What changed in this filing

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Item 1. Business

2023-02-09 compared with 2022-02-24 · 181 added, 130 removed, 691 unchanged (31% of the section changed)

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Our 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 FDA.

HETLIOZ ® is the first product approved by the FDA for patients with Non-24 and patients with SMS.

In addition, we have a number of drugs in development, including:

• 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;

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

• Fanapt ® (iloperidone) for the treatment of bipolar I 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;

• Portfolio of Cystic Fibrosis Transmembrane Conductance Regulator (CFTR) activators and inhibitors, including VSJ-110 for the treatment of dry eye and ocular inflammation and BPO-27 for the treatment of secretory diarrhea disorders, including cholera;

• 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.

• Portfolio of Cystic Fibrosis Transmembrane Conductance Regulator (CFTR) activators and inhibitors, including VSJ-110 for the treatment of dry eye and ocular inflammation and VPO-227 for the treatment of secretory diarrhea disorders, including cholera;

• VQW-765, a small molecule nicotinic acetylcholine receptor partial agonist, for the treatment of performance anxiety and psychiatric disorders;

• VHX-896, the active metabolite of iloperidone;

• Antisense oligonucleotide (ASO) molecules.

We were incorporated in 2002 and commenced operations in 2003.

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Non-24 (capsules)

Nighttime sleep disturbances in SMS (capsules and HETLIOZ LQ TM oral suspension)

Nighttime sleep disturbances in SMS (capsules and HETLIOZ LQ ® oral suspension)

$159.7 United States

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Patients diagnosed with traumatic brain injury, including concussions, frequently suffer from sleep disorders, some of which may be circadian rhythm sleep-wake disorders, including Non-24.

While there are no FDA or EC approved treatments for Non-24 other than HETLIOZ ® , there are a number of drugs approved and prescribed for patients with sleep disorders.

While there are no EC approved treatments for Non-24 other than HETLIOZ ® , and only recently has the FDA approved generics for the treatment of Non-24, there are a number of drugs approved and prescribed for patients with sleep disorders.

The most commonly prescribed drugs are hypnotics.

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HETLIOZ ® for SMS (capsules and oral suspension)

In December 2020, HETLIOZ ® capsules and oral suspension (HETLIOZ LQ TM ) were approved in the U.S.

In December 2020, HETLIOZ ® capsules and oral suspension (HETLIOZ LQ ® ) were approved in the U.S.

for the treatment of adults and children, respectively, with nighttime sleep disturbances in SMS.

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The FDA accepted the filing of our sNDA for HETLIOZ ® for the treatment of jet lag disorder in December 2018.

The FDA determined the action target date under the Prescription Drug User Fee Act Amendments of 2017 (PDUFA) to be August 16, 2019, and on that date, we received a complete response letter (CRL) from the FDA.

The FDA determined the action target date under the Prescription Drug User Fee Act Amendments of 2017 to be August 16, 2019 and, on that date, we received a complete response letter (CRL) from the FDA.

The FDA asserted in the CRL that the measures demonstrating improved sleep were of unclear clinical significance.

We met with the FDA to discuss the CRL in a Post Action meeting and we are determining our next steps.

We met with the FDA to discuss the CRL in a Post Action meeting and in 2022 we requested the opportunity for a hearing with the FDA on the approvability of the jet lag disorder sNDA.

We filed a lawsuit against the FDA in September 2022 demanding that the FDA immediately publish in the Federal

The FDA then published the notice in the Federal Register in October 2022.

We are undergoing discussions with the FDA on the timing of such hearing.

Jet lag disorder is a common circadian disorder frequently observed in millions of travelers who cross multiple time zones.

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residents make trips abroad each year to overseas destinations in Europe, the Middle East and Asia.

HETLIOZ ® for insomnia

HETLIOZ ® is effective in improving sleep onset difficulty in people with primary insomnia with the effect observed as early as the first night of treatment.

A Phase III, multi-center, placebo-controlled, 4-week trial evaluated patients with chronic primary insomnia.

Two transient insomnia studies induced by phase advance of the sleep-wake cycle were also conducted with five-hour and eight-hour phase advance, which showed a significant effect the first night in improving sleep parameters.

HETLIOZ ® for pediatric Non-24

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Sleep disturbances in ASD are a high unmet medical need in people with ASD and have been characterized in the literature to include difficulties falling and staying asleep.

Fanapt ® for bipolar disorder

A Phase III study of Fanapt ® in bipolar disorder is ongoing.

Fanapt ® for bipolar I disorder

In December 2022, we announced Fanapt ® was effective in the treatment of acute manic and mixed episodes associated with bipolar I disorder in adults in a randomized double-blind placebo controlled Phase III study.

The primary endpoint measured in Week 4 of treatment was assessed by the Young Mania Rating Scale (YMRS), a rating scale of clinical severity in the core symptoms of mania.

At the end of the 4-week study, Fanapt ® treated patients showed a larger improvement than placebo treated patients, and this difference was highly statistically significant.

Statistically significant benefit in the Fanapt ® group over placebo was observed as early as the Week 2 assessment.

Consistent with the total YMRS score, the individual YMRS subscale items also showed improvement in the Fanapt ® group versus the placebo group over the course of the 4-week study.

Other outcomes, such as Clinician Global Impression of Severity (CGI-S) and Clinician Global Impression of Change (CGI-C), also achieved statistical significance.

Bipolar disorders are brain disorders that cause changes in a person’s mood, energy and ability to function.

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Tradipitant met the primary endpoint of the study of change in nausea score as measured by patient daily diaries and also met the related endpoint of improvement in the number of nausea free days.

Tradipitant also showed significant improvement in

most of the secondary endpoints studied, including several key scales reflecting overall gastroparesis symptoms, specifically GCSI, PAGI-SYM, CGI-S, and PGI-C.

Tradipitant also showed significant improvement in most of the secondary endpoints studied, including several key scales reflecting overall gastroparesis symptoms, specifically GCSI, PAGI-SYM, CGI-S, and PGI-C.

In February 2022, we announced results from our Phase III clinical study, VP-VLY-686-3301, evaluating the efficacy and safety of tradipitant in treating the symptoms of gastroparesis.

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When restricting the analysis in the group of patients that used no rescue medications at baseline and adjusting for poor compliance, we identified strong evidence of a drug effect across a number of symptoms and across the duration of the study, including a significant and meaningful effect at the prespecified primary endpoint of nausea change at week 12.

We plan to continue the analysis of the data of this study and prepare the results for submission to peer review journals as well as prepare the data for submission to regulatory authorities.

The FDA may not view this data as constituting substantial evidence of efficacy for tradipitant in any indication for the treatment of gastroparesis or its symptoms, for any length of treatment.

We are preparing for submission of an NDA for tradipitant for patients with gastroparesis.

We believe that tradipitant has a well-established safety profile, as demonstrated by the results of extensive testing in animals and humans.

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The EAP is ongoing and a number of patients have initiated treatment.

Although this EAP is not intended for data collection, we will collect safety data from this cohort of expanded access patients and include this data in the NDA for tradipitant for the treatment of gastroparesis.

Although this EAP is not intended for data collection, we collect safety data from this cohort of expanded access patients and plan to include this data in the NDA for tradipitant for patients with gastroparesis.

The FDA may disregard such safety data when reviewing the NDA.

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The protocol for a pivotal Phase III motion sickness study was discussed with the FDA at the end of Phase II meeting, and the FDA agreed with the adequacy of the program design to support an NDA.

In the fourth quarter of 2021, the boat trip portion of the Phase III study commenced as the lifting of local restrictions related to the COVID-19 pandemic has allowed for boat trips to resume.

The Phase III study is ongoing.

Motion sickness is a disorder that arises often as a response to real or perceived movement, as occurring during vehicular travel.

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The EPIONE study continued to demonstrate that tradipitant is safe and well-tolerated.

The EPIONE 2 study was placed on hold due to the COVID-19 pandemic in 2020.

The EPIONE 2 study was placed on hold in 2020.

Atopic dermatitis is a chronic, relapsing inflammatory skin disorder characterized by the symptom of intense and persistent pruritus or itch.

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The DSMB also determined that there are no safety concerns that contributed to its recommendation.

Vanda will continue the genetics component of the study with the goal of identifying genetic susceptibility factors contributing to the incidence of severe pneumonia among patients infected with COVID-19.

We have continued the genetics component of the study with the goal of identifying genetic susceptibility factors contributing to the incidence of severe pneumonia among patients infected with COVID-19.

COVID-19 is associated with a lower respiratory tract inflammation that often progresses to acute respiratory distress syndrome requiring mechanical ventilation.

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Portfolio of CFTR activators and inhibitors

In October 2020, the FDA accepted the IND application to evaluate CFTR activator VSJ-110 and provided authorization to proceed with clinical development.

A clinical program in VSJ-110 is ongoing.

We are evaluating VSJ-110 for the treatment of allergic conjunctivitis.

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VSJ-110 has shown efficacy in a dry eye model and exhibited anti-inflammatory properties in both in vitro and in vivo assays.

In addition, an early stage CFTR inhibitor program is planned for BPO-27 for the treatment of secretory diarrhea disorders, including cholera.

In the fourth quarter of 2020, we initiated a study at a leading cholera lab at Harvard University.

Other products

In January 2020, the FDA accepted an IND application for VQW-765 and provided authorization to proceed with clinical development.

In addition, an early stage CFTR inhibitor program is planned for VPO-227 for the treatment of secretory diarrhea disorders, including cholera.

We believe that VPO-227 has the potential to be an orally administered treatment for cholera.

In October 2022, VPO-227 was granted orphan drug designation by FDA for the treatment of cholera.

We are evaluating VQW-765 for the treatment of psychiatric disorders.

We initiated a Phase II study of a single-dose treatment to alleviate social/performance anxiety.

In December 2022, we announced results from our Phase II study, VP-VQW-765-2201 (Study 2201), of a single-dose treatment to alleviate acute performance anxiety in social situations.

In the clinical study, 230 volunteers with prior history of performance anxiety were randomized to receive a single dose of VQW-765 or placebo and were challenged with the standardized Trier Social Stress Test (TSST).

The TSST creates an acute stress by requiring participants to make an interview-style presentation in front of a panel who provides no feedback or encouragement.

Participants who received VQW-765 showed numerically lower stress levels compared to those who received placebo.

A significant relationship was also seen between exposure to VQW-765 (amount of drug measured in blood) and the clinical response.

VQW-765 is a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist that we licensed from Novartis on December 31, 2014 pursuant to a settlement agreement.

VHX-896 (formerly P88)

Other products

In 2021, we initiated a bioequivalence study of Fanapt ® and VHX-896, the active metabolite of iloperidone.

We believe that VHX-896 has the potential to improve the clinical profile of Fanapt ® and create sustained, long-term value in the treatment of psychiatric disorders.

ASO Molecules

In 2022, we announced a research and development collaboration agreement with OliPass Corporation (OliPass) to jointly develop a set of ASO molecules based on OliPass’ proprietary modified peptide nucleic acids.

The collaboration focuses on editing and modifying gene expression using ASOs in disease states where the expression of genes is either altered or the sequence of the expressed genes can be altered for therapeutic benefit.

OliPass’ unique OliPass Peptide Nucleic Acids technology provides the delivery platform to enable these gene expression modifications.

For more detailed information regarding our clinical trial results and regulatory activities for our products please refer to our SEC filings and press releases, which can be found on the SEC EDGAR website and on our website www.vandapharma.com.

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We have paid BMS $37.5 million in upfront fees and milestone obligations.

We have no remaining milestone obligations to BMS.

remaining milestone obligations to BMS.

Additionally, we are obligated to make royalty payments on HETLIOZ ® net sales to BMS.

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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.

In December 2022, the royalty on net sales in the U.S.

decreased from 10% to 5%.

royalty will end in April 2024.

We are 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 we receive from a third party in connection with any sublicensing arrangement, at a rate which is in the mid-twenties.

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after November 2026.

We may lose our rights to develop and commercialize Fanapt ® if we fail to comply with certain requirements in the Titan license agreement regarding

our financial condition, or if we fail to comply with certain diligence obligations regarding our development or commercialization activities.

We may lose our rights to develop and commercialize Fanapt ® if we fail to comply with certain requirements in the Titan license agreement regarding our financial condition, or if we fail to comply with certain diligence obligations regarding our development or commercialization activities.

Tradipitant (VLY-686)

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Either party may terminate the agreement under certain circumstances.

In the event that we terminate the agreement, or if UCSF terminates the agreement due to our breach or for certain other reasons set forth in the agreement, all rights licensed and developed by us under the agreement will revert or otherwise be licensed back to UCSF.

In the event that we terminate the agreement, or if UCSF terminates the agreement due to our breach or for certain other reasons set forth in the agreement, all rights licensed

and developed by us under the agreement will revert or otherwise be licensed back to UCSF.

Termination will not relieve us of our obligation to pay royalties or other payments owed, if any, to UCSF under the terms of the agreement.

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Hatch-Waxman Protection

We will be able to protect our products from unauthorized use by others only to the extent that our products are covered through regulatory protections or by valid and enforceable patents, either licensed to us by others or generated through

our activities internally, that give us sufficient proprietary rights.

Our products are protected from unauthorized use by others only to the extent that our products are covered through regulatory protections or by valid and enforceable patents, either licensed to us by others or generated through our activities internally, that give us sufficient proprietary rights.

Accordingly, securing patents, regulatory data package protection, and other proprietary rights is an essential element of our business strategies.

HETLIOZ ® , tradipitant and VQW-765 are covered by NCE and other patents and patent applications related to their respective medicinal uses.

Tradipitant and VQW-765 are covered by NCE and other patents and patent applications related to their respective medicinal uses.

In addition, NCE patent protection has been sought for VTR-297 and CFTR.

Patent applications for these active ingredients remain pending.

While the NCE patents protecting Fanapt ® have expired, Fanapt ® remains protected by medicinal patents.

Although the NCE patents protecting Fanapt ® and HETLIOZ ® have expired, Fanapt ® remains protected by additional patents and HETLIOZ ® remains protected by additional patents, some of which we have asserted against current generic competitors.

For more on the license and sublicense arrangements related to these active ingredients, see License Agreements above.

For more on patent litigation, see Note 16, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” in Part I, Item 1A of this Annual Report, each of which is incorporated herein by reference.

In addition, we have filed for patents based on our own discoveries that seek to provide additional protection for HETLIOZ ® and Fanapt ® .

A comprehensive list of patents for our U.S.

A comprehensive list of active patents for our U.S.

commercial products is available in the Approved Drug Products with Therapeutic Equivalence Evaluations (Orange Book) for our commercial products and is also provided in the table below.

Members of these patent families are also issued or pending in a number of territories, such as Europe and Japan.

The patents in the table below that are marked with “*” are the subject of ongoing patent litigation.

See Note 16, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” in Part I, Item 1A of this Annual Report, each of which is incorporated herein by reference, for additional information.

Product Number Type

US 5,856,529 New chemical entity

US 9,060,995 Method of treatment

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US 11,141,400 Method of treatment

HETLIOZ LQ TM

US 5,856,529 New chemical entity

US 11,266,622 Method of treatment

US 11,285,129* Method of treatment

US 9,539,234 Method of treatment

US 9,730,910* Method of treatment

US 10,071,977 Drug substance

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US 9,074,256 Method of treatment

HETLIOZ ® and HETLOZ LQ TM

Our rights to the NCE patent covering HETLIOZ ® capsules and oral suspension (HETLIOZ LQ TM ) and related intellectual property have been acquired through a license with BMS.

HETLIOZ ® and its formulations, genetic markers and uses are the subject of numerous patent filings for which protection has been sought in selected countries worldwide.

The NCE patent covering HETLIOZ ® expires in December 2022 in the U.S., which is inclusive of a five-year extension granted under the Hatch-Waxman Act in October 2018.

US 9,138,432* Method of treatment

US 9,157,121 Method of treatment

HETLIOZ ® and HETLOZ LQ ®

Our rights to the NCE patent covering HETLIOZ ® capsules and oral suspension (HETLIOZ LQ ® ) and related intellectual property have been acquired through a license with BMS.

HETLIOZ ® and its formulations, genetic markers and

uses are the subject of numerous patent filings for which protection has been sought in selected countries worldwide.

The NCE patent covering HETLIOZ ® expired in December 2022 in the U.S., which is inclusive of a five-year extension granted under the Hatch-Waxman Act in October 2018.

Corresponding NCE patent protection has expired in most other markets.

Patent and Trademark Office has issued 15 method of treatment patents for HETLIOZ ® that will expire between 2033 and 2035 and two drug substance patents that will expire in 2035.

Patent and Trademark Office has issued 17 method of treatment patents for HETLIOZ ® that will expire between 2033 and 2035 and three drug substance patents that will expire in 2035.

Additionally, the U.S.

Patent and Trademark Office has issued a drug formulation patent for HETLIOZ LQ TM that will expire in 2040.

Patent and Trademark Office has issued a drug formulation patent for HETLIOZ LQ ® that will expire in 2040.

We also have other pending patent applications covering methods of treatment and compositions of tasimelteon (HETLIOZ ® active ingredient) oral suspensions.

We filed several Hatch-Waxman lawsuits in the U.S.

District Court for the District of Delaware (Delaware District Court) against Teva Pharmaceuticals USA, Inc.

(Teva), Apotex Inc.

(Apotex), MSN Pharmaceuticals, Inc.

and MSN Laboratories Private Limited (MSN) (collectively, the HETLIOZ ® Defendants) asserting infringement of patents covering HETLIOZ ® 20 mg capsules.

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

The consolidated lawsuits against the remaining HETLIOZ ® Defendants were tried in March 2022.

In December 2022, the Delaware District Court ruled that Teva and Apotex did not infringe U.S.

RE46,604, and that the asserted claims of U.S.

and 10,376,487 were invalid.

We have appealed the decision to the U.S.

Court of Appeals for the Federal Circuit.

We have also filed Hatch-Waxman lawsuits in U.S.

District Court for the District of New Jersey against each of Teva and Apotex and in the U.S.

District Court for the Southern District of Florida against Apotex, in each case, asserting infringement of a method of administration patent that was not litigated in the Delaware District Court.

This litigation does not affect the sale of HETLIOZ ® in the E.U.

and there is no generic litigation pending outside of the U.S.

with respect to HETLIOZ ® .

Furthermore, the litigation does not relate to the HETLIOZ LQ ® oral suspension formulation.

See Note 16, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” in Part I, Item 1A of this Annual Report, each of which is incorporated herein by reference, for additional information.

In Europe, the law provides for 10 years of data exclusivity (with the potential for an additional year if a medicine is developed for a significant new indication).

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and Europe, data exclusivity will protect HETLIOZ ® from generic competition for varying numbers of years depending on the country.

Additional patent applications directed to specific sleep disorders and to methods of treating patients with HETLIOZ ® , if issued, would provide exclusivity for such indications and methods of treatment, potentially extending the effective patent protection period in the U.S., Europe, and other markets.

Additional patent applications directed to specific sleep disorders and to methods of treating patients with HETLIOZ ® , if issued, could provide exclusivity for such indications and methods of treatment.

The NCE patent for Fanapt ® , which expired in 2016 in the U.S.

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We have also filed and plan on filing additional patent applications covering the use of iloperidone (Fanapt ® active ingredient) LAI formulations.

Patents for the microsphere LAI formulation of Fanapt ® expire in 2024 in the U.S.

and 2022 in some markets in Europe.

Patents for the aqueous microcrystals LAI formulation of Fanapt ® expire in 2023 in the U.S.

Patents for the microsphere LAI formulation of Fanapt ® expired in 2022 in some markets in Europe and will expire in 2024 in the U.S.

Patents for the aqueous microcrystals LAI formulation of Fanapt ® expire in 2023 in

and in some markets in Europe.

We have pending patent applications covering the use of iloperidone and plan on filing additional applications based on discoveries made throughout the development plan of this molecule.

We filed several Hatch-Waxman lawsuits in the Delaware District Court against a number of generic company competitors asserting infringement of two of our Fanapt ® patents.

The litigation has been resolved with respect to all but one of these competitors.

See Note 16, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” in Part I, Item 1A of this Annual Report, each of which is incorporated herein by reference, for additional information.

In Europe, the law provides for 10 years of regulatory exclusivity (with the potential for an additional year if the drug is developed for a significant new indication).

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These patents and patent applications have been licensed to us.

The NCE patent covering tradipitant expires in April 2023, except in the U.S., where it

expires normally in June 2024, subject to any extension that may be received under the Hatch-Waxman Act.

The NCE patent covering tradipitant expires in April 2023, except in the U.S., where it expires normally in June 2024, subject to any extension that may be received under the Hatch-Waxman Act.

We have filed additional patent applications based on discoveries made during recent studies with tradipitant.

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We require all of our employees, relevant consultants and advisors to enter into confidentiality agreements.

Where it is necessary to share our proprietary information or data with outside parties, our policy is to make available only that information and data required to accomplish the desired purpose and only pursuant to a duty of confidentiality on the part of those parties.

Where it is necessary to

share our proprietary information or data with outside parties, our policy is to make available only that information and data required to accomplish the desired purpose and only pursuant to a duty of confidentiality on the part of those parties.

Marketing and Sales

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Major Customers

Our revenues are generated from product sales and are concentrated with specialty pharmacies, including OptumRx (a subsidiary of UnitedHealth Group) and Accredo (a subsidiary of Express Scripts), and wholesalers, including Cardinal Health, Inc., AmerisourceBergen Drug Corporation, and McKesson Corporation.

Our revenues are generated from product sales and are concentrated with specialty pharmacies, including Accredo (a subsidiary of Express Scripts) and OptumRx (a subsidiary of UnitedHealth Group), and wholesalers, including AmerisourceBergen Drug Corporation, Cardinal Health, Inc., and McKesson Corporation.

These five major customers each accounted for more than 10% of total revenues for 2022 and, as a group, represented 87% of total revenues for the year ended December 31, 2022.

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We believe the primary competitors for HETLIOZ ® and Fanapt ® are as follows:

• For HETLIOZ ® in the treatment of Non-24 and nighttime sleep disturbances in SMS, there are no FDA approved direct competitors.

Sedative-Hypnotic treatments for certain sleep related disorders include, Ambien ® (zolpidem) by Sanofi (including Ambien CR ® ), Lunesta ® (eszopiclone) by Sunovion Pharmaceuticals Inc., Sonata ® (zaleplon) by Pfizer Inc., Rozerem ® (ramelteon) by Takeda Pharmaceuticals Company Limited, Silenor ® (doxepin) by Currax Pharmaceuticals LLC, Belsomra ® (suvorexant) by Merck & Co., Inc., Dayvigo ® (lemborexant) by Eisai Inc., generic products such as zolpidem, trazodone and doxepin, and over-the-counter remedies such as Benadryl ® and Tylenol PM ® .

The class of melatonin agonists includes Rozerem ® (ramelteon) by Takeda Pharmaceuticals Company Limited, Valdoxan ® (agomelatine) by Servier, Circadin ® (long-acting melatonin) by Neurim Pharmaceuticals Ltd.

• For HETLIOZ ® in the treatment of nighttime sleep disturbances in SMS, there are no FDA approved direct competitors.

For HETLIOZ ® in the treatment of Non-24, Teva has launched at risk, and the FDA has approved the Abbreviated New Drug Applications (ANDA) for Apotex and MSN.

In addition, sedative-hypnotic treatments for certain sleep related disorders include, Ambien ® (zolpidem) by Sanofi (including Ambien CR ® ), Lunesta ® (eszopiclone) by Sunovion Pharmaceuticals Inc., Rozerem ® (ramelteon) by Takeda Pharmaceuticals Company Limited, Silenor ® (doxepin) by Currax Pharmaceuticals LLC, Belsomra ® (suvorexant) by Merck & Co., Inc., Dayvigo ® (lemborexant) by Eisai Inc., generic products such as zaleplon, trazodone and doxepin, and over-the-counter remedies such as Benadryl ® and Tylenol PM ® .

The class of melatonin agonists includes Rozerem ® (ramelteon) by Takeda Pharmaceuticals Company Limited, Valdoxan ® (agomelatine) by Servier Laboratories Limited, Circadin ® (long-acting melatonin) by Neurim Pharmaceuticals Ltd.

and the food supplement melatonin.

Shift work and excessive sleepiness disorder treatments include Nuvigil ® (armodafinil) and Provigil ® (modafinil) both by Teva Pharmaceutical Industries Ltd.

• For Fanapt ® in the treatment of schizophrenia, the atypical antipsychotics competitors are Risperdal ® (risperidone), including the LAI formulation Risperdal Consta ® and Invega ® (paliperidone), including the LAI formulation Invega ® Sustenna ® , each by Ortho-McNeil-Janssen Pharmaceuticals, Inc., Zyprexa ® (olanzapine), including the LAI formulation Zyprexa ® Relprevv TM , each by Lilly, Seroquel ® and Seroquel XR ® (quetiapine) by AstraZeneca PLC, Abilify ® (aripiprazole) by Otsuka America Pharmaceutical Inc., Abilify Maintena ® (the LAI formulation of Abilify ® ) by Lundbeck/Otsuka America Pharmaceutical Inc., Geodon ® (ziprasidone) by Pfizer Inc., Saphris ® (asenapine) by AbbVie Inc., Latuda ® (lurasidone) by Sunovion Pharmaceuticals Inc., Rexulti ® (brexpiprazole) by Lundbeck/Otsuka America Pharmaceutical, Inc., Aristada ® (aripiprazole lauroxil) extended-release injectable suspension by Alkermes, plc, Vraylar ® (cariprazine) by AbbVie Inc., Perseris ® (risperidone) extended-release injectable suspension by Indivior plc, Caplyta ® (lumapteperone) by Intra-Cellular Therapies, Lybalvi (olanzapine and samidorphan) by Alkermes, Inc., and generic clozapine, as well as the typical antipsychotics haloperidol, chlorpromazine, thioridazine, and sulpiride (all of which are generic).

• For Fanapt ® in the treatment of schizophrenia, the atypical antipsychotics competitors are Risperdal ® (risperidone), including the LAI formulation Risperdal Consta ® and Invega ® (paliperidone), including the LAI formulation Invega ® Sustenna ® , each by Johnson & Johnson, the LAI formulation Zyprexa ® Relprevv TM (olanzapine) by Lilly, Abilify ® (aripiprazole) by Otsuka America Pharmaceutical Inc., Abilify Maintena ® (the LAI formulation of Abilify ® ) by Lundbeck/Otsuka America Pharmaceutical Inc., Geodon ® (ziprasidone) by Viatris, Inc., Saphris ® (asenapine) by AbbVie Inc., Latuda ® (lurasidone) by Sunovion Pharmaceuticals Inc., Rexulti ® (brexpiprazole) by Lundbeck/Otsuka America Pharmaceutical, Inc., Aristada ® (aripiprazole lauroxil) extended-release injectable suspension by Alkermes, plc, Vraylar ® (cariprazine) by AbbVie Inc., Perseris ® (risperidone) extended-release injectable suspension by Indivior plc, Caplyta ® (lumapteperone) by Intra-Cellular Therapies,

Inc., Lybalvi ® (olanzapine and samidorphan) by Alkermes, plc, and generic clozapine and quetiapine, as well as the typical antipsychotics haloperidol, chlorpromazine, thioridazine, and sulpiride (all of which are generic).

Our ability to compete successfully will depend in part on our ability to utilize our pharmacogenetics and pharmacogenomics and drug development expertise to identify, develop, secure rights to and obtain regulatory approvals for promising pharmaceutical products before others are able to develop competitive products.

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Patheon is responsible for manufacturing the Fanapt ® 1, 2, 4, 6, 8, 10 and 12 mg tablets, conducting quality control and stability testing, and packaging the Fanapt ® tablets.

The Fanapt ® manufacturing agreement has an initial term of five years and will automatically renew after the initial term for successive terms of one year each, unless either party gives notice of its intention to terminate the agreement at least 12 months prior to the end of the then current term.

The Fanapt ® manufacturing agreement had an initial term of five years and automatically renews after the initial term for successive terms of one year each, unless either party gives notice of its intention to terminate the agreement at least 12 months prior to the end of the then current term.

Either party may terminate the Fanapt ® manufacturing agreement under certain circumstances upon specified written notice to the other party.

In December 2020, we entered into a non-exclusive manufacturing agreement for the manufacture of commercial supplies of both 48 and 158 mL HETLIOZ LQ TM bottles.

The HETLIOZ LQ TM manufacturing agreement has an initial term of five years and automatically renews after the initial term for successive terms of one year each, unless either party gives notice of its intention to terminate the agreement at least 12 months prior to the end of the then current term.

In December 2020, we entered into a non-exclusive manufacturing agreement for the manufacture of commercial supplies of both 48 and 158 mL HETLIOZ LQ ® bottles.

The HETLIOZ LQ ® manufacturing agreement has an initial term of five years and automatically renews after the initial term for successive terms of one year each, unless either party gives notice of its intention to terminate the agreement at least 12 months prior to the end of the then current term.

Government Regulation

Government authorities in the U.S.

at the federal, state and local levels and in other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing and export and import of pharmaceutical products.

at the federal, state and local levels and in other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, recordkeeping, promotion, advertising, distribution, marketing and export and import of pharmaceutical products.

A new drug must be approved by the FDA through the NDA process before it may be legally marketed in the U.S.

The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign laws and regulations require the expenditure of substantial time and financial resources.

The process of obtaining

regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign laws and regulations require the expenditure of substantial time and financial resources.

Moreover, failure to comply with applicable requirements may result in, among other things, warning letters, clinical holds, civil or criminal penalties, recall or seizure of products, injunction, disbarment, partial or total suspension of production or withdrawal of the product from the market.

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Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies.

An IND application sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND.

An Investigational New Drug (IND) application sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND.

The sponsor must also include a protocol detailing, among other things, the objectives of the first phase of clinical trials, the parameters to be used in monitoring the safety of the trial, and the effectiveness criteria to be evaluated should the first phase lend itself to an efficacy evaluation.

Some preclinical testing may continue even after the IND is submitted.

automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the clinical trial on a clinical hold.

The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the clinical trial on a clinical hold.

Clinical holds also may be imposed by the FDA at any time before or during clinical trials due to safety concerns about on-going or proposed clinical trials or non-compliance with specific FDA requirements, and the trials may not begin or continue until the FDA notifies the sponsor that the hold has been lifted.

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Phase III clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population, generally at geographically dispersed clinical study sites.

These clinical trials, often referred to as “pivotal” clinical trials, are intended to establish the overall risk-benefit ratio of the compound and provide, if appropriate, an adequate basis for product labeling.

These clinical trials, often

referred to as “pivotal” clinical trials, are intended to establish the overall risk-benefit ratio of the compound and provide, if appropriate, an adequate basis for product labeling.

The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including any finding that the research subjects or patients are being exposed to an unacceptable health risk.

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Meetings at other times may be made upon request.

product in commercial quantities in accordance with the FDA’s current Good Manufacturing Practices (cGMP) requirements.

Concurrent with clinical trials, companies typically complete additional, animal or other non-clinical studies, develop additional information about the chemistry and physical characteristics of the drug, and finalize a process for manufacturing the product in commercial quantities in accordance with the FDA’s current Good Manufacturing Practices (cGMP) requirements.

The manufacturing process must consistently produce quality batches of the drug and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug.

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The FDA reviews NDAs to determine, among other things, whether the product is safe and effective for its intended use and whether it is manufactured in a cGMP-compliant manner, which will assure and preserve the product’s identity, strength, quality and purity.

Under PDUFA, the FDA has a goal of 10 months from the date of “filing” of a standard, completed NDA for a new molecular entity to review and act on the submission.

This review typically takes 12 months from the date the NDA is submitted to the FDA because FDA has 60 days to make a “filing” decision after the application is submitted.

Under Prescription Drug User Fee Act Amendments of 2022 (PDUFA), the FDA has a goal of 10 months from the date of “filing” of a standard, completed NDA for a new molecular entity to review and act on the submission.

This review typically takes 12 months from the date the NDA is submitted to the FDA because the FDA has 60 days to make a “filing” decision after the application is submitted.

The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review.

The FDA may request additional information rather than accept an NDA for filing.

In this event, the NDA must be resubmitted with the additional information.

In this event, the NDA must be

resubmitted with the additional information.

The resubmitted application also is subject to review before the FDA accepts it for filing.

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Before approving an NDA, the FDA may also inspect one or more clinical trial sites to assure compliance with GCP requirements.

After the FDA evaluates an NDA, it will issue an approval letter or a CRL.

After the FDA evaluates an NDA, it will issue an approval letter or a complete response letter (CRL).

A CRL indicates that the review cycle of the application is complete, and the application will not be approved in its present form.

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Under the PREA, original NDAs and supplements must contain a pediatric assessment unless the sponsor has received a deferral or waiver.

The required assessment must evaluate the safety and effectiveness of the product for the claimed indications in all

relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective.

The required assessment must evaluate the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective.

The sponsor or the FDA may request a deferral of pediatric clinical trials for some or all of the pediatric subpopulations.

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Manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP regulations and other laws and regulations.

Our approved products are, and any additional product manufactured or distributed by us following FDA approval will be, subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the drug, providing the FDA with updated safety and efficacy information, drug sampling and distribution requirements, complying with certain electronic records and signature requirements, and complying with FDA promotion and advertising requirements.

adverse experiences with the drug, providing the FDA with updated safety and efficacy information, drug sampling and distribution requirements, complying with certain electronic records and signature requirements, and complying with FDA promotion and advertising requirements.

The FDA strictly regulates labeling, advertising, promotion and other types of information regarding approved drugs that are placed on the market, and imposes requirements and restrictions on drug manufacturers, such as those related to direct-to-consumer advertising, the prohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities and promotional activities involving the internet.

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Orphan drug designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, generally a disease or condition that affects fewer than 200,000 individuals in the U.S or, if affects more than 200,000 individuals in the U.S., there is no reasonable expectation that sales of the drug will be sufficient to offset the cost of developing and making the drug available in the U.S..

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, generally a disease or condition that affects fewer than 200,000 individuals in the U.S or, if it affects more than 200,000 individuals in the U.S., there is no reasonable expectation that sales of the drug will be sufficient to offset the cost of developing and making the drug available in the U.S.

Orphan drug designation must be requested before submitting an NDA.

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The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the U.S.

product, for that indication.

for that product, for that indication.

During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity.

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Drugs intended to treat serious or life-threatening diseases or conditions may be eligible for accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.

As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials.

As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval

perform adequate and well-controlled post-marketing clinical trials.

Drugs receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails to conduct the required post-marketing trials or if such trials fail to verify the predicted clinical benefit.

In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.

Recently, the accelerated approval pathway has come under scrutiny within the FDA and by Congress.

The FDA has put increased focus on ensuring that confirmatory studies are conducted with diligence and, ultimately, that such studies confirm the benefit.

For example, the FDA has convened its Oncologic Drugs Advisory Committee to review what the FDA has called dangling or delinquent accelerated approvals where confirmatory studies have not been completed or where results did not confirm benefit.

In addition, Congress is considering various proposals to potentially make changes to the accelerated approval pathway, including proposals to increase the likelihood of withdrawal of approval in such circumstances.

The Food and Drug Administration Safety and Innovation Act established a category of drugs referred to as “breakthrough therapies” that may be eligible to receive breakthrough therapy designation.

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The breakthrough therapy designation is a distinct status from both accelerated approval and priority review, which can also be granted to the same drug if relevant criteria are met.

If a product is designated as breakthrough therapy, the FDA will work to expedite the development and review of such drug.

If a product is designated as a breakthrough therapy, the FDA will work to expedite the development and review of such drug.

Fast track designation, priority review and breakthrough therapy designation do not change the standards for approval but may expedite the development or approval process.

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An NCE is a drug that contains no active moiety that has been approved by the FDA in any other NDA.

by the chemical interaction of two compounds), chelate (i.e., a chemical compound), or clathrate (i.e., a polymer framework that traps molecules), of the molecule, responsible for the therapeutic activity of the drug substance.

During the exclusivity period, the FDA may not accept for review or approve an Abbreviated New Drug Application (ANDA) or a 505(b)(2) NDA submitted by another company that contains the previously approved active moiety.

An active moiety is the molecule or ion, excluding those appended portions of the molecule that cause the drug to be an ester, salt, including a salt with hydrogen or coordination bonds, or other noncovalent, or not involving the sharing of electron pairs between atoms, derivatives, such as a complex (i.e., formed by the chemical interaction of two compounds), chelate (i.e., a chemical compound), or clathrate (i.e., a polymer framework that traps molecules), of the molecule, responsible for the therapeutic activity of the drug substance.

During the exclusivity period, the FDA may not accept for review or approve an ANDA or a 505(b)(2) NDA submitted by another company that contains the previously approved active moiety.

An ANDA or 505(b)(2) application, however, may be submitted one year before NCE exclusivity expires if it includes a certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid.

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The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant.

The ANDA application also will not be approved until any non-patent exclusivity, such as exclusivity for obtaining approval of a NCE, listed in the Orange Book for the referenced drug has expired.

The ANDA application also will not be approved until any non-patent exclusivity, such as exclusivity for obtaining approval of an NCE, listed in the Orange Book for the referenced drug has expired.

Drug Price Competition and Patent Term Restoration Act of 1984, more commonly known as the “Hatch-Waxman Act,” provides a period of five years following approval of a drug containing no previously approved active ingredients, during which ANDAs for generic versions of those drugs cannot be submitted unless the submission contains a Paragraph IV challenge to a listed patent, in which case the submission may be made four years following the original drug approval.

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Violations of the Anti-Kickback Statute are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion from the participation in federal healthcare programs, such as Medicare and Medicaid.

A number of states also have anti-kickback laws that establish similar prohibitions that may apply to items or services reimbursed by government programs, as well as any third-party payors, including commercial payors, known as "all-payor" laws.

number of states also have anti-kickback laws that establish similar prohibitions that may apply to items or services reimbursed by government programs, as well as any third-party payors, including commercial payors, known as “all-payor” laws.

Prescription Drug Marketing Act

As part of the sales and marketing process, pharmaceutical companies frequently provide healthcare providers with samples of approved drugs.

The Prescription Drug Marketing Act (PDMA) imposes requirements and limitations upon the distribution of drugs and drug samples, and prohibits states from licensing distributors of prescription drugs unless the state licensing program meets certain federal guidelines that include minimum standards for storage and handling, as well as record keeping and other requirements.

Violations of the PDMA may result in criminal and civil penalties.

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These companies may be required, however, to enter into corporate integrity agreements with the government, which may impose substantial costs on companies to ensure compliance.

falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

Health Insurance Portability and Accountability Act of 1996

The Health Insurance Portability and Accountability Act of 1996 (HIPAA), includes federal criminal statutory provisions that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) and their implementing regulations, impose certain requirements and restrictions on certain types of individuals and entities relating to the privacy and security of individually identifiable health information.

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Foreign drug development, review and approval processes

Regardless of whether we obtain FDA approval for a product, we must obtain approval by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries.

Regardless of whether a sponsor obtains FDA approval for a product, it must obtain approval by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries.

The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval.

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However, the foreign equivalent of an IND is not a prerequisite to performing pilot studies or Phase I clinical trials.

regulatory systems, we may submit Marketing Authorization Applications either under a centralized or decentralized procedure.

regulatory systems, a sponsor may submit Marketing Authorization Applications either under a centralized or decentralized procedure.

The centralized procedure, which is available for drugs produced by biotechnology or which are highly innovative, provides for the grant of a single marketing authorization that is valid for all E.U.

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In addition, regulatory approval of prices is required in most countries other than the U.S.

We face the risk that the resulting prices would be insufficient to generate an acceptable return to us.

Companies face the risk that the resulting prices would be insufficient to generate an acceptable return.

Foreign fraud and abuse laws and other regulatory matters

Outside the U.S., we are subject to similar regulations in those countries where we market and sell products, including with respect to transparency, bribery and other laws mentioned above.

Outside the U.S., companies are subject to similar regulations in those countries where we market and sell products, including with respect to transparency, bribery and other laws mentioned above.

In some foreign countries, including major markets in the E.U.

and Japan, the pricing of prescription pharmaceuticals is subject to governmental control.

In these countries, pricing negotiations with governmental authorities can take nine to 12 months or longer after the receipt of regulatory marketing approval for a product.

In these countries, pricing negotiations with governmental authorities can take nine to 12 months or longer after the receipt of regulatory

marketing approval for a product.

To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product to other available therapies, which can be costly and time-consuming.

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Failure to comply with E.U.

data protection laws may result in significant fines, including GDPR fines of up to the higher of €20,000,000 or 4% of our total worldwide annual revenue of the preceding financial year, and other administrative penalties, which may be onerous and adversely affect our business, financial condition, results of operations and prospects.

data protection laws may result in significant fines, including GDPR fines of up to the higher of €20,000,000 or 4% of total worldwide annual revenue of the preceding financial year, and other administrative penalties.

Pharmaceutical Coverage, Pricing and Reimbursement and Healthcare Reform

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In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals.

A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved.

A payor’s decision to provide coverage for a drug product does not imply that the reimbursement rate ultimately paid will be adequate.

Third party reimbursement may not be sufficient to maintain price levels high enough to realize an appropriate return on investment in product development.

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There have been a number of federal and state proposals during the last several years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the U.S.

By way of example, in March 2010, the ACA was passed, ushering in significant changes to the coverage and payment for products under government health care programs.

By way of example, the ACA was passed in 2010 and made significant changes to the coverage and payment for products under government health care programs.

Among the provisions of the ACA of importance to pharmaceutical companies are:

• an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee does not apply to sales of certain products approved exclusively for orphan indications;

• expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

• expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs and revising the definition of “average manufacturer price,” for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices and extending rebate liability to prescriptions for individuals enrolled in Medicaid managed care plans;

• addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

• expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program (MDRP) by increasing the minimum rebate for both branded and generic drugs and extending rebate liability to prescriptions for individuals enrolled in Medicaid managed care plans;

• introduced a new methodology for the reporting of average manufacturer price by manufacturers under the MDRP for drugs that are inhaled, infused, instilled, implanted or injected;

• expanded the types of entities eligible for the 340B drug discount program;

• established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a point‑of‑sale‑discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;

The Bipartisan Budget Act of 2018 increased the manufacturer discount from 50% to 70% effective in 2019;

• established a new Patient‑Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

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• established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

Some of the provisions of the ACA have yet to be fully implemented, however, while others have been subject to judicial and Congressional challenges, as well as efforts by the former Trump administration to repeal or replace certain aspects of the ACA.

While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA such as removing or delaying penalties, starting January 1, 2019, for not complying with the ACA’s individual mandate to carry health insurance, delaying the implementation of certain ACA-mandated fees, and increasing the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D.

Additionally, in December 2018, a Texas District Court judge ruled that the ACA is unconstitutional in its entirety because the individual mandate was repealed by Congress.

In July 2021, the U.S Supreme Court ruled that the states and individuals that brought the lawsuit did not have standing to challenge the ACA, and therefore, the Court did not reach the merits of the lawsuit.

Accordingly, we continue to evaluate the effect that the ACA has on our business.

At the federal level, the former Trump administration supported legislative proposals and issued certain Executive Orders seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs.

The Department of Health and Human Services (HHS), has solicited feedback on some of these measures and implemented others under its existing authority.

The FDA also released a final rule in

September 2020 providing guidance for states to build and submit importation plans for drugs from Canada.

Further, in November 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Medicare Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.

These modifications to the safe harbors are being challenged in court and HHS has delayed their implementation until January 1, 2023;

however, the rule may be repealed through legislative action before such time.

In July 2021, President Biden issued an executive order pertaining to drug pricing, which expressed support for legislation allowing direct negotiation in Medicare Part D and inflationary rebates and directed various executive branch agencies to take actions to lower drug prices and promote generic competition.

In response to President Biden’s executive order, in September 2021, HHS issued a Comprehensive Plan for Addressing High Drug Prices that identified potential legislative policies and administrative tools that Congress and the agency can pursue in order to make drug prices more affordable and equitable, improve and promote competition throughout the prescription drug industry, and foster scientific innovation.

Several pending or proposed legislative efforts incorporate these drug pricing reforms in addition to inflationary rebates on Part B and Part D drugs that would be payable on commercial and governmental program utilization, policies aimed at redesigning the Medicare Part D benefit and adopting drug price transparency measures.

Drug manufacturers who are unwilling to negotiate with Medicare would be subject to additional excise taxes.

Additionally, the plan would impose tax penalties on drug manufacturers that increase the prices of drug products faster than the rate of inflation.

If elements of these prescription drug pricing plans become law, our pricing strategy and commercial prospects may be adversely affected.

Additionally, in December 2020, CMS issued a final rule that materially modifies current Medicaid Drug Rebate Program regulations by, among other things, broadening the definitions for “line extension” and “new formulation”, the key term within the line extension definition.

A “line extension” drug may be subject to a higher Medicaid rebate, thereby reducing the amount the manufacturer is paid with respect to such product.

These new definitions became effective on January 1, 2022.

Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA.

In June 2021, the U.S.

Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted.

These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and will stay in effect through 2024 unless additional congressional action is taken, the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years and the American Rescue Plan Act of 2021, which will eliminate the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.

These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

Further, there have been several recent U.S.

congressional inquiries and proposed state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.

These changes include the Budget Control Act of 2011, which, among other things, included aggregate reductions of Medicare payments to providers that started in 2013 and will stay in effect through 2031 unless additional congressional action is taken.

More recently, in March 2021, President Biden signed into law the American Rescue Plan Act of 2021, which will eliminate the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.

Additionally, in December 2020, CMS issued a final rule that materially modifies current MDRP regulations by, among other things, broadening the definitions of what constitutes a “line extension.” A “line extension” drug may be subject to a higher Medicaid rebate, and broadening this definition is likely to subject a greater number of drugs to the higher rebate.

These new definitions became effective on January 1, 2022.

Most significantly, in August 2022, President Biden signed the Inflation Reduction Act of 2022 (IRA) into law.

This statute marks the most significant action by Congress with respect to the pharmaceutical industry since adoption of the ACA in 2010.

Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap;

imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (beginning October 1, 2022);

and replaces the Medicare Part D coverage gap discount program with a new discounting program (beginning in 2025).

The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years.

For that and other reasons, it is currently unclear how the IRA will be effectuated, and while the impact of the IRA on the pharmaceutical industry cannot yet be fully determined, it is likely to be significant.

The cost of prescription pharmaceuticals in the U.S.

is likely to remain the subject of considerable discussion.

There have been several Congressional inquiries and proposed and enacted legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare, and reform government program reimbursement methodologies for drug products.

The likelihood of implementation of these and other reform initiatives is uncertain.

In the coming years, additional legislative and regulatory changes could be made to governmental health programs that could significantly impact pharmaceutical companies and the success of our product candidates.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect that healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our product candidates.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures.

Some measures encourage importation from other countries and bulk purchasing.

In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.

These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.

The ACA, as well as other federal, state and foreign healthcare reform measures that have been and may be adopted in the future, could have a material adverse effect on our business.

Further, it is also possible that additional governmental action is taken in response to the COVID-19 pandemic as it continues into 2022.

The IRA, as well as other federal, state and foreign healthcare reform measures that have been and may be adopted in the future, could have a material adverse effect on our business.

These healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price for any approved product and/or the level of reimbursement physicians receive for administering any approved product.

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Any country that has price controls or reimbursement limitations for drug products may not provide favorable reimbursement and pricing arrangements.

See the risk factor entitled “ If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in the U.S., we could be subject to additional reimbursement requirements, penalties, sanctions and fines which could have a material adverse effect on our business, financial condition, results of operations and growth prospects ” in Part I, Item 1A of this Annual Report for additional information regarding our participation in federal healthcare programs and related compliance obligations.

Human Capital

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To access these documents from the main page of our website, click on “Investor” at the top of the page, then click on “Learn More” under “Corporate Governance” and then click on the desired document.

We intend to satisfy the disclosure requirements under Item 5.05 of Form 8‑K regarding amendments to, or waivers from, provisions of our code of business conduct and ethics by posting such information on the website address and location specified above.

to satisfy the disclosure requirements under Item 5.05 of Form 8‑K regarding amendments to, or waivers from, provisions of our code of business conduct and ethics by posting such information on the website address and location specified above.

None of the information contained on our website or www.sec.gov is incorporated by reference into this Annual Report or any other report or document filed with the SEC unless expressly stated otherwise therein.

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 1. Business