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Item 1A. Risk Factors

2025-02-14 compared with 2024-02-08 · 300 added, 217 removed, 804 unchanged (39% of the section changed)

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Risks Related to our Business and Industry

We are dependent on the commercial success of HETLIOZ ® , Fanapt ® and PONVORY ® .

We are dependent on the commercial success of Fanapt ® , HETLIOZ ® and PONVORY ® .

In the U.S., HETLIOZ ® competes with generic versions of HETLIOZ ® and we could experience increased generic competition in the near term.

We are substantially dependent upon the commercial success of HETLIOZ ® capsules for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24), HETLIOZ ® capsules and oral suspension (HETLIOZ LQ ® ) for the treatment of nighttime sleep disturbances in Smith-Magenis Syndrome (SMS), Fanapt ® oral tablets for the treatment of schizophrenia and PONVORY ® oral tablets for the treatment of relapsing forms of multiple sclerosis (RMS) in adults.

We are substantially dependent upon the commercial success of Fanapt ® oral tablets for the acute treatment of mixed or manic episodes associated with bipolar I disorder and the treatment of schizophrenia, HETLIOZ ® capsules for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24), HETLIOZ ® capsules and oral suspension (HETLIOZ LQ ® ) for the treatment of nighttime sleep disturbances in Smith-Magenis syndrome (SMS) and PONVORY ® oral tablets for the treatment of relapsing forms of multiple sclerosis (RMS) in adults.

In the fourth quarter of 2014, we acquired the U.S.

commercial rights to Fanapt ® , and began selling, marketing and distributing Fanapt ® in the U.S.

for the treatment of schizophrenia in adults.

On April 2, 2024, the FDA approved Fanapt ® tablets for the acute treatment of manic or mixed episodes associated with bipolar I disorder in adults.

We initiated the commercial launch of Fanapt ® for the acute treatment of bipolar I disorder in adults in the third quarter of 2024.

In January 2014, the U.S.

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In January 2024, we filed a petition for a writ of certiorari with the U.S Supreme Court to review the Federal Circuit’s decision.

In April 2024, the U.S.

Supreme Court denied our petition.

The FDA has approved Abbreviated New Drug Applications (ANDA) for generic versions of HETLIOZ ® for Teva Pharmaceuticals USA, Inc.

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(Apotex) and MSN Pharmaceuticals Inc.

and MSN Laboratories Private Limited (MSN).

MSN Laboratories Private Limited (MSN).

Teva and Apotex have launched their generic versions of HETLIOZ ® at risk in the U.S., and MSN has launched its generic version as well.

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Sales of generic versions of HETLIOZ ® have resulted in and could continue to result in a reduction in the demand for HETLIOZ ® and/or the price at which we can sell it and/or create volatility in net product sales in future periods, which would have a material and adverse impact on our revenues and results of operations.

Unless and until we are able to successfully enforce our legal rights to exclusivity, we may reduce the amount we spend with the intention of retaining the capability to ramp-up promptly.

Our expansion and development of HETLIOZ ® outside the U.S.

is generally not subject to the adverse patent ruling in the U.S.

In the fourth quarter of 2014, we acquired the U.S.

commercial rights to Fanapt ® , and began selling, marketing and distributing Fanapt ® in the U.S.

PONVORY ® tablets were approved in the U.S.

for the treatment of RMS in adults in March 2021 and commercially launched in the U.S.

by Actelion Pharmaceuticals Ltd.

(Janssen), a Johnson & Johnson Company in April 2021.

PONVORY ® tablets were approved in Canada for the treatment of relapsing forms of multiple sclerosis (RMS) in adults in April 2021 and commercially launched in Canada by Janssen in November 2021.

In December 2023, we acquired the U.S.

and Canadian rights to PONVORY ® from Actelion Pharmaceuticals Ltd.

(Janssen), a Johnson & Johnson Company.

Janssen is responsible for the continued marketing and sale of PONVORY ® during a transition period until the regulatory and supply responsibilities for PONVORY ® are transitioned to us.

Our ability to generate significant product revenue from sales of HETLIOZ ® , Fanapt ® and PONVORY ® both in the U.S.

and Canadian rights to PONVORY ® from Janssen.

Janssen was responsible for the continued marketing and sale of PONVORY ® during a transition period.

We initiated our commercial launch of PONVORY ® in RMS in the third quarter of 2024.

Our ability to generate significant product revenue from sales of Fanapt ® , HETLIOZ ® and PONVORY ® both in the U.S.

and abroad, in the near term will depend on, among other things, our ability to:

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• adequately protect against and effectively respond to any unanticipated adverse effects or unfavorable publicity that develops in respect to our products, as well as the emergence of new or existing competitive products, which may be proven to be more clinically effective and cost-effective.

We expect to continue to incur significant expenses and to utilize a substantial portion of our cash resources as we continue the commercialization of HETLIOZ ® and Fanapt ® and commence commercial operations for PONVORY ® , evaluate foreign market opportunities for HETLIOZ ® and Fanapt ® and continue to grow our operational capabilities, both domestically and abroad.

This activity represents a significant investment in the commercial success of HETLIOZ ® , Fanapt ® and PONVORY ® , which is uncertain.

If our continued commercial efforts are not successful with respect to HETLIOZ ® , Fanapt ® and PONVORY ® in the U.S., Europe, Canada or other jurisdictions in which these products may be approved for sale, our ability to generate increased product sales revenue may be adversely affected.

We expect to continue to incur significant expenses and to utilize a substantial portion of our cash resources as we continue to commercialize our commercial products, evaluate foreign market opportunities for Fanapt ® and HETLIOZ ® and continue to grow our operational capabilities, both domestically and abroad.

This activity represents a significant investment in the commercial success of Fanapt ® , HETLIOZ ® and PONVORY ® , which is uncertain.

If our continued commercial efforts are not successful with respect to our commercial products in the U.S., Europe, Canada or other jurisdictions in which these products may be approved for sale, our ability to generate increased product sales revenue may be adversely affected.

The cost of growing and maintaining a sales, marketing and distribution organization may exceed its cost effectiveness.

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As a result of the decision in favor of generic drug companies in connection with our HETLIOZ ® patent litigation, we have faced generic competition in the near term and our revenues and results of operations could be further affected by the launch of additional generic versions of HETLIOZ ® in the U.S.

Between April 2018 and March 2021, we filed numerous Hatch-Waxman lawsuits in the Delaware District Court against Teva, MSN and Apotex asserting that our patents would be infringed by their generic versions of HETLIOZ ® .

Between April 2018 and March 2021, we filed numerous Hatch-Waxman lawsuits in the Delaware District Court against Teva, Apotex and MSN asserting that our patents would be infringed by their generic versions of HETLIOZ ® .

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

A trial was held in March 2022 in the Delaware District Court to resolve the consolidated lawsuits against the remaining companies (the Defendants).

In December 2022, following conclusion of the trial, the Delaware District Court issued its ruling in favor of the Defendants, finding that the Defendants’ use of a generic HETLIOZ ® , for which they were seeking FDA approval, did not infringe one of our HETLIOZ ® patents and the asserted claims of certain of our other HETLIOZ ® patents were invalid.

A trial was held in March 2022 in the Delaware District Court to resolve the consolidated lawsuits against Teva and Apotex.

In December 2022, following conclusion of the trial, the Delaware District Court issued its ruling in favor of Teva and Apotex, finding that their use of a generic HETLIOZ ® , for which they were seeking FDA approval, did not infringe one of our HETLIOZ ® patents and the asserted claims of certain of our other HETLIOZ ® patents were invalid.

We appealed the decision to the Federal Circuit and in May 2023, a three-judge panel of the Federal Circuit affirmed the Delaware District Court’s ruling.

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Supreme Court to review the Federal Circuit’s decision.

In April 2024, the U.S.

Supreme Court denied our petition.

Teva and Apotex have since launched their generic versions at risk and MSN has launched its generic version as well.

The commercial launch of the generic versions, and potential increased competition from additional generic entrants in the near term, have resulted in and could continue to have a material and adverse impact on our revenues and our results of operations.

Further, although we are pursuing additional remedies in other courts, including seeking injunctions against Apotex and Teva, we may not be successful in any such efforts, which will be costly and time-consuming to pursue.

Such efforts will also require considerable attention of management and could, even if ultimately successful, negatively impact our results of operations.

Specifically, we have filed Hatch-Waxman lawsuits in the 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, asserting infringement of U.S.

11,285,129, which is a method of administration patent that was not litigated in the prior litigation.

The New Jersey cases have been transferred to the Delaware District Court, where they remain pending, and the Florida case was voluntarily dismissed.

We have also filed patent infringement lawsuits against each of Teva and Apotex in the U.S.

District Court for the District of Delaware, in each case, asserting infringement of U.S.

11,918,556, another method of administration patent that was not litigated in the prior litigation.

These lawsuits do 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 ® .

These efforts will also require considerable attention of management and could, even if ultimately successful, negatively impact our results of operations.

See Note 18, 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 ,” each of which is incorporated herein by reference, for additional information.

In addition, while we believe that HETLIOZ ® is difficult to manufacture and that building capacity to manufacture HETLIOZ ® is time-consuming and expensive, which may limit the amount of tasimelteon supply available to generic companies, we do not have direct visibility into the supply levels of any of the generic companies and we rely on our own experience together with information from third parties, which information may not be reliable.

The generic companies could potentially find or develop sources of qualified HETLIOZ ® supply that are not known to us and that are more efficient or inexpensive than our sources.

The generic companies could potentially find or develop sources of qualified tasimelteon supply that are not known to us and that are more efficient or inexpensive than our sources.

Furthermore, generic companies could potentially convince our suppliers or third-party manufacturers to prioritize supply to the generic companies ahead of any applicable contractual commitments to supply us.

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as well if supply costs and availability are affected.

Future performance of HETLIOZ ® , Fanapt ® and PONVORY ® may be impacted by a number of factors including competing products or unanticipated safety issues.

If HETLIOZ ® , Fanapt ® or PONVORY ® is not successful in gaining broad commercial acceptance, our business would be harmed.

Future performance of HETLIOZ ® , Fanapt ® and PONVORY ® sales will be dependent on several factors, including our ability to educate physicians and to increase physician awareness of the benefits of our products relative to competing products.

Future performance of Fanapt ® , HETLIOZ ® and PONVORY ® may be impacted by a number of factors including competing products or unanticipated safety issues.

If Fanapt ® , HETLIOZ ® or PONVORY ® is not successful in gaining broad commercial acceptance, our business would be harmed.

Future performance of Fanapt ® , HETLIOZ ® and PONVORY ® sales will be dependent on several factors, including our ability to educate physicians and to increase physician awareness of the benefits of our products relative to competing products.

The degree of further market acceptance of any of our products, including with respect to new indications, or market acceptance of approved product candidates among physicians, patients, health care payors and the medical community, will depend on a number of factors, including but not limited to:

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• pricing and cost effectiveness.

In addition, HETLIOZ ® , Fanapt ® and PONVORY ® are subject to continual review by the FDA, and we cannot assure that newly discovered or reported safety issues will not arise.

In addition, commercial products are subject to continual review by the FDA, and we cannot assure that newly discovered or reported safety issues will not arise.

With the use of any newly marketed drug by a wider patient population, serious adverse events may occur from time to time that initially do not appear to relate to the drug itself.

Any safety issues could cause us to suspend or cease marketing of our approved products, cause us to modify how we market our approved products, subject us to substantial liabilities and adversely affect our revenues and financial condition.

In the event of a withdrawal of HETLIOZ ® , Fanapt ® or PONVORY ® from the market, our revenues would decline significantly and our business would be seriously harmed.

In the event of a withdrawal of our commercial products from the market, our revenues would decline significantly and our business would be seriously harmed.

With the launch of generic versions of HETLIOZ ® and further generic versions possible, it may not be viable for us to invest in market education to grow the U.S.

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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;

Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare, with prices that can be negotiated subject to a cap, with the first drug price negotiations effective January 1, 2026;

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).

and replaces the Medicare Part D coverage gap discount program with a new discounting program beginning January 1, 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.

On March 15, 2023 and June 30, 2023, HHS issued guidance regarding implementation of the Medicare drug price negotiation program in initial price applicability year 2026.

HHS stated it would provide additional information in the future related to implementation for initial price applicability years 2027 and beyond.

More recently, in October 2024, HHS released guidance related to implementation for initial price applicability year 2027.

2024, CMS announced prices for the first ten drugs under the drug price negotiation program, with the new prices going into effect in 2026, and is expected to announce the next fifteen drugs to be selected for the second round of negotiations by February 1, 2025.

Several manufacturers and industry groups have challenged the drug price negotiation program for Medicare Parts B and D in federal court.

These lawsuits are ongoing, and additional lawsuits may be filed in the future related to provisions of the IRA.

It is unknown whether such litigation or other litigation, if brought, will be successful.

It is unknown whether such litigation or other litigation, if brought, will be successful, or whether there will be future changes to the IRA.

Moreover, the recent change in presidential administrations in the U.S.

may introduce additional unpredictability regarding the future of the IRA.

For these 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.

on pharmaceutical products, could impact our ability to obtain or maintain reimbursement for our products at satisfactory levels, or at all, which could materially harm our business and financial results.

Healthcare reform efforts or any future legislation or regulatory actions aimed at controlling and reducing healthcare costs, including through measures designed to limit reimbursement, restrict access or impose unfavorable pricing modifications on pharmaceutical products, could impact our ability to obtain or maintain reimbursement for our products at satisfactory levels, or at all, which could materially harm our business and financial results.

We have encountered third-party payors that refuse to cover or reimburse prescriptions written for HETLIOZ ® and patients who are unable to navigate the coverage or reimbursement processes established by these third-party payors.

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We have encountered third-party payors that refuse to cover or reimburse prescriptions written for HETLIOZ ® .

This rate may increase further as a result of the recent entry into the market of generic versions of HETLIOZ ® .

This rate may increase further as a result of the entry into the market of generic versions of HETLIOZ ® .

Additionally, we are aware of patients who are experiencing difficulties navigating coverage processes established by third-party payors, making it difficult for them to fill a prescription for HETLIOZ ® .

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Our business may be materially adversely affected if this trend continues and large numbers of patients cannot fill their HETLIOZ ® prescriptions due to coverage or reimbursement challenges.

If the FDA does not approve our tradipitant NDA filing for the use of tradipitant for patients with gastroparesis or accept our sNDA filing for the use of tradipitant for patients with motion sickness;

or if the FDA determines that our clinical trial results for tradipitant for the treatment of gastroparesis or for the treatment of motion sickness do not demonstrate adequate safety and substantial evidence of efficacy, continued development of tradipitant will be significantly delayed or terminated, our business will be significantly harmed, and the market price of our stock could decline.

If the FDA does not approve our NDA filing for the use of tradipitant for patients with gastroparesis;

or if the FDA determines that our clinical trial results for tradipitant for the treatment of gastroparesis do not demonstrate adequate safety and substantial evidence of efficacy, continued development of tradipitant may be significantly delayed or terminated, our business will be significantly harmed, and the market price of our stock could decline.

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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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.

In May 2023, we announced positive results from the first Phase III study of tradipitant in motion sickness, confirming the previously reported results demonstrating that tradipitant is effective in the prevention of vomiting associated with motion sickness.

Our second Phase III study of tradipitant in motion sickness is ongoing.

We have also initiated a Phase III clinical study of tradipitant for the treatment of motion sickness.

Any adverse developments or results or perceived adverse developments or results with respect to our regulatory submission or the tradipitant clinical programs in any or all indications will significantly harm our business and could cause the market price of our stock to decline.

Examples of such adverse developments include, but are not limited to:

• the FDA determining that they believe additional clinical studies are required with respect to tradipitant for the treatment of gastroparesis or for the treatment of motion sickness;

• safety, efficacy or other concerns arising from clinical or non-clinical studies in these programs;

• the FDA determining that the tradipitant clinical trial programs raise safety concerns or do not demonstrate substantial evidence of efficacy.

Any adverse developments or results or perceived adverse developments or results with respect to our regulatory submission or the tradipitant clinical program in gastroparesis will significantly harm our business and could cause the market price of our stock to decline.

Examples of such potential adverse developments include, but are not limited to:

• the FDA determining that it believes additional clinical studies are required with respect to tradipitant for the treatment of gastroparesis;

• safety, efficacy or other concerns arising from clinical or non-clinical studies in this program;

• the FDA determining that the tradipitant clinical trial program for gastroparesis does not demonstrate adequate safety and substantial evidence of efficacy.

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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In February 2019, we filed a lawsuit in the U.S.

District Court for the District of Columbia (DC District Court) challenging the FDA’s position, but we ultimately did not prevail.

District Court for the District of Columbia (DC District Court) challenging the FDA’s position, but

we ultimately did not prevail.

Despite our disagreement with the FDA, the preclinical package has allowed us to continue to conduct all of the efficacy studies necessary for NDA filing.

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

In December 2023, the FDA accepted our NDA for tradipitant in gastroparesis for

filing and set a PDUFA target action date of September 18, 2024.

If approved, tradipitant will be the first novel drug to be approved by the FDA for the treatment of gastroparesis in over 40 years and tradipitant is the first novel drug to be accepted for review by the FDA for gastroparesis in over 30 years.

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

In December 2023, the FDA accepted our NDA for tradipitant in gastroparesis for filing and set a PDUFA target action date of September 18, 2024.

On September 18, 2024, we received a CRL from the FDA.

In January 2025, we received a Notice of Opportunity for a Hearing, and we have accepted the opportunity for a hearing.

Tradipitant is the first novel drug to be accepted for review by the FDA for gastroparesis in over 30 years and, if approved, will be the first novel drug to be approved by the FDA for the treatment of gastroparesis in over 40 years.

The lack of long-term (i.e., more than 12 weeks in humans) safety data would likely impact the FDA’s willingness to approve tradipitant for a chronic indication.

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However, the FDA may not deem the safety information sufficient even for a short-term indication.

Moreover, FDA authorization of an EAP is not a guarantee of or a step in obtaining full FDA approval of an NDA.

Our business will be materially adversely impacted if we are not able to agree with the FDA on a regulatory path to approval for tradipitant or the FDA delays or denies approval of NDA or sNDA filings for the treatment of gastroparesis or motion sickness.

Moreover, FDA authorization of an EAP is not a guarantee of or a step towards obtaining full FDA approval of an NDA.

We plan to continue to pursue the marketing authorization for tradipitant but our business will be materially adversely impacted if we are not able to agree with the FDA on a regulatory path to approval for tradipitant or the FDA delays or denies approval of our NDA filing.

If the FDA does not accept our NDA filing for the use of tradipitant for patients with motion sickness;

or if the FDA determines that our clinical trial results for tradipitant for the treatment of motion sickness do not demonstrate adequate safety and substantial evidence of efficacy, continued development of tradipitant will be significantly delayed or terminated, our business will be significantly harmed, and the market price of our stock could decline.

In May 2024 we announced positive results from the second Phase III study of tradipitant in motion sickness, confirming the previously reported results of two efficacy studies demonstrating tradipitant is effective in prevention of vomiting associated with motion sickness.

Any adverse developments or results or perceived adverse developments or results with respect to our regulatory submission or the tradipitant clinical program in motion sickness will significantly harm our business and could cause the market price of our stock to decline.

Examples of such potential adverse developments include, but are not limited to:

• the FDA determining that it believes additional clinical studies are required with respect to tradipitant for the treatment of motion sickness;

• safety, efficacy or other concerns arising from clinical or non-clinical studies in this program;

• the FDA determining that the tradipitant clinical trial program for motion sickness does not demonstrate adequate safety and substantial evidence of efficacy.

See the risk factor entitled “ If the FDA does not approve our NDA filing for the use of tradipitant for patients with gastroparesis;

Global economic conditions may have an adverse effect on our business.

Financial instability or a general decline in economic conditions in the U.S.

and other countries caused by political instability and conflict and economic challenges caused by general health crises such as the COVID-19 pandemic have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused record inflation globally and could adversely affect our operations.

and other countries caused by political instability and conflict and economic challenges caused by general health crises have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused record inflation globally and could adversely affect our operations.

Increased inflation may result in increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital on acceptable terms, if at all.

Existing free trade laws and regulations, such as the United States-Mexico-Canada Agreement, provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable

classification and other requirements.

Changes in laws or policies governing the terms of trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products, such as Canada, China and Mexico, could have a material adverse effect on our business and financial results.

For example, in February 2025, the U.S.

government imposed or threatened to impose new tariffs on imported products from Mexico, Canada and China.

The impact of these tariffs is subject to a number of factors, including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any retaliatory responses to such actions that the target countries may take and any mitigating actions that may become available.

Despite recent trade negotiations between the U.S.

and the Mexican, Canadian and Chinese governments, given the uncertainty regarding the scope and duration of any new tariffs, as well as the potential for additional tariffs or trade barriers by the U.S., Mexico, Canada, China or other countries, we can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful.

In addition, the U.S.

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Global health crises and pandemics may adversely impact our business.

Global health crises and pandemics, such as the COVID-19, could lead to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures that may negatively impact productivity and disrupt our business.

Additionally, the COVID-19 pandemic caused global supply chain disruptions that may have lasting impacts and consequences that are difficult to predict.

Global health crises and pandemics could lead to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures that may negatively impact productivity and disrupt our business.

The COVID-19 pandemic impacted clinical research globally, including delays in our development programs.

While our clinical trials have since resumed patient enrollment, we may experience future disruptions as a result of the lasting effects of the COVID-19 pandemic or other health crises that could adversely impact our sales activities, supply chain, our ongoing and planned clinical trials, and other regulatory activities, including:

While our clinical trials have since resumed patient enrollment, we may experience future disruptions as a result of other health crises that could adversely impact our sales activities, supply chain, our ongoing and planned clinical trials, and other regulatory activities, including:

• curtailment of our sales force or patient access to healthcare providers, which may reduce the number of prescription refills or new patient starts, thereby adversely affecting our revenues;

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• interruption or delays in the operations of regulatory agencies, which may impact review and approval timelines.

If the FDA does not approve our sNDAs for HETLIOZ ® for the treatment of jet lag disorder or insomnia, continued development of tasimelteon for the treatment of jet lag disorder and insomnia will be significantly delayed or terminated, our business will be significantly harmed, and the market price of our stock could decline.

If the FDA does not approve our sNDAs for HETLIOZ ® for the treatment of jet lag disorder or insomnia, continued development of tasimelteon for the treatment of jet lag disorder and insomnia may be significantly delayed or terminated, our business will be significantly harmed, and the market price of our stock could decline.

In December 2018, we announced that the FDA had accepted the HETLIOZ ® sNDA for the treatment of jet lag disorder.

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We have asked the U.S.

District Court for the District of Columbia (DC District Court) to, among other things, compel the FDA to comply with its obligations and declare that its lack of compliance violates the FDCA and the FDA regulations.

In January 2024, the DC District Court held an oral argument on dispositive cross-motions, following which the DC District Court granted our motion for summary judgment.

The DC District Court ruled that the FDA violated the statute and ordered the FDA to either finally resolve our application or commence a hearing on or before March 5, 2024.

Our lawsuit remains pending.

We have asked the DC District Court to, among other things, compel the FDA to comply with its obligations and declare that its lack of compliance violates the FDCA and the FDA regulations.

District Court for the District of Columbia (DC District Court) to, among other things, compel the FDA to comply with its obligations and declare that the FDA’s lack of compliance violates the FDCA and the FDA regulations.

In January 2024, the DC District Court held an oral argument on dispositive cross-motions, following which the DC District Court granted our motion for summary judgment.

The DC District Court ruled that the FDA violated the statute and ordered the FDA to either finally resolve our application or commence a hearing on or before March 5, 2024.

Our lawsuit remains pending.

In July 2023, the FDA accepted our sNDA for HETLIOZ ® in insomnia for filing and set a Prescription Drug User Fee Act (PDUFA) target action date of March 4, 2024 for its decision.

In March 2024, we and the FDA filed a consent motion for entry of final judgment in our favor on our Administrative Procedure Act claim for the FDA’s unreasonable delay in resolving the hearing request, following which the FDA refused to hold a hearing or approve our sNDA for HETLIOZ ® in the treatment of jet lag disorder.

We subsequently filed a petition for review in the U.S.

Court of Appeals for the District of Columbia Circuit (DC Circuit).

In January 2025, the DC Circuit held an oral argument on the petition.

Our petition remains pending.

We continue to pursue FDA approval for HETLIOZ ® for the treatment of jet lag disorder.

In July 2023, the FDA accepted our sNDA for HETLIOZ ® for insomnia for filing.

On March 4, 2024, we received a CRL from the FDA.

In June 2024, we received a Notice of Opportunity for a Hearing and accepted an opportunity for a heading in July 2024.

In August 2024, we filed for summary judgment requesting approval or a hearing on approvability of tasimelteon to treat insomnia associated with difficulties with sleep initiation.

In October 2024, we received a Proposed Order denying a hearing on approvability for the insomnia sNDA, and we submitted a response to the Proposed Order in December 2024.

We continue to pursue FDA approval for HETLIOZ ® for the treatment of insomnia.

Any additional adverse developments or results or perceived adverse developments or results with respect to our regulatory submissions for jet lag disorder or insomnia will significantly harm our business and could cause the market price of our stock to decline.

Examples of such adverse developments include, but are not limited to:

Examples of such potential adverse developments include, but are not limited to:

• the FDA determining that additional clinical studies are required with respect to the jet lag disorder or insomnia programs;

• safety, efficacy or other concerns arising from clinical or non-clinical studies in the jet lag disorder or insomnia programs, or the manufacturing processes or facilities used for the jet lag disorder program;

• the FDA determining that the jet lag disorder or insomnia programs raise safety concerns or do not demonstrate substantial evidence of efficacy.

If the FDA does not approve our sNDA for Fanapt ® for the treatment of bipolar I disorder, our business will be significantly harmed, and the market price of our stock could decline.

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.

In August 2023, the FDA accepted our sNDA for Fanapt ® in bipolar I disorder in adults for filing and set a PDUFA target action date of April 2, 2024 for its decision.

Any additional adverse developments or results or perceived adverse developments or results with respect to our regulatory submission for bipolar I disorder will significantly harm our business and could cause the market price of our stock to decline.

Examples of such adverse developments include, but are not limited to:

• the FDA determining that additional clinical studies are required with respect to the bipolar I disorder program;

• safety, efficacy or other concerns arising from clinical or non-clinical studies in the bipolar I disorder program, or the manufacturing processes or facilities used for the bipolar I disorder program;

• the FDA determining that the bipolar I disorder program raises safety concerns or does not demonstrate substantial evidence of efficacy.

We may enter into third-party collaborations from time to time in order to develop and commercialize our products.

If we are unable to identify or enter into an agreement with any material third-party collaborator, if our collaborations with any such third party are not commercially successful or if our agreement with any such third party is terminated or allowed to expire, we could be adversely affected financially or our business reputation could be harmed.

Our business strategy includes entering into collaborations with corporate collaborators for the commercialization of HETLIOZ ® , Fanapt ® and our other products.

While we are not currently party to any material commercial collaborative arrangements, areas in which we may potentially enter into third-party collaboration arrangements include joint sales and marketing arrangements for sales and marketing in certain E.U.

Our business strategy includes entering into collaborations with third parties for the commercialization of our products.

While we are not currently party to any material commercial collaborative arrangements, areas in which we may potentially

enter into third-party collaboration arrangements include joint sales and marketing arrangements for sales and marketing in certain E.U.

countries and elsewhere outside of the U.S., and future product development arrangements.

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Even after we obtain regulatory approvals of a product, acceptance of the product in the marketplace is uncertain and failure to achieve commercial acceptance will prevent or delay our ability to generate significant revenue from such product.

Even after obtaining regulatory approvals for the sale of our products, the commercial success of these products will depend, among other things, on their acceptance by physicians, patients, third-party payors and other members of the medical

community as therapeutic and cost-effective alternatives to competing products and treatments.

The degree of market acceptance of any product will depend on a number of factors, including the demonstration of its safety and efficacy, its cost-effectiveness, its potential advantages over other therapies, the reimbursement policies of government and third-party payors with respect to such product, our ability to attract and maintain corporate partners, including pharmaceutical companies, to assist in commercializing our products, receipt of regulatory clearance of marketing claims for the uses that we are developing and the effectiveness of our marketing and distribution capabilities.

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Generic competition may also adversely affect our ability to grow our markets and obtain acceptance of our products in the marketplace.

We have just recently completed the acquisition of PONVORY ® and our ability to commercialize PONVORY ® in the U.S.

and Canada and transition regulatory and supply responsibility to us is uncertain, and we may not realize all of the anticipated benefits of the acquisition, those benefits make take longer to realize than expected or we may encounter significant integration difficulties.

We completed the acquisition of PONVORY ® in December 2023 and initiated our commercial launch of PONVORY ® in the third quarter of 2024.

Our ability to successfully launch PONVORY ® in the U.S.

and Canada is uncertain, and we may not realize all of the anticipated benefits of the acquisition, those benefits make take longer to realize than expected or we may encounter significant integration difficulties.

We acquired the U.S.

and Canadian rights to PONVORY ® in December 2023.

Our ability to realize the anticipated benefits of the acquisition will depend, to a large extent, on our ability to integrate PONVORY ® into our business and realize anticipated growth opportunities and synergies.

We will be required to devote significant management attention and resources to integrating this product into our business.

and Canadian rights to PONVORY ® in December 2023 and we initiated our commercial launch of PONVORY ® in the third quarter of 2024.

Our ability to realize the anticipated benefits of the acquisition will depend, to a large extent, on our capacity to capitalize on potential growth opportunities and synergies.

The process may be disruptive to our business and the expected benefits may not be achieved within the anticipated time frame, or at all.

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Our ability to realize the anticipated benefits of the transaction will require us to overcome a number of difficulties, including, among others:

• the diversion of management attention to integration matters;

• difficulties in achieving anticipated business opportunities and growth prospects from the acquisition;

• challenges related to public and market perception of PONVORY ® and/or our acquisition of the product;

• delays or other difficulties with the transition of regulatory and supply responsibilities for PONVORY ® to us from Janssen;

• potential unknown liabilities, adverse consequences, unforeseen increased expenses or other unanticipated problems associated with the acquisition.

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As a result, it cannot be assured that the acquisition of PONVORY ® will result in the full realization of the benefits anticipated from the transaction within the anticipated time frames, or at all.

We rely on, and will continue to rely on, outsourcing arrangements for many of our activities, including preclinical and clinical development and supply of HETLIOZ ® , HETLIOZ LQ ® , Fanapt ® , PONVORY ® and our other products.

We rely on, and will continue to rely on, outsourcing arrangements for many of our activities, including preclinical and clinical development and supply of Fanapt ® , HETLIOZ ® , HETLIOZ LQ ® , PONVORY ® and our other products.

We rely on outsourcing arrangements for a significant portion of our activities, including distribution, preclinical and clinical research and development, data collection and analysis and manufacturing.

We have limited control over these third parties and we cannot guarantee that they will perform their obligations in an effective and timely manner.

Disruptions to our HETLIOZ ® , HETLIOZ LQ ® Fanapt ® or PONVORY ® supply chains could materially affect our level of success in commercializing these products, thereby reducing our future earnings and prospects.

A loss or disruption with any one of our manufacturers or suppliers could disrupt the supply of HETLIOZ ® , HETLIOZ LQ ® , Fanapt ® or PONVORY ® , possibly for a significant time period, and we may not have sufficient inventories to maintain supply before the manufacturer or supplier could be replaced or the disruption is resolved.

Disruptions to our Fanapt ® , HETLIOZ ® , HETLIOZ LQ ® or PONVORY ® supply chains could materially affect our level of success in commercializing these products, thereby reducing our future earnings and prospects.

A loss or disruption with any one of our manufacturers or suppliers could disrupt the supply of Fanapt ® , HETLIOZ ® , HETLIOZ LQ ® or PONVORY ® , possibly for a significant time period, and we may not have sufficient inventories to maintain supply before the manufacturer or supplier could be replaced or the disruption is resolved.

In addition, marketed drugs and their contract manufacturing organizations are subject to continual review, including review and approval by regulatory authorities of their manufacturing facilities and the manufacturing processes, which can result in delays in the regulatory approval process and/or commercialization.

Introducing a replacement or backup manufacturer or supplier for HETLIOZ ® , HETLIOZ LQ ® , Fanapt ® or PONVORY ® requires a lengthy regulatory and commercial process, including FDA approval of chemistry, manufacturing and controls (CMC) changes, and there can be no guarantee that we could obtain necessary regulatory approvals in a timely fashion or at all.

Introducing a replacement or backup manufacturer or supplier for our products requires a lengthy regulatory and commercial process, including FDA approval of chemistry, manufacturing and controls (CMC) changes, and there can be no guarantee that we could obtain necessary regulatory approvals in a timely fashion, or at all.

In addition, it is difficult to identify and select qualified suppliers and manufacturers with the necessary technical capabilities, and establishing new supply and manufacturing sources involves a lengthy and technical engineering process.

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Such restatements and recalculations increase our costs for complying with the laws and regulations governing the MDRP and the 340B program discussed below.

Pursuant to the IRA, certain figures we report under the MDRP will also be used to compute rebates under Medicare Part D triggered by price increases that outpace inflation.

Pursuant to the IRA, certain figures we report under the MDRP

will also be used to compute rebates under Medicare Part D triggered by price increases that outpace inflation.

If we fail to provide information timely or are found to have knowingly submitted false information to CMS, we may be subject to civil monetary penalties and other sanctions, including termination from the MDRP.

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These 340B covered entities include a variety of community health clinics and other entities that receive health services grants from the Public Health Service, as well as certain small rural hospitals and hospitals that serve a disproportionate share of low-income patients.

The ACA expanded the 340B program to include additional entity types:

certain free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals, but exempts drugs designated under section 526 of the Federal Food, Drug and Cosmetic Act as “orphan drugs” from the ceiling price requirements for these covered entities.

The ACA expanded the 340B program to include additional entity types, including certain free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals, but exempts drugs designated under section 526 of the Federal Food, Drug and Cosmetic Act as “orphan drugs” from the ceiling price requirements for these covered entities.

The 340B ceiling price is calculated using a statutory formula, which is based on pricing data we report under the MDRP and the rebate amount for the covered outpatient drug as calculated under the MDRP.

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A recent court decision in the District Court of South Carolina, Genesis Health Care, Inc.

Becerra , found that HRSA’s definition of “patient” as applied to the 340B Program was too broad and may result in covered entities expanding the number of individuals considered eligible to receive drugs purchased through the 340B Program, resulting in higher volumes of drugs purchased at the discounted 340B ceiling price.

Becerra , found that HRSA’s definition of “patient” as applied to the 340B Program was too restrictive compared to the plain language of the statute, and may result in covered entities expanding the number of individuals considered eligible to receive drugs purchased through the 340B Program, resulting in higher volumes of drugs purchased at the discounted 340B ceiling price.

Recently, HRSA has stated that it has received inquiries from manufacturers related to different rebate models, and some manufacturers have commenced litigation to challenge the legality of HRA’s position regarding proposed rebate models.

The outcome of such litigation and impact on participating manufacturers is unknown at this time.

In addition, legislation may be introduced that, if passed, would further expand the 340B program, such as adding further covered entities or requiring participating manufacturers to agree to provide 340B discounted pricing on drugs when used in an inpatient setting.

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In addition, because our products are available in the retail and specialty pharmacy setting, we are required to provide rebates to the Department of Defense for prescriptions dispensed to Tricare beneficiaries from Tricare retail network pharmacies under the Tricare Retail Refund Program.

If a manufacturer participating in the FSS program fails to provide timely information or is found to have knowingly submitted false information, the manufacturer may be subject to civil monetary penalties.

If a manufacturer participating in the FSS program fails to provide timely information or is found to have knowingly submitted false information, or fails to provide information on a timely basis, the manufacturer may be subject to civil monetary penalties.

Individual states continue to consider and have enacted legislation to limit the growth of healthcare costs, including the cost of prescription drugs and combination products.

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If we are found to have knowingly submitted false pricing data to the Medicaid program or the FSS pricing program, or fail to submit pricing data on a timely basis, we may be subject to significant civil monetary penalties.

Such failure also could be grounds for CMS to terminate our Medicaid drug rebate agreement, which is the agreement under which we would participate in the MDRP.

Such failure could also be grounds for CMS to terminate our Medicaid drug rebate agreement, which is the agreement under which we would participate in the MDRP.

In the event that CMS terminates our rebate agreement, our products may no longer be eligible for coverage under Medicaid or Medicare Part B.

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If our products are marketed or distributed in a manner that violates federal or state healthcare fraud and abuse laws, marketing disclosure laws or other federal or state laws and regulations, we may be subject to civil or criminal penalties.

In addition to FDA and related regulatory requirements, our general operations, and the research, development, manufacture, sale and marketing of our products, are subject to extensive additional federal and state healthcare regulation, including the federal Anti-Kickback Statute, the Prescription Drug Marketing Act, and the federal False Claims Act (FCA), the federal Health Insurance Portability and Accountability Act of 1996, the federal Physician Payment Sunshine Act and the Foreign Corrupt Practices Act (and their state analogues), as discussed above in Part I, Item 1 under the heading Government Regulation - Fraud and abuse laws and other U.S.

In addition to FDA and related regulatory requirements, our general operations, and the research, development, manufacture, sale and marketing of our products, are subject to extensive additional federal and state healthcare regulation, including the federal Anti-Kickback Statute, the Prescription Drug Marketing Act, the federal False Claims Act (FCA), the federal Health Insurance Portability and Accountability Act of 1996, the federal Physician Payments Sunshine Act and the Foreign Corrupt Practices Act (and their state analogues), as discussed above in Part I, Item 1 under the heading Government Regulation - Fraud and abuse laws and other U.S.

regulatory matters .

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These incentives have led to, and could continue to lead to, FCA lawsuits, which attempt to recoup moneys paid by government agencies and extract penalties from manufacturers.

For example, federal enforcement agencies have recently pursued

enforcement actions against pharmaceutical companies’ product and patient assistance programs, including relationships with specialty pharmacies, and support for charitable foundations providing patients with co-pay assistance.

For example, federal enforcement agencies have recently pursued enforcement actions against pharmaceutical companies’ product and patient assistance programs, including relationships with specialty pharmacies, and support for charitable foundations providing patients with co-pay assistance.

In addition, Relators have filed lawsuits involving manufacturer reimbursement support services as well as promotion of pharmaceutical products beyond labeled claims.

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In recent years, in addition to federal legislation related to transparency reporting of transfers of value to healthcare providers and healthcare organizations, several states have enacted legislation requiring pharmaceutical companies to file periodic reports.

Several states have adopted legislation to require pharmaceutical companies to establish marketing and promotional compliance programs or codes of conduct or to file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials, and other activities.

Several states have adopted legislation requiring pharmaceutical companies to establish marketing and

promotional compliance programs or codes of conduct or to file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials, and other activities.

Several states have also adopted laws that prohibit certain marketing-related activities, including the provision of gifts, meals or other items to certain healthcare providers.

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We expect that it would take a significant amount of time if we were required to replace one or more of our specialty pharmacies.

Our revenues from Fanapt ® are substantially dependent on sales through a limited number of wholesalers, and such revenues may fluctuate from quarter to quarter.

Our revenues from Fanapt ® and PONVORY ® are substantially dependent on sales through a limited number of customers, and such revenues may fluctuate from quarter to quarter.

We sell Fanapt ® primarily through a limited number of pharmaceutical wholesalers in the U.S.

The use of pharmaceutical wholesalers involves certain risks, including, but not limited to, risks that these pharmaceutical wholesalers will:

• not provide us accurate or timely information regarding their inventories, demand from wholesaler customers buying Fanapt ® or complaints about Fanapt ® ;

• reduce their efforts or discontinue to sell or support or otherwise not effectively sell or support Fanapt ® ;

• not devote the resources necessary to sell Fanapt ® in the volumes and within the time frames that we expect;

We sell PONVORY ® through a limited number of specialty pharmacies and specialty distributors in the U.S., which may not be identical to the historic distribution network used by Janssen when selling PONVORY ® in the U.S.

The use of pharmaceutical wholesalers, specialty pharmacies and specialty distributors involves certain risks, including, but not limited to, risks that these specialty pharmacies, specialty distributors and pharmaceutical wholesalers will:

• not provide us accurate or timely information regarding their inventories, demand from customers buying Fanapt ® or PONVORY ® or complaints about Fanapt ® or PONVORY ® ;

• reduce their efforts or discontinue to sell or support or otherwise not effectively sell or support Fanapt ® or PONVORY ® ;

• not devote the resources necessary to sell Fanapt ® or PONVORY ® in the volumes and within the time frames that we expect;

• be unable to satisfy financial obligations to us or others;

• cease operations.

Additionally, our reliance on a small number of wholesalers could cause revenues to fluctuate from quarter to quarter based on the buying patterns of these wholesalers.

In addition, if any of these wholesalers fails to pay on a timely basis or at all, our business, financial condition and results of operations could be materially adversely affected.

Additionally, our reliance on a small number of wholesalers, specialty pharmacies and specialty distributors, could cause revenues to fluctuate from quarter to quarter based on the buying patterns of these customers.

In addition, if any of these customers fails to pay on a timely basis or at all, our business, financial condition and results of operations could be materially adversely affected.

We face substantial competition, which may result in others developing or commercializing products before or more successfully than we do.

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Accordingly, our competitors may succeed in obtaining patent protection, receiving FDA or foreign regulatory approval or commercializing superior products or other competing products before we do.

Technological developments or the approval by the FDA or foreign regulators of new therapeutic indications for existing products may make our products obsolete or may make them more difficult to market successfully, any of which could have a material adverse effect on our business, results of operations and financial condition.

Technological developments or the approval by the FDA or foreign regulators of new therapeutic indications for existing products may make our products obsolete or may make them more difficult to market successfully, either of which could have a material adverse effect on our business, results of operations and financial condition.

Our products, if successfully developed and approved for commercial sale, will compete with a number of drugs and therapies currently manufactured and marketed by other biotechnology companies, including major pharmaceutical companies.

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Physicians, patients, third-party payors and the medical community may not accept or utilize any of our products that may be approved.

If HETLIOZ ® , Fanapt ® , PONVORY ® and our other products, if and when approved, do not achieve significant market acceptance, our business, results of operations and financial condition would be materially adversely

See Part I, Item 1, Competition, for a discussion of the primary competitors for HETLIOZ ® , Fanapt ® and PONVORY ® .

If Fanapt ® , HETLIOZ ® , PONVORY ® and our other products, if and when approved, do not achieve significant market acceptance, our business, results of operations and financial condition would be materially adversely affected.

See Part I, Item 1, Competition, for a discussion of the primary competitors for our commercial products.

In addition, we may face competition from newly developed generic products.

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If we are unsuccessful at challenging an ANDA filed pursuant to the Hatch-Waxman Act, cheaper generic versions of our products, which may be favored by insurers and third-party payors, may be launched commercially, which would significantly harm our business.

In December 2022, the Delaware District Court ruled in favor of the Defendants in our patent litigation relating to the Defendants’ filing of ANDAs for generic versions of HETLIOZ ® in the U.S.

In December 2022, the Delaware District Court ruled in favor of Teva and Apotex in our patent litigation relating to their filing of ANDAs for generic versions of HETLIOZ ® in the U.S.

We appealed the decision to the Federal Circuit, and in May 2023, a three-judge panel of the Federal Circuit affirmed the Delaware District Court’s ruling.

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In January 2024, we filed a petition for a writ of certiorari with the U.S Supreme Court to review the Federal Circuit’s decision.

The FDA has approved ANDAs for Teva, Apotex and MSN, and Teva and Apotex have launched their generic versions of HETLIOZ ® at risk in the U.S., and MSN has launched its generic version as well.

In April 2024, the U.S.

Supreme Court denied our petition.

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 U.S.

11,285,129, which is a method of administration patent that was not litigated in the prior litigation.

The New Jersey cases have been transferred to the Delaware District Court, where they remain pending, and the Florida case was voluntarily dismissed.

We have also filed patent infringement lawsuits against each of Teva and Apotex in the U.S.

District Court for the District of Delaware, in each case, asserting infringement of U.S.

11,918,556, another method of administration patent that was not litigated in the prior litigation.

The FDA has approved ANDAs for Teva, Apotex and MSN, and Teva and Apotex have

launched their generic versions of HETLIOZ ® at risk in the U.S., and MSN has launched its generic version as well.

In addition, other potential competitors may be successful in obtaining ANDA approval and launching their own generic versions.

In July 2024, we filed a Hatch-Waxman lawsuit against MSN in the Delaware District Court asserting that U.S.

10,179,119, 11,266,622, 11,285,129, 11,850,229, 10,610,510, 10,980,770, and 11,759,446 will be infringed by MSN’s generic version of HETLIOZ LQ ® for which MSN is seeking FDA approval.

A trial is scheduled to begin on June 15, 2026, and a 30-month stay is in place until December 3, 2026.

We also have Orphan Drug Exclusivity for HETLIOZ LQ ® until December 1, 2027, thus no ANDAs for generic HETLIOZ LQ ® can be approved prior to December 1, 2027.

To obtain an ANDA approval for a generic drug, the generic company needs to show, among other things, that its version of the product is bioequivalent to the Reference Listed Drug (RLD).

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In recent years, U.S.

federal lawmakers and the FDA have considered proposals and enacted legislation to facilitate the generic drug company’s access to samples and foster the generic competition.

federal lawmakers and the FDA have considered proposals and enacted legislation to facilitate the generic drug company’s access to samples and foster generic competition.

For example, the Creating and Restoring Equal Access to Equivalent Samples Act (CREATES Act) allows a biosimilar or generic product developer to bring a civil action against a brand drug manufacturer for failing to provide samples of the brand product for comparative testing “on commercially reasonable, market-based terms.” The developer could receive injunctive relief and a monetary award “sufficient to deter the license holder from failing to provide other eligible product developers with sufficient quantities of a covered product on commercially reasonable, market-based terms” in certain cases.

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The FDA or applicable foreign regulatory agency can delay, limit or deny approval of a product for many reasons, including that:

• a product may not be shown to be safe or effective;

• the FDA or foreign agency may not believe a product is shown to be safe or effective;

• the FDA or foreign agency may interpret data from preclinical and clinical trials in different ways than we do;

• the FDA or foreign agency may not approve our or our partners’ manufacturing processes or facilities;

• a product may not be approved for all the indications we request;

• the FDA or foreign agency may not approve a product for all the indications we request;

• the FDA or foreign agency may change its approval policies or adopt new regulations;

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Any delay or failure to obtain regulatory approvals for our products will result in increased costs, could diminish competitive advantages that we may attain and would adversely affect the marketing and sale of our products.

Other than HETLIOZ ® and HETLIOZ LQ ® in the U.S.

and HETLIOZ ® in the countries in Europe covered by the centralized marketing authorization by the EC, and Fanapt ® in the U.S., Mexico and Israel, we have not received, and may never receive, regulatory approval to market any of our products in any jurisdiction.

In December 2023, we acquired U.S.

and Canadian rights to PONVORY ® , which had already been approved by the FDA and Health Canada, for the treatment of adults with RMS.

Other than Fanapt ® in the U.S., Mexico and Israel, HETLIOZ ® and HETLIOZ LQ ® in the U.S.

and HETLIOZ ® in the European countries covered by the EC’s centralized marketing authorization and PONVORY ® in the U.S.

and Canada, we have not received, and may never receive, regulatory approval to market any of our products in any jurisdiction.

Even following regulatory approval of our products, the FDA or the applicable foreign agency may impose limitations on the indicated uses for which such products may be marketed, subsequently withdraw approval or take other actions against us or such products that are adverse to our business.

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Product approvals, once granted, may be withdrawn or modified if problems occur after initial marketing.

We and our partners also are subject to numerous federal, state, local and foreign laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices, the environment and the use and disposal of hazardous substances used in connection with discovery, research and development work.

We and our partners are also subject to numerous federal, state, local and foreign laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices, the environment and the use and disposal of hazardous substances used in connection with discovery, research and development work.

In addition, we cannot predict the extent to which new governmental regulations might significantly impede the discovery, development, production and marketing of our products.

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However, we cannot predict whether the commercial use of our approved products (or our products in development, if and when they are approved for commercial use) will produce undesirable or unintended side effects that have not been evident in the use of, or in clinical trials conducted for, such products to date.

For example, despite the positive results of the completed trials for HETLIOZ ® , Fanapt ® and PONVORY ® , as well as the FDA’s approval of the NDA for HETLIOZ ® for the treatment of Non-24 in January 2014, the NDA for Fanapt ® for the treatment of schizophrenia in May 2009, the EC’s grant of the centralized marketing authorization for HETLIOZ ® for the treatment of Non-24 in totally blind adults in July 2015, the FDA’s approval of the sNDA and NDA for HETLIOZ ® capsule and liquid formulation for the treatment of adults and children, respectively, with nighttime sleep disturbances in SMS in December 2020, and the NDA for PONVORY ® for the treatment of RMS in adults in March 2021 and Health Canada’s approval of PONVORY ® for the treatment of adults with RMS in April 2021, we are uncertain whether either of these products will ultimately prove to be effective and safe in humans long term and in all uses.

For example, despite the positive results of the completed trials for Fanapt ® , HETLIOZ ® and PONVORY ® , as well as the FDA’s approval of the NDA for HETLIOZ ® for the treatment of Non-24 in January 2014, the NDA for Fanapt ® for the treatment of schizophrenia in May 2009, the EC’s grant of the centralized marketing authorization for HETLIOZ ® for the treatment of Non-24 in totally blind adults in July 2015, the FDA’s approval of the sNDA and NDA for HETLIOZ ® capsule and liquid formulation for the treatment of adults and children, respectively, with nighttime sleep disturbances in SMS in December 2020, and the NDA for PONVORY ® for the treatment of RMS in March 2021 and Health Canada’s approval of PONVORY ® for the treatment of RMS in April 2021, we are uncertain whether any of these products will ultimately prove to be effective and safe in humans long term and in all uses.

Frequently, products that have shown promising results in clinical trials have suffered significant setbacks in later clinical trials or even long after they are approved for commercial sale.

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• governmental or regulatory delays and changes in regulatory requirements and guidelines.

If we fail to complete successfully, or have difficulty enrolling a sufficient number of patients for, our clinical trials, we or they may not receive the regulatory approvals needed to market that product.

If we fail to complete our clinical trials successfully or have difficulty enrolling a sufficient number of patients for them, we may not receive the regulatory approvals needed to market that product.

Any such failure or difficulty could have a material adverse effect on our business.

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We have been engaged in identifying and developing drug products since March 2003, which has required, and will continue to require, significant research and development expenditures.

The continued commercialization of HETLIOZ ® , Fanapt ® and PONVORY ® will also require substantial additional expenditures.

The continued commercialization of our products will also require substantial additional expenditures.

As of December 31, 2024, we had an accumulated deficit of $174.3 million and we cannot estimate with precision the extent of our future income or loss.

We may not succeed in maintaining or gaining additional market acceptance of HETLIOZ ® , Fanapt ® and PONVORY ® in the U.S.

and we may not succeed in commercializing HETLIOZ ® or Fanapt ® outside of the U.S or PONVORY ® in Canada.

We may not succeed in maintaining or gaining additional market acceptance of our products in the U.S.

and we may not succeed in commercializing Fanapt ® or HETLIOZ ® outside of the U.S or PONVORY ® in Canada.

We may be unable to fully develop, obtain regulatory approval for, commercialize, manufacture, market, sell and derive revenue from our products in the timeframes we project, if at all, and our inability to do so would materially and adversely impact the market price of our common stock and our ability to raise capital and continue operations.

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Our ability to use net operating loss carryforwards and tax credit carryforwards to offset future taxable income is dependent on generating future taxable income and may be limited, including as a result of transactions involving our common stock.

We have recorded deferred tax assets based on our assessment that we will be able to realize the benefits of our net operating losses and other favorable tax attributes.

We have recorded deferred tax assets based on our assessment that it is more likely than not that we will be able to realize the benefits of our net operating losses and other favorable tax attributes.

Realization of deferred tax assets involves significant judgments and estimates, which are subject to change, and ultimately depends on generating sufficient taxable income of the appropriate character during the appropriate periods.

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In addition, we are potentially subject to ongoing and periodic tax examinations and audits in various jurisdictions, including with respect to the amount of our net operating losses and any limitation thereon.

An adjustment to such net operating loss carryforwards, including an adjustment from a taxing authority, could result in higher tax costs, penalties and interest, thereby adversely impacting our financial condition.

An adjustment to such net operating loss carryforwards or other tax attributes, including an adjustment from a taxing authority, could result in higher tax costs, penalties and interest, thereby adversely impacting our financial condition.

Certain of our tax attributes, including net operating losses (NOLs) and credit carryforwards, would be subject to limitation under Section 382 and 383 should an ownership change as defined under Section 382 of the Internal Revenue Code of 1986, as amended (IRC), occur.

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Our activities will necessitate significant uses of working capital throughout 2025 and beyond.

It is uncertain whether cash provided by our operating activities, together with our existing funds, will be sufficient to meet our long-term operating

It is uncertain whether cash provided by our operating activities, together with our existing funds, will be sufficient to meet our long-term operating needs.

As of December 31, 2024, our total cash and cash equivalents and marketable securities were $374.6 million.

Our long-term capital requirements are expected to depend on many factors, including, among others:

• our level of success in commercializing HETLIOZ ® , Fanapt ® and PONVORY ® , as well as other products that may be approved, globally;

• our level of success in commercializing Fanapt ® , HETLIOZ ® and PONVORY ® , as well as other products that may be approved, globally;

• outcomes of ongoing and potential patent litigation;

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• market acceptance of our products;

• costs involved in establishing and maintaining manufacturing capabilities for commercial quantities of our products;

• costs of establishing and maintaining manufacturing capabilities for commercial quantities of our products;

• the number of potential formulations and products in development;

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• time and costs involved in obtaining regulatory (including FDA) approval;

• costs involved in preparing, filing, prosecuting, maintaining and enforcing patent, trademark and other intellectual property claims;

• costs of preparing, filing, prosecuting, maintaining and enforcing patent, trademark and other intellectual property claims;

• cost of evaluating and acquiring new products from third parties;

• competing technological and market developments;

• costs for recruiting and retaining employees and consultants;

• costs for training physicians;

• costs of recruiting and retaining employees and consultants;

• costs of training physicians;

• legal, accounting, insurance and other professional and business-related costs.

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If additional financing is not available when required or is not available on acceptable terms, we may be unable to fund our operations and planned growth, develop or enhance our technologies or products, take advantage of business opportunities or respond to competitive market pressures, any of which would materially harm our business, financial condition and results of operations.

If our contract research organizations (CROs) do not successfully carry out their duties or if we lose our relationships with CROs, our drug development efforts could be delayed.

Our arrangements with CROs are critical to our success in bringing our products to the market.

If our contract research organizations (CROs), third-party vendors and investigators do not successfully carry out their duties or if we lose our relationships with CROs, third-party vendors and investigators, our drug development efforts could be delayed.

Our arrangements with CROs, third-party vendors and investigators are critical to our success in bringing our products to the market.

We are generally dependent on CROs, third-party vendors and investigators for preclinical testing and clinical trials related to our drug discovery and development efforts and we will likely continue to depend on them to assist in our future discovery and development efforts.

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If they assist our competitors, it could harm our competitive position.

Our CROs could merge with or be acquired by other companies or experience financial or other setbacks unrelated to our collaboration that could, nevertheless, materially adversely affect our business, results of operations and financial condition.

If we lose our relationship with any one or more of these parties, we could experience a significant delay in both identifying another comparable provider and then contracting for its services.

Our CROs, third-party vendors and investigators could merge with or be acquired by other companies or experience financial or other setbacks unrelated to our collaboration that could, nevertheless, materially adversely affect our business, results of operations and financial condition.

If we lose our relationship with any one or more of these parties, we could experience a significant delay in both identifying another comparable provider and contracting for its services.

We may be unable to retain an alternative provider on reasonable terms, if at all.

Even if we locate an alternative provider, it is likely that this provider may need additional time to respond to our needs and may not provide the same type or level of service as the original provider.

addition, any provider that we retain will be subject to current Good Laboratory Practices as set forth in 21 Code of Federal Regulations (C.F.R.) Part 58 and Good Clinical Practices as set forth in 21 C.F.R.

In addition, any provider that we retain will be subject to current Good Laboratory Practices as set forth in 21 Code of Federal Regulations (C.F.R.) Part 58 and Good Clinical Practices as set forth in 21 C.F.R.

Part 50, 54, and 312, and similar international standards and we do not have control over compliance with these regulations by these providers.

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This may expose us to the risk of not being able to directly oversee the production and quality of the manufacturing process and provide ample commercial supplies to successfully launch and maintain the marketing of our products.

Furthermore, these third-party contractors, whether foreign or domestic, may experience regulatory compliance difficulty, mechanical shut downs, employee strikes, or other unforeseeable events that may delay or limit production.

Furthermore, these third-party contractors, whether foreign or domestic, may experience regulatory compliance difficulties, mechanical shut downs, employee strikes, or other unforeseeable events that may delay or limit production.

Our inability to adequately establish, supervise and conduct (either ourselves or through third parties) all aspects of the formulation and manufacturing processes would have a material adverse effect on our ability to develop and commercialize our products.

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and Patheon Inc.

(collectively, Patheon), subsidiaries of Thermo Fisher Scientific, for the manufacture of HETLIOZ ® and Fanapt ® .

(collectively, Patheon), subsidiaries of Thermo Fisher Scientific, for the manufacture of Fanapt ® and HETLIOZ ® .

In January 2014, we entered into a manufacturing agreement with Patheon for the manufacture of commercial supplies of HETLIOZ ® 20 mg capsules at Patheon’s Cincinnati, Ohio manufacturing site.

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Additionally, in December 2020, we entered into a non-exclusive third-party manufacturing agreement for the manufacture of commercial supplies of HETLIOZ LQ ® .

During December 2024, we entered into a non-exclusive third-party manufacturing agreement for the manufacture of commercial supplies of PONVORY ® .

We do not have exclusive long-term agreements with any other third-party manufacturers of our products.

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Similarly, if we change contract manufacturers, the FDA must approve these contract manufacturers or any other CMC changes before our products can be manufactured.

PONVORY ® is manufactured by third parties and supplied to Janssen, which is currently distributing PONVORY ® pursuant to the terms of a transition agreement.

During the transition period, Vanda and Janssen will transition supply responsibility for PONVORY ® to us.

If we, or Janssen during the transition period, are unable to acquire sufficient quantities of PONVORY ® , our sales of PONVORY ® would suffer adverse effects.

Our manufacturing strategy presents the following additional risks:

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Although we maintain product liability insurance, our aggregate coverage limit under this insurance is $30.0 million, and while we believe this amount of insurance is sufficient to cover our product liability exposure, these limits may not be high enough to fully cover potential liabilities.

As our development activities and commercialization efforts progress and we sell our products, this coverage may be inadequate, we may be unable to obtain adequate coverage at an acceptable cost or we may be unable to get adequate coverage at all or our insurer may disclaim coverage as to a future claim.

This could prevent the commercialization or limit the commercial potential of our

As our development activities and commercialization efforts progress and we sell our products, this coverage may be inadequate, we may be unable to obtain adequate coverage at an acceptable cost, we may be unable to get adequate coverage at all or our insurer may disclaim coverage as to a future claim.

This could prevent the commercialization or limit the commercial potential of our products.

Even if we are able to maintain insurance that we believe is adequate, our results of operations and financial condition may be materially adversely affected by a product liability claim.

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Acceptance for reimbursement comes with cost, use and often volume restrictions, which can vary by Member State.

Although we have received marketing authorization for HETLIOZ ® capsules from the EC, pricing negotiations with governmental authorities may take a considerable amount of time in those Member States that impose price controls.

Although we have received marketing authorization for HETLIOZ ® capsules from the EC, pricing negotiations

with governmental authorities may take a considerable amount of time in those Member States that impose price controls.

For example, we launched HETLIOZ ® commercially in Germany in August 2016, and concluded our pricing negotiations with German authorities in October 2017.