What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-25 compared with 2024-02-22 · 248 added, 142 removed, 648 unchanged (38% of the section changed)

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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Rebate Accrual for Medicaid – Refer to “Note 3 – Product Sales, Net” to the financial statements

We believe that our audits.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Rebate Accrual for Medicaid – Refer to “Note 3- Net Product Revenue” to the financial statements

Critical Audit Matter Description

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The rebate provision and related liability related to the Medicaid Drug Rebate Program (the “Medicaid rebate accrual”) involves the use of significant assumptions and judgments in the Company’s calculation.

These significant assumptions and judgments include consideration of legal interpretations of applicable laws and regulations, historical claims experience, payer channel mix, current contract prices, unbilled claims, claims submission time lags, and inventory levels in the distribution channel.

These significant assumptions and judgments include historical claims experience, payer channel mix, current contract prices, unbilled claims, claims submission time lags, and inventory levels in the distribution channel.

Given the complexity involved in determining the significant assumptions used in calculating the Medicaid rebate accrual, auditing these estimates involved especially subjective judgment.

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● We tested significant assumptions and key inputs used to calculate the Medicaid rebate accrual.

● We evaluated the Company’s ability to estimate the Medicaid rebate accrual accurately by comparing actual amounts incurred for the Medicaid rebate accrual to historical estimates.

● We evaluated the Company’s ability to estimate the Medicaid rebate accrual accurately by comparing the actual amounts incurred for the Medicaid rebate accrual to historical estimates.

● We tested the overall reasonableness of the Medicaid rebate accrual recorded at period end by developing an expectation for comparison to actual recorded balances.

Accounting Treatment of the Asset Acquisition – Refer to “Note 4 – Acquisition” to the financial statements

Critical Audit Matter Description

As described further in Note 4 to the financial statements, during the year ended December 31, 2023, the Company completed an asset acquisition for which substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable in-process research and development (“IPR&D”) asset, ZYN002.

The transaction was accounted for as an asset acquisition, and as such, the total consideration was allocated to the acquired asset based upon its relative fair value.

The Company utilized a third-party valuation specialist to assist in the determination of the fair value of the asset acquired.

The methods used to estimate the fair value involved significant assumptions.

We identified the accounting for the asset acquisition versus a business combination and the valuation of the asset as a critical audit matter.

The principal considerations for our determination that the accounting for the transaction as an asset acquisition versus a business combination and valuation of the asset acquisition is a critical audit matter included (i) the significant judgment by the Company in the interpretation and application of the relevant accounting literature to conclude on asset acquisition;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the Company’s fair value estimate of the asset acquired, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Given the complexity involved in interpreting the guidance for the accounting treatment of the asset acquisition, auditing these estimates involved especially subjective judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the audit considerations of the asset acquisition included the following, among others:

● We evaluated the underlying terms of the Agreement and Plan of Merger and the Company’s accounting memoranda, including application of the relevant accounting guidance.

● With the assistance of internal subject matter experts, we evaluated the appropriateness and consistency of the Company’s application of accounting literature related to the transaction.

● We tested the effectiveness of internal controls over the Company’s asset acquisition evaluation, including those over the determination of the fair value of IPR&D.

● With the assistance of fair value specialists, we evaluated the appropriateness of the Company’s methodology used to estimate the fair value of the IPR&D asset and the significant assumptions utilized.

/s/ Deloitte & Touche LLP

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Accumulated other comprehensive (loss) income

Accumulated deficit

Retained earnings (accumulated deficit)

TOTAL STOCKHOLDERS’ EQUITY

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Income before income taxes

Income tax (expense) benefit

Unrealized income (loss) on investments

Income tax expense

Unrealized (loss) income on investments

Comprehensive income

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Balance as of December 31, 2021

Issuance of common stock

Exercise of options

Stock-based compensation

Balance as of December 31, 2021

Unrealized loss on investments

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Balance as of December 31, 2023

Unrealized gain on investments

Repurchase of common stock

Exercise of options and vesting of restricted stock units (2)

Stock-based compensation

Balance as of December 31, 2024

(1) Common stock of Harmony Biosciences Holdings, Inc.

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Trade payables

Accrued expenses and other current liabilities

Other non-current liabilities

Other liabilities

Net cash provided by operating activities

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Acquisition of Zynerba Pharmaceuticals, Inc., net of cash acquired

Milestone payments

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

Payment of license fee and milestone

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

Common stock issuance costs

Proceeds from issuance of debt

Proceeds from long-term debt

Debt issuance costs

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in September 2017 and, in February 2020, the Company changed its name to Harmony Biosciences Holdings, Inc.

The Company’s operations are conducted in its wholly owned subsidiary, Harmony Biosciences, LLC (“Harmony”), which was formed in May 2017.

The Company’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.

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(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 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.

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 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 $ 143,277 and $ 272,130 , as of December 31, 2023, and 2022, respectively.

The Company had retained earnings and an accumulated deficit of $ 2,216 and $ 143,277 , as of December 31, 2024, and 2023, respectively.

As of December 31, 2024, the Company had cash, cash equivalents and investments of $ 576,060 .

The Company believes that its existing cash, cash equivalents and investments on hand as of December 31, 2023, as well as additional cash generated from operating and financing activities will meet its operational liquidity needs and fund its planned investing activities for the next twelve months from the date of issuance of these consolidated financial statements.

The Company believes that its existing cash, cash equivalents and investments on hand as of December 31, 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 consolidated financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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.

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

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

Operating segments which are defined as components 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.

Operating segments which are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) 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, therefore, has one reportable segment.

Fair Value of Financial Instruments

The Company’s consolidated financial statements include cash, cash equivalents, accounts payable, and accrued liabilities, all of which are short term in nature and, accordingly, approximate fair value.

Additionally, prior to the IPO, the Company’s consolidated financial statements included a warrant liability that was carried at fair value and was re-measured at each balance sheet date until it would be exercised or expired.

Additionally, prior to the initial public offering (the “IPO”), the Company’s consolidated financial statements included a warrant liability that was carried at fair value and was re-measured at each balance sheet date until it would be exercised or expired.

In connection with the IPO, the Warrants were re-evaluated under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, and reclassified to equity.

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Short-term and long-term investments are carried at fair value and unrealized gains and losses are recorded as a component of accumulated comprehensive income in stockholders’ equity.

The amortization of premiums and accretion of discounts adjust the carrying value of investments and are recorded in interest expense, net, on the unaudited condensed consolidated statements of operations and comprehensive income.

Interest income and realized gains and losses, if any, are also recorded in interest expense, net, on the unaudited condensed consolidated statement of operations and comprehensive income.

The amortization of premiums and accretion of discounts adjust the carrying value of investments and are recorded in interest expense on the consolidated statements of operations and comprehensive income.

Interest income and realized gains and losses, if any, are also recorded in interest income on the 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.

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

As of December 31, 2023, three customers accounted for 100 % of gross accounts receivable, Accredo Health Group, Inc.

As of December 31, 2024, three customers accounted for 100 % of gross accounts receivable, Caremark LLC (“CVS Caremark”), which accounted for 39 % of gross accounts receivable;

PANTHERx Specialty Pharmacy LLC (“PANTHERx”), which accounted for 31 % of gross accounts receivable;

and Accredo Health Group, Inc.

(“Accredo), which accounted for 30 % of gross accounts receivable.

Caremark LLC (“CVS Caremark”), which accounted for 32 % of gross accounts receivable;

and PANTHERX Specialty Pharmacy LLC (“Pantherx), which accounted for 29 % of gross accounts receivable.

As of December 31, 2023, three customers accounted for 100 % of gross accounts receivable;

CVS Caremark, which accounted for 41 % of gross accounts receivable, Accredo, which accounted for 35 % of gross accounts receivable and Pantherx, which accounted for 24 % of gross accounts receivable.

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 year ended December 31, 2024, three customers accounted for 100 % of gross product revenue;

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CVS Caremark accounted for 37 % of gross product revenue;

Pantherx accounted for 29 % of gross product revenue;

and Accredo accounted for 29 % of gross product revenue.

For the year ended December 31, 2021,

three customers accounted for 100 % of gross product revenue;

CVS Caremark accounted for 36 % of gross product revenue;

Accredo accounted for 32 % of gross product revenue;

and PANTHERx accounted for 31 % of gross product revenue.

For the year ended December 31, 2022, three customers accounted for 100 % of gross product revenue;

CVS Caremark accounted for

42 % of gross product revenue;

PANTHERx accounted for 29 % of gross products revenue;

and Accredo accounted for 29 % of gross product revenue.

The Company depends on a single source supplier for each of its product and active pharmaceutical ingredient.

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

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Leasehold improvements are depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the term of the lease.

The Company’s leasehold improvements primarily relate to its corporate headquarters in Plymouth Meeting, PA, and are generally being depreciated through the end of the lease term in May 2024.

The Company’s leasehold improvements primarily relate to its corporate headquarters in Plymouth Meeting, PA, and have been fully depreciated as of December 31, 2024.

When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in the consolidated statement of operations and comprehensive income (loss) in the period realized.

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(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

(iv) allocate the transaction price to the performance

obligations in the contract;

and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services it transfers to the customer.

We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services it transfers to the customer.

The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under contracts will not occur in a future period.

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The method incorporates various assumptions, such as the risk-free interest rate, expected volatility, expected dividend yield, and expected life of the options.

The Company also had non-employee stock awards subject to a performance condition that are recognized based on probable outcome of achieving future events.

The Company recognizes forfeitures as they occur.

Basic and Diluted Net Income per Share

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Changes in recognition or measurement are reflected in the period in which a change in judgment occurs.

At December 31, 2023 and 2022, the Company did no t have any unrecognized uncertain tax positions.

At December 31, 2024 and 2023, the Company did not have any unrecognized uncertain tax positions.

The Company’s policy is to include any interest and penalties as a component of income tax expense.

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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

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

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No.

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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.

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 consolidated financial statements.

This ASU was effective for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption was permitted.

ASU 2023-07 was required to be applied retrospectively to all prior periods presented in the financial statements.

The Company adopted this guidance in the fourth quarter of 2024.

This pronouncement addresses disclosures only and had no impact on its consolidated financial results.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued Accounting Standards Update (“ASU”) No 2023-09, “Income Taxes (Topic 740):

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

On October 10, 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”), 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.

Both the Common Cash Amount and Common CVR Amount are to be paid in cash, subject to any applicable withholding of taxes and without interest.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) .

ASU 2024-03 requires disclosure, in the notes to the financial statements, of specified information about certain costs and expenses, including amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense caption, as well as a qualitative description of amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.

ASU 2024-03 also requires disclosure of the total amount of selling expenses and, in annual periods, an entity’s definition of selling expenses.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

The guidance may be applied prospectively or retrospectively.

Early adoption is permitted.

The Company is currently evaluating the impact that ASU 2024-03 will have on its 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”), 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.

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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.

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.

The guidance in ASC Topic 730 Research and Development 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 $ 2,260 related to acquired in-process research and development expense related to the ZYN002 IPR&D asset during the year ended December 31, 2023.

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Net assets acquired

Subsequent to the acquisition, The Company incurred $ 7,544 in severance charges related to the acquisition, of which $ 3,858 was included in general administrative expenses and $ 3,686 was included in research and development expenses, within the consolidated statements of operations for the year ended December 31, 2023.

As of December 31, 2023, the Company had accrued $ 7,544 related to these severance charges, which is included in accrued compensation in the consolidated balance sheet.

The amount of Zynerba’s net loss included in the consolidated statements of operations and comprehensive income for the year ended December 31, 2023, was $ 14,451 .

There was no revenue from Zynerba included in the consolidated statements of operations and comprehensive income for the year ended December 31, 2023, as Zynerba has no historical sales.

Unaudited Pro Forma Financial Information

Unaudited pro forma net income was $ 108,350 and $ 135,567 for the year ended December 31, 2023, and 2022, respectively and there was no adjustment to unaudited pro forma net product revenue for the year ended December 31, 2023, and 2022, as Zynerba has no historical sales through December 31, 2023.

The unaudited pro forma combined financial information presented above has been prepared from historical financial statements that have been adjusted to give effect to the acquisition of Zynerba as though it had occurred on January 1, 2022.

They include adjustments for severance expense and acquired in-process research and development expense.

The unaudited pro forma financial information is not intended to reflect the actual results of operations that would have occurred if the acquisition had occurred on January 1, 2022, nor is it indicative of future operating results.

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.

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.

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.

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.

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 year ended December 31, 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:

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Corporate debt securities

government securities

Total short-term investments

Commercial paper

Corporate debt securities

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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.

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 December 31, 2024, or December 31, 2023.

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Finished goods

Inventory, gross

Reserve for excess inventory

Total inventory, net

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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 December 31, 2023, the remaining useful life was 5.8 years.

The Company determined a useful life of 10 years for the intangible asset, and, as of December 31, 2024, the remaining useful life was 4.8 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 December 31, 2023, the remaining useful life was 5.8 years.

The Company determined a useful life of 9 years for the intangible asset, and, as of December 31, 2024, the remaining useful life was 4.8 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 December 31, 2023, the remaining useful life was 5.8 years.

The Company determined a useful life of 7.6 years for the intangible asset, and, as of December 31, 2024, the remaining useful life was 4.8 years.

Amortization expense was $ 23,845 , $ 23,845 and $ 22,966 for the years ended December 31, 2024, 2023 and 2022, respectively, and is recorded in general and administrative expenses in the consolidated statements of operations and comprehensive income (loss).

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LICENSE AGREEMENTS AND ASSET PURCHASE 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.

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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.

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.

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The $ 30,000 licensing fee was recorded in research and development within the consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2022.

Agreement Related to Intellectual Property

In April 2024, the Company announced that it entered into a sublicense agreement with Bioprojet for an orexin-2 receptor agonist (OX2R) (“BP1.15205”) 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 BP1.15205 in the United States and Latin American territories (the “Licensed Territories”), which are rights that Bioprojet originally licensed from Teijin Pharma, the innovator of BP1.15205.

BP1.15205 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 consolidated statements of operations and comprehensive income for the year ended December 31, 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.

(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 .

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.

Additionally, there are payments due under the APA upon the achievement of certain milestones including $ 1,750 for preclinical milestones, $ 19,000 for development milestones, $ 44,000 for regulatory milestones and $ 110,000 for sales milestones.

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 consolidated statement of operations and comprehensive income for the year ended December 31, 2023.

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 consolidated statement of operations and comprehensive income for the year ended December 31, 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:

Accrued expenses included the following:

Royalties due to Bioprojet

Rebates and other sales deductions

Selling and marketing

Sales and marketing

Research and development

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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

will pay a ticking fee at a rate of 1 % per annum on the undrawn portion of the DDTL, which commenced on August 10, 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 will pay a ticking fee at a rate of 1 % per annum on the undrawn portion of the DDTL, which commenced on August 10, 2022.

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

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

In addition, the Company paid $ 1,000 in debt issuance costs relating to the DDTL, which was initially recorded in other current assets within the consolidated balance sheet for the year ended December 31, 2021.

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

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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 consolidated statement of operations and comprehensive income for the year ended December 31, 2023.

OrbiMed Credit Agreement

In January 2020, the Company entered into a credit agreement with OrbiMed for an aggregate amount of $ 200,000 (the “OrbiMed Loan”), with a maturity date of January 2026.

Borrowings under the OrbiMed Loan were collateralized by all of the Company’s assets, excluding the intellectual property licensed through the License Agreement.

The OrbiMed Loan had an interest rate equal to the sum of (i) the greater of (a) 1-month LIBOR or (b) 2.00 % per annum, plus (ii) 11.00 % per annum, paid in cash monthly in arrears on the last day of each month starting in January 2020.

At the time of prepayment or repayment of all or any portion of the principal of the OrbiMed Loan, the Company was required to pay an exit fee of 7.0 % of the principal amount of the OrbiMed Loan prepaid, repaid, or required to be prepaid or repaid.

The Company recorded the exit fee as a liability and debt discount at the origination of the term loan.

In connection with the OrbiMed Loan, the Company extinguished its $ 200,000 multi-draw loan agreement with CRG Servicing LLC (the “CRG Loan”), which required a payoff amount of $ 120,893 consisting of principal repayment, interest, and exit fees.

In connection with extinguishment of the CRG Loan, the Company recognized a loss on extinguishment of $ 22,639 within the Company’s consolidated statement of operations for the year ended December 31, 2020.

In connection with the Blackstone Credit Agreement, the Company extinguished the OrbiMed Loan, which required a payoff amount of $ 222,666 consisting of principal repayment, interest, exit fees and a prepayment premium.

The Company recognized a loss on extinguishment of $ 26,146 relating to the OrbiMed Loan within the Company’s consolidated statement of operation for the year ended December 31, 2021.

Long-term debt, net consists of the following:

Liability component - principal

Principal amount

Unamortized debt discount associated with debt financing costs

Liability component - net carrying value

Total debt, net

Less current portion

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Years ending December 31,

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

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

Interest on principal balance

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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.

The terms of the lease payments provide for rental payments on a monthly basis and on a graduated scale.

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December 31, 2023

December 31, 2022

Operating cash flows from operating leases

Right of use assets obtained in exchange for operating lease obligations

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

Future payments under non-cancelable operating leases with initial terms of one year or more as of December 31, 2024, consisted of the following:

Years ending December 31,

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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 December 31, 2023, 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 December 31, 2024, there were no material claims or lawsuits outstanding other than the ANDA litigation discussed below .

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.

(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 Pharma.

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.

On August 7, 2024, the Company and Bioprojet received further notice from AET pursuant to 21 U.S.C.

§ 355(j) et seq.

and 21 C.F.R.

§ 314.95 et seq .

(the “Second AET Notice Letter”) that AET has submitted 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.

The Second AET Notice Letter asserts that its 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 August 13, 2024, we, Bioprojet and

Bioprojet Pharma filed a complaint in the United States District Court for the District of Delaware for patent infringement of the ’947 patent and the ‘197 patent against AET.

On October 31, 2024, the Company reached an agreement with Novugen Pharma to resolve the dispute over Novugen’s ANDA for a generic pitolisant hydrochloride product.

Under the terms of the settlement agreement, the litigation between the parties in the United States District Court for the District of Delaware was ended on November 4, 2024, and Novugen will have a license to sell its generic product beginning January 2030, or earlier under certain circumstances.

On December 12, 2024, the Company and Bioprojet received further notice from Lupin pursuant to 21 U.S.C.

§ 355(j) et seq.

and 21 C.F.R.

§ 314.95 et seq .

(the “Second Lupin Notice Letter”) that Lupin has submitted the Lupin 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.

The Second Lupin Notice Letter asserts that its 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 January 24, 2025, we, Bioprojet and Bioprojet Pharma filed a complaint in the United States District Court for the District of Delaware for patent infringement of the ’947 patent and the ‘197 patent against Lupin.

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

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The Company’s common stock has no preemptive rights, conversion rights or other subscription rights or redemption or sinking fund provisions.

In connection with the Blackstone Credit Agreement, in August 2021, the Company sold an aggregate of 1,048,951 shares of our common stock, par value $ 0.00001 per share, for an aggregate cash consideration of $ 30,000 , or $ 28.60 per share.

This sale did not involve a public offering and was therefore exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D thereunder as a transaction not involving any public offering.

In connection with the OrbiMed Loan, the Company issued warrants to OrbiMed Royalty & Credit Opportunities, LP on January 9, 2020.

Pursuant to the warrants, OrbiMed Royalty & Credit Opportunities, LP had the option to purchase up to 410,239 shares of the Company’s common stock for an initial exercise price of $ 16.10 .

In September 2021, OrbiMed exercised its option to purchase shares of the Company’s common stock which resulted in the net settlement of 221,511 shares of common stock being issued to OrbiMed.

Share Repurchase Program

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

The August 2023 Repurchase Program may be suspended, terminated or modified at any time for any reason.

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 year ended December 31, 2023, the Company repurchased and retired 1,439,792 shares of common stock at an aggregate cost of $ 50,000 under the August 2023 Repurchase Program, excluding commissions and transaction fees.

On October 27, 2023, the Company’s Board of Directors terminated the August 2023 Repurchase Program and any remaining amount authorized for the repurchase of shares.

Simultaneously, 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 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 year ended December 31, 2024, the Company repurchased and retired no shares of common stock.

During the year ended December 31, 2023, the Company repurchases and retired 1,814,653 shares of common stock at an aggregate cost of $ 50,000 under the October 2023 Repurchase Program, excluding commissions and transaction fees.

As of December 31, 2024, the remaining amount of common stock authorized for repurchase was $ 150,000 .

STOCK INCENTIVE PLAN AND STOCK-BASED COMPENSATION

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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.

The 2020 Plan provides for the grant of stock

options, including incentive stock options (“ISOs”) and non-qualified stock options (“NSOs”), stock appreciation rights (“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).

4 unchanged sentences

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 common shares 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.

2 unchanged sentences

The following table summarizes stock option activity for the year ended December 31, 2024:

Value ($000's)

Awards outstanding—December 31, 2023

3 unchanged sentences

Awards outstanding—December 31, 2024

Awards exercisable—December 31, 2024

Awards unvested—December 31, 2024

The weighted-average grant-date fair value of stock options granted during the year ended December 31, 2024, was $ 20.68 .

The total intrinsic value of stock options exercised for the year ended December 31, 2024, was $ 4,328 .

Stock Appreciation Rights

The following table summarizes SARs activity for the year ended December 31, 2024:

Value ($000's)

Awards outstanding—December 31, 2023

3 unchanged sentences

Awards outstanding—December 31, 2024

Awards exercisable—December 31, 2024

Restricted Stock Units

5 unchanged sentences

Awards outstanding—December 31, 2024

As of December 31, 2023, and 2022, stock awards issued under the 2017 and 2020 Plans of 3,298,284 and 1,818,045 common shares, respectively, were vested.

Value of Stock Options and SARs

8 unchanged sentences

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

Year Ended December 31,

Dividend yield

2 unchanged sentences

74.87 - 80.78

72.57 - 77.08

Risk-free interest rate

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General and administrative expense

Stock-based compensation expense, net related to options and RSUs issued under the 2017 Plan and 2020 Plan is included in stockholder’s equity, and a liability for S AR s is included in other non-current liabilities, in the Company’s consolidated balance sheet.

As of December 31, 2023, the total unrecognized stock-based compensation expense related to options and RSUs was $ 69,594 which will be recognized in the Company’s consolidated statement of operations over a weighted average period of 2.3 years.

Stock-based compensation expense, net related to options and RSUs issued under the 2017 Plan and 2020 Plan and the employee stock purchase plan is included in stockholder’s equity, and a liability for S AR s is included in other non-current liabilities, in the Company’s consolidated balance sheet.

As of December 31, 2024, the total unrecognized stock-based compensation expense was $ 49,247 and $ 15,658 for stock options and RSUs, respectively.

These amounts will be recognized in the Company’s consolidated statement of operations over a weighted average period of 2.1 years and 2.7 years for stock options and RSU’s, respectively.

Employee Stock Purchase Plan

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The discount on the ESPP was $ 298 , $ 393 and $ 363 for the years ended December 31, 2024, 2023 and 2022, respectively, and is recorded within stock-based compensation expense.

SEGMENT INFORMATION

The Company has one reportable segment:

rare neurological diseases.

The rare neurological diseases segment consists of the Company’s commercial product, WAKIX, and its potential product candidates, that focus on patients living with rare neurological diseases who have unmet needs.

The Company currently derives all of its revenue from sales of WAKIX, which is used in the treatment of EDS and cataplexy in adult patients with narcolepsy and the treatment of EDS in pediatric patients six years and older with narcolepsy and manages its business activities on a consolidated basis.

The accounting policies of the rare neurological diseases segment are consistent with those described in Note 3, Summary of Significant Accounting Policies , and the measure of segment assets is reported on the consolidated balance sheets as total assets.

The Company’s CODM is the chief executive officer.

The CODM assesses performance of the rare neurological diseases segment using net income as reported in the consolidated statements of operations and comprehensive income.

Net income is assessed by the CODM to make decisions on how to allocate resources, such as reinvesting profits into the rare neurological diseases segment or pursuing potential investing activities.

The following table summarizes segment revenue and significant segment expenses for the years ended December 31, 2024, 2023 and 2022:

Rare Neurological Diseases Segment

Year Ended December 31,

Net product revenue

Cost of product sold

Research and development (excluding stock compensation and IPR&D)

Sales and marketing (excluding stock compensation)

General and administrative (excluding stock compensation, amortization and depreciation)

Depreciation and amortization

Stock-based compensation

Interest expense

Interest income

Income tax expense (benefit)

Other segment items (a)

Consolidated net income

(a) Other segment items include other expense (income), net, IPR&D charges and charges related to the extinguishment of debt.

EARNINGS PER SHARE

3 unchanged sentences

Year Ended December 31,

Net income available to common shareholders

Net income per share of common stock - basic

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Stock-based compensation

Nondeductible IPR&D

Valuation allowance

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As of December 31, 2024, and December 31, 2023, our deferred tax assets were primarily the result of acquired in-process research and development costs, operating loss carryforwards, capitalized research and development costs, inventory, and accrued rebates.

As of December 31, 2023, the Company recorded a valuation allowance on federal net operating losses of Zynerba’s subsidiary, Zynerba Pharmaceuticals Pty Ltd., and the state net operating losses of Zynerba.

During the years ended December 31, 2024 and 2023, the Company recorded a valuation allowance on federal net operating losses of the Company’s subsidiary, Zynerba Pharmaceuticals Pty Ltd., and the state net operating losses of Zynerba.

The Company previously recorded a valuation allowance against Harmony’s historical deferred tax assets.

4 unchanged sentences

Decreases recorded as a benefit to income tax provision

Increases due to Zynerba Acquisition

Increases recorded to income tax provision

Increases recorded in opening balance sheet

Valuation allowance at the end of the year

As of December 31, 2024, and 2023, the Company has approximately $ 220,243 and $ 179,390 , respectively, of federal net operating loss ("NOL") carryforward available to offset future federal taxable income.

The Company also has approximately $ 137,331 and $ 95,230 of state NOL carryforwards as of December 31, 2023, and 2022, respectively, available to offset

future state taxable income.

The Company also has approximately $ 111,079 and $ 137,331 of state NOL carryforwards as of December 31, 2024, and 2023, respectively, available to offset future state taxable income.

All of the Company’s tax years remain open to examination by federal and state taxing authorities.

9 unchanged sentences

RELATED-PARTY TRANSACTIONS

The Company was party to a management agreement for professional services provided by a related party, Paragon.

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

The Company’s related party, Paragon, is an entity that shares common ownership with the Company.

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

1 unchanged sentence

For the years ended December 31, 2024, 2023 and 2022, the Company incurred $ 290 , $ 290 and $ 284 , respectively, in expenses pursuant to the right of use agreement with this related party, which are included in general and administrative expense in the consolidated statements of operations and comprehensive income (loss).

In August 2021, the Company paid a $ 2,300 advisory fee to Paragon in connection with the Blackstone Credit Agreement.

$ 2,000 of this payment was recorded in debt issuance costs as a component of long-term debt, net and $ 300 was recorded in common stock issuance costs as a component of additional paid-in capital, within the consolidated balance sheet as of December 31, 2 0 22.

As of December 31, 2024, and 2023, there were no amounts due to or due from related parties included within the consolidated balance sheet.

5 unchanged sentences

Deductions due to payment of distribution fees, discount and chargebacks

Allowance for distribution fees, discounts and chargebacks at the beginning of the year

Allowance for distribution fees, discounts and chargebacks at the end of the year

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data