What changed in this filing

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Item 1. Financial Statements

2024-08-06 compared with 2024-04-30 · 136 added, 81 removed, 444 unchanged (33% of the section changed)

36 unchanged sentences

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

500,000,000 shares authorized at June 30, 2024 and December 31, 2023, respectively;

56,833,771 and 56,769,081 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid in capital

9 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net product revenue

28 unchanged sentences

Stock-based compensation

Balance as of June 30, 2024

comprehensive

stockholders’

(loss) income

Balance as of March 31, 2024

Unrealized loss on investments

Exercise of options

Stock-based compensation

Balance as of June 30, 2024

comprehensive

5 unchanged sentences

Stock-based compensation

Balance as of June 30, 2023

comprehensive

stockholders’

(loss) income

Balance as of March 31, 2023

Unrealized loss on investments

Exercise of options

Stock-based compensation

Balance as of June 30, 2023

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

3 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

Intangible amortization

Acquired in-process research & development (IPR&D) expense

Stock-based and employee stock purchase compensation expense

14 unchanged sentences

Purchase of property and equipment

Acquisition of Epygenix Therapeutics, Inc., net of cash acquired

Payment of license fee

Net cash used in investing activities

1 unchanged sentence

Principal repayment of long term debt

Payments of employee withholding taxes related to stock-based awards

Proceeds from exercised options

5 unchanged sentences

Cash paid during the year for interest

Cash paid during the year for taxes

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

7 unchanged sentences

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’s operations are conducted in its wholly owned subsidiaries, Harmony Biosciences, LLC (“Harmony”), and Harmony Biosciences Management, 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.

2 unchanged sentences

(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.

Zynerba is a clinical-stage pharmaceutical company focused on innovative pharmaceutically produced transdermal cannabidiol therapies for orphan neurobehavioral disorders, including Fragile X Syndrome.

As of July 1, 2024, Zynerba was renamed and is known as Harmony Biosciences Management, Inc.

On April 30, 2024, the Company acquired all of the issued and outstanding capital stock of Epygenix Therapeutics, Inc., a Wyoming corporation (“Epygenix”).

As a result, the Company now has an exclusive license relating to the use of clemizole, initially for the treatment of Dravet Syndrome and Lennox-Gastaut Syndrome.

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.

The Company had an accumulated deficit of $ 93,352 and $ 143,277 , as of June 30, 2024, and December 31, 2023, respectively.

As of June 30, 2024, the Company had cash, cash equivalents and investments of $ 434,088 .

The Company believes that its existing cash, cash equivalents and investments on hand as of June 30, 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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

The unaudited condensed consolidated balance sheet as of March 31, 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

its operations and its cash flows for the three months ended March 31, 2024, and 2023.

The unaudited condensed consolidated balance sheet as of June 30, 2024, the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 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 and six months ended June 30, 2024, and 2023, are unaudited.

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

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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 did not classify any assets or liabilities as Level 3 as of June 30, 2024, or December 31, 2023.

Cash, Cash Equivalents and Restricted Cash

6 unchanged sentences

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.

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.

14 unchanged sentences

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;

As of June 30, 2024, three customers accounted for 100 % of gross accounts receivable;

Caremark LLC (“CVS Caremark”), which accounted for 41 % of gross accounts receivable;

5 unchanged sentences

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;

For the six months ended June 30, 2024, three customers accounted for 100 % of gross product revenue;

CVS Caremark accounted for 40 % of gross product revenue;

1 unchanged sentence

and Pantherx accounted for 27 % of gross product revenue.

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

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

CVS Caremark accounted for 35 % of gross product revenue;

7 unchanged sentences

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.

Refer to Note 4, Acquisitions , for a more detailed discussion of the Company’s acquisitions of Zynerba and Epygenix.

Recently Issued Accounting Pronouncements

1 unchanged sentence

2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

ASU 2023-07 is intended to improve

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.

ASU 2023-07 is intended to improve 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.

8 unchanged sentences

The Company is currently evaluating the impact that ASU 2023-09 will have on its condensed consolidated financial statements.

Acquisition of Zynerba

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.

2 unchanged sentences

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.

ZYN002 is the first and only pharmaceutically manufactured, synthetic cannabidiol, devoid of THC, 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.

Acquisition of Epygenix

On April 30, 2024, the Company acquired all of the issued and outstanding capital stock of Epygenix pursuant to the terms of a stock purchase agreement.

In connection with the closing of the transaction, the Company paid the former stockholders of Epygenix up front consideration of $ 35,000 less a working capital

In addition, the Company will 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.

As a result, the Company now has an exclusive license relating to the use of clemizole, initially for the treatment of Dravet Syndrome and Lennox-Gastaut Syndrome.

The total purchase consideration for Epygenix was as follows:

Cash consideration paid to selling shareholders and to settle restricted stock units ("RSUs")

Transaction costs

Total purchase consideration

The acquisition of Epygenix was accounted for as an asset acquisition under ASC Topic 805, Business Combinations.

The Company did not acquire any outputs and there was not an acquired substantive process in place to create outputs.

In accordance with the accounting for asset acquisitions, an entity that acquires IPR&D assets in an asset acquisition follows the guidance in ASC Topic 730, Research and Development, which requires that both tangible and intangible identifiable research and development assets with no alternative future use be allocated a portion of the consideration transferred and recorded as research and development expense at the acquisition date.

As a result, the Company recorded a charge of $ 17,095 related to acquired in-process research and development expense during the three and six months ended June 30, 2024.

The following table shows the allocation of the purchase consideration based on the relative fair value of assets acquired and liabilities assumed by the Company, after reducing the excess fair value of the IPR&D asset as described above:

Assets acquired

Acquired in-process research and development

Deferred tax asset

Total assets acquired

Total liabilities assumed

Net assets acquired

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

June 30, 2024

Commercial paper

15 unchanged sentences

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

The Company did not have any available-for-sale debt security investments in a continuous unrealized loss position of greater than 12 months as of March 31, 2024, and December 31, 2023, respectively.

The Company did not have any available-for-sale debt security investments in a continuous unrealized loss position of greater than 12 months as of June 30, 2024, and December 31, 2023, respectively.

FAIR VALUE MEASUREMENTS

3 unchanged sentences

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

The Company did not classify any assets or liabilities as Level 3 as of March 31, 2024, or December 31, 2023.

The Company did not classify any assets or liabilities as Level 3 as of June 30, 2024, or December 31, 2023.

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

March 31, 2024

June 30, 2024

December 31, 2023

11 unchanged sentences

This event triggered a milestone payment of $ 75,000 under the provisions of the 2017 LCA (defined below) which the Company capitalized as an intangible asset.

The Company determined a useful life of 10 years for such intangible asset, and, as of March 31, 2024, the remaining useful life was 5.5 years.

The Company determined a useful life of 10 years for such intangible asset, and, as of June 30, 2024, the remaining useful life was 5.3 years.

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

This event triggered a milestone payment of $ 100,000 under the provisions of the 2017 LCA which the Company capitalized as an intangible asset and paid in January of 2021.

The Company determined a useful life of 9 years for such intangible asset, and, as of March 31, 2024, the remaining useful life was 5.5 years.

The Company determined a useful life of 9 years for such intangible asset, and, as of June 30, 2024, the remaining useful life was 5.3 years.

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

This event triggered a final $ 40,000 payment under the provisions of the 2017 LCA which the Company capitalized as an intangible asset and paid in March of 2022.

The Company determined a useful life of 7.6 years for such intangible asset, and, as of March 31, 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 determined a useful life of 7.6 years for such intangible asset, and, as of June 30, 2024, the remaining useful life was 5.3 years.

Amortization expense was $ 5,961 for each of the three months ended June 30, 2024, and 2023, respectively, and $ 11,922 for each of the six months ended June 30, 2024, and 2023, respectively, and is recorded in general and administrative 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)

2024 (excluding the six months ended June 30, 2024)

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

12 unchanged sentences

The 2017 LCA also requires a fixed trademark royalty and a tiered royalty based on net sales, which is payable to Bioprojet on a quarterly basis.

The Company incurred $ 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.

The Company incurred $ 30,199 and $ 22,542 for the three months ended June 30, 2024, and 2023, respectively, and $ 54,937 and $ 41,602 for the six months ended June 30, 2024, and 2023, respectively, for sales-based, trademark and tiered royalties recognized as cost of product sold.

As of June 30, 2024, and December 31, 2023, the Company had accrued $ 30,199 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.

2 unchanged sentences

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.

In April 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 a Clinical Trial Application currently anticipated in mid-2025.

Under the Sublicense, the Company paid Bioprojet an upfront license fee of $ 25,500 , which the Company recognized as an IPR&D charge recorded in research and development within the unaudited condensed consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2024, 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.

Agreement Related to Intellectual Property

3 unchanged sentences

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

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

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.

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.

ACCRUED EXPENSES

13 unchanged sentences

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 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 .

The fair value of the Term Loans as of June 30, 2024, was $ 187,863 .

Long-term debt, net consists of the following:

4 unchanged sentences

Long-term debt, net

Future minimum payments relating to total debt, net as of March 31, 2024, for the periods indicated below consists of the following:

Future minimum payments relating to total debt, net as of June 30, 2024, for the periods indicated below consists of the following:

Years ending December 31,

2024 (excluding the three months ended March 31, 2024)

2024 (excluding the six months ended June 30, 2024)

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

Six Months Ended

Interest on principal balance

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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.

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 %.

The Company recorded operating lease costs of $ 622 and $ 444 for the three months ended June 30, 2024, and 2023, respectively and $ 1,131 and $ 822 for the six months ended June 30, 2024, and 2023, respectively.

As of June 30, 2024, the weighted-average remaining lease term for operating leases was 1.7 years and the weighted-average discount rate for operating leases was 7.56 %.

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

Classification

March 31, 2024

June 30, 2024

December 31, 2023

7 unchanged sentences

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

March 31, 2024

March 31, 2023

June 30, 2024

June 30, 2023

Operating cash flows from operating leases

Right of use assets obtained in exchange for operating lease obligations

Future payments under noncancelable operating leases with initial terms of one year or more as of March 31, 2024, consisted of the following:

Future payments under noncancelable operating leases with initial terms of one year or more as of June 30, 2024, consisted of the following:

Years ending December 31,

2024 (excluding the three months ended March 31, 2024)

2024 (excluding the six months ended June 30, 2024)

Total lease payments

4 unchanged sentences

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

As of March 31, 2024, there were no material claims or suits outstanding.

As of June 30, 2024, there were no material claims or suits outstanding.

STOCKHOLDERS’ EQUITY

6 unchanged sentences

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 .

During the three and six months ended June 30, 2024, and 2023, no shares of common stock were repurchased and cancelled by the Company.

As of June 30, 2024, the remaining amount of common stock authorized for repurchases was $ 150,000 .

STOCK INCENTIVE PLAN AND STOCK-BASED COMPENSATION

4 unchanged sentences

RSUs vest over the vesting period specified in the applicable award agreement, at achievement of a performance requirement, or upon change of control (as defined in the applicable plan).

As of March 31, 2024, there were 7,890,232 shares of common stock available for issuance under the 2020 Plan.

As of June 30, 2024, there were 7,654,586 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.

5 unchanged sentences

Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2024:

The following table summarizes stock option activity for the six months ended June 30, 2024:

Value ($000's)

Awards outstanding—December 31, 2023

2 unchanged sentences

Awards forfeited

Awards outstanding—March 31, 2024

Awards outstanding—June 30, 2024

Awards exercisable—June 30, 2024

Stock Appreciation Rights

The following table summarizes SARs activity for the three months ended March 31, 2024:

The following table summarizes SARs activity for the six months ended June 30, 2024:

Value ($000's)

Awards outstanding—December 31, 2023

2 unchanged sentences

Awards forfeited

Awards outstanding—March 31, 2024

Awards outstanding—June 30, 2024

Awards exercisable—June 30, 2024

Restricted Stock Units

The following table summarizes RSU activity for the three months ended March 31, 2024:

The following table summarizes RSU activity for the six months ended June 30, 2024:

Awards outstanding—December 31, 2023

2 unchanged sentences

Awards forfeited

Awards outstanding—March 31, 2024

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.

Awards outstanding—June 30, 2024

Value of Stock Options and SARs

3 unchanged sentences

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.

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.

11 unchanged sentences

The fair value of RSUs is equal to the value of the Company’s common stock on the grant date.

The weighted average per share fair value of awards issued under the 2017 Plan and 2020 Plan was $ 21.13 and $ 20.64 on March 31, 2024, and December 31, 2023, respectively.

The weighted average per share fair value of awards issued under the 2017 Plan and 2020 Plan was $ 21.24 and $ 20.64 on June 30, 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,

Stock-based compensation expense for the three and six months ended June 30, 2024, and 2023, was recorded in the unaudited condensed consolidated statements of operations and comprehensive income in the following line items:

Three Months Ended June 30,

Six Months Ended June 30,

Research and development expense

2 unchanged sentences

Stock-based compensation expense 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.

As of June 30, 2024, the total unrecognized stock-based compensation expense was $ 68,926 and $ 19,749 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 2.6 years.

3 unchanged sentences

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.

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.

There were 10,707 and 14,043 shares issued under the ESPP for each of the three and six months ended June 30, 2024, and 2023, respectively.

The discount on the ESPP was $ 78 and $ 103 for the three months ended June 30, 2024, and 2023, respectively, and $ 158 and $ 208 for the six months ended June 30, 2024, and 2023, respectively, and is recorded within stock-based compensation expense.

EARNINGS PER SHARE

2 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net income per share of common stock - basic

3 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Stock options, SARs, and RSUs to purchase common stock

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Stock options, SARs, and RSUs to purchase common stock

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,

A reconciliation between the statutory federal income tax rate and the Company’s effective income tax rate for the three and six months ended June 30, 2024, and 2023 is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Federal income tax rate

Stock-based compensation

Nondeductible IPR&D

Valuation allowance

4 unchanged sentences

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.

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”).

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.

The Company incurred $ 72 and $ 74 for the three months ended June 30, 2024, and 2023, respectively, and incurred $ 145 and $ 145 for the six months ended June 30, 2024, and 2023, respectively, in expenses to Paragon, which are included in general and administrative in the unaudited condensed consolidated statements of operations and comprehensive loss.

As of June 30, 2024, and December 31, 2023, there were no amounts due to or due from related parties included in the unaudited condensed consolidated balance sheets.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements