Harmony Biosciences Holdings, Inc. 10-Q

Item 1. Financial Statements HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS ​ (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ 2023 2022 ASSETS ​ ​ CURRENT ASSETS: ​ ​ Cash and cash equivalents ​ $ 324,603 ​ $ 243,784 Investments, short-term ​ ​ 46,071 ​ ​ 79,331 Trade receivables, net ​ 67,264 ​ 54,740 Inventory, net ​ 5,087 ​ 4,297 Prepaid expenses ​ 14,269 ​ 9,347 Other current assets ​ 5,704 ​ 8,786 Total current assets ​ 462,998 ​ 400,285 NONCURRENT ASSETS: ​ ​ Property and equipment, net ​ 428 ​ 573 Restricted cash ​ 250 ​ 750 Investments, long-term ​ ​ 67,700 ​ ​ 22,568 Intangible assets, net ​ 143,069 ​ 160,953 Deferred tax asset ​ ​ 100,485 ​ ​ 85,943 Other noncurrent assets ​ 2,836 ​ 2,798 Total noncurrent assets ​ 314,768 ​ 273,585 TOTAL ASSETS ​ $ 777,766 ​ $ 673,870 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ CURRENT LIABILITIES: ​ ​ Trade payables ​ $ 6,539 ​ $ 3,786 Accrued compensation ​ 10,322 ​ 11,532 Accrued expenses ​ 72,761 ​ 59,942 Current portion of long-term debt ​ ​ 15,000 ​ ​ 2,000 Other current liabilities ​ 7,786 ​ 1,624 Total current liabilities ​ 112,408 ​ 78,884 NONCURRENT LIABILITIES: ​ ​ Long-term debt, net ​ 182,131 ​ 189,647 Other noncurrent liabilities ​ 1,895 ​ 2,501 Total noncurrent liabilities ​ 184,026 ​ 192,148 TOTAL LIABILITIES ​ 296,434 ​ 271,032 COMMITMENTS AND CONTINGENCIES (Note 12) ​ ​ STOCKHOLDERS’ EQUITY: ​ ​ Common stock—$ 0.00001 par value; 500,000,000 shares authorized at September 30, 2023 and December 31, 2022, respectively; 58,571,944 shares and 59,615,731 issued and outstanding at September 30, 2023 and December 31, 2022, respectively ​ 1 ​ 1 Additional paid in capital ​ 651,731 ​ 675,118 Accumulated other comprehensive (loss) income ​ ​ ( 516 ) ​ ​ ( 151 ) Accumulated deficit ​ ( 169,884 ) ​ ( 272,130 ) TOTAL STOCKHOLDERS’ EQUITY ​ 481,332 ​ 402,838 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY ​ $ 777,766 ​ $ 673,870 ​ The accompanying notes are an integral part of the unaudited condensed consolidated financial statements ​ 3 Table of Contents HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2023 2022 2023 2022 Net product revenues ​ $ 160,268 ​ $ 117,206 ​ $ 413,610 ​ $ 309,547 Cost of product sold ​ 32,296 ​ 22,959 ​ 78,084 ​ 56,596 Gross profit ​ 127,972 ​ 94,247 ​ 335,526 ​ 252,951 Operating expenses: ​ ​ ​ ​ Research and development ​ 17,499 ​ 40,548 ​ 45,757 ​ 60,794 Sales and marketing ​ 23,418 ​ 20,467 ​ 70,518 ​ 58,210 General and administrative ​ 22,546 ​ 21,331 ​ 67,417 ​ 61,374 Total operating expenses ​ 63,463 ​ 82,346 ​ 183,692 ​ 180,378 Operating income ​ 64,509 ​ 11,901 ​ 151,834 ​ 72,573 Loss on debt extinguishment ​ ( 9,766 ) ​ — ​ ( 9,766 ) ​ — Other (expense) income, net ​ ( 5 ) ​ 56 ​ ( 34 ) ​ 96 Interest expense, net ​ ( 2,906 ) ​ ( 3,990 ) ​ ( 8,327 ) ​ ( 12,086 ) Income before income taxes ​ 51,832 ​ 7,967 ​ 133,707 ​ 60,583 Income tax (expense) benefit ​ ( 13,371 ) ​ 79,976 ​ ( 31,461 ) ​ 72,376 Net income ​ $ 38,461 ​ $ 87,943 ​ $ 102,246 ​ $ 132,959 Unrealized income (loss) on investments ​ 6 ​ ( 149 ) ​ ( 365 ) ​ ( 178 ) Comprehensive income ​ $ 38,467 ​ $ 87,794 ​ $ 101,881 ​ $ 132,781 EARNINGS PER SHARE: ​ ​ ​ ​ Basic ​ $ 0.64 ​ $ 1.48 ​ $ 1.71 ​ $ 2.25 Diluted ​ $ 0.63 ​ $ 1.44 ​ $ 1.68 ​ $ 2.18 Weighted average number of shares of common stock - basic ​ 59,863,102 ​ 59,234,720 ​ 59,856,941 ​ 59,070,063 Weighted average number of shares of common stock - diluted ​ 60,681,676 ​ 61,207,625 ​ 60,892,992 ​ 60,921,482 ​ The accompanying notes are an integral part of the unaudited condensed consolidated financial statements ​ 4 Table of Contents HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ other ​ ​ ​ ​ Total ​ ​ Common Stock ​ paid-in ​ comprehensive ​ Accumulated ​ stockholders’ ​ Shares Amount capital (loss) income deficit equity Balance as of December 31, 2022 59,615,731 ​ $ 1 ​ $ 675,118 ​ $ ( 151 ) ​ $ ( 272,130 ) ​ $ 402,838 Net income — ​ — ​ — ​ ​ — ​ 102,246 ​ 102,246 Unrealized loss on investments ​ — ​ ​ — ​ ​ — ​ ​ ( 365 ) ​ ​ — ​ ​ ( 365 ) Repurchase of common stock ​ ( 1,439,792 ) ​ ​ — ​ ​ ( 50,543 ) ​ ​ — ​ ​ — ​ ​ ( 50,543 ) Exercise of options and restricted stock units 396,005 ​ — ​ 4,314 ​ ​ — ​ — ​ 4,314 Stock-based compensation — ​ — ​ 22,842 ​ ​ — ​ — ​ 22,842 Balance as of September 30, 2023 58,571,944 ​ $ 1 ​ $ 651,731 ​ $ ( 516 ) ​ $ ( 169,884 ) ​ $ 481,332 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ other ​ ​ ​ ​ Total ​ ​ Common Stock ​ paid-in ​ comprehensive ​ Accumulated ​ stockholders’ ​ Shares Amount capital (loss) income deficit equity Balance as of June 30, 2023 ​ 59,999,658 ​ $ 1 ​ $ 694,038 ​ $ ( 522 ) ​ $ ( 208,345 ) ​ $ 485,172 Net income — ​ — ​ — ​ ​ — ​ 38,461 ​ 38,461 Unrealized loss on investments ​ — ​ ​ — ​ ​ — ​ ​ 6 ​ ​ — ​ ​ 6 Repurchase of common stock ​ ( 1,439,792 ) ​ ​ — ​ ​ ( 50,543 ) ​ ​ — ​ ​ — ​ ​ ( 50,543 ) Exercise of options 12,078 ​ — ​ 245 ​ ​ — ​ — ​ 245 Stock-based compensation — ​ — ​ 7,991 ​ ​ — ​ — ​ 7,991 Balance as of September 30, 2023 58,571,944 ​ $ 1 ​ $ 651,731 ​ $ ( 516 ) ​ $ ( 169,884 ) ​ $ 481,332 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ other ​ ​ ​ Total ​ ​ Common Stock ​ paid-in ​ comprehensive ​ Accumulated ​ stockholders’ ​ Shares Amount capital ​ (loss) income deficit equity Balance as of December 31, 2021 58,825,769 ​ $ 1 ​ $ 640,104 ​ $ — ​ $ ( 453,598 ) ​ $ 186,507 Net income — ​ — ​ — ​ ​ — ​ 132,959 ​ 132,959 Unrealized loss on investments ​ — ​ ​ — ​ ​ — ​ ​ ( 178 ) ​ ​ — ​ ​ ( 178 ) Issuance of common stock ​ 8,050 ​ ​ — ​ ​ 408 ​ ​ — ​ ​ — ​ ​ 408 Exercise of stock options 470,589 ​ — ​ 5,275 ​ ​ — ​ — ​ 5,275 Stock-based compensation — ​ — ​ 18,913 ​ ​ — ​ — ​ 18,913 Balance as of September 30, 2022 59,304,408 ​ $ 1 ​ $ 664,700 ​ $ ( 178 ) ​ $ ( 320,639 ) ​ $ 343,884 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ other ​ ​ ​ Total ​ ​ Common Stock ​ paid-in ​ comprehensive ​ Accumulated ​ stockholders’ ​ Shares Amount capital ​ (loss) income deficit equity Balance as of June 30, 2022 59,117,749 ​ $ 1 ​ $ 655,143 ​ $ ( 29 ) ​ $ ( 408,582 ) ​ $ 246,533 Net income — ​ — ​ — ​ ​ — ​ 87,943 ​ 87,943 Unrealized loss on investments ​ — ​ ​ — ​ ​ — ​ ​ ( 149 ) ​ ​ — ​ ​ ( 149 ) Issuance of common stock ​ 8,050 ​ ​ — ​ ​ 408 ​ ​ ​ ​ ​ — ​ ​ 408 Exercise of options 178,609 ​ — ​ 2,143 ​ ​ — ​ — ​ 2,143 Stock-based compensation — ​ — ​ 7,006 ​ ​ — ​ — ​ 7,006 Balance as of September 30, 2022 59,304,408 ​ $ 1 ​ $ 664,700 ​ $ ( 178 ) ​ $ ( 320,639 ) ​ $ 343,884 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements ​ 5 Table of Contents HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ Net income ​ $ 102,246 ​ $ 132,959 Adjustments to reconcile net income to net cash used in operating activities: ​ ​ ​ Depreciation ​ 350 ​ 312 Intangible amortization ​ 17,884 ​ 17,005 Stock-based and employee stock purchase compensation expense ​ 22,842 ​ 18,913 Stock appreciation rights market adjustment ​ ( 531 ) ​ 321 Debt issuance costs amortization ​ 2,089 ​ 1,241 Deferred taxes ​ ​ ( 14,542 ) ​ ​ ( 81,679 ) Amortization of premiums and accretion of discounts on Investment securities ​ ​ ( 2,031 ) ​ ​ — Loss on debt extinguishment ​ ​ 9,766 ​ ​ — Other non-cash expenses ​ ​ 1,258 ​ ​ 1,042 Change in operating assets and liabilities: ​ ​ ​ Trade receivables ​ ( 12,524 ) ​ ( 20,222 ) Inventory ​ ( 790 ) ​ 532 Prepaid expenses and other assets ​ ( 1,759 ) ​ ( 4,704 ) Trade payables ​ 2,753 ​ 9,048 Accrued expenses and other current liabilities ​ 15,714 ​ 43,171 Other non-current liabilities ​ ( 3 ) ​ ( 151 ) Net cash provided by operating activities ​ 142,722 ​ 117,788 CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ Purchase of investment securities ​ ​ ( 105,856 ) ​ ​ ( 55,637 ) Proceeds from maturities and sales of investment securities ​ ​ 95,687 ​ ​ 872 Purchase of property and equipment ​ ( 205 ) ​ ( 172 ) Milestone payments ​ — ​ ( 40,000 ) Net cash used in investing activities ​ ( 10,374 ) ​ ( 94,937 ) CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ Proceeds from issuance of common stock ​ ​ — ​ ​ 408 Proceeds from long term debt ​ 200,000 ​ — Debt issuance costs ​ ( 2,997 ) ​ — Extinguishment of debt ​ ( 196,500 ) ​ — Extinguishment of debt exit fees ​ ( 5,846 ) ​ — Principal repayment of long term debt ​ ​ ( 1,000 ) ​ ​ ( 1,500 ) Repurchase of common stock ​ ​ ( 50,000 ) ​ ​ — Payments of employee withholding taxes related to stock-based awards ​ ​ ( 514 ) ​ ​ — Proceeds from exercised options ​ 4,828 ​ 5,275 Net cash (used in) provided by financing activities ​ ( 52,029 ) ​ 4,183 NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ​ 80,319 ​ 27,034 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period ​ 244,534 ​ 235,059 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period ​ $ 324,853 ​ $ 262,093 Supplemental Disclosure of Cash Flow Information: ​ ​ Cash paid during the year for interest ​ $ 15,653 ​ $ 11,334 Cash paid during the year for taxes ​ ​ 36,543 ​ ​ 9,702 ​ The accompanying notes are an integral part of the unaudited condensed consolidated financial statements ​ 6 Table of Contents HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) 1. ORGANIZATION AND DESCRIPTION OF BUSINESS The Company Harmony Biosciences Holdings, Inc., and its consolidated subsidiary (the “Company”) was founded in July 2017 as Harmony Biosciences II, LLC, a Delaware limited liability company. The Company converted to a Delaware corporation named Harmony Biosciences II, Inc. in September 2017 and, in February 2020, the Company changed its name to Harmony Biosciences Holdings, Inc. The Company’s operations are conducted in its wholly owned subsidiary, Harmony Biosciences, LLC (“Harmony”), which was formed in May 2017. The Company is a commercial-stage pharmaceutical company focused on developing and commercializing innovative therapies for patients living with rare neurological diseases as well as patients living with other neurological diseases who have unmet medical needs. The Company is headquartered in Plymouth Meeting, Pennsylvania. 2. LIQUIDITY AND CAPITAL RESOURCES 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 $ 169,884 and $ 272,130 , as of September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023, the Company had cash, cash equivalents and investments of $ 438,374 . The Company believes that its existing cash, cash equivalents and investments on hand as of September 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. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented. All intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated balance sheet as of September 30, 2023, the unaudited condensed consolidated statements of cash flows for the three and nine months ended September 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 nine months ended September 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 September 30, 2023, and the results of its operations and its cash flows for the three and nine months ended September 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. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted under the SEC’s rules and regulations. These unaudited condensed consolidated financial statements should be read 7 Table of Contents in conjunction with the audited financial statements and accompanying notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the unaudited condensed consolidated financial statements, including the notes thereto, and elsewhere in this report. Actual results may differ significantly from estimates, which include rebates due pursuant to commercial and government contracts, accrued research and development expenses, stock-based compensation expense and income taxes. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents and restricted cash consist of cash and, if applicable, highly liquid investments with an original maturity of three months or less when purchased, including investments in Money Market Funds and debt securities that approximate fair value. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheet and the statements of cash flows. ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ September 30, December 31, ​ ​ 2023 ​ 2022 Cash and cash equivalents ​ $ 324,603 ​ $ 243,784 Restricted cash ​ 250 ​ 750 Total cash, cash equivalents, and restricted cash shown in the statements of cash flows ​ $ 324,853 ​ $ 244,534 ​ Restricted cash includes amounts required to be held as a security deposit in the form of letters of credit for the Company’s credit card program and the fleet program. Investments The Company’s investments consist of debt securities that are classified as available-for-sale. Short-term and long-term investments are carried at fair value and unrealized gains and losses are recorded as a component of accumulated comprehensive income in stockholders’ equity. The amortization of premiums and accretion of discounts adjust the carrying value of investments and are recorded in interest expense, net, on the unaudited condensed consolidated statements of operations and comprehensive income. Interest income and realized gains and losses, if any, are also recorded in interest expense, net, on the unaudited condensed consolidated statement of operations and comprehensive income. Realized gains and losses that result from the sale of investments are determined on a specific identification basis. At each reporting period, the Company reviews any unrealized losses position to determine if the decline in the fair value of the underlying investments is a result of credit losses or other factors. If the assessment indicates that a credit loss exists, any impairment is recognized as an allowance for credit losses in our consolidated statement of operations. Interest income generated from our investments and cash equivalents, which is included in interest expense, net, was $ 3,384 and $ 8,537 for the three and nine months ended September 30, 2023, respectively, compared to $ 828 and $ 1,145 for the three and nine months ended September 30, 2022, respectively. ​ Concentrations of Risk Substantially all of the Company’s cash and money market funds are held in four financial institutions. Due to their size, the Company believes these financial institutions represent minimal credit risk. Deposits may 8 Table of Contents exceed the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation for U.S. institutions. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company believes that it is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company is subject to credit risk from its trade receivables related to its product sales. The Company extends credit to specialty pharmaceutical distribution companies within the United States. Customer creditworthiness is monitored, and collateral is not required. 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 September 30, 2023, three customers accounted for 100 % of gross accounts receivable; Caremark LLC (“CVS Caremark”), which accounted for 37 % of gross accounts receivable; Accredo Health Group, Inc. (“Accredo”), which accounted for 37 % of gross accounts receivable; and PANTHERx Specialty Pharmacy LLC (“Pantherx”), which accounted for 26 % of gross accounts receivable. As of December 31, 2022, three customers accounted for 100 % of gross accounts receivable; CVS Caremark, which accounted for 41 % of gross accounts receivable, Accredo, which accounted for 35 % of gross accounts receivable; and Pantherx, which accounted for 24 % of gross accounts receivable. For the nine months ended September 30, 2023, three customers accounted for 100 % of gross product revenues; CVS Caremark accounted for 37 % of gross product revenues; Accredo accounted for 32 % of gross product revenues; and Pantherx accounted for 31 % 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; Pantherx accounted for 30 % of gross product revenues; and Accredo accounted for 30 % of gross product revenues. The Company depends on a single source supplier for each of its product and active pharmaceutical ingredient. Share Repurchases The Company accounts for share repurchases as constructive retirements, whereby it reduces common stock and additional paid-in capital by the amount of the original issuance, with any excess purchase price recorded as a reduction to retained earnings. Under this method, issued and outstanding shares of common stock are reduced by the amount of shares of common stock repurchased, and no treasury stock is recognized on the condensed consolidated financial statements. ​ Recently Issued Accounting Pronouncements The Company did not adopt any new accounting pronouncements that had a material effect on its condensed consolidated financial statements during the three and nine months ended September 30, 2023. ​ ​ 9 Table of Contents 4. INVESTMENTS 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, 2023 ​ ​ Amortized ​ Unrealized ​ Unrealized ​ ​ Fair ​ ​ Cost ​ Gains ​ Losses ​ ​ Value Short-term: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial paper $ 27,717 ​ 1 ​ ( 13 ) ​ $ 27,705 Corporate debt securities ​ 16,456 ​ 3 ​ ( 7 ) ​ ​ 16,452 U.S. government securities ​ 1,915 ​ — ​ ( 1 ) ​ ​ 1,914 Total short-term investments $ 46,088 ​ 4 ​ ( 21 ) ​ $ 46,071 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Long-term: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial paper $ 1,623 ​ — ​ ( 2 ) ​ $ 1,621 Corporate debt securities ​ 39,497 ​ 14 ​ ( 155 ) ​ ​ 39,356 U.S. government securities ​ 27,079 ​ — ​ ( 356 ) ​ ​ 26,723 Total long-term investments $ 68,199 ​ 14 ​ ( 513 ) ​ $ 67,700 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ Amortized ​ Unrealized ​ Unrealized ​ ​ Fair ​ ​ Cost ​ Gains ​ Losses ​ ​ Value Short-term: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial paper $ 26,553 ​ 15 ​ ( 34 ) ​ $ 26,534 Corporate debt securities ​ 49,213 ​ 9 ​ ( 73 ) ​ ​ 49,149 U.S. government securities ​ 3,658 ​ — ​ ( 10 ) ​ ​ 3,648 Total short-term investments $ 79,424 ​ 24 ​ ( 117 ) ​ $ 79,331 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Long-term: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial paper $ 853 ​ 1 ​ — ​ $ 854 Corporate debt securities ​ 21,516 ​ 11 ​ ( 68 ) ​ ​ 21,459 U.S. government securities ​ 257 ​ — ​ ( 2 ) ​ ​ 255 Total long-term investments $ 22,626 ​ 12 ​ ( 70 ) ​ $ 22,568 ​ The Company classifies investments with an original maturity of less than one year as current and investments with an original maturity date of greater than one year as noncurrent on its unaudited condensed consolidated balance sheet. The investments classified as noncurrent have 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 September 30, 2023 and December 31, 2022, respectively. 5. FAIR VALUE MEASUREMENTS 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. 10 Table of Contents 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: Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2—Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities. Level 3—Valuations based on unobservable inputs and models that are supported by little or no market activity. Money market funds are classified as Level 1 fair value instruments. Investments in available-for-sale debt securities are classified as Level 2 and carried at fair value, which we estimate utilizing a third-party pricing service. The pricing service utilizes industry standard valuation models whereby all significant inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, bids, offers, or other market-related data, are observable. We validate valuations obtained from third-party services by obtaining market values from other pricing sources. The Company did not classify any assets or liabilities as Level 3 as of September 30, 2023 or December 31, 2022. The Company’s assets measured at fair value consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 ​ December 31, 2022 ​ ​ Total ​ Level 1 ​ Level 2 ​ ​ Total ​ Level 1 ​ Level 2 Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash equivalents $ 198,135 ​ 198,135 ​ — ​ $ 184,977 ​ 184,977 ​ — Commercial paper ​ 29,326 ​ — ​ 29,326 ​ ​ 27,388 ​ — ​ 27,388 Corporate debt securities ​ 55,808 ​ — ​ 55,808 ​ ​ 70,608 ​ — ​ 70,608 U.S. government securities ​ 28,637 ​ — ​ 28,637 ​ ​ 3,903 ​ — ​ 3,903 Total $ 311,906 ​ 198,135 ​ 113,771 ​ $ 286,876 ​ 184,977 ​ 101,899 ​ ​ 6. INVENTORY Inventory, net consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ September 30, December 31, ​ ​ 2023 ​ 2022 Raw materials ​ $ 932 ​ $ 838 Work in process ​ 1,833 ​ 1,513 Finished goods ​ 2,611 ​ 2,565 Inventory, gross ​ 5,376 ​ 4,916 Reserve for excess inventory ​ ( 289 ) ​ ( 619 ) Total inventory, net ​ $ 5,087 ​ $ 4,297 ​ ​ 11 Table of Contents 7. INTANGIBLE ASSETS 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 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, 2023, the remaining useful life was 6.0 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 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, 2023, the remaining useful life was 6.0 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 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, 2023, the remaining useful life was 6.0 years. Amortization expense was $ 5,962 and $ 5,961 for the three months ended September 30, 2023 and 2022, respectively, and $ 17,884 and $ 17,005 for the nine months ended September 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 nine months ended September 30, 2023) ​ $ 5,961 2024 ​ 23,845 2025 ​ 23,845 2026 ​ 23,845 2027 ​ 23,845 Thereafter ​ ​ 41,728 Total ​ $ 143,069 ​ The gross carrying amount and net book value of the intangible asset is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ September 30, December 31, ​ ​ 2023 ​ 2022 Gross Carrying Amount ​ $ 215,000 ​ $ 215,000 Accumulated Amortization ​ ( 71,931 ) ​ ( 54,047 ) Net Book Value ​ $ 143,069 ​ $ 160,953 ​ ​ 8. LICENSE AGREEMENTS AND ASSET PURCHASE AGREEMENTS License Agreements 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 12 Table of Contents 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. The $ 2,000 payment and $ 75,000 milestone payment were paid in August and November 2019, respectively. In addition, a milestone payment of $ 102,000 , which included a $ 2,000 fee was due upon the FDA approval of the NDA for WAKIX for the treatment of cataplexy in adult patients with narcolepsy. The $ 2,000 payment was paid in October 2020 and a $ 100,000 milestone payment was paid in January 2021. 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 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 $ 29,665 and $ 20,944 for the three months ended September 30, 2023 and 2022, respectively, and $ 71,267 and $ 51,741 for the nine months ended September 30, 2023 and 2022, respectively, for sales-based, trademark and tiered royalties recognized as cost of product sold. As of September 30, 2023 and December 31, 2022, the Company had accrued $ 29,665 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. Harmony paid an initial, non-refundable $ 30,000 licensing fee in October 2022 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 other 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. Agreement Related to Intellectual Property In August 2021, the Company entered into an asset purchase agreement with ConSynance Therapeutics, Inc. (the “APA”) to acquire HBS-102 (formerly referred to as “CSTI-100”), a potential first-in-class molecule with a novel mechanism of action. Under the terms of the APA, the Company acquired full development and commercialization rights globally, with the exception of Greater China, for $ 3,500 . The Company accounted for the transaction as an asset acquisition as substantially all of the fair value of the assets acquired was concentrated in a single identified asset. 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 nine months ended September 30, 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. 13 Table of Contents 9. ACCRUED EXPENSES Accrued expenses consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ September 30, December 31, ​ ​ 2023 ​ 2022 Royalties due to Bioprojet ​ $ 29,665 ​ $ 25,367 Rebates and other sales deductions ​ 31,853 ​ 27,860 Interest ​ ​ 3,140 ​ ​ 3,286 Selling and marketing ​ 2,253 ​ 1,135 Research and development ​ 2,190 ​ 358 Professional fees, consulting, and other services ​ 1,841 ​ 1,163 Other expenses ​ 1,819 ​ 773 ​ ​ $ 72,761 ​ $ 59,942 ​ ​ ​ 10. DEBT Term Loan A Credit Agreement 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 . On September 21, 2023, the Company entered into the First Incremental Amendment (the “First Incremental Amendment”) with the Administrative Agent and Bank of America, N.A., as incremental lender. The First Incremental Amendment provides for an incremental senior secured term loan (the “Incremental Term Loan”) in an aggregate principal amount of $ 15,000 . The First Incremental Amendment amends the TLA Credit Agreement and provides that the Incremental Term Loan will have identical terms as the TLA Term Loan. The repayment schedule for both the TLA Term Loan and the Incremental Term Loan (together, the “Term Loans”) consists of quarterly $ 3,750 principal payments, which commence on December 31, 2023, increasing to quarterly $ 5,000 principal payments beginning on December 31, 2025, with a $ 115,000 payment due on the maturity date of July 26, 2028. The Term Loans bear interest at a per annum rate equal to, at the Company’s option, (i) a base rate plus a specified margin ranging from 2.50 % to 3.00 %, based on the Company’s senior secured net leverage ratio (as defined in the TLA Credit Agreement) or (ii) Term SOFR plus a credit spread adjustment of 0.10 % plus a specified margin ranging from 3.50 % to 4.00 %, based on the Company’s senior secured net leverage ratio. The net cash received related to the Term Loans as a result of the transactions, less debt issuance costs of $ 2,997 , was $ 197,003 . The debt issuance costs related to the Term Loans will be amortized as additional interest expense over the loan term of the TLA Credit Agreement. The fair value of the Term Loans as of September 30, 2023 was $ 199,820 . ​ 14 Table of Contents ​ ​ Blackstone Credit Agreement In August 2021, the Company entered into the Blackstone Credit Agreement that provided for (i) a senior secured term loan facility in an aggregate original principal amount of $ 200,000 (the “Initial Term Loan”) and (ii) a senior secured delayed draw term loan facility in an aggregate principal amount up to $ 100,000 (the “DDTL”). 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 would pay a ticking fee at a rate of 1 % per annum on the undrawn portion of the DDTL (the “Ticking Fee”), which commenced on August 10, 2022. Net cash received from the Initial Term Loan was $ 191,849 , net of debt issuance costs of $ 8,151 . In addition, the Company paid $ 1,000 in debt issuance costs relating to the DDTL, which was initially recorded in other current assets within the unaudited condensed consolidated balance sheet. In connection with the TLA Credit Agreement, the Company extinguished the Blackstone Credit Agreement, which required a payoff amount of $ 207,308 consisting of principal repayment, interest, exit fees, Ticking Fee and a prepayment premium. The Company recognized a loss on extinguishment of debt of $ 9,766 relating to the Blackstone Credit Agreement within the Company’s unaudited condensed consolidated statements of operation and comprehensive income for the three and nine months ended September 30, 2023. In addition, the Company recognized $ 1,972 relating to unamortized debt issuance costs relating to the DDTL and the Ticking Fee, which was recorded in interest expense, net within the unaudited condensed consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2023. Long-term debt, net consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2023 ​ 2022 Liability component - principal ​ $ 200,000 ​ $ 197,500 Unamortized debt discount associated with debt financing costs ​ ( 2,869 ) ​ ( 5,853 ) Liability component - net carrying value ​ ​ 197,131 ​ ​ 191,647 Less current portion ​ ​ ( 15,000 ) ​ ​ ( 2,000 ) Long-term debt, net ​ $ 182,131 ​ $ 189,647 ​ 15 Table of Contents Future minimum payments relating to long-term debt, net as of September 30, 2023, for the periods indicated below consists of the following: ​ ​ ​ ​ ​ Years ending December 31, ​ ​ ​ 2023 (Excluding the nine months ended September 30, 2023) ​ $ 3,750 2024 ​ 15,000 2025 ​ 16,250 2026 ​ 20,000 2027 ​ 20,000 Thereafter ​ ​ 125,000 Total ​ $ 200,000 ​ 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 ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2023 2022 ​ 2023 2022 Interest on principal balance ​ $ 4,791 ​ $ 4,513 ​ $ 15,900 ​ $ 12,110 Amortization of deferred financing costs ​ 2,221 ​ 418 ​ 3,061 ​ 1,241 Total term loan interest expense ​ $ 7,012 ​ $ 4,931 ​ $ 18,961 ​ $ 13,351 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11. LEASES In June 2018, the Company entered into an operating lease for approximately fifteen thousand square feet of office space in Plymouth Meeting, PA, which expires in May 2024. The Company subsequently entered into two separate operating leases for additional office space in Plymouth Meeting, PA, which include approximately thirteen thousand square feet and seven thousand square feet of additional office space, respectively, and expire in May 2024. The terms of the lease payments provide for rental payments on a monthly basis and on a graduated scale. The Company also leases a fleet of automobiles that are used by its sales representatives and are classified as operating leases. 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. 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 $ 473 and $ 378 for the three months ended September 30, 2023 and 2022, respectively, and $ 1,295 and $ 1,155 for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, the weighted-average remaining lease term for operating leases was 1.8 years and the weighted-average discount rate for operating leases was 6.0 %. 16 Table of Contents Supplemental balance sheet information related to operating leases was as follows: ​ ​ ​ ​ ​ ​ ​ Leases Classification ​ September 30, 2023 ​ December 31, 2022 Assets ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets Other noncurrent assets $ 2,456 ​ $ 2,312 Liabilities ​ ​ ​ ​ ​ ​ Operating lease liability, current portion Other current liabilities $ 1,683 ​ $ 1,614 Operating lease liability, long-term Other long-term liabilities ​ 901 ​ ​ 975 Total operating lease liabilities ​ $ 2,584 ​ $ 2,589 ​ Supplemental cash flow information related to operating leases was as follows: ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 ​ ​ September 30, 2022 Operating cash flows from operating leases $ 1,448 ​ $ 1,297 Right of use assets obtained in exchange for operating lease obligations $ 1,592 ​ $ 485 ​ Future payments under noncancelable operating leases with initial terms of one year or more as of September 30, 2023 consisted of the following: ​ ​ ​ ​ Years ending December 31, ​ ​ 2023 (Excluding the nine months ended September 30, 2023) ​ $ 558 2024 ​ 1,407 2025 ​ 532 2026 ​ 252 2027 ​ — Thereafter ​ — Total lease payments ​ ​ 2,749 Less: imputed interest ​ ​ ( 165 ) Total lease liabilities ​ $ 2,584 ​ ​ ​ 12. COMMITMENTS AND CONTINGENCIES Litigation From time to time, the Company is subject to claims and suits arising in the ordinary course of business. The Company accrues such liabilities when they are known, if they are deemed probable and can be reasonably estimated. As of September 30, 2023, there were no material claims or suits outstanding. ​ 13. STOCKHOLDERS’ EQUITY Common Stock The holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of the Company’s stockholders. The holders of common stock do not have any cumulative voting rights. Holders of common stock are entitled to receive ratably any dividends declared by the Company’s board of directors out of funds legally available for that purpose, subject to any preferential dividend rights of any outstanding preferred stock. The Company’s common stock has no preemptive rights, conversion rights or other subscription rights or redemption or sinking fund provisions. 17 Table of Contents Share Repurchase Program On August 1, 2023, the Company’s Board of Directors approved a program providing for the repurchase of shares of common stock in an aggregate amount of up to $ 125,000 , excluding commissions and transaction fees (the “August 2023 Repurchase Program”). The August 2023 Repurchase Program may be suspended, terminated or modified at any time for any reason. During the three and nine months ended September 30, 2023, the Company repurchased and cancelled 1,439,792 shares of common stock at an aggregate cost of $ 50,000 , exclusive of commissions and transaction fees. As of September 30, 2023 the remaining amount of common stock authorized for repurchases was $ 75,000 . See Note 18 to our unaudited condensed consolidated financial statements for information related to the termination of the August 2023 Repurchase Program as of October 27, 2023. 14. STOCK INCENTIVE PLAN AND STOCK-BASED COMPENSATION 2020 Stock Incentive Plan In connection with the Company’s IPO, the board of directors adopted, and its stockholders approved, the 2020 Incentive Award Plan (the “2020 Plan”), in order to facilitate the grant of cash and equity incentives to directors, employees (including the Company’s named executive officers) and consultants of the Company and its subsidiaries. The 2020 Plan provides for the grant of stock options, including incentive stock options (“ISOs”) and non-qualified stock options (“NSOs”), SARs, restricted stock, dividend equivalents, restricted stock units (“RSUs”) and other stock or cash-based awards. Stock options and stock appreciation rights under the 2020 Plan have a 10-year contractual term and 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). 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 September 30, 2023, there were 6,755,091 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. 2017 Stock Incentive Plan In August 2017, the Company adopted an equity incentive plan (the “2017 Plan”). Under the 2017 Plan, directors, officers, employees, consultants, and advisors of the Company can be paid incentive compensation measured by the value of the Company’s shares of common stock through grants of stock options, stock appreciation rights (“SARs”), or restricted stock. Following the adoption of the 2020 Plan, no further grants have been, or will be, made under the 2017 Plan. However, the 2017 Plan will continue to govern the terms and conditions of outstanding awards granted under it. 18 Table of Contents Stock Options The following table summarizes stock option activity for the nine months ended September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Weighted- ​ Average ​ ​ ​ ​ Average ​ Remaining ​ ​ Number of ​ Exercise ​ Contractual ​ Awards Price Term Awards outstanding—December 31, 2022 6,460,947 ​ $ 30.90 7.86 Awards issued 376,422 ​ $ 36.71 Awards exercised ( 367,376 ) ​ $ 12.02 Awards forfeited ( 206,318 ) ​ $ 24.84 Awards outstanding—September 30, 2023 6,263,675 ​ $ 32.55 7.39 ​ Stock Appreciation Rights The following table summarizes SARs activity for the nine months ended September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Weighted- ​ Average ​ ​ ​ ​ Average ​ Remaining ​ ​ Number of ​ Exercise ​ Contractual ​ Awards Price Term Awards outstanding—December 31, 2022 43,208 ​ $ 9.38 6.32 Awards issued — ​ $ — Awards exercised — ​ $ — Awards forfeited — ​ $ — Awards outstanding—September 30, 2023 43,208 ​ $ 9.38 5.58 ​ Restricted Stock Units The following table summarizes RSU activity for the nine months ended September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Weighted- ​ Average ​ ​ ​ ​ Average ​ Remaining ​ ​ Number of ​ Grant Date ​ Contractual ​ Awards Fair Value Term Awards outstanding—December 31, 2022 60,000 ​ $ 29.03 8.24 Awards issued — ​ $ — Awards vested ( 30,000 ) ​ $ 29.03 Awards forfeited — ​ $ — Awards outstanding—September 30, 2023 30,000 ​ $ 29.03 7.49 ​ As of September 30, 2023 and December 31, 2022, stock awards issued under the 2017 and 2020 Plans of 3,141,836 and 1,818,045 shares of common stock, respectively, were vested. Value of Stock Options and SARs The Company values options and SARs using the Black-Scholes option-pricing model. The Company lacks sufficient historical company-specific volatility information. Therefore, the Company estimates expected stock volatility based on historical volatility of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. For options with service- 19 Table of Contents based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. For SARs, the expected term is based upon the weighting of certain future events. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for the time periods approximately equal to the expected term of the award. An expected dividend yield of 0 % is based on the fact that the Company has never paid cash dividends and does not expect to do so in the foreseeable future. The assumptions used to value the awards are summarized in the following table. ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ September 30, December 31, ​ ​ 2023 2022 ​ Dividend yield 0.00 % 0.00 % Expected volatility 76.32 - 80.21 % 72.57 - 77.08 % Risk-free interest rate 3.42 - 4.61 % 1.99 - 4.05 % Lack of marketability discount 0.00 % 0.00 % Expected term (years) 2.4 - 6.3 3.1 - 6.3 ​ ​ Value of RSUs 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 $ 20.13 and $ 18.88 on September 30, 2023 and December 31, 2022, respectively. Stock-Based Compensation Expense Stock-based compensation expense, net for the three and nine months ended September 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 September 30, ​ Nine Months Ended September 30, ​ 2023 2022 2023 2022 Research and development expense ​ $ 1,030 ​ $ 522 ​ $ 2,962 ​ $ 1,866 Sales and marketing expense ​ 1,218 ​ 1,096 ​ 3,437 ​ 2,956 General and administrative expense ​ 5,709 ​ 5,349 ​ 15,912 ​ 14,412 ​ ​ $ 7,957 ​ $ 6,967 ​ $ 22,311 ​ $ 19,234 ​ 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, 2023, the total unrecognized stock-based compensation expense related to options and RSUs was $ 67,842 . Such amount will be recognized in the Company’s consolidated statement of operations over a weighted average period of 2.4 years. ​ Employee Stock Purchase Plan The 2020 Employee Stock Purchase Plan (“ESPP”) was adopted by the Company’s Board of Directors on April 30, 2021. The ESPP permits eligible employees to purchase shares of the Company’s common stock at a 15 % discount from the lesser of the fair market value per share of the Company’s common stock on the first day of the offering period or the fair market value of the Company’s common stock on the purchase date. Funds are collected from employees through after-tax payroll deductions. 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 20 Table of Contents 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. There were no shares issued under the ESPP for the three months ended September 30, 2023 and 2022, and there were 14,043 and 14,889 shares issued under the ESPP for the nine months ended September 30, 2023 and 2022, respectively. The discount on the ESPP was $ 100 and $ 86 for the three months ended September 30, 2023 and 2022, respectively, and $ 308 and $ 271 for the nine months ended September 30, 2023 and 2022, respectively, and is recorded within stock-based compensation expense. 15. EARNINGS PER SHARE 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 share of common 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 and restricted stock units. The following table sets forth the computation of basic and diluted net income per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ ​ 2023 2022 2023 2022 Numerator ​ ​ ​ ​ ​ Net income ​ $ 38,461 ​ $ 87,943 ​ $ 102,246 ​ $ 132,959 Denominator ​ ​ ​ ​ Net income per share of common stock - basic ​ $ 0.64 ​ $ 1.48 ​ $ 1.71 ​ $ 2.25 Net income per share of common stock- diluted ​ $ 0.63 ​ $ 1.44 ​ $ 1.68 ​ $ 2.18 Weighted average number of shares of common stock - basic ​ 59,863,102 ​ 59,234,720 ​ 59,856,941 ​ 59,070,063 Weighted average number of shares of common stock - diluted ​ 60,681,676 ​ 61,207,625 ​ 60,892,992 ​ 60,921,482 ​ Securities outstanding that were included in the computation above, utilizing the treasury stock method are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ ​ 2023 2022 2023 2022 Stock options, SARs, and RSUs to purchase common stock ​ ​ 818,574 ​ ​ 1,972,905 ​ ​ 1,036,051 ​ ​ 1,851,419 ​ 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 September 30, ​ Nine Months Ended September 30, ​ ​ 2023 2022 2023 2022 Stock options, SARs, and RSUs to purchase common stock ​ 5,518,309 ​ 4,754,958 ​ ​ 5,300,832 ​ 4,876,444 ​ ​ ​ 21 Table of Contents 16. INCOME TAXES A reconciliation between the statutory federal income tax rate and the Company’s effective income tax rate for the three and nine months ended September 30, 2023 and 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ Nine Months Ended September 30, ​ ​ 2023 2022 ​ ​ 2023 2022 Federal income tax rate 21.0 % 21.0 % ​ 21.0 % 21.0 % Stock-based compensation — ​ ( 17.0 ) ​ ​ ( 0.9 ) ​ 4.4 ​ State taxes 4.0 ​ ( 22.1 ) ​ ​ 4.7 ( 0.5 ) ​ Credits 0.2 ​ — ​ ​ ( 1.6 ) ​ ( 0.2 ) ​ Other 0.6 ​ — ​ ​ 0.3 0.7 ​ Valuation allowance — ​ ( 985.7 ) ​ ​ — ( 144.9 ) ​ Total 25.8 % ( 1,003.8 ) % ​ 23.5 % ( 119.5 ) % ​ ​ 17. RELATED-PARTY TRANSACTIONS 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. In addition, the Chairman of the Company’s board of directors was the President and owner of the entity. The Company terminated the management agreement upon the consummation of its IPO. The Company is also party to a right of use agreement with the related party whereby it has access to and the right to use certain office space leased by the related party in Chicago, IL. 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 $ 73 and $ 71 for the three months ended September 30, 2023 and 2022, and incurred $ 218 and $ 213 for the nine months ended September 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 September 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. 18. SUBSEQUENT EVENTS On October 10, 2023, the Company completed a tender offer (the “Tender Offer”) to acquire all of the outstanding shares of common stock of Zynerba Pharmaceuticals, Inc. (“Zynerba Common Stock”), a clinical-stage pharmaceutical company focused on innovative pharmaceutically produced transdermal cannabidiol therapies for orphan neuropsychiatric disorders, including Fragile X syndrome. Under the terms of the Tender Offer, the Company paid (i) $ 1.1059 per share of Zynerba Common Stock (the “Common Cash Amount”), plus (ii) one contingent value right (each, a “CVR”) per share of Zynerba Common Stock (the “Common CVR Amount”) for each holder of Zynerba Common Stock upon the closing of the Tender Offer, which represents the right to receive up to approximately $ 2.5444 per share of Zynerba Common Stock, subject to the achievement of certain clinical, regulatory and sales-based milestones. Both the Common Cash Amount and Common CVR Amount are to be paid in cash, subject to any applicable withholding of taxes and without interest. The aggregate consideration paid by the Company to acquire the Zynerba Common Stock upon completion of the Tender Offer was $ 60,000 , exclusive of transaction related fees. The Company financed the acquisition with cash on hand. On October 27, 2023, the Company’s Board of Directors approved a program providing for the repurchase of shares of common stock in an aggregate amount of up to $ 200,000 , excluding commissions and transaction fees (the “October 2023 Repurchase Program”). The board simultaneously terminated the August 2023 Repurchase Program and any remaining amount authorized for the repurchase of shares. The October 2023 Repurchase Program may be suspended, terminated, or modified at any time for any reason. 22 Table of Contents ​