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Item 9A. Controls and Procedures

2022-02-24 compared with 2021-02-11 · 128 added, 227 removed, 952 unchanged (27% of the section changed)

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Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)) as of December 31, 2021.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of December 31, 2020, the end of the period covered by this Annual Report, to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of December 31, 2021, the end of the period covered by this annual report on Form 10- K (Annual Report), to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting

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OTHER INFORMATION

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DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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Information required under this item will be contained in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021 and is incorporated herein by reference pursuant to General Instruction G (3) to Form 10-K.

EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The consolidated financial statements filed as part of this annual report on Form 10-K are listed in the Index to Consolidated Financial Statements.

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The Exhibits are listed in the Exhibit Index.

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Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

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Polymeropoulos, M.D.

President and Chief Executive Officer

President, Chief Executive Officer and Chairman of the Board of Directors

Pursuant to the requirements of the Securities Act of 1934, this annual report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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Polymeropoulos, M.D.

President and Chief Executive Officer and Director (Principal Executive Officer) February 11, 2021

President, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) February 24, 2022

Polymeropoulos, M.D.

/s/ Kevin Moran Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) February 24, 2022

Thomas Watkins Chairman of the Board and

Director February 11, 2021

Thomas Watkins Lead Independent Director February 24, 2022

Thomas Watkins

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Stephen Ray Mitchell

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Vanda Pharmaceuticals Inc.

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm ( PCAOB ID 238 )

Consolidated Balance Sheets at December 31, 2021 and 2020

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Notes to the Consolidated Financial Statements

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Report of Independent Registered Public Accounting Firm

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

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A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

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expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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The allowance for rebates is based on statutory or contracted discount rates and estimated patient utilization.

The Company has recorded product revenue allowances of $34.4 million as of December 31, 2020, of which a significant amount relates to allowances for Fanapt ® Medicaid rebates.

The principal considerations for our determination that performing procedures relating to the Fanapt ® Medicaid rebates is a critical audit matter are the significant judgment by management due to the significant measurement uncertainty involved in developing the allowances, as these allowances are based on assumptions developed for estimated patient utilization, primarily payor mix and invoice lag;

The Company has recorded product revenue allowances of $40.0 million as of December 31, 2021, of which a significant amount relates to allowances for Medicaid Rebates for Fanapt ® .

The principal considerations for our determination that performing procedures relating to Medicaid Rebates for Fanapt ® is a critical audit matter are the significant judgment by management due to the significant measurement uncertainty involved in developing the allowances, as these allowances are based on assumptions developed for estimated patient utilization, primarily payor mix and invoice lag;

this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the estimated patient utilization assumption.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the allowances for Fanapt ® Medicaid rebates, including controls over the assumptions used to estimate these rebates.

These procedures also included, among others, (i) developing an independent estimate of the Fanapt ® Medicaid rebates by utilizing third-party information related to patient utilization, as well as the historical trends of the invoice lag;

These procedures included testing the effectiveness of controls relating to the allowances for Medicaid Rebates for Fanapt ® , including controls over the assumptions used to estimate these rebates.

These procedures also included, among others, (i) developing an independent estimate of the Medicaid Rebates for Fanapt ® by utilizing third-party information related to patient utilization, as well as the historical trends of the invoice lag;

and (ii) comparing the independent estimate to management’s estimate.

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We have served as the Company’s auditor since 2003.

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VANDA PHARMACEUTICALS INC.

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669,223 650,300

Accumulated other comprehensive income 239 249

Accumulated other comprehensive income (loss) ( 175 ) 239

Accumulated deficit ( 164,176 ) ( 197,328 )

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The accompanying notes are an integral part of these consolidated financial statements.

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VANDA PHARMACEUTICALS INC.

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The accompanying notes are an integral part of these consolidated financial statements.

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VANDA PHARMACEUTICALS INC.

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Change in net unrealized gain (loss) on marketable securities ( 472 ) ( 102 ) 313

Tax benefit (provision) on other comprehensive income 24 ( 71 ) —

Tax benefit (provision) on other comprehensive income (loss) 107 24 ( 71 )

Other comprehensive income (loss), net of tax ( 414 ) ( 10 ) 248

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The accompanying notes are an integral part of these consolidated financial statements.

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VANDA PHARMACEUTICALS INC.

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Balances at December 31, 2018 52,477,593 $ 52 $ 611,587 $ 1 $ ( 336,218 ) $ 275,422

Net proceeds from public offering of common stock

6,325,000 6 100,864 — — 100,870

Issuance of common stock from the exercise of stock options and settlement of restricted stock units

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Net income — — — — 23,337 23,337

Other comprehensive income, net of tax

— — — 248 — 248

Other comprehensive loss, net of tax — — — ( 10 ) — ( 10 )

Balances at December 31, 2020 54,865,092 55 650,300 239 ( 197,328 ) 453,266

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The accompanying notes are an integral part of these consolidated financial statements.

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VANDA PHARMACEUTICALS INC.

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Cash flows from investing activities

Acquisition of intangible asset — — ( 25,000 )

Purchases of property and equipment ( 552 ) ( 1,795 ) ( 1,019 )

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Cash flows from financing activities

Net proceeds from offering of common stock — — 100,870

Proceeds from exercise of stock options 3,550 5,634 6,264

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The accompanying notes are an integral part of these consolidated financial statements.

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VANDA PHARMACEUTICALS INC.

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The Company’s commercial portfolio is currently comprised of two products, HETLIOZ ® for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) and nighttime sleep disturbances in Smith-Magenis Syndrome (SMS) and Fanapt ® for the treatment of schizophrenia.

HETLIOZ ® is the first treatment for patients with Non-24 and SMS approved by the United States Food and Drug Administration (FDA).

HETLIOZ ® is the first product approved by the United States Food and Drug Administration (FDA) for patients with Non-24 and patients with SMS.

In addition, the Company has a number of drugs in development, including:

• HETLIOZ ® (tasimelteon) for the treatment of jet lag disorder, pediatric Non-24, delayed sleep phase disorder (DSPD) and autism spectrum disorder (ASD);

• Fanapt ® (iloperidone) for the treatment of bipolar disorder and Parkinson's disease psychosis (PDP) and a long acting injectable (LAI) formulation for the treatment of schizophrenia;

• Tradipitant (VLY-686), a small molecule neurokinin-1 receptor (NK-1R) antagonist, for the treatment of gastroparesis, motion sickness, atopic dermatitis, and COVID-19 pneumonia;

• HETLIOZ ® (tasimelteon) for the treatment of jet lag disorder, delayed sleep phase disorder (DSPD), symptoms of autism spectrum disorder (ASD) and pediatric Non-24;

• Fanapt ® (iloperidone) for the treatment of bipolar disorder and Parkinson ’ s disease psychosis and a long acting injectable (LAI) formulation for the treatment of schizophrenia;

• Tradipitant (VLY-686), a small molecule neurokinin-1 (NK-1) receptor antagonist, for the treatment of gastroparesis, motion sickness, atopic dermatitis, and COVID-19 pneumonia;

• VTR-297, a small molecule histone deacetylase (HDAC) inhibitor for the treatment of hematologic malignancies and with potential use as a treatment for several oncology indications;

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• VQW-765, a small molecule nicotinic acetylcholine receptor partial agonist, with potential use for the treatment of psychiatric disorders;

• VHX-896 (formerly P88), the active metabolite of iloperidone.

Basis of Presentation

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headquarters.

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The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total end of period cash, cash equivalents and restricted cash reported within the Consolidated Statement of Cash Flows:

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The Company’s investment policy requires the selection of high-quality issuers.

Available-for-sale securities are carried at fair market value, with unrealized gains and losses reported as a component of stockholders’ equity in accumulated other comprehensive income.

Available-for-sale securities are carried at fair market value, with unrealized gains and losses reported as a component of stockholders’ equity in accumulated other comprehensive income (loss).

At each balance sheet date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis.

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Intangible assets related Fanapt ® have been fully amortized on a straight-line basis to November 2016.

The useful life estimate for Fanapt ® was based on the market participant methodology prescribed by ASC 805, and therefore does not reflect the impact of additional Fanapt ® patents solely owned by the Company with varying expiration dates, the latest of which is December 2031.

The useful life estimate for Fanapt ® was based on the market participant methodology prescribed by Accounting Standards Codification (ASC) 805, and therefore does not reflect the impact of additional Fanapt ® patents solely owned by the Company with varying expiration dates, the latest of which is December 2031.

Property and Equipment

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Leasehold improvements are amortized using a

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straight-line basis over the lesser of the estimated useful lives of the assets or the terms of the related leases.

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Upon retirement or disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the statement of operations for that period.

In accordance with Accounting Standards Codification (ASC) 842, Leases , effective January 1, 2019, the Company determines if an arrangement contains a lease at inception.

The Company determines if an arrangement contains a lease at inception.

Right-of-use (ROU) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from that lease.

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The Company does not combine lease and non-lease elements for office leases.

For existing office leases as of January 1, 2019, executory costs are excluded from lease expense, which is consistent with the Company's accounting under ASC 840, Leases .

For existing office leases as of the adoption date of ASC 842, Leases , on January 1, 2019, executory costs are excluded from lease expense, which is consistent with the Company’s accounting under ASC 840, Leases .

For all office leases entered into after January 1, 2019, executory costs are allocated between lease and non-lease elements based upon their relative stand-alone prices.

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Pursuant to management’s assessment of the services that have been performed on clinical trials and other contracts, the Company recognizes these expenses as the services are provided.

Such management assessments include, but are not limited to:

(i) an evaluation by the project manager of the work that has been completed during the period, (ii) measurement of progress prepared internally and/or provided by the third-party service provider, (iii) analyses of data that justify the progress, and (iv) management’s judgment.

In the event that the Company does not identify certain costs that have begun to be incurred or the Company under- or over-estimates the level of services performed or the costs of such services, the Company’s reported expenses for such period would be too low or too high.

Revenue from Net Product Sales

In accordance with ASC 606, Revenue from Contracts with Customers (ASC 606), which the Company adopted January 1, 2018, the Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

The Company recognizes revenue when control of the product is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those product sales, which is typically once the product physically arrives at the customer.

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HETLIOZ ® is available in the United States (U.S.) for distribution through a limited number of specialty pharmacies, and is not available in retail pharmacies.

Specialty pharmacy customers include Diplomat Pharmacy, Inc.

(a subsidiary of

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UnitedHealth Group) and Accredo (a subsidiary of Express Scripts).

Specialty pharmacy customers include OptumRx (a subsidiary of UnitedHealth Group) and Accredo (a subsidiary of Express Scripts).

Fanapt ® is available in the U.S.

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Distributor E 14 % 13 %

*Represents less than 10% of respective balance.

The transaction price is determined based upon the consideration to which the Company will be entitled in exchange for transferring product to the customer.

The Company’s product sales are recorded net of applicable product revenue allowances for which reserves are established and include discounts, rebates, chargebacks, service fees, co-pay assistance and product returns that are applicable for various government and commercial payors.

The Company estimates the amount of variable consideration that should be included in the transaction price utilizing the most likely amount method and updates its estimate at each reporting date.

Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

Where appropriate, the Company’s estimates of variable consideration included in the transaction price consider a range of possible outcomes.

Allowances for rebates, chargebacks and co-pay assistance are based upon the insurance benefits of the end customer, which are estimated using historical activity and, where available, actual and pending prescriptions for which the Company has validated the insurance benefits.

Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts.

If actual results in the future vary from the Company’s estimates, it adjusts its estimates in the period identified, which would affect net product sales in the period such variances become known.

Reserves for variable consideration are classified as product revenue allowances on the Consolidated Balance Sheets, with the exception of prompt-pay discounts that are classified as reductions of accounts receivable.

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The allowance for rebates is based on statutory or contracted discount rates and estimated patient utilization.

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• Chargebacks:

Chargebacks are discounts that occur when contracted indirect customers purchase directly from specialty pharmacies and wholesalers.

Contracted indirect customers, which currently consist primarily of Public Health Service institutions and federal government entities purchasing via the Federal Supply Schedule, generally purchase the product at a discounted price.

Contracted indirect customers, which currently consist primarily of Public Health Service institutions and federal government entities purchasing via the Federal Supply Schedule, generally

purchase the product at a discounted price.

The specialty pharmacy or wholesaler, in turn, charges back the difference between the price initially paid by the specialty pharmacy or wholesaler and the discounted price paid to the specialty pharmacy or wholesaler by the contracted customer.

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• Service Fees:

The Company receives sales order management, data and distribution services from certain customers.

The Company receives sales order management, data and distribution services from certain customers, for which it is assessed fees.

These fees are based on contracted terms and are known amounts.

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The Company expenses research and development costs as they are incurred for products in the development stage, including manufacturing costs and milestone payments made under license agreements prior to FDA approval.

Upon and subsequent to FDA approval, manufacturing and milestone payments related to license agreements are

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Upon and subsequent to FDA approval, manufacturing and milestone payments related to license agreements are capitalized.

Milestone payments are accrued when it is deemed probable that the milestone event will be achieved.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of salaries, stock-based compensation, facilities and third-party expenses.

Selling, general and administrative expenses consist of salaries, other employee-related costs and stock-based compensation, and facilities and third-party expenses.

Selling, general and administrative expenses are associated with the activities of the corporate, finance, accounting, information technology, business development, commercial support, trade and distribution, sales, marketing, legal, medical affairs and human resource functions.

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Revenues and expenses denominated in foreign currencies are translated at average exchange rates for the respective periods.

Foreign currency translation adjustments are recorded in accumulated other comprehensive income.

Transactions denominated in currencies other than subsidiaries’ functional currencies are recorded based on exchange rates at the time such transactions arise.

Foreign currency translation adjustments are recorded in accumulated other comprehensive income (loss).

Transactions denominated in currencies other than functional currency are recorded based on exchange rates at the time such transactions arise.

Changes in exchange rates with respect to amounts recorded in the Consolidated Balance Sheets related to these items will result in unrealized foreign currency transaction gains and losses based upon period-end exchange rates.

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The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement.

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Interest and penalties related to income taxes are recognized as a component of income tax expense in the Consolidated Statements of Operations, and cumulative accrued interest and penalties are recognized within the related liability lines in the Consolidated Balance Sheets.

Certain Risks and Uncertainties

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The standard is effective for years beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2020.

The adoption of this standard on January 1, 2021 is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, which changed the impairment model for most financial assets and certain other financial instruments.

The standard requires the use of a forward-looking “expected loss” model for instruments measured at amortized cost that generally will result in the earlier recognition of allowances for losses.

The standard is effective for years beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2019.

The adoption of this standard on January 1, 2020 did not have a material impact on the Company's consolidated financial results.

The adoption of this standard on January 1, 2021 did not have a material impact on the Company’s consolidated financial statements.

Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 2021, which all have contractual maturities of less than two years:

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(in thousands) Amortized

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Corporate debt 140,538 87 ( 8 ) 140,617

Asset-backed securities 48,355 49 ( 3 ) 48,401

Total marketable securities $ 306,504 $ 216 $ ( 11 ) $ 306,709

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Corporate debt 140,617 — 140,617 —

Asset-backed securities 48,401 — 48,401 —

Total assets measured at fair value $ 306,709 $ 166,092 $ 140,617 $ —

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Total assets measured at fair value as of December 31, 2020 include no cash equivalents.

Total assets measured at fair value as of December 31, 2019 include $ 7.0 million of cash equivalents.

Total assets measured at fair value as of December 31, 2021 and 2020 include no cash equivalents.

The Company also has financial assets and liabilities, not required to be measured at fair value on a recurring basis, which primarily consist of cash, accounts receivable, restricted cash, accounts payable and accrued liabilities, product revenue allowances, and milestone obligations under license agreements, the carrying values of which materially approximate their fair values.

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in Washington, D.C.

The sublease term began in

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January 2017 and ends in July 2026 but may be terminated earlier by either party under certain circumstances.

The sublease term began in January 2017 and ends in July 2026 but may be terminated earlier by either party under certain circumstances.

The Company has the right to sublease or assign all or a portion of the premises, subject to standard conditions.

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In November 2020, the Company extended the non-cancellable portion of the lease term from 2021 to 2023 and has the option to renew the lease for an additional three years following its expiration.

As of December 31, 2021, the renewal period has not been included in the lease term.

The following is a summary of the Company’s ROU assets and operating lease liabilities as of December 31, 2021 and 2020:

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For each of the years ended December 31, 2021, 2020 and 2019, the Company recognized operating lease cost of $ 2.3 million and short-term operating lease cost of $ 0.4 million.

The Company also recognized $ 1.5 million and $ 1.4 million, respectively, of expense related to non-lease elements, such as building maintenance services and utilities, and executory costs associated with the operating leases.

The Company also recognized $ 1.4 million, $ 1.5 million and $ 1.4 million, respectively, of expense related to non-lease elements, such as building maintenance services and utilities, and executory costs associated with the operating leases.

For existing leases as of January 1, 2019, executory costs are excluded from operating lease expense, which is consistent with the Company’s accounting under ASC 840.

For all leases entered into after January 1, 2019, executory costs are allocated between lease and non-lease elements based upon their relative stand-alone prices.

For the year ended December 31, 2018, the Company recognized $ 3.6 million of rent expense, inclusive of lease expense, non-lease elements, and executory costs for short and long-term operating leases.

Cash paid for amounts included in the measurement of operating lease liabilities is included in operating cash flows and was $ 2.6 million and $ 2.5 million for the years ended December 31, 2020 and 2019, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities is included in operating cash flows and was $ 2.3 million, $ 2.6 million and $ 2.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The table below reconciles the Company’s future cash obligations to operating lease liabilities recorded on the balance sheet as of December 31, 2021:

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Operating lease non-current liabilities $ 10,055

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Intangible Assets

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As a result of the achievement of this milestone, the Company made a payment to BMS of $ 25.0 million in 2018.

The $ 25.0 million, which was capitalized as an intangible asset in the first quarter of 2015, was determined to be additional consideration for the acquisition of the HETLIOZ ® intangible asset and is being amortized on a straight-line basis over the estimated economic useful life of the related product patents.

The estimated economic useful life of both the $ 8.0 million and the $ 25.0 million intangible assets were changed from February 2035 to July 2035 based on the July 2035 expiration date of U.S.

patent number 10,376,487 (‘487 Patent) issued by the U.S.

Patent and Trademark Office in August 2019.

The $ 25.0 million, which was capitalized as an intangible asset in the first quarter of 2015, was

determined to be additional consideration for the acquisition of the HETLIOZ ® intangible asset and is being amortized on a straight-line basis over the estimated economic useful life of the related product patents.

The following is a summary of the Company’s intangible assets as of December 31, 2021:

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(in thousands) December 31, 2021 December 31, 2020

Compensation and employee benefits $ 10,951 $ 6,597

Research and development expenses $ 10,082 $ 6,173

Royalties payable 5,817 5,904

Consulting and other professional fees 8,732 5,052

Compensation and employee benefits 6,515 10,951

Royalties payable 5,873 5,817

Operating lease liabilities 2,311 2,117

Milestone obligations under license agreements — 350

Other 1,049 1,673

Accounts payable and other accrued liabilities 925 1,049

Total accounts payable and accrued liabilities $ 34,438 $ 31,509

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Commitments and Contingencies

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The Company has no remaining milestone obligations to BMS.

Additionally, the Company is obligated to make royalty payments on HETLIOZ ® net sales to BMS in any territory where the Company commercializes HETLIOZ ® for a period equal to the greater of 10 years following the first commercial sale in the territory or the expiry of the new chemical entity (NCE) patent in that territory.

During the period prior to the expiry of the NCE patent in a territory, the Company is obligated to pay a 10 % royalty on net sales in that territory.

The royalty rate is decreased by half for countries in which no NCE patent existed or for the remainder of the 10 years after the expiry of the NCE patent.

Additionally, the Company is obligated to make royalty payments on HETLIOZ ® net sales to BMS.

The royalty period in each territory where the Company commercializes HETLIOZ ® is 10 years following the first commercial sale in the territory.

In territories outside the U.S., the royalty is 5 % on net sales.

In the U.S., the current royalty on net sales is 10 %.

This royalty will drop to 5 % in December 2022 and will end in April 2024.

The Company is also obligated under the license agreement to pay BMS a percentage of any sublicense fees, upfront payments and milestone and other payments (excluding royalties) that it receives from a third party in connection with any sublicensing arrangement, at a rate which is in the mid-twenties .

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through November 2026.

In April 2012, the Company entered into a license agreement with Eli Lilly and Company (Lilly) pursuant to which the Company acquired an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize an NK-1R antagonist, tradipitant, for all human indications.

In April 2012, the Company entered into a license agreement with Eli Lilly and Company (Lilly) pursuant to which the Company acquired an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize an NK-1 receptor antagonist, tradipitant, for all human indications.

Lilly is eligible to receive future payments based upon achievement of specified development, regulatory approval and commercialization milestones as well as tiered-royalties on net sales at percentage rates up to the low double digits .

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UCSF is eligible to receive future payments based upon achievement of specified development and commercialization milestones as well as single-digit royalties on net sales.

As of December 31, 2020, the Company has paid UCSF $ 1.2 million in upfront fees and development milestones, including a $ 0.2 million development milestone payment in March 2019.

As of December 31, 2020, remaining milestone obligations include

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$ 12.2 million for development milestones and $ 33.0 million for future regulatory approval and sales milestones.

Included in the $ 12.2 million of development milestones is a $ 350,000 milestone due upon the conclusion of a Phase I study for each licensed product but not to exceed $ 1.1 million in total for the CFTR portfolio.

In the fourth quarter of 2020, the Company determined the $ 350,000 milestone to be probable and accrued it as a current liability as of December 31, 2020.

As of December 31, 2021, the Company has paid UCSF $ 1.6 million in upfront fees and development milestones.

As of December 31, 2021, remaining milestone obligations include $ 11.9 million for development milestones and $ 33.0 million for future regulatory approval and sales milestones.

Included in the $ 11.9 million of development milestones are $ 1.1 million of milestone obligations due upon the conclusion of clinical studies for each licensed product but not to exceed $ 3.2 million in total for the CFTR portfolio.

As a result of completion of the first clinical study initiated by the Company for VSJ-110, the Company made a $ 350,000 development milestone payment to UCSF in the fourth quarter of 2021.

The likelihood of achieving this milestone was determined to be probable during 2020 and the obligation of $ 350,000 tied to such milestone was recorded as research and development expense in the consolidated Statements of Operations during the year ended December 31, 2020 and as a current liability in the Consolidated Balance Sheet as of December 31, 2020.

In connection with a settlement agreement with Novartis relating to Fanapt ® , the Company received an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize VQW-765, a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist.

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Purchase Commitments

In the course of its business, the Company regularly enters into agreements with clinical organizations to provide services relating to clinical development and clinical manufacturing activities under fee service arrangements.

The Company’s current agreements for clinical, marketing and other services may be terminated on generally 90 days’ notice without incurring additional charges, other than charges for work completed but not paid for through the effective date of termination and other costs incurred by the Company’s contractors in closing out work in progress as of the effective date of termination.

Public Offering of Common Stock

In March 2018, the Company completed a public offering of 6,325,000 shares of its common stock, including the exercise of the underwriters’ option to purchase an additional 825,000 shares of common stock, at a price to the public of $ 17.00 per share.

Net cash proceeds from the public offering were $ 100.9 million, after deducting the underwriting discounts and commissions and offering expenses.

Accumulated Other Comprehensive Income

In the course of its business, the Company regularly enters into agreements with third-party vendors under fee service arrangements, which generally may be terminated on 90 days’ notice without incurring additional charges, other than charges for work completed or materials procured but not paid for through the effective date of termination and other costs incurred by the Company’s contractors in closing out work in progress as of the effective date of termination.

The Company’s non-cancellable purchase commitments for agreements longer than one year primarily relate to commitments for data services and are not material.

Various other long-term agreements entered into for services with other third-party vendors, such as inventory purchase commitments, are cancellable in nature or contain variable commitment terms within the agreement.

Accumulated Other Comprehensive Income (Loss)

The accumulated balances related to each component of other comprehensive income (loss), net of taxes, were as follows for the years ended December 31, 2021 and 2020:

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Unrealized gain on marketable securities ( 207 ) 158

Accumulated other comprehensive income $ 239 $ 249

Accumulated other comprehensive income (loss) $ ( 175 ) $ 239

Stock-Based Compensation

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In June 2016, the Company’s stockholders approved the 2016 Plan.

The 2016 Plan has been amended and restated three times to increase the number of shares reserved for issuance, among other administrative changes.

Each of the amendments and restatements of the 2016 Plan was approved by the Company's stockholders.

The 2016 Plan has been amended a number of times since to increase the number of shares reserved for issuance, among other administrative changes.

Each of the amendments to the 2016 Plan was approved by the Company’s stockholders.

There is a total of 10,790,000 shares of common stock authorized for issuance under the 2016 Plan, 4,716,342 shares of which remained available for future grant as of December 31, 2021.

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Subsequent annual service option awards granted to directors vest and become exercisable in full on the first anniversary of the grant date.

Certain service option awards granted to employees and executive officers provide for partial

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acceleration of vesting if the employee or executive officer is subject to an involuntary termination, and full acceleration of vesting if the employee or executive officer is subject to an involuntary termination within 24 months after a change in control of the Company.

Certain service option awards granted to employees and executive officers provide for partial acceleration of vesting if the employee or executive officer is subject to an involuntary termination, and full acceleration of vesting if the employee or executive officer is subject to an involuntary termination within 24 months after a change in control of the Company.

Service option awards granted to directors provide for accelerated vesting if there is a change in control of the Company or if the director’s service terminates as a result of the director’s death or total and permanent disability.

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No option awards are classified as a liability as of December 31, 2021.

A summary of option activity under the Plans for the years ended December 31, 2020, 2019, and 2018 is as follows:

A summary of option activity under the Plans for the year ended December 31, 2021 is as follows:

(in thousands, except for share and per share amounts)

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Forfeited ( 128,285 ) 15.79

Exercised ( 685,715 ) 9.12 5,945

Outstanding at December 31, 2018 4,369,042 11.15 5.28 65,438

Granted 687,500 18.38

Forfeited ( 53 ) 7.94

Expired ( 10,000 ) 18.30

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Outstanding at December 31, 2021 3,721,148 14.16 5.77 11,327

Granted 627,500 11.27

Forfeited ( 225,000 ) 18.83

Expired ( 557,604 ) 14.21

Exercised ( 733,223 ) 7.68 2,868

Outstanding at December 31, 2020 3,606,818 12.24 5.76 8,511

Exercisable at December 31, 2021 2,616,440 12.69 4.56 10,045

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The weighted average grant-date fair value of options granted was $ 8.91 , $ 5.53 and $ 10.19 per share for the years ended December 31, 2021, 2020 and 2019, respectively.

The total intrinsic value of options exercised was $ 4.1 million, $ 2.9 million and $ 2.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Proceeds from the exercise of stock options amounted to $ 3.6 million, $ 5.6 million and $ 6.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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No RSUs are classified as a liability as of December 31, 2021.

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A summary of RSU activity for the Plans for the years ended December 31, 2020, 2019, and 2018 is as follows:

A summary of RSU activity for the Plans for the year ended December 31, 2021 is as follows:

Shares Weighted

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Unvested at December 31, 2021 1,764,740 17.27

Granted 937,328 19.46

Forfeited ( 75,444 ) 18.93

Vested ( 526,175 ) 14.54

Unvested at December 31, 2019 1,649,285 18.04

Granted 832,162 11.28

Forfeited ( 260,127 ) 17.35

Vested ( 581,757 ) 16.54

Unvested at December 31, 2020 1,639,563 15.26

The grant date fair value for the 581,757 shares underlying RSUs that vested during the year ended December 31, 2020 was $ 9.6 million.

The weighted average grant-date fair value of RSUs granted was $ 19.57 , $ 11.28 and $ 19.46 per share for the years ended December 31, 2021, 2020 and 2019, respectively.

The total fair value of the RSUs that vested during the years ended December 31, 2021, 2020 and 2019 was $ 9.1 million, $ 9.6 million, and $ 7.7 million, respectively.

Stock-Based Compensation Expense

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Expected volatility rates are based on the historical volatility of the Company’s publicly traded common stock and other factors.

The expected terms are determined based on a combination of historical exercise data and hypothetical exercise data for unexercised stock options.

The risk-free interest rates are based on the U.S.

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The Company match vests over a 4 -year period and amounted to $ 1.0 million, $ 0.9 million and $ 0.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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The following is a summary of the domestic and foreign components of income before income taxes for the years ended December 31, 2021, 2020 and 2019:

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Other tax rate changes ( 0.2 ) % 0.2 % ( 0.5 ) %

Other changes in state deferred taxes (3) — % — % 5.9 %

Uncertain tax positions (2) 4.0 % 4.7 % 26.3 %

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Reductions in 2019 valuation allowances include $ 7.5 million related to 2019 U.S.

income before income taxes, $ 10.7 related to adjustments for prior period credit carryforwards and uncertain tax positions and $ 85.6 million related to a change in

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beginning-of-the-year balances that resulted from a change in circumstances that caused a change in judgment about the realizability of U.S.

income before income taxes, $ 10.7 related to adjustments for prior period credit carryforwards and uncertain tax positions and $ 85.6 million related to a change in beginning-of-the-year balances that resulted from a change in circumstances that caused a change in judgment about the realizability of U.S.

deferred tax assets in future years.

Reductions in 2018 valuation allowances are attributable to 2018 income before income taxes.

(2) 2019 activity includes adjustments to prior year credit carryforwards and prior year tax positions.

As a result of the tax valuation allowance previously recorded against deferred tax assets in the U.S., these adjustments resulted in no change in tax expense.

(3) Includes adjustments to state deferred taxes based on changes to filing jurisdictions.

The following is a summary of the components of the Company’s net deferred tax assets and the related tax valuation allowance as of December 31, 2021 and 2020.

Certain prior period amounts in the table have been reclassified to conform to the current period presentation.

(in thousands) December 31, 2021 December 31, 2020

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These tax attributes will begin to expire in 2033 , 2024 and 2030 , respectively.

In addition, the Company has $ 8.4 million of deferred tax assets relating to U.S.

state NOL carryforwards, which primarily relate to the District of Columbia.

State NOLs for the District of Columbia will begin to expire in 2032 and other state NOLs will begin to expire in 2029 .

In addition, the Company has $ 8.3 million of deferred tax assets relating to other U.S.

NOL carryforwards, which primarily relate to the District of Columbia.

NOLs for the District of Columbia will begin to expire in 2032 and state NOLs will begin to expire in 2029 .

Tax benefits are recognized from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by the taxing authorities based on the technical merits of the position.

The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement.

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A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

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The amount of uncertain tax benefits that, if recognized, would impact the effective tax rate is $ 12.9 million.

No material income tax interest or penalties have been recorded, and unrecognized tax benefits are not expected to change materially over the next 12 months.

Income tax returns filed by the Company for all periods are open to examination by tax jurisdictions.

Unrecognized tax benefits are not expected to change materially over the next 12 months.

Income tax returns filed by the

Company for all periods are open to examination by tax jurisdictions.

As of December 31, 2021, the Company is not under examination by any federal or state tax jurisdiction.

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District Court for the District of Delaware (Delaware District Court) for patent infringement.

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ANDA until the expiration of the ‘610 Patent in November 2027, or May 2028 if the Company obtains pediatric exclusivity.

In August 2016, the Delaware District Court ruled in the Company’s favor, permanently enjoining Roxane from manufacturing, using, selling, offering to sell, distributing or importing any generic iloperidone product described in Roxane’s ANDA until the expiration of the ‘610 Patent in November 2027, or May 2028 if the Company obtains pediatric exclusivity.

This ruling was affirmed on appeal by the Federal Circuit Court of Appeals in April 2018.

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effective as of the expiration of the ‘610 Patent or earlier under certain limited circumstances.

The Company entered into a confidential stipulation with Inventia regarding any potential launch of its generic versions of Fanapt ® , but the Company’s lawsuit against Inventia regarding the ‘610 and ‘432 Patents remains pending.

Between April and February 2021, the Company filed numerous patent infringement lawsuits in the Delaware District Court against Teva Pharmaceuticals USA, Inc.

The Company entered into a confidential stipulation with Inventia

regarding any potential launch of its generic versions of Fanapt ® , but the Company’s lawsuit against Inventia regarding the ‘610 and ‘432 Patents remains pending.

Between April 2018 and March 2021, the Company filed numerous Hatch-Waxman lawsuits in the Delaware District Court against Teva Pharmaceuticals USA, Inc.

(Teva), MSN Pharmaceuticals Inc.

and MSN Laboratories Private Limited (MSN) and Apotex (collectively with Teva and MSN, the HETLIOZ ® Defendants) after having received multiple Paragraph IV certification notice letters (Paragraph IV Letters) from each of the HETLIOZ ® Defendants alleging that the Company’s patents covering HETLIOZ ® , U.S.

RE46,604, 9,060,995, 9,539,234, 9,549,913, 9,730,910, 9,844,241, 10,071,977, 10,149,829, 10,376,487, 10,449,176, 10,610,510, 10,610,511, and 10,829,465, were invalid, unenforceable and/or would not be infringed by the manufacture, use or sale of their generic versions of HETLIOZ ® , as described in the ANDAs submitted to the FDA by each of the HETLIOZ ® Defendants.

These lawsuits have been consolidated and are schedule for trial in March 2022.

and MSN Laboratories Private Limited (MSN) and Apotex (collectively the HETLIOZ ® Defendants) asserting that U.S.

RE46,604, 9,060,995, 9,539,234, 9,549,913, 9,730,910, 9,844,241, 10,071,977, 10,149,829, 10,376,487, 10,449,176, 10,610,510, 10,610,511, 10,829,465, and 10,611,744 will be infringed by the HETLIOZ ® Defendants’ generic versions of HETLIOZ ® , for which they are seeking FDA approval.

In January 2022, the Company entered into a license agreement with MSN and Impax Laboratories LLC (Impax) resolving the lawsuits against MSN.

The license agreement, which is subject to review by the U.S.

Federal Trade Commission and the U.S.

Department of Justice (the DOJ), grants MSN and Impax a non-exclusive license to manufacture and commercialize MSN’s version of HETLIOZ ® in the U.S.

effective as of March 13, 2035, unless prior to that date the Company obtains pediatric exclusivity for HETLIOZ ® , in which case the license will be effective as of July 27, 2035.

MSN and Impax may enter the market earlier under certain limited circumstances.

The consolidated lawsuits against the remaining HETLIOZ ® Defendants are scheduled for trial in March 2022.

Other Matters .

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The complaint alleged that the Company violated these laws through the promotion and marketing of its products Fanapt ® and HETLIOZ ® and sought, among other things, treble damages, civil penalties for each alleged false claim, and attorneys’ fees and costs.

By virtue of the DC District Court having unsealed the original complaint, the Company learned that in January 2019, the U.S.

Department of Justice (the DOJ), as well as the Plaintiff States, elected not to intervene in the qui tam action at that time.

By virtue of the DC District Court having unsealed the original complaint, the Company learned that in January 2019, the DOJ, as well as the Plaintiff States, elected not to intervene in the qui tam action at that time.

In May 2019, the plaintiff filed an amended complaint under seal repeating the same allegations and seeking the same relief.

According to a filing unsealed in June 2019, the DOJ reaffirmed its decision not to intervene and incorporated its prior filing, indicating that neither the DOJ nor the Plaintiff States were intervening regarding the original complaint.

Although the DOJ and the Plaintiff States have elected not to intervene, the plaintiff may litigate this action and the DOJ and the Plaintiff States may later seek to intervene in the action.

In August 2019, the Company filed a motion to dismiss, and in October 2019 the plaintiff filed a reply.

In May 2020, the DC District Court dismissed the plaintiff’s complaint in its entirety, without prejudice.

Although the DOJ and the Plaintiff States have elected not to intervene, the plaintiff has continued to litigate this action and the DOJ and the Plaintiff States may later seek to intervene.

In August 2019, the Company filed a motion to dismiss, and in May 2020, the DC District Court dismissed the plaintiff’s complaint in its entirety, without prejudice.

In June 2020, the plaintiff filed a second amended complaint with similar allegations and seeking the same relief.

In July 2020, the Company filed another motion to dismiss and in October 2020 the plaintiff filed a reply.

The DC District Court will hear the Company's motion to dismiss on February 24, 2021.

The Company intends to continue to vigorously defend itself in the case.

In July 2020, the Company filed another motion to dismiss, which was denied by the DC District Court in March 2021.

The Company filed its answer to the plaintiff’s second amended complaint in April 2021 and intends to continue to vigorously defend itself in the case.

In February 2019, a securities class action, Gordon v.

6 unchanged sentences

In March 2020, the Company filed a motion to dismiss the complaint.

The Company believes that it has meritorious defenses and intends to vigorously defend this lawsuit.

The Company does not anticipate that this litigation will have a material adverse effect on its business, results of operations or financial condition.

However, this lawsuit is subject to inherent uncertainties, the actual cost may be significant, and the Company may not prevail.

The Company believes it is entitled to coverage under its relevant insurance policies, subject to a retention, but coverage could be denied or prove to be insufficient.

In July 2019, a shareholder derivative complaint, Samuel Williams v.

Mihael Polymeropoulos, et al.

, was filed in the U.S.

District Court for the Eastern District of New York naming certain current and former Company directors and officers as defendants.

In September 2019, a shareholder derivative complaint, Michael Bavaro v.

Mihael Polymeropoulos, et al.

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in the Delaware District Court naming certain current and former Company directors and officers as defendants.

In October 2019, the Company filed a motion to transfer the Bavaro case to the Eastern District of New York, where the Gordon and Williams cases are pending.

In March 2020, the Delaware District Court transferred the Bavaro case to the Eastern District of New York, consolidating the Williams and Bavaro cases, and the plaintiffs filed a consolidated complaint in April 2020.

These complaints, filed on behalf of purported stockholders, derivatively on behalf of the Company, assert claims for alleged breach of fiduciary duties by certain of the Company’s current and former directors and officers.

In March 2021, the motion to dismiss was granted in part and denied in part.

In April 2021, the Company filed its answer to the amended complaint.

The Company believes that it has meritorious defenses and intends to vigorously defend this lawsuit.

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The Company believes it is entitled to coverage under its relevant insurance policies, subject to a retention, but coverage could be denied or prove to be insufficient.

In July 2017, the Committee for Medicinal Products for Human Use (CHMP) issued a negative opinion recommending against approval of Fanaptum ® (oral iloperidone tablets) for the treatment of schizophrenia in adult patients in the E.U.

The CHMP was of the opinion that the benefits of Fanaptum ® did not outweigh its risks and recommended against marketing authorization.

In March 2018, the Company filed an application seeking annulment of the EMA’s negative opinion and the subsequent European Commission decision refusing marketing authorization of Fanaptum in the E.U.

General Court.

In December 2019, the General Court issued its judgment dismissing the action, leaving the EMA opinion and Commission decision intact.

In February 2020, the Company filed an appeal of this judgment with the Court of Justice of the E.U.

Quarterly Financial Data (Unaudited)

The following is a summary of quarterly financial data for the years ended December 31, 2020 and 2019:

(in thousands, except for per share amounts) First

Quarter Second

Quarter Third

Quarter Fourth

Year Ended December 31, 2020

Revenues $ 58,000 $ 62,207 $ 60,308 $ 67,653

Gross profit (1) 52,423 55,991 54,041 60,871

Income (loss) from operations ( 125 ) 9,171 7,742 10,451

Net income 486 8,714 5,947 8,190

Net income per share, basic $ 0.01 $ 0.16 $ 0.11 $ 0.15

Net income per share, diluted $ 0.01 $ 0.16 $ 0.11 $ 0.15

Year Ended December 31, 2019

Revenues $ 47,713 $ 59,060 $ 59,485 $ 60,930

Gross profit (1) 42,220 52,313 52,327 54,335

Income (loss) from operations ( 2,087 ) 9,895 10,759 4,243

Net income (loss) ( 612 ) 11,526 100,423 4,216

Net income (loss) per share, basic $ ( 0.01 ) $ 0.22 $ 1.88 $ 0.08

Net income (loss) per share, diluted $ ( 0.01 ) $ 0.21 $ 1.84 $ 0.08

(1) Gross profit includes revenues less cost of goods sold excluding amortization, and less intangible asset amortization.

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VANDA PHARMACEUTICALS INC.

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333-130759) on March 17, 2006, and incorporated herein by reference).

4.2* Description of Securities of the registrant

10.1# Amended and Restated License, Development and Commercialization Agreement, dated July 24, 2005, by and between Bristol-Myers Squibb Company and the registrant (relating to HETLIOZ®) (filed as Exhibit 10.3 to Amendment No.

6 unchanged sentences

333-130759), as filed on March 17, 2006, and incorporated herein by reference).

10.4† Amended and Restated Employment Agreement, dated December 16, 2008, by and between Mihael H.

Polymeropoulos and the registrant (filed as Exhibit 10.34 to the registrant’s quarterly report on Form 10-Q (File No.

001-34186) on August 10, 2009 and incorporated herein by reference).

10.5† Amendment to Amended and Restated Employment Agreement, dated December 16, 2010, by and between Mihael H.

8 unchanged sentences

001-34186) on April 19, 2010 and incorporated herein by reference).

10.8 Amendment to Amended and Restated License, Development and Commercialization Agreement, dated as of May 24, 2012, by and between Bristol-Myers Squibb Company and the registrant (filed as Exhibit 10.46 to the registrant’s current report on Form 8-K (File No.

10.9 Ninth Amendment to Amended and Restated License, Development and Commercialization Agreement, dated as of May 24, 2012, by and between Bristol-Myers Squibb Company and the registrant (filed as Exhibit 10.46 to the registrant’s current report on Form 8-K (File No.

001-34186) on May 30, 2012 and incorporated herein by reference).

1 unchanged sentence

001-34186) on August 3, 2012 and incorporated herein by reference).

10.10 Amendment to Amended and Restated License, Development and Commercialization Agreement, dated as of April 25, 2013, by and between Bristol-Myers Squibb Company and the registrant (filed as Exhibit 10.50 to the registrant’s current report on Form 8-K (File No.

10.11 Tenth Amendment to Amended and Restated License, Development and Commercialization Agreement, dated as of April 25, 2013, by and between Bristol-Myers Squibb Company and the registrant (filed as Exhibit 10.50 to the registrant’s current report on Form 8-K (File No.

001-34186) on April 29, 2013 and incorporated herein by reference).

Manufacturing Agreement, dated January 24, 2014, by and between Patheon Pharmaceuticals Inc.

and the registrant (relating to HETLIOZ ® ) (filed as Exhibit 10.53 to the registrant’s quarterly report on Form 10-Q (File No.

001-34186) on May 8, 2014 and incorporated herein by reference).

10.12 Amendment to Lease Agreement, dated March 18, 2014, by and between Square 54 Office Owner LLC and the registrant (filed as Exhibit 10.54 to the registrant’s quarterly report on Form 10-Q (File No.

001-34186) on May 8, 2014 and incorporated herein by reference).

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and the registrant (relating to HETLIOZ ® ).

Number Description

10.13 First Amendment to Lease Agreement, dated March 18, 2014, by and between Square 54 Office Owner LLC and the registrant (filed as Exhibit 10.54 to the registrant’s quarterly report on Form 10-Q (File No.

001-34186) on May 8, 2014 and incorporated herein by reference).

10.14 Settlement Agreement and Mutual General Release, dated December 22, 2014, by and among Novartis Pharma AG and the registrant (filed as Exhibit 10.55 to the registrant’s annual report on Form 10-K (File No.

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10.23† Vanda Pharmaceuticals Inc.

Amended and Restated 2016 Equity Incentive Plan, effective as of June 11, 2020 (filed as Exhibit 10.1 to the registrant’s registration statement on Form S-8 (File No.

Amended and Restated 2016 Equity Incentive Plan, as amended effective as of June 10, 2021 (filed as Exhibit 10.1 to the registrant’s registration statement on Form S-8 (File No.

333-256994) on June 10, 2021 and incorporated herein by reference).

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Manufacturing Agreement, dated May 6, 2016, by and between Patheon Pharmaceuticals Inc.

and the registrant (relating to Fanapt®) (filed as Exhibit 10.42 to the registrant’s quarterly report on Form 10-Q (File No.

001-34186) on July 28, 2016 and incorporated herein by reference).

and the registrant (relating to Fanapt ® ).

Number Description

10.30 Second Amendment to Lease Agreement, dated June 20, 2016, by and between Square 54 Office Owner LLC and the registrant (filed as Exhibit 10.43 to the registrant’s quarterly report on Form 10-Q (File No.

001-34186) on July 28, 2016 and incorporated herein by reference).

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Number Description

10.31 Sublease Agreement, dated June 22, 2016, by and between Hunton & Williams LLP and the registrant (filed as Exhibit 10.44 to the registrant’s quarterly report on Form 10-Q (File No.

14 unchanged sentences

001-34186) on November 7, 2018 and incorporated herein by reference).

10.37† Employment Agreement, dated July 3, 2019, by and between Aranthan "AJ" Jones II and the registrant (filed as Exhibit 10.40 to the registrant’s quarterly report on Form 10-Q (File No.

001-34186) on November 7, 2019 and incorporated herein by reference).

10.38† Employment Agreement, dated August 5, 2019, by and between Joakim Wijkstrom and the registrant (filed as Exhibit 10.41 to the registrant’s quarterly report on Form 10-Q (File No.

001-34186) on November 7, 2019 and incorporated herein by reference).

10.39† Amended and Restated Employment Agreement, dated May 5, 2020, by and between Kevin Moran and the registrant (filed as Exhibit 10.42 to the registrant’s quarterly report on Form 10-Q (File No.

001-34186) on May 7, 2020 and incorporated herein by reference).

10.40* Fifth Amendment to Lease Agreement, dated April 11, 2019 , by and between Square 54 Office Owner LLC and the registrant.

10.41* Sixth Amendment to Lease Agreement, dated May 7, 2020, by and between Square 54 Office Owner LLC and the registrant.

21.1* List of Subsidiaries .

10.39† Amended and Restated Employment Agreement, dated July 27, 2020, by and between Kevin Moran and the registrant (filed as Exhibit 10.1 to the registrant’s current report on Form 8-K (File No.

001-34186) on July 29, 2020 and incorporated herein by reference).

10.40 Fifth Amendment to Lease Agreement, dated April 11, 2019, by and between Square 54 Office Owner LLC and the registrant (filed as Exhibit 10.40 to the registrant’s annual report on Form 10-K (File No.

001-34186) on February 10, 2021 and incorporated herein by reference).

10.41 Sixth Amendment to Lease Agreement, dated May 7, 2020, by and between Square 54 Office Owner LLC and the registrant (filed as Exhibit 10.41 to the registrant’s annual report on Form 10-K (File No.

001-34186) on February 10, 2021 and incorporated herein by reference).

21.1 List of Subsidiaries (filed as Exhibit 21.1 to the registrant’s annual report on Form 10-K (File No.

001-34186) on February 10, 2021 and incorporated herein by reference).

23.1* Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.

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104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

† Indicates management contract or compensatory plan.

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Number Description

# Confidential treatment has been granted with respect to certain provisions of this exhibit.

† Indicates management contract or compensatory plan or arrangement.

# Confidential treatment has been granted with respect to certain portions of this exhibit.

Omitted portions have been filed separately with the Securities and Exchange Commission.

‡ Portions of this exhibit have been omitted under rules of the Securities and Exchange Commission permitting the confidential treatment of select information.

* Filed herewith.

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 9A. Controls and Procedures