Harmony Biosciences Holdings, Inc. 10-Q

Item 1. Financial Statements HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS ​ (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ 2024 2023 ASSETS ​ ​ CURRENT ASSETS: ​ ​ Cash and cash equivalents ​ $ 332,981 ​ $ 311,660 Investments, short-term ​ ​ 39,369 ​ ​ 41,800 Trade receivables, net ​ 79,719 ​ 74,140 Inventory, net ​ 5,857 ​ 5,363 Prepaid expenses ​ 12,894 ​ 12,570 Other current assets ​ 8,683 ​ 5,537 Total current assets ​ 479,503 ​ 451,070 NONCURRENT ASSETS: ​ ​ Property and equipment, net ​ 213 ​ 371 Restricted cash ​ 270 ​ 270 Investments, long-term ​ ​ 81,244 ​ ​ 72,169 Intangible assets, net ​ 131,147 ​ 137,108 Deferred tax asset ​ ​ 147,639 ​ ​ 144,162 Other noncurrent assets ​ 6,969 ​ 6,298 Total noncurrent assets ​ 367,482 ​ 360,378 TOTAL ASSETS ​ $ 846,985 ​ $ 811,448 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ CURRENT LIABILITIES: ​ ​ Trade payables ​ $ 15,144 ​ $ 17,730 Accrued compensation ​ 7,317 ​ 23,747 Accrued expenses ​ 91,699 ​ 99,494 Current portion of long-term debt ​ ​ 15,000 ​ ​ 15,000 Other current liabilities ​ 25,093 ​ 7,810 Total current liabilities ​ 154,253 ​ 163,781 NONCURRENT LIABILITIES: ​ ​ Long-term debt, net ​ 174,996 ​ 178,566 Other noncurrent liabilities ​ 2,342 ​ 2,109 Total noncurrent liabilities ​ 177,338 ​ 180,675 TOTAL LIABILITIES ​ 331,591 ​ 344,456 COMMITMENTS AND CONTINGENCIES (Note 13) ​ ​ STOCKHOLDERS’ EQUITY: ​ ​ Common stock—$ 0.00001 par value; 500,000,000 shares authorized at March 31, 2024 and December 31, 2023, respectively; 56,791,214 and 56,769,081 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively ​ 1 ​ 1 Additional paid in capital ​ 620,507 ​ 610,266 Accumulated other comprehensive (loss) income ​ ​ ( 171 ) ​ ​ 2 Accumulated deficit ​ ( 104,943 ) ​ ( 143,277 ) TOTAL STOCKHOLDERS’ EQUITY ​ 515,394 ​ 466,992 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY ​ $ 846,985 ​ $ 811,448 ​ The accompanying notes are an integral part of the unaudited condensed consolidated financial statements ​ 3 Table of Contents HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2024 2023 Net product revenue ​ $ 154,615 ​ $ 119,126 ​ Cost of product sold ​ 27,484 ​ 20,780 ​ Gross profit ​ 127,131 ​ 98,346 ​ Operating expenses: ​ ​ ​ Research and development ​ 22,189 ​ 13,289 ​ Sales and marketing ​ 27,233 ​ 22,572 ​ General and administrative ​ 25,676 ​ 22,062 ​ Total operating expenses ​ 75,098 ​ 57,923 ​ Operating income ​ 52,033 ​ 40,423 ​ Other (expense) income, net ​ ( 141 ) ​ 2 ​ Interest expense ​ ​ ( 4,535 ) ​ ​ ( 5,731 ) ​ Interest income ​ 4,428 ​ 3,086 ​ Income before income taxes ​ 51,785 ​ 37,780 ​ Income tax expense ​ ( 13,451 ) ​ ( 8,295 ) ​ Net income ​ $ 38,334 ​ $ 29,485 ​ Unrealized (loss) income on investments ​ ( 173 ) ​ 120 ​ Comprehensive income ​ $ 38,161 ​ $ 29,605 ​ EARNINGS PER SHARE: ​ ​ ​ Basic ​ $ 0.68 ​ $ 0.49 ​ Diluted ​ $ 0.67 ​ $ 0.48 ​ Weighted average number of shares of common stock - basic ​ 56,771,251 ​ 59,732,157 ​ Weighted average number of shares of common stock - diluted ​ 57,597,627 ​ 61,221,511 ​ ​ The accompanying notes are an integral part of the unaudited condensed consolidated financial statements ​ 4 Table of Contents HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARIES 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, 2023 56,769,081 ​ $ 1 ​ $ 610,266 ​ $ 2 ​ $ ( 143,277 ) ​ $ 466,992 Net income — ​ — ​ — ​ ​ — ​ 38,334 ​ 38,334 Unrealized loss on investments ​ — ​ ​ — ​ ​ — ​ ​ ( 173 ) ​ ​ — ​ ​ ( 173 ) Exercise of options and restricted stock units 22,133 ​ — ​ ( 153 ) ​ ​ — ​ — ​ ( 153 ) Stock-based compensation — ​ — ​ 10,394 ​ ​ — ​ — ​ 10,394 Balance as of March 31, 2024 56,791,214 ​ $ 1 ​ $ 620,507 ​ $ ( 171 ) ​ $ ( 104,943 ) ​ $ 515,394 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 — ​ — ​ — ​ ​ — ​ 29,485 ​ 29,485 Unrealized loss on investments ​ — ​ ​ — ​ ​ — ​ ​ 120 ​ ​ — ​ ​ 120 Exercise of stock options 338,887 ​ — ​ 3,395 ​ ​ — ​ — ​ 3,395 Stock-based compensation — ​ — ​ 7,203 ​ ​ — ​ — ​ 7,203 Balance as of March 31, 2023 59,954,618 ​ $ 1 ​ $ 685,716 ​ $ ( 31 ) ​ $ ( 242,645 ) ​ $ 443,041 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements ​ 5 Table of Contents HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ Net income ​ $ 38,334 ​ $ 29,485 Adjustments to reconcile net income to net cash used in operating activities: ​ ​ ​ Depreciation ​ 163 ​ 103 Intangible amortization ​ 5,961 ​ 5,961 Stock-based and employee stock purchase compensation expense ​ 10,394 ​ 7,203 Stock appreciation rights market adjustment ​ 40 ​ ( 642 ) Debt issuance costs amortization ​ 180 ​ 416 Deferred taxes ​ ​ ( 3,477 ) ​ ​ ( 3,442 ) Amortization of premiums and accretion of discounts on Investment securities ​ ​ ( 594 ) ​ ​ ( 636 ) Other non-cash expenses ​ ​ 467 ​ ​ 369 Change in operating assets and liabilities: ​ ​ ​ Trade receivables ​ ( 5,579 ) ​ 2,165 Inventory ​ ( 494 ) ​ 207 Prepaid expenses and other assets ​ ( 3,439 ) ​ 592 Trade payables ​ ( 2,586 ) ​ 2,628 Other liabilities ​ ( 8,229 ) ​ ( 1,850 ) Net cash provided by operating activities ​ 31,141 ​ 42,559 CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ Purchase of investment securities ​ ​ ( 25,106 ) ​ ​ ( 47,776 ) Proceeds from maturities and sales of investment securities ​ ​ 18,925 ​ ​ 45,986 Purchase of property and equipment ​ ( 5 ) ​ — Net cash used in investing activities ​ ( 6,186 ) ​ ( 1,790 ) CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ Principal repayment of long term debt ​ ​ ( 3,750 ) ​ ​ ( 500 ) Proceeds from exercised options ​ 116 ​ 3,909 Net cash (used in) provided by financing activities ​ ( 3,634 ) ​ 3,409 NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ​ 21,321 ​ 44,178 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period ​ 311,930 ​ 244,534 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period ​ $ 333,251 ​ $ 288,712 Supplemental Disclosure of Cash Flow Information: ​ ​ Cash paid during the year for interest ​ $ 4,585 ​ $ 5,017 ​ The accompanying notes are an integral part of the unaudited condensed consolidated financial statements ​ 6 Table of Contents HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARIES 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 subsidiaries (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”), and Zynerba Pharmaceuticals, Inc. The Company is a commercial-stage pharmaceutical company focused on developing and commercializing innovative therapies for patients living with rare neurological disorders as well as patients living with other neurological diseases who have unmet medical needs. The Company is headquartered in Plymouth Meeting, Pennsylvania. On October 10, 2023, the Company completed a tender offer to acquire all of the outstanding shares of common stock of Zynerba Pharmaceuticals, Inc. (together with its subsidiary, Zynerba Pharmaceutical Pty, Ltd., “Zynerba”). Zynerba is a clinical-stage pharmaceutical company focused on innovative pharmaceutically produced transdermal cannabidiol therapies for orphan neuropsychiatric disorders, including Fragile X Syndrome. 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 $ 104,943 and $ 143,277 , as of March 31, 2024, and December 31, 2023, respectively. As of March 31, 2024, the Company had cash, cash equivalents and investments of $ 453,594 . The Company believes that its existing cash, cash equivalents and investments on hand as of March 31, 2024, 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 March 31, 2024, the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2024, and 2023, 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, 2024, and 2023, are unaudited. The balance sheet as of December 31, 2023, was derived from audited financial statements as of and for the year ended December 31, 2023. 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, 2023, 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, 2024, and the results of 7 Table of Contents its operations and its cash flows for the three months ended March 31, 2024, and 2023. 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 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, 2023. Reclassifications Certain prior period amounts within the unaudited condensed consolidated statements of operations and comprehensive income have been reclassified to conform to current period presentation. In particular, interest expense and interest income were previously classified together as interest expense, net and are now separately classified as interest expense and interest income, respectively. The reclassification of these items had no impact on net income, earnings per share or accumulated deficit in current or prior periods. Significant Risks and Uncertainties The Company’s operations are subject to a number of factors that can affect its operating results and financial condition. Such factors include, but are not limited to, clinical trial results of the Company’s product candidates; the Company’s ability to obtain regulatory approval to market its products; competition from products manufactured and sold or being developed by other companies; the price of, and demand for, the Company’s products, if approved; the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its product candidates. The Company currently has one commercially approved product, WAKIX, and there can be no assurance that the Company’s research and development efforts will result in successfully commercialized products in addition to WAKIX. Developing and commercializing a product requires significant time and capital and is subject to regulatory review and approval as well as competition from other biotechnology and pharmaceutical companies. The Company operates in an environment of rapid change and is dependent upon the continued services of its employees and consultants and obtaining and protecting intellectual property. ​ 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. Operating Segments The Company holds all its tangible assets, conducts its operations, and generates its revenue in the United States. Operating segments are defined as comp one nts of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Makers in deciding how to allocate resources to an individual segment and in assessing performance. The Company has determined it operates in a single operating segment and has one reportable segment. Fair Value of Financial Instruments 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. 8 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 March 31, 2024, or December 31, 2023. 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 ​ March 31, December 31, ​ ​ 2024 ​ 2023 Cash and cash equivalents ​ $ 332,981 ​ $ 311,660 Restricted cash ​ 270 ​ 270 Total cash, cash equivalents, and restricted cash shown in the statements of cash flows ​ $ 333,251 ​ $ 311,930 ​ 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. Interest income earned on cash and investment balances, accretion of the discount on investments in debt securities, amortization of premiums and realized gains and losses, if any, are recorded in interest income 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. 9 Table of Contents 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. Concentrations of Risk Substantially all of the Company’s cash and money market funds are held in five financial institutions. Due to their size, the Company believes these financial institutions represent minimal credit risk. Deposits may 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 March 31, 2024, three customers accounted for 100 % of gross accounts receivable; Caremark LLC (“CVS Caremark”), which accounted for 41 % of gross accounts receivable; Accredo Health Group, Inc. (“Accredo”), which accounted for 36 % of gross accounts receivable; and PANTHERx Specialty Pharmacy LLC (“Pantherx”), which accounted for 23 % of gross accounts receivable. As of December 31, 2023, three customers accounted for 100 % of gross accounts receivable; Accredo, which accounted for 39 % of gross accounts receivable, CVS Caremark, which accounted for 32 % of gross accounts receivable; and Pantherx, which accounted for 29 % of gross accounts receivable. For the three months ended March 31, 2024, three customers accounted for 100 % of gross product revenue; CVS Caremark accounted for 42 % of gross product revenue; Accredo accounted for 33 % of gross product revenue; and Pantherx accounted for 25 % of gross product revenue. For the three months ended March 31, 2023, three customers accounted for 100 % of gross product revenue; CVS Caremark accounted for 35 % of gross product revenue; Pantherx accounted for 33 % of gross product revenue; and Accredo accounted for 32 % of gross product revenue. The Company depends on a single supplier for its product and a single supplier for its 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. ​ Business Combinations Business combinations and asset acquisitions are accounted for in accordance with FASB ASC 805 Business Combinations. Refer to Note 4, Acquisition , for a more detailed discussion of the Zynerba Acquisition. ​ Recently Issued Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is intended to improve 10 Table of Contents reportable segment disclosures primarily through enhanced disclosure of reportable segment expenses and requires that a public entity that has a single reportable segment provide all the disclosures required by ASU 2023-07 and all existing segment disclosures in Topic 280. This ASU is effective for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 is required to be applied retrospectively to all prior periods presented in the financial statements. The Company has one reportable segment and is currently evaluating the impact that ASU 2023-07 will have on its condensed consolidated financial statements. ​ In December 2023, the FASB issued Accounting Standards Update (“ASU”) No 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 expands disclosures in the rate reconciliation and requires disclosure of income taxes paid by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact that ASU 2023-09 will have on its condensed consolidated financial statements. ​ 4. ACQUISITION In October 2023, the Company completed a tender offer to purchase the outstanding common stock of Zynerba (“Zynerba Common Stock”) for (i) $ 1.1059 per share of Zynerba Common Stock (the “Common Cash Amount”), the aggregate amount of which was $ 60,000 and was paid at closing, plus (ii) one contingent value right (each, a “CVR”) per share of Zynerba Common Stock (the “Common CVR Amount”), 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. The Common CVR Amounts are to be paid in cash, subject to any applicable withholding of taxes and without interest. The aggregate amount of consideration to acquire Zynerba Common Stock was $ 60,000 , excluding transaction related fees of $ 2,645 and was paid by the Company using cash on hand. The Zynerba Acquisition was accounted for as an asset acquisition under ASC Topic 805, Business Combinations, because substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable IPR&D asset, ZYN002, Zynerba’s lead asset. ZYN002 is the first and only pharmaceutically manufactured, synthetic cannabidiol, a non-euphoric cannabidiol, formulated as a patent-protected permeation-enhanced gel for transdermal delivery through the skin and into the circulatory system and is currently in Phase III clinical trial for the potential treatment of Fragile X Syndrome. The Company recognized the acquired assets and assumed liabilities based on the consideration paid, including transaction costs, on a relative fair value basis, and after first allocating the preliminary excess of the fair value of net assets acquired over the purchase price consideration to certain qualifying assets, principally, the IPR&D asset. 5. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ ​ Amortized ​ Unrealized ​ Unrealized ​ ​ Fair ​ ​ Cost ​ Gains ​ Losses ​ ​ Value Short-term: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial paper $ 23,038 ​ 10 ​ ( 7 ) ​ $ 23,041 Corporate debt securities ​ 16,316 ​ 16 ​ ( 4 ) ​ ​ 16,328 Total short-term investments $ 39,354 ​ 26 ​ ( 11 ) ​ $ 39,369 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Long-term: ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate debt securities ​ 51,062 ​ 61 ​ ( 50 ) ​ ​ 51,073 U.S. government securities ​ 30,368 ​ — ​ ( 197 ) ​ ​ 30,171 Total long-term investments $ 81,430 ​ 61 ​ ( 247 ) ​ $ 81,244 11 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Amortized ​ Unrealized ​ Unrealized ​ ​ Fair ​ ​ Cost ​ Gains ​ Losses ​ ​ Value Short-term: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial paper $ 23,832 ​ 36 ​ ( 3 ) ​ $ 23,865 Corporate debt securities ​ 15,968 ​ 28 ​ — ​ ​ 15,996 U.S. government securities ​ 1,940 ​ — ​ ( 1 ) ​ ​ 1,939 Total short-term investments $ 41,740 ​ 64 ​ ( 4 ) ​ $ 41,800 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Long-term: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial paper $ 744 ​ — ​ — ​ $ 744 Corporate debt securities ​ 42,688 ​ 81 ​ ( 28 ) ​ ​ 42,741 U.S. government securities ​ 28,795 ​ 7 ​ ( 118 ) ​ ​ 28,684 Total long-term investments $ 72,227 ​ 88 ​ ( 146 ) ​ $ 72,169 ​ 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 March 31, 2024, and December 31, 2023, respectively. 6. FAIR VALUE MEASUREMENTS 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 March 31, 2024, or December 31, 2023. The Company’s assets measured at fair value consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ December 31, 2023 ​ ​ Total ​ Level 1 ​ Level 2 ​ ​ Total ​ Level 1 ​ Level 2 Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash equivalents $ 264,079 ​ 264,079 ​ — ​ $ 244,569 ​ 243,685 ​ 884 Commercial paper ​ 23,041 ​ — ​ 23,041 ​ ​ 24,609 ​ — ​ 24,609 Corporate debt securities ​ 67,401 ​ — ​ 67,401 ​ ​ 58,737 ​ — ​ 58,737 U.S. government securities ​ 30,171 ​ — ​ 30,171 ​ ​ 30,623 ​ — ​ 30,623 Total $ 384,692 ​ 264,079 ​ 120,613 ​ $ 358,538 ​ 243,685 ​ 114,853 ​ ​ 12 Table of Contents 7. INVENTORY Inventory, net consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ March 31, December 31, ​ ​ 2024 ​ 2023 Raw materials ​ $ 1,009 ​ $ 1,060 Work in process ​ 1,748 ​ 2,020 Finished goods ​ 3,100 ​ 2,283 Total inventory, net ​ $ 5,857 ​ $ 5,363 ​ ​ 8. 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 March 31, 2024, the remaining useful life was 5.5 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, 2024, the remaining useful life was 5.5 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, 2024, the remaining useful life was 5.5 years. Amortization expense was $ 5,961 for each of the three months ended March 31, 2024, and 2023 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, ​ ​ 2024 (excluding the three months ended March 31, 2024) ​ $ 17,884 2025 ​ 23,845 2026 ​ 23,845 2027 ​ 23,845 2028 ​ 23,845 Thereafter ​ ​ 17,883 Total ​ $ 131,147 ​ ​ ​ ​ ​ ​ ​ ​ 13 Table of Contents The gross carrying amount and net book value of the intangible asset is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ March 31, December 31, ​ ​ 2024 ​ 2023 Gross Carrying Amount ​ $ 215,000 ​ $ 215,000 Accumulated Amortization ​ ( 83,853 ) ​ ( 77,892 ) Net Book Value ​ $ 131,147 ​ $ 137,108 ​ ​ 9. 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 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 $ 24,738 and $ 19,060 for the three months ended March 31, 2024, and 2023, respectively, for sales-based, trademark and tiered royalties recognized as cost of product sold. As of March 31, 2024, and December 31, 2023, the Company had accrued $ 24,738 and $ 40,419 , respectively, for sales-based, trademark and tiered royalties. In July 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 three months ended March 31, 2023. There are 14 Table of Contents 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. 10. ACCRUED EXPENSES Accrued expenses consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ March 31, December 31, ​ ​ 2024 ​ 2023 Royalties due to Bioprojet ​ $ 24,738 ​ $ 40,419 Rebates and other sales deductions ​ 48,165 ​ 38,842 Interest ​ ​ 3,125 ​ ​ 3,354 Sales and marketing ​ 2,999 ​ 2,354 Research and development ​ 7,898 ​ 9,835 Professional fees, consulting, and other services ​ 1,918 ​ 2,195 Other expenses ​ 2,856 ​ 2,495 ​ ​ $ 91,699 ​ $ 99,494 ​ ​ ​ 11. DEBT Term Loan A Credit Agreement In July 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 . In September 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 March 31, 2024, was $ 192,267 . 15 Table of Contents Long-term debt, net consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2024 ​ 2023 Principal amount ​ $ 192,500 ​ $ 196,250 Unamortized debt discount associated with debt financing costs ​ ( 2,504 ) ​ ( 2,684 ) Total debt, net ​ ​ 189,996 ​ ​ 193,566 Less current portion ​ ​ ( 15,000 ) ​ ​ ( 15,000 ) Long-term debt, net ​ $ 174,996 ​ $ 178,566 ​ Future minimum payments relating to total debt, net as of March 31, 2024, for the periods indicated below consists of the following: ​ ​ ​ ​ ​ Years ending December 31, ​ ​ ​ 2024 (excluding the three months ended March 31, 2024) ​ $ 11,250 2025 ​ 16,250 2026 ​ 20,000 2027 ​ 20,000 2028 ​ 125,000 Thereafter ​ ​ — Total ​ $ 192,500 ​ Interest expense related to the Company’s long-term debt, net, is included in interest expense within the unaudited condensed consolidated statements of operations and comprehensive income and consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ ​ 2024 2023 Interest on principal balance ​ $ 4,355 ​ $ 5,315 Amortization of deferred financing costs ​ 180 ​ 416 Total term loan interest expense ​ $ 4,535 ​ $ 5,731 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12. 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. In March 2024, the Company amended its existing operating leases for office space in Plymouth Meeting to extend their terms through June 2025. 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 $ 509 and $ 378 for the three months ended March 31, 2024, and 2023, respectively. 16 Table of Contents As of March 31, 2024, the weighted-average remaining lease term for operating leases was 1.8 years and the weighted-average discount rate for operating leases was 7.32 %. Supplemental balance sheet information related to operating leases was as follows: ​ ​ ​ ​ ​ ​ ​ Leases Classification ​ March 31, 2024 ​ December 31, 2023 Assets ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets Other noncurrent assets $ 3,046 ​ $ 2,344 Liabilities ​ ​ ​ ​ ​ ​ Operating lease liability, current portion Other current liabilities $ 1,793 ​ $ 1,437 Operating lease liability, long-term Other long-term liabilities ​ 1,276 ​ ​ 1,082 Total operating lease liabilities ​ $ 3,069 ​ $ 2,519 ​ Supplemental cash flow information related to operating leases was as follows: ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ ​ March 31, 2023 Operating cash flows from operating leases $ 561 ​ $ 428 Right of use assets obtained in exchange for operating lease obligations $ 1,198 ​ $ 526 ​ Future payments under noncancelable operating leases with initial terms of one year or more as of March 31, 2024, consisted of the following: ​ ​ ​ ​ Years ending December 31, ​ ​ 2024 (excluding the three months ended March 31, 2024) ​ $ 1,564 2025 ​ 1,239 2026 ​ 473 2027 ​ 3 2028 ​ - Thereafter ​ - Total lease payments ​ ​ 3,279 Less: imputed interest ​ ​ ( 210 ) Total lease liabilities ​ $ 3,069 ​ ​ ​ 13. 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 March 31, 2024, there were no material claims or suits outstanding. ​ 14. 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 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 In October 2023, the Company’s Board of Directors approved a share repurchase program (the “October 2023 Repurchase 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 may be suspended, terminated, or modified at any time for any reason. During the three months ended March 31, 2024, and 2023, no shares of common stock were repurchased and cancelled by the Company. As of March 31, 2024 the remaining amount of common stock authorized for repurchases was $ 150,000 . 15. STOCK INCENTIVE PLAN AND STOCK-BASED COMPENSATION 2020 Stock Incentive Plan In August 2020, the Company 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 March 31, 2024, there were 7,890,232 shares of common stock available for issuance under the 2020 Plan. The number of shares that may be issued under the 2020 Plan automatically increases 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. Stock Options The following table summarizes stock option activity for the three months ended March 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Weighted- ​ Average ​ ​ ​ ​ Average ​ Remaining ​ ​ Number of ​ Exercise ​ Contractual ​ Awards Price Term Awards outstanding—December 31, 2023 6,316,422 ​ $ 32.47 7.17 Awards issued 1,071,750 ​ $ 30.69 Awards exercised ( 14,120 ) ​ $ 8.22 Awards forfeited ( 11,529 ) ​ $ 39.31 Awards outstanding—March 31, 2024 7,362,523 ​ $ 32.25 7.35 ​ 18 Table of Contents Stock Appreciation Rights The following table summarizes SARs activity for the three months ended March 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Weighted- ​ Average ​ ​ ​ ​ Average ​ Remaining ​ ​ Number of ​ Exercise ​ Contractual ​ Awards Price Term Awards outstanding—December 31, 2023 43,208 ​ $ 9.38 5.32 Awards issued — ​ $ — Awards exercised — ​ $ — Awards forfeited — ​ $ — Awards outstanding—March 31, 2024 43,208 ​ $ 9.38 5.08 ​ Restricted Stock Units The following table summarizes RSU activity for the three months ended March 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average ​ ​ Number of ​ Grant Date ​ Awards Fair Value Awards outstanding—December 31, 2023 330,000 ​ $ 31.53 Awards issued 387,500 ​ $ 30.69 Awards vested ( 15,000 ) ​ $ 29.03 Awards forfeited ( 350 ) ​ $ 30.69 Awards outstanding—March 31, 2024 702,150 ​ $ 31.08 ​ As of March 31, 2024, and December 31, 2023, stock awards issued under the 2017 and 2020 Plans of 3,596,040 and 3,298,284 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-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 ​ March 31, December 31, ​ ​ 2024 2023 ​ Dividend yield 0.00 % 0.00 % Expected volatility 72.60 - 72.60 % 74.87 - 80.78 % Risk-free interest rate 4.06 - 4.20 % 3.42 - 4.62 % Lack of marketability discount 0.00 % 0.00 % Expected term (years) 2.01 - 6.11 2.26 - 10.77 ​ ​ 19 Table of Contents 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 $ 21.13 and $ 20.64 on March 31, 2024, and December 31, 2023, respectively. Stock-Based Compensation Expense Stock-based compensation expense for the three months ended March 31, 2024, and 2023, was recorded in the unaudited condensed consolidated statements of operations and comprehensive income in the following line items: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2024 2023 Research and development expense ​ $ 1,371 ​ $ 976 Sales and marketing expense ​ 1,994 ​ 1,073 General and administrative expense ​ 7,069 ​ 4,512 ​ ​ $ 10,434 ​ $ 6,561 ​ ​ Stock-based compensation expense 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, 2024, the total unrecognized stock-based compensation expense was $ 73,718 and $ 19,399 for stock options and RSUs, respectively. This amount will be recognized in the Company’s consolidated statement of operations over a weighted average period of 2.7 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 automatically increases on January 1 of each year in an amount equal to the lesser of (i) 1.0 % of the shares of the Company’s common stock outstanding on December 31 of the preceding year or (ii) an amount determined by the Company’s board of directors. It is intended that the ESPP meet the requirements for an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. There were no shares issued under the ESPP for the three months ended March 31, 2024, and 2023, respectively. The discount on the ESPP was $ 80 and $ 105 for the three months ended March 31, 2024, and 2023, respectively, and is recorded within stock-based compensation expense. 16. 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. 20 Table of Contents The following table sets forth the computation of basic and diluted net income per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2024 2023 Numerator ​ ​ Net income ​ $ 38,334 ​ $ 29,485 Denominator ​ ​ Net income per share of common stock - basic ​ $ 0.68 ​ $ 0.49 Net income per share of common stock- diluted ​ $ 0.67 ​ $ 0.48 Weighted average number of shares of common stock - basic ​ 56,771,251 ​ 59,732,157 Weighted average number of shares of common stock - diluted ​ 57,597,627 ​ 61,221,511 ​ Securities outstanding that were included in the computation above, utilizing the treasury stock method are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2024 2023 Stock options, SARs, and RSUs to purchase common stock ​ ​ 826,376 ​ ​ 1,489,354 ​ 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, ​ ​ 2024 2023 Stock options, SARs, and RSUs to purchase common stock ​ 7,281,505 ​ 4,661,499 ​ ​ ​ 17. INCOME TAXES A reconciliation between the statutory federal income tax rate and the Company’s effective income tax rate for the three months ended March 31, 2024, and 2023 is as follows: ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2024 2023 ​ Federal income tax rate 21.0 % 21.0 % Stock-based compensation — ​ ( 2.8 ) ​ State taxes 5.1 ​ 6.3 ​ Credits ( 1.0 ) ​ ( 2.9 ) ​ Other 0.4 ​ 0.4 ​ Valuation allowance 0.5 ​ — ​ Total 26.0 % 22.0 % ​ ​ 18. RELATED-PARTY TRANSACTIONS The Company was party to a management agreement for professional services provided by a related party, Paragon Biosciences, LLC (“Paragon”). Paragon is an entity that shares common ownership with the Company. In addition, the Chairman of the Company’s board of directors is the Founder, Chairman and CEO of Paragon. The Company is also party to a right of use agreement with Paragon whereby it has access to and the right to use certain office space leased by Paragon in Chicago, IL. The Company incurred $ 73 and $ 71 for the three months ended March 31, 2024, and 2023, respectively, in expenses to Paragon, which are included in general and administrative expense in the unaudited condensed consolidated statements of operations and comprehensive loss. As of March 31, 2024, and December 31, 2023, there were no amounts due to or due from related parties included in the unaudited condensed consolidated balance sheets. 21 Table of Contents 19. SUBSEQUENT EVENTS On April 11, 2024, the Company announced that it entered into a sublicense agreement with Bioprojet for an orexin-2 receptor agonist (OX2R) (the “Licensed Compound”) to be evaluated for the treatment of narcolepsy and other potential indications (the “Sublicense”). Under the Sublicense, the Company obtained the exclusive right to develop, manufacture and commercialize the Licensed Compound in the United States and Latin American territories (the “Licensed Territories”), which are rights that Bioprojet originally licensed from Teijin Pharma, the innovator of the Licensed Compound. The Licensed Compound is currently in pre-clinical development with an Investigational New Drug application currently anticipated in the second half 2025. Under the Sublicense, the Company paid Bioprojet an upfront license fee of $ 25,500 and will also be obligated to pay up to $ 127,500 upon achievement of development and regulatory milestones and up to $ 240,000 upon achievement of sales-based milestones, as well as royalty rates in the mid-teens on any sales of product using the Licensed Compound in the Licensed Territories. On April 30, 2024, the Company announced that its subsidiary, Zynerba, acquired all of the issued and outstanding capital stock of Epygenix Therapeutics, Inc., a Wyoming corporation (“Epygenix”), pursuant to the terms of a stock purchase agreement. In connection with the closing of the transaction, Zynerba paid the former stockholders of Epygenix up front consideration of $ 35,000 (which amount is subject to adjustment following the closing). In addition, Zynerba will also be obligated to pay up to $ 130,000 upon the achievement of development and regulatory milestones and up to $ 515,000 upon the achievement of certain sales-based milestones, in each case to Epygenix’s former stockholders. Epygenix has an exclusive license relating to the use of clemizole for the treatment of Dravet Syndrome and Lennox-Gestaut Syndrome. ​