What changed in this filing

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Item 1. Financial Statements

2024-10-29 compared with 2024-08-06 · 199 added, 102 removed, 478 unchanged (39% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

September 30,

CURRENT ASSETS:

30 unchanged sentences

Common stock—$ 0.00001 par value;

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

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

57,030,897 and 56,769,081 shares issued and outstanding at September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net product revenue

6 unchanged sentences

Operating income

Loss on debt extinguishment

Other (expense) income, net

20 unchanged sentences

Stock-based compensation

Balance as of June 30, 2024

Balance as of September 30, 2024

comprehensive

1 unchanged sentence

(loss) income

Balance as of March 31, 2024

Balance as of June 30, 2024

Unrealized loss on investments

1 unchanged sentence

Stock-based compensation

Balance as of June 30, 2024

Balance as of September 30, 2024

comprehensive

3 unchanged sentences

Unrealized loss on investments

Repurchase of common stock

( 1,439,792 )

Exercise of stock options

Stock-based compensation

Balance as of June 30, 2023

Balance as of September 30, 2023

comprehensive

1 unchanged sentence

(loss) income

Balance as of March 31, 2023

Balance as of June 30, 2023

Unrealized loss on investments

Repurchase of common stock

( 1,439,792 )

Exercise of options

Stock-based compensation

Balance as of June 30, 2023

Balance as of September 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)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

7 unchanged sentences

Amortization of premiums and accretion of discounts on Investment securities

Loss on debt extinguishment

Other non-cash expenses

13 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term debt

Debt issuance costs

Extinguishment of debt

Extinguishment of debt exit fees

Principal repayment of long-term debt

Repurchase of common stock

Payments of employee withholding taxes related to stock-based awards

21 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 neurobehavioral disorders, including Fragile X Syndrome.

Zynerba was 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.

3 unchanged sentences

The unaudited condensed consolidated financial statements have been prepared as though the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company had an accumulated deficit of $ 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.

The Company had an accumulated deficit of $ 47,259 and $ 143,277 , as of September 30, 2024, and December 31, 2023, respectively.

As of September 30, 2024, the Company had cash, cash equivalents and investments of $ 504,698 .

The Company believes that its existing cash, cash equivalents and investments on hand as of September 30, 2024, as well as additional cash generated from operating and financing activities will meet its operational liquidity needs and fund potential 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 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 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 June 30, 2024, and the results of its operations and its cash flows for the three and six months ended June 30, 2024, and 2023.

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

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 September 30, 2024, and the results of its operations and its cash flows for the three and nine months ended September 30, 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.

9 unchanged sentences

the Company’s ability to obtain regulatory approval to market its products;

competition from products manufactured and sold or being developed by other companies;

competition from products manufactured and sold or being developed by other companies, including generic competition;

the price of, and demand for, the Company’s products, if approved;

7 unchanged sentences

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.

The Company holds all its tangible assets, conducts its operations, and generates its revenue in the United States.

Fair Value of Financial Instruments

10 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 June 30, 2024, or December 31, 2023.

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

Cash, Cash Equivalents and Restricted Cash

1 unchanged sentence

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheet and the statements of cash flows.

September 30,

Cash and cash equivalents

21 unchanged sentences

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

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

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

Caremark LLC (“CVS Caremark”), which accounted for 34 % of gross accounts receivable;

5 unchanged sentences

and Pantherx, which accounted for 29 % of gross accounts receivable.

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

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

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

CVS Caremark accounted for 37 % 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.

Accredo accounted for 32 % of gross product revenue;

and Pantherx accounted for 31 % of gross product revenue.

The Company depends on a single supplier of the active pharmaceutical ingredient (“API”) for its commercial product, WAKIX, and single API suppliers for each of its potential product candidates.

Share Repurchases

27 unchanged sentences

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.

The Company paid the former stockholders of Epygenix up front consideration of $ 35,000 less a working capital adjustment.

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.

7 unchanged sentences

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.

As a result, the Company recorded a charge of $ 17,095 related to acquired in-process research and development expense during the nine months ended September 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:

6 unchanged sentences

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

June 30, 2024

September 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 June 30, 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 September 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 June 30, 2024, or December 31, 2023.

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

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

June 30, 2024

September 30, 2024

December 31, 2023

4 unchanged sentences

Inventory, net consisted of the following:

September 30,

Raw materials

5 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 June 30, 2024, the remaining useful life was 5.3 years.

The Company determined a useful life of 10 years for such intangible asset, and, as of September 30, 2024, the remaining useful life was 5.0 years.

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

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

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

The Company determined a useful life of 9 years for such intangible asset, and, as of September 30, 2024, the remaining useful life was 5.0 years.

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

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

The Company determined a useful life of 7.6 years for such intangible asset, and, as of 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 determined a useful life of 7.6 years for such intangible asset, and, as of September 30, 2024, the remaining useful life was 5.0 years.

Amortization expense was $ 5,961 and $ 5,962 for the three months ended September 30, 2024, and 2023, respectively, and $ 17,883 and $ 17,884 for the nine months ended September 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 six months ended June 30, 2024)

2024 (excluding the nine months ended September 30, 2024)

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

September 30,

Gross Carrying Amount

2 unchanged sentences

LICENSE AGREEMENTS AND ASSET PURCHASE AGREEMENTS

License Agreements

Bioprojet 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.

6 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 $ 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.

The Company incurred $ 40,295 and $ 29,665 for the three months ended September 30, 2024, and 2023, respectively, and $ 95,232 and $ 71,267 for the nine months ended September 30, 2024, and 2023, respectively, for sales-based, trademark and tiered royalties recognized as cost of product sold.

As of September 30, 2024, and December 31, 2023, the Company had accrued $ 40,295 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.

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.

2 unchanged sentences

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

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 nine months ended September 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.

ConSynance Agreement

In August 2021, the Company entered into an asset purchase agreement with ConSynance Therapeutics, Inc.

2 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 six months ended June 30, 2023.

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

In September 2024, the Company achieved a milestone for preclinical proof-of-concept, which triggered a $ 1,000 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 and nine months ended September 30, 2024.

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

ACCRUED EXPENSES

Accrued expenses consist of the following:

September 30,

Royalties due to Bioprojet

2 unchanged sentences

Research and development

Milestone payments

Professional fees, consulting, and other services

6 unchanged sentences

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 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 commenced 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 June 30, 2024, was $ 187,863 .

The fair value of the Term Loans as of September 30, 2024, was $ 188,356 .

Blackstone Credit Agreement

In August 2021, the Company entered into the Blackstone Credit Agreement, which provided for (i) a senior secured term loan facility in an aggregate original principal amount of $ 200,000 (the “Initial Term Loan”) and (ii) a senior secured delayed draw term loan facility in an aggregate principal amount up to $ 100,000 (the “DDTL”).

The DDTL was initially available to draw down through August 9, 2022.

In August 2022, the Company entered into an agreement to extend the expiration date of the DDTL to August 9, 2023, for which the Company paid a ticking fee at a rate of 1 % per annum on the undrawn portion of the DDTL (the “Ticking Fee”), commencing on August 10, 2022.

Net cash received from the Initial Term Loan was $ 191,849 , net of debt issuance costs of $ 8,151 .

In addition, the Company paid $ 1,000 in debt issuance costs relating to the DDTL, which was initially recorded in other current assets within the unaudited condensed consolidated balance sheet.

In connection with the TLA Credit Agreement, the Company extinguished the Blackstone Credit Agreement, which required a payoff amount of $ 207,308 , consisting of principal repayment, interest, exit fees, payment of the Ticking Fee and a prepayment premium.

The Company recognized a loss on extinguishment of debt of $ 9,766 relating to the Blackstone Credit Agreement within the Company’s unaudited condensed consolidated statements of operation and comprehensive income for the three and nine months ended September 30, 2023.

In addition, the Company recognized $ 1,972 relating to unamortized debt issuance costs relating to the DDTL and the Ticking Fee, which was recorded in interest expense, net within the unaudited condensed consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2023.

Long-term debt, net consists of the following:

September 30,

Principal amount

3 unchanged sentences

Long-term debt, net

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

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

Years ending December 31,

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

2024 (excluding the nine months ended September 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

Nine Months Ended

September 30,

Interest on principal balance

1 unchanged sentence

Total term loan interest expense

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 June 2018, the Company entered into an operating lease for approximately fifteen thousand square feet of office space in Plymouth Meeting, PA, which was set to 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.

The Company also leases a fleet of automobiles that are primarily used by its sales force 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.

1 unchanged sentence

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 $ 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 %.

The Company recorded operating lease costs of $ 491 and $ 473 for the three months ended September 30, 2024, and 2023, respectively and $ 1,622 and $ 1,295 for the nine months ended September 30, 2024, and 2023, respectively.

As of September 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 7.66 %.

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

Classification

June 30, 2024

September 30, 2024

December 31, 2023

7 unchanged sentences

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

June 30, 2024

June 30, 2023

September 30, 2024

September 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 June 30, 2024, consisted of the following:

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

Years ending December 31,

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

2024 (excluding the nine months ended September 30, 2024)

Total lease payments

2 unchanged sentences

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

Accruals may be adjusted from time to time, as appropriate, in light of new information.

The amount of loss incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued.

Any expenses, fines, fees, penalties, judgments or settlements that might be incurred by the Company in connection with proceedings could have a material adverse effect on the Company’s results of operations and financial condition.

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

Abbreviated New Drug Application (“ANDA”) Litigation

On September 27, 2023, the Company and its licensor, Bioprojet, received notice from Lupin Limited (“Lupin”) pursuant to 21 U.S.C.

§ 355(j) et seq.

and 21 C.F.R.

§ 314.95 et seq.

(the “Lupin Notice Letter”) that

Lupin has submitted ANDA No.

218846 (the “Lupin ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® before the expiration of U.S.

8,486,947 (“’947 patent”) and 8,207,197 (“’197 patent”).

On September 27, 2023, the Company and Bioprojet received notice from Novugen Pharma Sdn.

(“Novugen”) pursuant to 21 U.S.C.

§ 355(j) et seq.

and 21 C.F.R.

§ 314.95 et seq.

(the “Novugen Notice Letter”) that Novugen has submitted ANDA No.

218834 (the “Novugen ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® before the expiration of the ’947 patent and ’197 patent.

The ’947 patent and the ‘197 patent are listed with respect to WAKIX ® in the FDA’s Orange Book and will expire in September 2029 and March 2030, respectively.

The Lupin Notice Letter and the Novugen Notice Letter assert that their generic product will not infringe the ’947 patent and the ‘197 patent and/or that the ’947 patent and the ‘197 patent are invalid or unenforceable.

On November 9, 2023, we, Bioprojet and Bioprojet’s wholly owned subsidiary, Bioprojet Pharma SAS (“Bioprojet Pharma”), filed a complaint for patent infringement of the ’947 patent and the ‘197 patent against Lupin, Novugen and certain of their affiliates and agents in the United States District Court for the District of Delaware in response to the filing of their respective ANDAs with the FDA.

On October 12, 2023, the Company and Bioprojet received notice from Novitium Pharma LLC (“Novitium”), pursuant to 21 U.S.C.

§ 355(j) et seq.

and 21 C.F.R.

§ 314.95 et seq.

(the “Novitium Notice Letter”), that Novitium has submitted ANDA No.

218495 (the “Novitium ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® before the expiration of U.S.

8,354,430 (the “’430 patent”), which is also listed with respect to WAKIX ® in the FDA’s Orange Book and will expire in February 2026, ’947 patent, and ’197 patent.

On October 12, 2023, the Company and Bioprojet received notice from Zenara Pharma Pvt.

(“Zenara”), pursuant to 21 U.S.C.

§ 355(j) et seq.

and 21 C.F.R.

§ 314.95 et seq.

(the “Zenara Notice Letter”), that Zenara has submitted ANDA No.

218796 (the “Zenara ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® before the expiration of the ’430 patent, ’947 patent and the ’197 patent.

On October 14, 2023, the Company and Bioprojet received notice from AET Pharma US, Inc.

(“AET”), pursuant to 21 U.S.C.

§ 355(j) et seq.

and 21 C.F.R.

§ 314.95 et seq.

(the “AET Notice Letter”), that AET has submitted ANDA No.

218892 (the “AET ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® before the expiration of the ’947 patent and the ’197 patent.

On October 16, 2023, the Company and Bioprojet received notice from Annora Pharma Private Limited (“Annora”), pursuant to 21 U.S.C.

§ 355(j) et seq.

and 21 C.F.R.

§ 314.95 et seq.

(the “Annora Notice Letter”), that Annora has submitted ANDA No.

218832 (the “Annora ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® before the expiration of the ’430 patent, the ’947 patent and the ’197 patent.

AET’s Notice Letter asserts that AET’s generic product will not infringe the ’947 patent and the ‘197 patent and/or that ’947 patent and the ‘197 patent are invalid or unenforceable.

The Annora Notice Letter asserts that its generic product will not infringe the ‘430 patent, ’947 patent and the ‘197 patent and/or that the ‘430 patent, ’947 patent and the ‘197 patent are invalid or unenforceable.

The Novitium Notice Letter asserts that its generic product will not infringe the ‘430 patent, ’947 patent and the ‘197 patent and/or that the ‘430 patent, ’947 patent and the ‘197 patent are invalid or unenforceable.

The Zenara Notice Letter asserts that its generic product will not infringe the ‘430 patent, ’947 patent and the ‘197 patent and/or that the ‘430 patent, ’947 patent and the ‘197 patent are invalid or unenforceable.

On November 21, 2023, the Company, Bioprojet and Bioprojet Pharma filed a complaint for patent infringement of the ’947 patent and the ‘197 patent against AET, Annora, Novitium and Zenara and certain of their affiliates and agents and for patent infringement of the ’430 patent against Annora, Novitium and Zenara and certain of their affiliates and agents in the United States District Court for the District of Delaware in response to their filing of their respective ANDAs with the FDA.

In October 2023, MSN Pharmaceuticals Inc.

(“MSN Pharma”) sent correspondence to the Company and Bioprojet stating that MSN Pharma has submitted ANDA No.

218873 (the “MSN ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® .

On December 8, 2023, MSN Laboratories Private Limited (“MSN”) filed a declaratory judgment action in the United States District Court for the Eastern District of Virginia against Bioprojet claiming that the ‘430 patent, the ’947 patent and the ‘197 patent will not be infringed by MSN’s generic version of WAKIX ® and that the ‘947 patent is invalid.

On December 11, 2023, we, Bioprojet and Bioprojet Pharma filed a complaint in the United States District Court for the District of Delaware for patent infringement of the ‘430 patent, the ’947 patent and the ‘197 patent against MSN and MSN

On January 12, 2024, the declaratory judgment action was transferred from the United States District Court for the Eastern District of Virginia to the United States District Court for the District of Delaware.

On April 15, 2024, the United States District Court for the District of Delaware issued a scheduling order consolidating the cases described above for all purposes up to and including trial (the “Scheduling Order”).

The Scheduling Order set March 27, 2025, as the date for the hearing on claim construction and scheduled a four-day bench trial beginning on February 17, 2026.

The resolution of one or more of these matters against the Company could have a significant negative effect on the Company’s results of operations.

STOCKHOLDERS’ EQUITY

4 unchanged sentences

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.

In August 2023, the Company’s Board of Directors approved a program providing for the repurchase of shares of common stock in an aggregate amount of up to $ 125,000 , excluding commissions and transaction fees (the “August 2023 Repurchase Program”).

During the three and nine months ended September 30, 2023, the Company repurchased and cancelled 1,439,792 shares of common stock at an aggregate cost of $ 50,000 , exclusive of commissions and transaction fees.

In October 2023, the Company’s Board of Directors terminated the August 2023 Repurchase Program and any remaining amount authorized for the repurchase of shares and simultaneously approved a new 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 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 .

During the three and nine months ended September 30, 2024, and 2023, no shares of common stock were repurchased and cancelled by the Company under the October 2023 Repurchase Program.

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

STOCK INCENTIVE PLAN AND STOCK-BASED COMPENSATION

3 unchanged sentences

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 June 30, 2024, there were 7,654,586 shares of common stock available for issuance under the 2020 Plan.

RSUs vest over the vesting period specified in the applicable award agreement, at achievement of a performance requirement, or upon change of

control (as defined in the applicable plan).

As of September 30, 2024, there were 6,836,036 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 six months ended June 30, 2024:

The following table summarizes stock option activity for the nine months ended September 30, 2024:

Value ($000's)

3 unchanged sentences

Awards forfeited

Awards outstanding—June 30, 2024

Awards exercisable—June 30, 2024

Awards outstanding—September 30, 2024

Awards exercisable—September 30, 2024

Stock Appreciation Rights

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

The following table summarizes SARs activity for the nine months ended September 30, 2024:

Value ($000's)

3 unchanged sentences

Awards forfeited

Awards outstanding—June 30, 2024

Awards exercisable—June 30, 2024

Awards outstanding—September 30, 2024

Awards exercisable—September 30, 2024

Restricted Stock Units

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

The following table summarizes RSU activity for the nine months ended September 30, 2024:

Awards outstanding—December 31, 2023

2 unchanged sentences

Awards forfeited

Awards outstanding—June 30, 2024

Awards outstanding—September 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.

2 unchanged sentences

The assumptions used to value the awards are summarized in the following table.

September 30,

Dividend yield

7 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 $ 21.24 and $ 20.64 on June 30, 2024, and December 31, 2023, respectively.

The weighted average per share fair value of awards issued under the 2017 Plan and 2020 Plan was $ 21.25 and $ 20.64 on September 30, 2024, and December 31, 2023, respectively.

Stock-Based Compensation Expense

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,

Stock-based compensation expense for the three and nine months ended September 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 September 30,

Nine Months Ended September 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 June 30, 2024, the total unrecognized stock-based compensation expense was $ 68,926 and $ 19,749 for stock options and RSUs, respectively.

As of September 30, 2024, the total unrecognized stock-based compensation expense was $ 59,799 and $ 17,533 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 2.4 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.

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 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.

There were 1,206 and 0 shares issued under the ESPP for the three months ended September 30, 2024, and 2023, respectively.

There were 11,913 and 14,043 shares issued under the ESPP for the nine months ended September 30, 2024, and 2023, respectively.

The discount on the ESPP was $ 72 and $ 100 for the three months ended September 30, 2024, and 2023, respectively, and $ 230 and $ 308 for the nine months ended September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 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 and six months ended June 30, 2024, and 2023 is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Federal income tax rate

5 unchanged sentences

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.

In addition, the Chairman of the Company’s board of directors is the Founder, Chairman and CEO

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 $ 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.

The Company incurred $ 73 for each of the three months ended September 30, 2024, and 2023, and incurred $ 218 for each of the nine months ended September 30, 2024, and 2023 in expenses to Paragon, which are included in general and administrative in the unaudited condensed consolidated statements of operations and comprehensive loss.

As of September 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