023-05-02 · 107 added, 67 removed, 403 unchanged (30% of the section changed)

36 unchanged sentences

Common stock—$ 0.00001 par value;

500,000,000 shares authorized at March 31, 2023 and December 31, 2022, respectively;

59,954,618 shares and 59,615,731 issued and outstanding at March 31, 2023 and December 31, 2022, respectively

500,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively;

59,999,658 shares and 59,615,731 issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive (loss) income

Accumulated deficit

7 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net product revenues

6 unchanged sentences

Operating income

Other income (expense), net

Other (expense) income, net

Interest expense, net

1 unchanged sentence

Income tax expense

Unrealized gain on investments

Unrealized loss on investments

Comprehensive income

9 unchanged sentences

stockholders’

income (loss)

(loss) income

Balance as of December 31, 2022

2 unchanged sentences

Stock-based compensation

Balance as of June 30, 2023

comprehensive

stockholders’

(loss) income

Balance as of March 31, 2023

Unrealized loss on investments

Issuance of common stock

Exercise of options

Stock-based compensation

Balance as of June 30, 2023

comprehensive

stockholders’

(loss) income

Balance as of December 31, 2021

Unrealized loss on investments

Exercise of stock options

Stock-based compensation

Balance as of June 30, 2022

comprehensive

stockholders’

(loss) income

Balance as of March 31, 2022

Unrealized loss on investments

Exercise of options

Stock-based compensation

Balance as of June 30, 2022

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)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

22 unchanged sentences

Principal repayment of long term debt

Payments of employee withholding taxes related to stock-based awards

Proceeds from exercised options

Net cash provided by financing activities

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

NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

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

2 unchanged sentences

Cash paid during the year for interest

Cash paid during the year for taxes

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

12 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 $ 242,645 and $ 272,130 , as of March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023, the Company had cash, cash equivalents and investments of $ 392,416 .

The Company believes that its existing cash, cash equivalents and investments on hand as of March 31, 2023, 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 $ 208,345 and $ 272,130 , as of June 30, 2023 and December 31, 2022, respectively.

As of June 30, 2023, the Company had cash, cash equivalents and investments of $ 429,884 .

The Company believes that its existing cash, cash equivalents and investments on hand as of June 30, 2023, 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 March 31, 2023, the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2023, and 2022, and the unaudited condensed consolidated statements of operations and comprehensive income and the unaudited condensed consolidated statements of shareholders’ equity for the three months ended March 31, 2023 and 2022, are unaudited.

The balance sheet as of March 31, 2023, was derived from audited financial statements as of and for the year ended December 31, 2022.

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, 2022, and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of March 31, 2023, and the results of its operations and its cash flows for the three months ended March 31, 2023 and 2022.

The unaudited condensed consolidated balance sheet as of June 30, 2023, the unaudited condensed consolidated statements of cash flows for the three and six months ended June 30, 2023, and 2022, 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, 2023 and 2022, are unaudited.

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

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, 2022, 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, 2023, and the results of its operations and its cash flows for the three and six months ended June 30, 2023 and 2022.

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

19 unchanged sentences

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

Interest income generated from our investments and cash equivalents, which is included in interest expense, net, was $ 2,731 and $ 5,153 for the three and six months ended June 30, 2023, respectively, compared to $ 250 and $ 317 for the three and six months ended June 30, 2022, respectively.

Concentrations of Risk

9 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 March 31, 2023, three customers accounted for 100 % of gross accounts receivable;

The Company monitors its exposure within accounts receivable and would record a reserve against uncollectible accounts receivable if necessary.

As of June 30, 2023, three customers accounted for 100 % of gross accounts receivable;

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

Accredo Health Group, Inc.

(“Accredo”), which accounted for 36 % of gross accounts receivable;

Caremark LLC (“CVS Caremark”), which accounted for 30 % of gross accounts receivable;

and PANTHERx Specialty Pharmacy LLC (“Pantherx”), which accounted for 26 % of gross accounts receivable.

2 unchanged sentences

and Pantherx, which accounted for 24 % of gross accounts receivable.

For the three months ended March 31, 2023, three customers accounted for 100 % of gross product revenues;

For the six months ended June 30, 2023, three customers accounted for 100 % of gross product revenues;

CVS Caremark accounted for 35 % of gross product revenues;

1 unchanged sentence

and Accredo accounted for 32 % of gross product revenues.

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

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

CVS Caremark accounted for 39 % of gross product revenues;

12 unchanged sentences

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

March 31, 2023

June 30, 2023

Commercial paper

17 unchanged sentences

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

The Company did not have any available-for-sale debt security investments in a continuous unrealized loss position of greater than 12 months as of June 30, 2023 and December 31, 2022, respectively.

FAIR VALUE MEASUREMENTS

11 unchanged sentences

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 March 31, 2023 or December 31, 2022.

The Company did not classify any assets or liabilities as Level 3 as of June 30, 2023 or December 31, 2022.

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

March 31, 2023

June 30, 2023

December 31, 2022

13 unchanged sentences

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 March 31, 2023, the remaining useful life was 6.5 years.

The Company determined a useful life of 10 years for such intangible asset, and, as of June 30, 2023, the remaining useful life was 6.3 years.

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

This event triggered a milestone payment of $ 100,000 under the provisions of the 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 March 31, 2023, the remaining useful life was 6.5 years.

The Company determined a useful life of 9 years for such intangible asset, and, as of June 30, 2023, the remaining useful life was 6.3 years.

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

This event triggered a final $ 40,000 payment under the provisions of the 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 March 31, 2023, the remaining useful life was 6.5 years.

Amortization expense was $ 5,961 and $ 5,082 for the three months ended March 31, 2023 and 2022, respectively, and is recorded in general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive income.

The Company determined a useful life of 7.6 years for such intangible asset, and, as of June 30, 2023, the remaining useful life was 6.3 years.

Amortization expense was $ 5,961 for each of the three months ended June 30, 2023 and 2022, respectively, and $ 11,922 and $ 11,043 for the six months ended June 30, 2023 and 2022, respectively, and is recorded in general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive income.

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

Years ending December 31,

2023 (Excluding the three months ended March 31, 2023)

2023 (Excluding the six months ended June 30, 2023)

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

5 unchanged sentences

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.

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.

A milestone payment of $ 77,000 , which included a $ 2,000 fee that is described below, was due upon FDA approval of WAKIX (pitolisant) for treatment of EDS in adult patients with narcolepsy, which was achieved in August 2019.

4 unchanged sentences

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 $ 19,060 and $ 13,672 for the three months ended March 31, 2023 and 2022, respectively, for sales-based, trademark and tiered royalties recognized as cost of product sold.

As of March 31, 2023 and December 31, 2022, the Company had accrued $ 19,060 and $ 25,367 , respectively, for sales-based, trademark and tiered royalties.

The Company incurred $ 22,542 and $ 17,125 for the three months ended June 30, 2023 and 2022, respectively, and $ 41,602 and $ 30,797 for the six months ended June 30, 2023 and 2022, respectively, for sales-based, trademark and tiered royalties recognized as cost of product sold.

As of June 30, 2023 and December 31, 2022, the Company had accrued $ 22,542 and $ 25,367 , 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.

7 unchanged sentences

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

In March 2023, the Company achieved a preclinical milestone, which triggered a $ 750 payment under the provisions of the APA, which the Company recognized as an IPR&D charge recorded in research and development within the unaudited condensed consolidated statement of operations and comprehensive income for the three months ended March 31, 2023.

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

16 unchanged sentences

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 March 31, 2023 was $ 168,569 .

In addition, the Company paid $ 1,000 in debt issuance costs relating to 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, 2023 was $ 171,622 .

Long-term debt, net consists of the following:

4 unchanged sentences

Long-term debt, net

Future minimum payments relating to long-term debt, net as of March 31, 2023, for the periods indicated below consists of the following:

Future minimum payments relating to long-term debt, net as of June 30, 2023, for the periods indicated below consists of the following:

Years ending December 31,

2023 (Excluding the three months ended March 31, 2023)

2023 (Excluding the six months ended June 30, 2023)

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

Three Months Ended

Six Months Ended

Interest on principal balance

8 unchanged sentences

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 $ 378 and $ 385 for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, the weighted-average remaining lease term for operating leases was 1.5 years and the weighted-average discount rate for operating leases was 4.6 %.

The Company recorded operating lease costs of $ 444 and $ 392 for the three months ended June 30, 2023 and 2022, respectively, and $ 822 and $ 777 for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, the weighted-average remaining lease term for operating leases was 1.4 years and the weighted-average discount rate for operating leases was 4.7 %.

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

Classification

March 31, 2023

June 30, 2023

December 31, 2022

7 unchanged sentences

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

March 31, 2023

March 31, 2022

June 30, 2023

June 30, 2022

Operating cash flows from operating leases

Right of use assets obtained in exchange for operating lease obligations

Future payments under noncancelable operating leases with initial terms of one year or more as of March 31, 2023 consisted of the following:

Future payments under noncancelable operating leases with initial terms of one year or more as of June 30, 2023 consisted of the following:

Years ending December 31,

2023 (Excluding the three months ended March 31, 2023)

2023 (Excluding the six months ended June 30, 2023)

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 March 31, 2023, there were no material claims or suits outstanding.

As of June 30, 2023, 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 March 31, 2023, there were 4,647,087 shares of common stock available for issuance under the 2020 Plan.

As of June 30, 2023, there were 6,825,685 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 three months ended March 31, 2023:

The following table summarizes stock option activity for the six months ended June 30, 2023:

Awards outstanding—December 31, 2022

2 unchanged sentences

Awards forfeited

Awards outstanding—March 31, 2023

Awards outstanding—June 30, 2023

Stock Appreciation Rights

The following table summarizes SARs activity for the three months ended March 31, 2023:

The following table summarizes SARs activity for the six months ended June 30, 2023:

Awards outstanding—December 31, 2022

2 unchanged sentences

Awards forfeited

Awards outstanding—March 31, 2023

Awards outstanding—June 30, 2023

Restricted Stock Units

The following table summarizes RSU activity for the three months ended March 31, 2023:

The following table summarizes RSU activity for the six months ended June 30, 2023:

Awards outstanding—December 31, 2022

2 unchanged sentences

Awards forfeited

Awards outstanding—March 31, 2023

As of March 31, 2023 and December 31, 2022, stock awards issued under the 2017 and 2020 Plans of 2,219,090 and 1,818,045 shares of common stock, respectively, were vested.

Awards outstanding—June 30, 2023

As of June 30, 2023 and December 31, 2022, stock awards issued under the 2017 and 2020 Plans of 2,459,938 and 1,818,045 shares of common stock, respectively, were vested.

Value of Stock Options and SARs

11 unchanged sentences

76.32 - 80.21

72.57 - 77.08

Risk-free interest rate

3 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 $ 19.83 and $ 18.88 on March 31, 2023 and December 31, 2022, respectively.

The weighted average per share fair value of awards issued under the 2017 Plan and 2020 Plan was $ 20.06 and $ 18.88 on June 30, 2023 and December 31, 2022, respectively.

Stock-Based Compensation Expense

Stock-based compensation expense, net for the three months ended March 31, 2023 and 2022, was recorded in the unaudited condensed consolidated statements of operations and comprehensive income in the following line items:

Three Months Ended March 31,

Stock-based compensation expense, net for the three and six months ended June 30, 2023 and 2022, was recorded in the unaudited condensed consolidated statements of operations and comprehensive income in the following line items:

Three Months Ended June 30,

Six Months Ended June 30,

Research and development expense

2 unchanged sentences

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 March 31, 2023, the total unrecognized stock-based compensation expense related to options and RSUs was $ 77,333 .

As of June 30, 2023, the total unrecognized stock-based compensation expense related to options and RSUs was $ 74,153 .

Such amount will be recognized in the Company’s consolidated statement of operations over a weighted average period of 2.6 years.

5 unchanged sentences

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

There were no shares issued under the ESPP for each of the three months ended March 31, 2023 and 2022.

The discount on the ESPP was $ 105 and $ 94 for the three months ended March 31, 2023 and 2022, respectively, and is recorded within stock-based compensation expense.

There were 14,043 and 14,889 shares issued under the ESPP for each of the three and six months ended June 30, 2023 and 2022, respectively.

The discount on the ESPP was $ 103 and $ 91 for the three months ended June 30, 2023 and 2022, respectively, and $ 208 and $ 185 for the six months ended June 30, 2023 and 2022, respectively, and is recorded within stock-based compensation expense.

EARNINGS PER SHARE

2 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net income per common share - basic

3 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Stock options, SARs, and RSUs to purchase common stock

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Stock options, SARs, and RSUs to purchase common stock

The reasons for the difference between the statutory federal income tax rate and the Company’s effective income tax rate for the three months ended March 31, 2023 and 2022 are as follows:

Three Months Ended March 31,

The reasons for the difference between the statutory federal income tax rate and the Company’s effective income tax rate for the three and six months ended June 30, 2023 and 2022 are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Federal income tax rate

3 unchanged sentences

The Company was party to a management agreement for professional services provided by a related party, Paragon Biosciences, LLC (“Paragon”).

The related party is an entity that shares common ownership

with the Company.

The related party is an entity that shares common ownership with the Company.

In addition, the Chairman of the Company’s board of directors was the President and owner of the entity.

2 unchanged sentences

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

The Company incurred $ 71 for each of the three months ended March 31, 2023 and 2022, in expenses to this related party, which are included in general and administrative expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

As of March 31, 2023 and December 31, 2022, there were no amounts due to or due from related parties included in the unaudited condensed consolidated balance sheets.

The Company incurred $ 74 and $ 71 for the three months ended June 30, 2023 and 2022, and incurred $ 145 and $ 142 for the six months ended June 30, 2023 and 2022, respectively, 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, 2023 and December 31, 2 0 22, there were no amounts due to or due from related parties included in the unaudited condensed consolidated balance sheets.

SUBSEQUENT EVENTS

On July 26, 2023, the Company entered into a Credit Agreement (the “TLA Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders.

The TLA Credit Agreement provides for a five-year senior secured term loan (the “TLA Term Loan”) in an aggregate principal amount of $ 185,000 .

The proceeds from the TLA Term Loan, together with the Company’s cash on hand, were used to repay the Initial Term Loan and to pay transaction fees and expenses in connection with the establishment of the TLA Credit Agreement.

In addition, the Company paid a repayment premium of 2.00 % of the principal amount of the Initial Term Loan outstanding at the time of repayment.

Upon entry into the TLA Credit Agreement and repayment of the Initial Term Loan, all commitments under the Blackstone Credit Agreement were terminated.

On August 1, 2023, the Company’s Board of Directors approved a repurchase program providing for the repurchase of shares of common stock in an aggregate amount of up to $ 125,000 , exclusive of commissions and transaction fees.

The repurchase program may be modified at any time.

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