What changed in this filing

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Item 9A. Controls and Procedures

2025-02-14 compared with 2024-02-08 · 437 added, 208 removed, 1005 unchanged (39% of the section changed)

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Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)) as of December 31, 2024.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of December 31, 2023, the end of the period covered by this annual report on Form 10-K (Annual Report), to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of December 31, 2024, the end of the period covered by this annual report on Form 10-K (Annual Report), to ensure that the information required to be disclosed by us in the reports that we file or submit under the

Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting

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Consolidated Statements of Operations for the years ended December 31, 2024 , 2023 and 2022

Consolidated Statements of Comprehensive Income for the years ended December 31, 2023 , 2022 and 2021

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024 , 2023 and 2022

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024 , 2023 and 2022

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We have audited the accompanying consolidated balance sheets of Vanda Pharmaceuticals Inc.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, of comprehensive income (loss), of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Critical Audit Matters

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

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

Medicaid Rebates for Fanapt ®

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

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

Allowances for the Medicaid Drug Rebate Program

As described in Note 2 to the consolidated financial statements, the allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program as well as contracted rebate programs with other payors.

Rebate amounts owed after the final dispensing of the product to a benefit plan participant are based upon contractual agreements or legal requirements with public sector benefit providers, such as Medicaid.

Allowances for rebates are based upon the insurance benefits of the end customer, which are estimated using historical activity.

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

The Company has recorded product revenue allowances of $49.2 million as of December 31, 2023, of which a significant amount relates to allowances for Medicaid Rebates for Fanapt ® .

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

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

The Company has recorded product revenue allowances of $60.9 million as of December 31, 2024, of which a significant portion relates to allowances for Medicaid drug rebates.

The principal considerations for our determination that performing procedures relating to the allowances for the Medicaid Drug Rebate Program is a critical audit matter are (i) the significant judgment by management due to the significant measurement uncertainty when developing the estimate of the allowances and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating assumptions related to historical activity, statutory or contracted discount rates, and estimated patient utilization.

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

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

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

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

Developing the independent estimate involved (i) testing the completeness and accuracy of the patient utilization data from third-party reports, and (ii) testing rebate claims processed by the Company, including evaluating those claims for consistency with the contractual and mandated terms of the Medicaid Drug Rebate Program.

These procedures included testing the effectiveness of controls relating to the allowances for the Medicaid Drug Rebate Program.

These procedures also included, among others, (i) developing an independent estimate of the allowances for Medicaid drug rebates by utilizing third-party information related to patient utilization and historical activity;

(ii) comparing the independent estimate to management’s estimate to evaluate the reasonableness of management’s estimate;

and (iii) testing, on a sample basis, rebate claims processed by the Company, including evaluating those claims for consistency with the statutory or contractual terms of the Medicaid Drug Rebate Program.

Income Taxes - Realizability of U.S.

Federal Deferred Tax Assets

As described in Note 15 to the consolidated financial statements, the Company has approximately $81.4 million of net deferred tax assets as of December 31, 2024, of which a significant portion relates to the U.S.

federal jurisdiction.

The Company assesses the need for a valuation allowance against its deferred tax assets each quarter through the review of all available positive and negative evidence.

Deferred tax assets are reduced by a tax valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.

The analysis is highly dependent upon historical and projected pretax income.

As of December 31, 2024, after considering all available positive and negative evidence, including but not limited to cumulative income in recent periods, historical, current and future projected results and significant risks and uncertainties related to forecasts, the Company concluded, consistent with prior periods, that it is more likely than not that substantially all of its deferred tax assets in the U.S.

are realizable in future periods.

The principal considerations for our determination that performing procedures relating to the realizability of U.S.

federal deferred tax assets is a critical audit matter are (i) the significant judgment by management in determining whether the U.S.

federal deferred tax assets are more likely than not to be realized in the future and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to management’s assessment of the realizability of U.S.

federal deferred tax assets.

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

These procedures included testing the effectiveness of controls relating to management’s assessment of the realizability of U.S.

federal deferred tax assets, including controls over projected results, including projected pretax income.

These procedures also included, among others, (i) evaluating the positive and negative

evidence available to support management’s assessment of the realizability of U.S.

federal deferred tax assets;

(ii) testing the completeness and accuracy of underlying data used in management’s assessment;

and (iii) evaluating the reasonableness of management’s projected results, including projected pretax income.

Evaluating the reasonableness of management’s projected results of the Company involved considering (i) the current and past performance of the Company;

(ii) the consistency with external market and industry data;

and (iii) the consistency with evidence obtained in other areas of the audit.

/s/ PricewaterhouseCoopers LLP

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Operating lease right-of-use assets 5,602 7,103

Finance lease right-of-use assets

Intangible assets, net 114,096 121,369

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Operating lease non-current liabilities

Finance lease non-current liabilities

Other non-current liabilities

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712,706 700,274

Accumulated other comprehensive loss ( 30 ) ( 1,193 )

Accumulated other comprehensive income (loss)

Accumulated deficit ( 174,292 ) ( 155,392 )

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( 40,660 ) ( 13,952 ) 6,329

Other income 20,291 4,971 199

Income before income taxes 6,339 11,300 42,364

Provision for income taxes 3,830 5,025 9,212

Net income $ 2,509 $ 6,275 $ 33,152

Net income per share:

Other income, net

17,739 20,291 4,971

Income (loss) before income taxes

( 22,921 ) 6,339 11,300

Provision (benefit) for income taxes

( 4,021 ) 3,830 5,025

Net income (loss)

$ ( 18,900 ) $ 2,509 $ 6,275

Net income (loss) per share:

Basic $ ( 0.33 ) $ 0.04 $ 0.11

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VANDA PHARMACEUTICALS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year Ended December 31,

(in thousands) 2024 2023 2022

Net income $ 2,509 $ 6,275 $ 33,152

Net income (loss)

$ ( 18,900 ) $ 2,509 $ 6,275

Other comprehensive income (loss):

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104 1,163 ( 1,018 )

Comprehensive income $ 3,672 $ 5,257 $ 32,738

Comprehensive income (loss)

$ ( 18,796 ) $ 3,672 $ 5,257

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

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Net income — — — — 2,509 2,509

Other comprehensive loss, net of tax — — — ( 1,018 ) — ( 1,018 )

Other comprehensive income, net of tax

— — — 1,163 — 1,163

Balances at December 31, 2023 57,534,499 58 700,274 ( 30 ) ( 155,392 ) 544,910

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Stock-based compensation expense — — 12,432 — — 12,432

Net income — — — — 2,509 2,509

— — — — ( 18,900 ) ( 18,900 )

Other comprehensive income, net of tax

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Cash flows from operating activities

Net income $ 2,509 $ 6,275 $ 33,152

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss)

$ ( 18,900 ) $ 2,509 $ 6,275

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation of property and equipment 859 920 1,217

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Product revenue allowances 11,591 3,192 5,985

Net cash provided by operating activities 12,801 31,984 64,214

Net cash provided by (used in) operating activities

( 15,757 ) 12,801 31,984

Cash flows from investing activities

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Cash flows from financing activities

Principal payments on finance leases

Proceeds from exercise of stock options — — 734

Net cash provided by financing activities

Net cash provided by (used in) financing activities

( 155 ) — 734

Effect of exchange rate changes on cash, cash equivalents and restricted cash

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Vanda Pharmaceuticals Inc.

(the Company) is a global biopharmaceutical company focused on the development and commercialization of innovative therapies to address high unmet medical needs and improve the lives of patients.

The Company commenced its operations in 2003 and operates in one reporting segment.

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

and Canadian rights to on December 7, 2023, for the treatment of relapsing forms of multiple sclerosis (MS) to include clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease, in adults.

(the Company or Vanda) is a global biopharmaceutical company focused on the development and commercialization of innovative therapies to address high unmet medical needs and improve the lives of patients.

The Company commenced its operations in 2003.

The Company’s commercial portfolio is currently comprised of three products:

Fanapt ® for the acute treatment of manic or mixed episodes associated with bipolar I disorder and the treatment of schizophrenia, HETLIOZ ® for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) and for the treatment of nighttime sleep disturbances in Smith-Magenis syndrome (SMS) and PONVORY ® for the treatment of relapsing forms of multiple sclerosis (RMS) including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease.

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

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

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

• Fanapt ® (iloperidone) for the treatment of bipolar I disorder and a long acting injectable (LAI) formulation for the treatment of schizophrenia;

• PONVORY (ponesimod) for the treatment of inflammatory/autoimmune disorders, including but not limited to ulcerative colitis, psoriasis, Crohn's disease, atopic dermatitis, eosinophilic esophagitis and alopecia areata;

In addition, the Company has a number of drugs and/or additional indications for current products in development, including:

• Fanapt ® (iloperidone) long acting injectable (LAI) formulation for the treatment of schizophrenia;

• Bysanti TM (milsaperidone), the active metabolite of Fanapt ® (iloperidone), for the acute treatment of manic or mixed episodes associated with bipolar I disorder and for the treatment of schizophrenia and major depressive disorder (MDD);

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

• PONVORY ® (ponesimod) for the treatment of psoriasis and ulcerative colitis;

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

• VHX-896, the active metabolite of iloperidone;

• Imsidolimab, an IL-36R antagonist, for the treatment of generalized pustular psoriasis (GPP);

• VTR-297, a small molecule histone deacetylase (HDAC) inhibitor for the treatment of onychomycosis and 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 VPO-227 for the treatment of secretory diarrhea disorders, including cholera;

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

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

• Antisense oligonucleotide (ASO) molecules, including VCA-894A for the treatment of Charcot-Marie-Tooth Disease, Type 2S (CMT2S), caused by cryptic slice site variants within IGHMBP2.

• Antisense oligonucleotide (ASO) molecules, including VCA-894A for the treatment of Charcot-Marie-Tooth Disease, Type 2S (CMT2S), caused by cryptic slice site variants within the IGHMBP2 gene and VGT-1849A for the treatment of polycythemia vera (PV), a form of a rare hematologic malignancy.

Basis of Presentation

The accompanying consolidated financial statements includes the accounts of Vanda Pharmaceuticals Inc.

The accompanying consolidated financial statements include the accounts of Vanda Pharmaceuticals Inc.

and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period.

Management continually re-evaluates its estimates, judgments and assumptions, and management’s evaluation could change.

Actual results could differ from those estimates.

The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported periods.

Management continually re-

evaluates its estimates, judgments and assumptions, and management’s evaluation could change.

Actual results could differ from those estimates under different assumptions or conditions.

Cash, Cash Equivalents and Restricted Cash

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Cash and cash equivalents include investments in money market funds with commercial banks and financial institutions, and commercial paper of high-quality corporate issuers.

Restricted cash relates primarily to amounts held as collateral for letters of credit for leases for office space at the Company’s Washington, D.C.

Restricted cash relates primarily to amounts held as collateral for letters of credit for office space leases at the Company’s Washington, D.C.

headquarters.

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

(in thousands) 2024 2023

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Inventory, which is recorded at the lower of cost or net realizable value, includes the cost of third-party manufacturing and other direct and indirect costs and is valued using the first-in, first-out method.

The Company evaluates expiry risk by evaluating current and future product demand relative to product shelf life.

The Company builds demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance and patient usage.

The Company evaluates the risk of excess inventory and product expiry by evaluating current and future product demand relative to product shelf life, taking into account all possible alternative uses for the inventory available in the ordinary course of business.

The Company builds demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance, patient usage and generic competition.

The Company capitalizes inventory costs associated with its products upon regulatory approval when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized;

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Any excess consideration transferred over the fair value of the net assets acquired is allocated to the identifiable assets based on relative fair values.

See Note 3, PONVORY ® Acquisition , for further discussion of the Company’s acquisition of the U.S.

and Canadian rights to PONVORY ® from Actelion Pharmaceuticals Ltd.

See Note 3, PONVORY ® Acquisition , for further discussion of the Company’s acquisition of the United States (U.S.) and Canadian rights to PONVORY ® from Actelion Pharmaceuticals Ltd.

(Janssen), a Johnson & Johnson Company, which the Company accounted for as an asset acquisition under ASC 805-50.

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When available, the Company uses the rate implicit in the lease to discount lease payments to present value.

In the case the implicit rate is not available, the Company uses its incremental borrowing rate based on information available at the lease commencement date, including publicly available data for instruments with similar characteristics, to determine the present value of lease payments.

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

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

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

When the implicit rate is not available, the Company uses its incremental borrowing rate based on information available at the lease commencement date, including publicly available data for instruments with similar characteristics, to determine the present value of lease payments.

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

Impairment of Long-Lived Assets

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

Sales taxes, value add taxes, and usage-based taxes are excluded from revenues.

The Company’s net product sales consist of sales of HETLIOZ ® , Fanapt ® and PONVORY ® .

Sales taxes, value-added taxes, and usage-based taxes are excluded from revenues.

The Company’s net product sales consist of sales of Fanapt ® , HETLIOZ ® and PONVORY ® .

Net sales by product for the years ended December 31, 2024, 2023 and 2022 were as follows:

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2024 2023 2022

HETLIOZ ® net product sales

$ 100,167 $ 159,655 $ 173,536

Fanapt ® net product sales

$ 94,297 $ 90,873 $ 94,727

HETLIOZ ® net product sales

76,675 100,167 159,655

PONVORY ® net product sales

27,800 1,600 —

Total net product sales $ 198,772 $ 192,640 $ 254,382

The Company’s HETLIOZ ® net product sales as reported for the three months ended March 31, 2023 reflected higher unit sales as compared to recent prior periods.

The higher unit sales during the three months ended March 31, 2023 resulted in a significant increase of inventory stocking at specialty pharmacy customers during 2023 and at December 31, 2023.

HETLIOZ ® net product sales during the year ended December 31, 2023 reflect lower unit sales as a result the impact of generic competition.

HETLIOZ ® net product sales may continue to reflect lower unit sales as a result of continued reduction of the elevated inventory levels at specialty pharmacy customers.

Further, HETLIOZ ® net product sales will likely decline in future periods, potentially significantly, related to generic competition in the U.S.

Additionally, the Company constrained HETLIOZ ® net product sales for the year ended December 31, 2023 to an amount not probable of significant revenue reversal.

The higher unit sales during the three months ended March 31, 2023 resulted in a significant increase of inventory stocking at specialty pharmacy customers at March 31, 2023.

During the remainder of 2023, although there was continued destocking at specialty pharmacy customers, inventory levels remained elevated relative to inventory levels prior to the entrance of generic competition and remained elevated throughout 2024.

Going forward, HETLIOZ ® net product sales may reflect lower unit sales as a result of reduction of the elevated inventory levels at specialty pharmacy customers or may be variable depending upon when specialty pharmacy customers need to purchase again.

HETLIOZ ® net product sales will likely decline in future periods, potentially significantly, related to continued generic competition in the U.S.

The Company constrained HETLIOZ ® net product sales for the years ended December 31, 2024 and 2023 to an amount not probable of significant revenue reversal.

The amount of revenue recognized during the year ended December 31, 2024 related to changes in estimates on revenue constrained during 2023 was $ 1.3 million.

HETLIOZ ® net product sales could experience variability in future periods as the remaining uncertainties associated with variable consideration related to inventory stocking by specialty pharmacy customers are resolved.

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

The Company's PONVORY ® net product sales for the year ended December 31, 2024 include approximately $ 3.0 million of variable consideration that may be subject to dispute but that the Company believes is not probable of significant revenue reversal.

Fanapt ® is available in the U.S.

for distribution through a limited number of wholesalers and is available in retail pharmacies.

HETLIOZ ® is available in the U.S.

for distribution through a limited number of specialty pharmacies and is not available in retail pharmacies.

PONVORY ® is available in the U.S.

for distribution primarily through specialty pharmacies.

The Company invoices and records revenue when its customers, specialty pharmacies and wholesalers, receive product from the third-party logistics warehouse, which is the point at which control is transferred to the customer.

for distribution primarily through a limited number of specialty distributors and specialty pharmacies.

The Company invoices and records revenue when its customers, wholesalers, specialty pharmacies and specialty distributors, receive product from the third-party logistics warehouse, which is the point at which control is transferred to the customer.

Revenues and accounts receivable are concentrated with these customers.

Outside the U.S., the Company sells HETLIOZ ® in Germany and has a distribution agreement for the commercialization of Fanapt ® in Israel.

Outside the U.S., the Company has a distribution agreement for the commercialization of Fanapt ® in Israel and sells HETLIOZ ® in Germany.

Receivables are carried at transaction price, net of allowance for credit losses.

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The constrained revenue relates to the uncertainties of payor utilization, patient demand and chargeback and rebate amounts, including Medicaid, related to the elevated levels of inventory on hand at the specialty pharmacies.

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

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

The reserve for product returns for which the product may not be returned for a period of greater than one year from the balance sheet date is included as a component of other non-current liabilities in the Consolidated Balance Sheets.

Uncertainties related to variable consideration are generally resolved in the quarter subsequent to period end, with the exception of Medicaid rebates, which are dependent upon the timing of when states submit reimbursement claims, Medicare inflationary rebates, and product returns that are resolved during the product expiry period specified in the customer contract.

Due to increased inventory stocking at specialty pharmacy customers of HETLIOZ ® in 2023, the time it takes to resolve these uncertainties could be longer than the Company has historically experienced.

Uncertainties related to variable consideration are generally resolved in the quarter subsequent to period end, with the exception of Medicaid rebates, which are dependent upon the timing of when states submit reimbursement claims, Medicare inflationary rebates, which are expected to be billed on an annual basis beginning in 2025, and product returns that are resolved during the product expiry period specified in the customer contract.

Due to increased inventory stocking at specialty pharmacy customers of HETLIOZ ® in 2024 and 2023, the time it takes to resolve these uncertainties could be longer than the Company has historically experienced.

The Company currently records sales allowances for the following:

• Prompt-pay:

Specialty pharmacies and wholesalers are generally offered discounts for prompt payment.

The Company expects that the specialty pharmacies and wholesalers will earn prompt payment discounts and, therefore, deducts the full amount of these discounts from total product sales when revenues are recognized.

Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program as well as contracted rebate programs with other payors, including the new Medicare Part D inflationary rebate effective October 1, 2022.

Wholesalers, specialty pharmacies and specialty distributors, the Company’s direct customers, are generally offered discounts for prompt payment.

The Company expects that these direct customers will earn prompt payment discounts and, therefore, deducts the full amount of these discounts from total product sales when revenues are recognized.

Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program as well as contracted rebate programs with other payors, including the Medicare Part D inflationary rebate effective October 1, 2022.

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• Chargebacks:

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

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

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

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

• Medicare Part D Coverage Gap:

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

• Medicare Part D Rebates:

The Medicare Part D prescription drug benefit requires manufacturers to fund approximately 70 % of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients for applicable drugs.

The Company accounts for the Medicare Part D coverage gap using a point of sale model.

Estimates for expected Medicare Part D coverage gap are based in part on historical activity and, where available, actual and pending prescriptions when the Company has validated the insurance benefits.

Beginning January 1, 2025, the Medicare Part D coverage gap discount program will be replaced with a new discounting program under the Inflation Reduction Act.

Estimates for expected Medicare Part D rebates are based, in part, on historical activity and, where available, actual and pending prescriptions when the Company has validated the insurance benefits.

Beginning January 1, 2025, the Medicare Part D coverage gap discount program was replaced with a new discounting program under the Inflation Reduction Act of 2022.

The Medicare Part D benefit redesign is expected to result in higher discounts for our Medicare payor segment relative to the current Medicare Part D prescription drug coverage gap discount program.

Under the redesigned Medicare Part D program, applicable drugs dispensed to applicable beneficiaries will be subject to manufacturer discounts of 10% during the initial coverage phase and 20% during the catastrophic coverage phase.

Manufacturers may be eligible for phase-in of discounts, such as for applicable beneficiaries who are Low Income Subsidy (LIS) eligible under section 1860D-14(a) of the Social

Security Act.

The Company is a specified manufacturer whose applicable drugs for applicable beneficiaries who are LIS eligible will be subject to lower applicable discounts during the phase-in period.

• Service Fees:

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The Company considers several factors in the estimation process, including expiration dates of product shipped to customers, inventory levels within the distribution channel, product shelf life, historical return activity, including activity for product sold for which the return period has past, prescription trends and other relevant factors.

The Company does not expect returned goods to be resalable.

The Company does not expect returned products to be resalable.

There was no right of return asset as of December 31, 2024 or 2023.

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Research and Development Expenses

Research and development expenses consist primarily of fees for services provided by third parties in connection with the clinical trials, costs of contract manufacturing services, milestone payments, costs of materials used in clinical trials and research and development, costs for regulatory consultants and filings, depreciation of capital resources used to develop products, related facilities costs, and salaries, other employee-related costs and stock-based compensation for research and development personnel.

Research and development expenses consist primarily of fees for services provided by third parties in connection with the clinical trials, costs of contract manufacturing services for clinical trial use, milestone payments made under licensing agreements prior to regulatory approval, costs of materials used in clinical trials and research and development, costs for regulatory consultants and filings, depreciation of capital resources used to develop products, related facilities costs, and salaries, other employee-related costs and stock-based compensation for research and development personnel.

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

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

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

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

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

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

Additionally, selling, general and administrative expenses included an estimate for the annual Affordable Care Act fee.

Selling, general and administrative expenses are associated with the

activities of the corporate, finance, accounting, information technology, business development, commercial support, trade and distribution, sales, marketing, legal, medical affairs and human resource functions.

Additionally, selling, general and administrative expenses include an estimate for the annual Affordable Care Act fee.

Stock-Based Compensation

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Tax rate changes are reflected in income during the period such changes are enacted.

Changes in ownership may limit the amount of net operating loss (NOL) carryforwards that can be utilized in the future to offset taxable income.

Changes in ownership may limit the amount of net operating loss (NOL) carryforwards and tax credits that can be utilized in the future to offset taxable income.

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

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Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist primarily of cash, cash equivalents and marketable securities.

The Company places its cash, cash equivalents and marketable

securities with highly rated financial institutions.

The Company places its cash, cash equivalents and marketable securities with highly rated financial institutions.

At December 31, 2024, the Company maintained all of its cash, cash equivalents and marketable securities in two financial institutions.

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Generally, these deposits may be redeemed upon demand, and the Company believes there is minimal risk of losses on such balances.

Segment and Geographic Information

The Company operates in one reporting segment and, accordingly, no segment disclosures are presented herein.

Foreign sales were not material for each of the years ended December 31, 2023, 2022 and 2021.

Recent Accounting Pronouncements

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The standard is effective for years beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024 and early adoption is permitted.

The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements.

The adoption of this standard for the year ended December 31, 2024 did not have a material impact on the Company’s consolidated financial results, but resulted in enhanced disclosures as included in Note 17, Segments .

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Topic 220-40), which addresses the disaggregation of income statement expenses.

This standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements.

PONVORY ® Acquisition

On December 7, 2023, the Company entered into an Asset Purchase Agreement (the Purchase Agreement) to acquire the U.S.

and Canadian rights to PONVORY ® , Janssen, and the closing of the transaction took place simultaneously with signing.

PONVORY ® is a once-daily oral selective sphingosine-1-phosphate receptor 1 modulator, indicated to treat adults with relapsing forms of multiple sclerosis, to include clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease.

The total consideration for the acquisition was $ 104.9 million consisting of cash paid to Janssen and acquisition-related transaction costs, of which $ 4.2 million of the consideration was accrued as of December 31, 2023 and recorded in the accounts payable and accrued liabilities balance of the Consolidated Balance Sheets;

the $ 4.2 million is a non-cash investing item in the Consolidated Statement of Cash Flows.

and Canadian rights to PONVORY ® from Actelion Pharmaceuticals Ltd.

(Janssen), a Johnson & Johnson Company, and the closing of the transaction took place simultaneously with signing.

PONVORY ® is a once-daily oral selective sphingosine-1-phosphate receptor 1 modulator, indicated to treat adults with relapsing forms of multiple sclerosis, including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease.

The total consideration for the acquisition was $ 104.9 million consisting of cash paid to Janssen and acquisition-related transaction costs.

The Purchase Agreement includes customary representations, warranties and covenants, as well as standard mutual indemnities covering losses arising from any material breach of the Purchase Agreement or inaccuracy of representations and warranties.

Janssen has agreed to indemnify the Company against losses arising from its activities prior to the closing, and the Company has agreed to indemnify Janssen against losses arising from the Company’s activities pertaining to PONVORY ® after the closing.

Simultaneously and in connection with the Purchase Agreement, the parties have also entered into certain supporting agreements, including a customary transition agreement, pursuant to which, during a transition period, Janssen will continue PONVORY ® operations and the Company and Janssen will transition regulatory and supply responsibility for PONVORY ® to the Company.

Simultaneously and in connection with the Purchase Agreement, the parties also entered into certain supporting agreements, including a customary transition agreement, pursuant to which, during a transition period, Janssen will continue PONVORY ® operations.

The Company announced in May 2024 that ownership of the U.S.

New Drug Application (NDA) and Investigational New Drug applications for PONVORY ® had been transferred to Vanda from a Johnson & Johnson Company, fully allowing the Company to commercialize PONVORY ® in the U.S.

The acquisition of PONVORY ® has been accounted for as an asset acquisition in accordance with ASC 805-50 because substantially all of the fair value of the assets acquired is concentrated in a single asset, the PONVORY ® product rights.

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The total consideration of $ 104.9 million was fully allocated to the acquired intangible asset for the U.S.

and Canada rights to PONVORY ® .

The straight-line method is used to amortize the intangible asset, as disclosed in Note 9.

and Canadian rights to PONVORY ® .

The straight-line method is used to amortize the intangible asset, as disclosed in Note 9, Intangible Assets .

Marketable Securities

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The Company’s assets classified in Level 1 and Level 2 as of December 31, 2024 and 2023 consist of cash equivalents and available-for-sale marketable securities.

The valuation of Level 1 instruments is determined using a market approach and is based upon unadjusted quoted prices for identical assets in active markets.

The valuation of Level 1 instruments is determined using a market approach and is

based upon unadjusted quoted prices for identical assets in active markets.

The valuation of Level 2 instruments is also determined using a market approach based upon quoted prices for similar assets in active markets, or other inputs that are observable for substantially the full term of the financial instrument.

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Total assets measured at fair value $ 316,211 $ 209,103 $ 107,108 $ —

Total assets measured at fair value as of December 31, 2023 include $ 63.8 million cash equivalents.

Total assets measured at fair value as of December 31, 2024 include no cash equivalents.

Total assets measured at fair value as of December 31, 2023 include $ 63.8 million cash equivalents.

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

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Total inventory $ 9,513 $ 10,205

The Company’s inventory balance consisted of $ 7.2 million and $ 8.0 million of HETLIOZ ® product and $ 3.0 million and $ 3.4 million of Fanapt ® product as of December 31, 2023 and 2022, respectively.

The Company’s inventory balance consisted of $ 2.0 million of Fanapt ® product, $ 7.3 million of HETLIOZ ® product and $ 0.2 million of PONVORY ® product as of December 31, 2024.

The Company’s inventory balance consisted of $ 3.0 million of Fanapt ® product and $ 7.2 million of HETLIOZ ® product as of December 31, 2023.

Property and Equipment

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The Company’s long-term leases primarily include operating leases and subleases for office space in Washington, D.C.

and London, England.

The Company recognized ROU assets and lease liabilities related to fixed payments for these long-term operating leases in its Consolidated Balance Sheets as of December 31, 2023 and 2022.

and London, England and vehicle finance leases for its fleet program.

The Company recognized ROU assets and lease liabilities related to fixed payments for these long-term leases in its Consolidated Balance Sheets as of December 31, 2024 and 2023.

The Company also has short-term leases, including office space in Berlin, Germany.

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in Washington, D.C.

The sublease term began in

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

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

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

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In November 2022, the Company extended the non-cancellable portion of the lease term from 2023 to 2026.

The following is a summary of the Company’s ROU assets and operating lease liabilities as of December 31, 2023 and 2022:

In August 2024, the Company entered into a master lease agreement for vehicles to be utilized by the Company’s sales force.

The individual car leases commence upon delivery of the vehicles, which began in the fourth quarter of 2024, and were determined to be finance leases upon lease commencement.

The contractual period of each lease is three years .

The following is a summary of the Company’s ROU assets and lease liabilities as of December 31, 2024 and 2023:

(in thousands) Classification on the Balance Sheet December 31, 2024 December 31, 2023

Operating lease assets Operating lease right-of-use assets $ 5,602 $ 7,103

Finance lease assets

Finance lease right-of-use assets

Total lease assets

$ 10,545 $ 7,103

Operating lease current liabilities Accounts payable and accrued liabilities $ 2,456 $ 2,398

Finance lease current liabilities

Accounts payable and accrued liabilities 1,814 —

Operating lease non-current liabilities Operating lease non-current liabilities 4,944 7,006

Finance lease non-current liabilities

Total lease liabilities $ 12,360 $ 9,404

Weighted average remaining lease term 4.3 5.2

Weighted average discount rate

The Company recognized operating lease cost of $ 2.2 million, $ 2.2 million and $ 2.3 million and short-term operating lease cost of $ 0.4 million for each of the years ended December 31, 2023, 2022 and 2021, respectively.

The Company also recognized $ 1.4 million of expense for each of the years ended December 31, 2023, 2022 and 2021, respectively, related to non-lease elements, such as building maintenance services and utilities, and executory costs associated with the operating leases.

Cash paid for amounts included in the measurement of operating lease liabilities is included in operating cash flows and was $ 2.7 million, $ 2.6 million and $ 2.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The table below reconciles the Company’s future cash obligations to operating lease liabilities recorded on the balance sheet as of December 31, 2023:

(in thousands) Operating Leases

Weighted average remaining lease term, operating leases

Weighted average discount rate, operating leases

Weighted average remaining lease term, finance leases

Weighted average discount rate, finance leases

The components of lease expense for the years ended December 31, 2024, 2023 and 2022 was as follows:

Year Ended December 31,

(in thousands) 2024 2023 2022

Operating lease cost:

Fixed lease cost

$ 2,223 $ 2,216 $ 2,226

Short-term lease cost

Finance lease cost:

Total lease costs

$ 2,852 $ 2,612 $ 2,615

Supplemental cash flow information related to leases for the years ended December 31, 2024, 2023 and 2022 was as follows:

Year Ended December 31,

(in thousands) 2024 2023 2022

Cash paid for amounts included in measurement of lease liabilities:

Operating cash flows from operating leases $ 2,723 $ 2,659 $ 2,581

Operating cash flows from finance leases 32 — —

Financing cash flows from finance leases 155 — —

Right-of-use assets obtained in exchange for lease obligations:

Finance leases 5,114 — —

The table below reconciles the Company’s future cash obligations to lease liabilities recorded on the balance sheet as of December 31, 2024:

(in thousands) Operating Leases Finance Leases

2025 $ 2,792 $ 1,877

2026 2,409 1,877

2027 2,159 1,689

Thereafter — —

Total minimum lease payments 8,459 5,443

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current obligations under leases ( 2,456 ) ( 1,814 )

Operating lease non-current liabilities $ 7,006

Lease non-current liabilities

$ 4,944 $ 3,146

Intangible Assets

In January 2014, the Company announced that the FDA had approved the New Drug Application (NDA) for HETLIOZ ® .

In January 2014, the Company announced that the FDA had approved the NDA for HETLIOZ ® .

As a result of this approval, the Company met a milestone under its license agreement with Bristol-Myers Squibb (BMS) that required the Company to make a license payment of $ 8.0 million to BMS.

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and Canadian rights to PONVORY ® from Janssen.

The total purchase price was allocated to the acquired intangible for the U.S.

and Canada rights to PONVORY ® .

The total purchase price was allocated to the acquired intangible asset for the U.S.

and Canadian rights to PONVORY ® .

See Note 3, PONVORY ® Acquisition , for additional details.

The PONVORY ® intangible asset is being amortized on a straight-line basis over the estimated economic useful life of the related product rights.

See Note 3, PONVORY ® Acquisition , for additional details about the PONVORY ® acquisition.

During the first quarter of 2024, the estimated useful life for the PONVORY ® intangible asset was changed from 2035 to 2042 based on a change in the estimated economic useful life of the related product rights.

The following is a summary of the Company’s amortizing intangible assets as of December 31, 2024:

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$ 137,894 $ 23,798 $ 114,096

The following is a summary of the Company’s intangible assets as of December 31, 2022:

The following is a summary of the Company’s amortizing intangible assets as of December 31, 2023:

December 31, 2023

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2035 $ 33,000 $ 15,937 $ 17,063

2035 104,894 588 104,306

Total amortizing intangible assets

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Research and development expenses $ 11,962 $ 15,691

Compensation and employee benefits 6,413 6,839

Consulting and other professional fees 9,226 4,404

Royalties payable 2,409 4,979

Compensation and employee benefits 8,465 6,413

Operating lease liabilities 2,456 2,398

Finance lease liabilities

Royalties payable 1,665 2,409

Accounts payable and other accrued liabilities 3,498 7,145

Total accounts payable and accrued liabilities $ 39,086 $ 38,460

As of December 31, 2022, the prepaid expenses and other current assets and accounts payable and accrued liabilities balances included $ 11.5 million related to the case Gordon v.

Vanda Pharmaceuticals Inc.

In January 2023, the settlement related to the case was fully and finally approved.

As a result, the Company removed the associated prepaid and liability balances.

Commitments and Contingencies

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The Company’s rights to develop and commercialize its products are subject to the terms and conditions of licenses granted to the Company by other pharmaceutical companies.

Pursuant to the terms of a settlement agreement with Novartis Pharma AG (Novartis), Novartis transferred all U.S.

and Canadian rights in the Fanapt ® franchise to the Company on December 31, 2014.

The Company paid directly to Sanofi S.A.

(Sanofi) a fixed royalty of 3 % of net sales through December 2019 related to manufacturing know-how.

The Company is also obligated to pay Sanofi a fixed royalty on Fanapt ® net sales equal to 6 % on Sanofi know-how not related to manufacturing under certain conditions for a period of up to 10 years in markets where the new chemical entity (NCE) patent has expired or was not issued.

The Company is obligated to pay this 6 % royalty on net sales in the U.S.

through November 2026.

In February 2004, the Company entered into a license agreement with BMS under which it received an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize HETLIOZ ® .

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

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

decreased from 10 % to 5 % in December 2022.

royalty will end in April 2024.

In the U.S., the royalty on net sales decreased from 10 % to 5 % in December 2022.

royalty ended in April 2024.

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

The Company is obligated to use its commercially reasonable efforts to develop and commercialize HETLIOZ ® .

Pursuant to the terms of a settlement agreement with Novartis Pharma AG (Novartis), Novartis transferred all U.S.

and Canadian rights in the Fanapt ® franchise to the Company on December 31, 2014.

The Company paid directly to Sanofi S.A.

(Sanofi) a fixed royalty of 3 % of net sales through December 2019 related to manufacturing know-how.

The Company is obligated to pay this 6 % royalty on net sales in the U.S.

through November 2026.

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

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

As of December 31, 2023, the Company has paid Lilly $ 5.0 million in upfront fees and development milestones.

These payments for upfront fees and development milestones include a $ 2.0 million milestone paid to Lilly during the year ended December 31, 2023 for the filing of the first application for marketing authorization for tradipitant in either the U.S.

As of December 31, 2024, the Company has paid Lilly $ 5.0 million in upfront fees and development milestones, including a $ 2.0 million milestone paid to Lilly during the year ended December 31, 2023 for the filing of the first application for marketing authorization for tradipitant in either the U.S.

or European Union (E.U.).

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The Company is obligated to use its commercially reasonable efforts to develop and commercialize tradipitant.

In January 2025, the Company entered into an exclusive global license agreement with Anaptys under which it acquired the worldwide rights to develop, manufacture, and commercialize imsidolimab, an IL-36R antagonist.

Under the terms of the agreement, the Company made an upfront payment of $ 10 million to Anaptys and an additional $ 5 million for existing drug supply.

Anaptys is eligible to receive up to $ 35 million in future regulatory approval and sales milestones.

Additionally, the Company is obligated to pay Anaptys a 10 % royalty on global net sales of imsidolimab.

The Company is obligated to use its commercially reasonable efforts to develop and commercialize imsidolimab.

Portfolio of CFTR activators and inhibitors .

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As of December 31, 2024, remaining milestone obligations include $ 11.9 million for development milestones and $ 33.0 million for future regulatory approval and sales milestones.

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

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

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

Pursuant to the license agreement, the Company is obligated to use its commercially reasonable efforts to develop and commercialize VQW-765 and is responsible for all development costs.

The Company has no milestone obligations;

however, Novartis is eligible to receive tiered-royalties on net sales at percentage rates up to the mid-teens .

Pursuant to the license

agreement, the Company is obligated to use its commercially reasonable efforts to develop and commercialize VQW-765 and is responsible for all development costs.

The Company has no milestone obligations, but Novartis is eligible to receive tiered-royalties on net sales at percentage rates up to the mid-teens .

Other Agreements

In September 2022, the Company entered into an agreement with OliPass Corporation (OliPass) to jointly develop a set of antisense oligonucleotide (ASO) molecules based on OliPass’ proprietary modified peptide nucleic acids.

As consideration for entering into the arrangement, the Company paid OliPass an upfront fee of $ 3.0 million, which was recorded as research and development expense during the three months ended September 30, 2022.

In September 2022, the Company entered into an agreement with OliPass Corporation (OliPass) to jointly develop a set of ASO molecules based on OliPass’ proprietary modified peptide nucleic acids.

As consideration for entering into the arrangement, the Company paid OliPass an upfront fee of $ 3.0 million, which was recorded as research and development expense in 2022.

The Company is funding the research and development activities and has the option to license jointly developed intellectual property upon successful development.

Shareholder Rights Plan.

On April 17, 2024, the Company’s board of directors authorized and declared a dividend distribution of one right (each, a Right) for each outstanding share of common stock of the Company to stockholders of record as of the close of business on April 29, 2024 (the Record Date).

Each Right entitles the registered holder to purchase from the Company, subject to certain conditions which have not yet occurred, one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $ 0.001 per share (the Preferred Stock), of the Company at an exercise price of $ 25.00 (the Exercise Price), subject to adjustment.

The complete terms of the Rights are set forth in a Rights Agreement, dated as of April 17, 2024, between the Company and Equiniti Trust Company, LLC, as rights agent (the Rights Agent), as amended by that certain Amendment No.

1 to the Rights Agreement, and that certain Amendment No.

2 to the Rights Agreement, each, by and between the Company and the Rights Agent (as amended, the Rights Agreement).

In general terms, subject to certain enumerated exceptions, the Rights Agreement works by imposing a significant penalty upon any person or group that acquires beneficial ownership of 10 % or more of the shares of common stock without the prior approval of the board of directors.

In general, any person will be deemed to beneficially own any securities (a) as to which such person has any agreement, arrangement or understanding with another person for the purpose of acquiring, holding, voting or disposing of any shares of Common Stock or (b) that are the subject of a derivative transaction or constitute a derivative security.

As a result, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult or discourage a merger, tender or exchange offer or other business combination involving the Company that is not approved by the board of directors.

However, neither the Rights Agreement nor the Rights should interfere with any merger, tender or exchange offer or other business combination approved by the board of directors.

Purchase Commitments

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

The Company’s non-cancellable purchase commitments for agreements longer than one year are not material.

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

Accumulated Other Comprehensive Loss

The accumulated balances related to each component of other comprehensive loss, net of taxes, were as follows for the years ended December 31, 2023 and 2022:

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

The Company’s non-cancellable purchase commitments for agreements longer than one year primarily relate to commitments for data services.

Accumulated Other Comprehensive Income (Loss)

The accumulated balances related to each component of other comprehensive income (loss), net of taxes, were as follows for the years ended December 31, 2024 and 2023:

(in thousands) December 31, 2024 December 31, 2023

Foreign currency translation $ ( 13 ) $ 21

Unrealized loss on marketable securities ( 51 ) ( 1,186 )

Accumulated other comprehensive loss $ ( 30 ) $ ( 1,193 )

Unrealized gain (loss) on marketable securities

Accumulated other comprehensive income (loss)

$ 74 $ ( 30 )

Stock-Based Compensation

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The 2006 Plan expired by its terms in April 2016, and the Company adopted the 2016 Plan.

Outstanding options under the 2006 Plan remain in effect and the terms of the 2006 Plan continue to apply, but no additional awards can be granted under the 2006 Plan.

Outstanding options under the 2006 Plan remain in effect and the terms of the 2006 Plan continue to apply, but no additional awards can be granted

under the 2006 Plan.

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

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The weighted average grant-date fair value of options granted was $ 2.95 , $ 3.53 and $ 5.18 per share for the years ended December 31, 2024, 2023 and 2022, respectively.

There were no options exercised for the year ended December 31, 2023.

The total intrinsic value of options exercised was $ 1.6 million and $ 4.1 million for the years ended December 31, 2022 and 2021, respectively.

There were no proceeds from the exercise of stock options for the year ended December 31, 2023.

Proceeds from the exercise of stock options amounted to $ 0.7 million and $ 3.6 million for the years ended December 31, 2022 and 2021, respectively.

There were no options exercised for the year ended December 31, 2024 and 2023.

The total intrinsic value of options exercised was $ 1.6 million for the year ended December 31, 2022.

There were no proceeds from the exercise of stock options for the year ended December 31, 2024 and 2023.

Proceeds from the exercise of stock options amounted to $ 0.7 million for the year ended December 31, 2022.

Restricted Stock Units

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Subsequent annual service RSUs granted to directors vest on the first anniversary of the date of grant.

Service RSUs granted to executive officers and certain other employees provide for accelerated vesting if the executive officer or employee is subject to an involuntary termination within 24 months after a change in control.

Service RSUs granted to directors provide for accelerated vesting if there is a change in control of the Company.

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Stock-Based Compensation Expense

Stock-based compensation expense recognized for the years ended December 31, 2023, 2022 and 2021 comprised of the following:

Stock-based compensation expense recognized for the years ended December 31, 2024, 2023 and 2022 was comprised of the following:

Year Ended December 31,

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The Company match vests over a 4 -year period and amounted to $ 1.0 million, $ 1.0 million and $ 1.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The following is a summary of the domestic and foreign components of income before income taxes for the years ended December 31, 2023, 2022 and 2021:

The following is a summary of the domestic and foreign components of income (loss) before income taxes for the years ended December 31, 2024, 2023 and 2022:

Year Ended December 31,

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Foreign 121 155 84

Total income before income taxes $ 6,339 $ 11,300 $ 42,364

Total income (loss) before income taxes

$ ( 22,921 ) $ 6,339 $ 11,300

The following is a summary of the provision (benefit) for income taxes for the years ended December 31, 2024, 2023 and 2022:

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Foreign ( 3 ) ( 15 ) 3

Provision for income taxes $ 3,830 $ 5,025 $ 9,212

The following is reconciliation between the federal statutory tax rate and the Company’s effective tax rate for the years ended December 31, 2023, 2022 and 2021:

Provision (benefit) for income taxes

$ ( 4,021 ) $ 3,830 $ 5,025

The Company assesses the need for a valuation allowance against its deferred tax asset each quarter through the review of all available positive and negative evidence.

Deferred tax assets are reduced by a tax valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The analysis is highly dependent upon historical and projected pretax income.

are realizable in future periods.

The Company maintains a valuation allowance against certain state net deferred tax assets.

The Company generated a pretax loss for the year ended December 31, 2024.

If the Company continues to generate pretax losses and/or if the Company’s projections indicate pretax losses in future periods, the conclusion about the appropriateness of the valuation allowance could change in a future period.

An increase in the valuation allowance would result in a non-cash income tax expense during the period of change.

The analysis to determine that a valuation allowance is necessary is highly dependent upon historical and future projected earnings, among other factors.

Any such adjustment could have a material impact on the Company’s results of operations.

The following is a reconciliation between the federal statutory tax rate and the Company’s effective tax rate for the years ended December 31, 2024, 2023 and 2022:

Year Ended December 31,

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The Company has NOL and other tax credit carryforwards in several jurisdictions.

As of December 31, 2023, the Company has utilized all of its U.S.

federal NOL carryforwards.

The Company has deferred tax assets of $ 16.1 million and $ 22.5 million related to U.S.

federal research and development credits and orphan drug credits, respectively.

These tax attributes will begin to expire in 2031 and 2030 , respectively.

As of December 31, 2024 and 2023, the Company had utilized all of its federal NOL carryforwards.

As of December 31, 2024 the Company has deferred tax

assets of $ 18.3 million and $ 17.9 million related to U.S.

federal and state research and development credits and orphan drug credits, respectively.

Both of these tax attributes will begin to expire in 2031 .

In addition, the Company has $ 6.0 million of deferred tax assets relating to other U.S.

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NOLs for the District of Columbia will begin to expire in 2032 and state NOLs will begin to expire in 2034 .

Cash paid for income taxes was $ 3.6 million for the year ended December 31, 2023.

Cash paid for income taxes for the years ended December 31, 2022 and 2021 were not material.

Cash taxes in 2023 include federal tax payments as a result of utilizing the Company’s remaining federal net operating loss carryover.

tax purposes, utilization of the Company’s tax credits is limited to 75 percent of federal income tax each year.

Cash paid for income taxes was $ 2.4 million and $ 3.6 million for the years ended December 31, 2024 and 2023.

Cash paid for income taxes for the year ended December 31, 2022 was no t material.

Cash taxes beginning in 2023 include federal tax payments as a result of utilizing the Company’s remaining federal net operating loss carryover.

For federal tax purposes, utilization of the Company’s tax credits is limited to 75 percent of federal income tax each year.

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

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

Generally, the tax years 2020 through

2022 remain open to examination by the major taxing jurisdiction to which the Company is subject.

Generally, the tax years 2021 through 2023 remain open to examination by the major taxing jurisdiction to which the Company is subject.

To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, or state or foreign tax authorities, to the extent utilized in a future period.

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Earnings per Share

Basic earnings per share (EPS) is calculated by dividing the net income by the weighted average number of shares of common stock outstanding.

Diluted EPS is computed by dividing the net income by the weighted average number of shares of common stock outstanding, plus potential outstanding common stock for the period.

Basic earnings per share (EPS) is calculated by dividing the net income (loss) by the weighted average number of shares of common stock outstanding.

Diluted EPS is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding, plus potential outstanding common stock for the period.

Potential outstanding common stock includes stock options and shares underlying RSUs, but only to the extent that their inclusion is dilutive, as calculated using the treasury stock method.

The following table presents the calculation of basic and diluted net income per share of common stock for the years ended December 31, 2023, 2022 and 2021:

The following table presents the calculation of basic and diluted net income (loss) per share of common stock for the years ended December 31, 2024, 2023 and 2022:

Year Ended December 31,

(in thousands, except for share and per share amounts) 2024 2023 2022

Net income $ 2,509 $ 6,275 $ 33,152

Net income (loss)

$ ( 18,900 ) $ 2,509 $ 6,275

Weighted average shares outstanding, basic 58,149,087 57,380,975 56,461,877

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Weighted average shares outstanding, diluted 58,149,087 57,557,911 56,983,171

Net income per share, basic and diluted:

Net income (loss) per share, basic and diluted:

Basic $ ( 0.33 ) $ 0.04 $ 0.11

Diluted $ ( 0.33 ) $ 0.04 $ 0.11

Antidilutive securities excluded from calculations of diluted net income per share 6,464,057 4,786,891 2,176,944

Antidilutive securities excluded from calculations of diluted net income (loss) per share

6,493,140 6,464,057 4,786,891

The Company incurred a net loss for the year ended December 31, 2024 causing inclusion of any potentially dilutive securities to have an anti-dilutive effect, resulting in dilutive loss per share and basic loss per share attributable to common stockholders being equivalent.

The Company operates in one reportable segment, which includes all activities related to the development and commercialization of innovative therapies to address high unmet medical needs and improve the lives of patients.

The determination of a single reportable segment is consistent with the consolidated financial information regularly provided to the Company’s chief operating decision maker (CODM), which is its chief executive officer, who reviews and evaluates consolidated net income (loss) for purposes of assessing performance, making operating decisions, allocating resources and planning and forecasting for future periods.

The measure of segment assets is reported on the balance sheet as total assets.

The following table presents the segment revenue and significant expense categories included within the product segment’s measure of profit or loss for the years ended December 31, 2024, 2023 and 2022:

Year Ended December 31,

(in thousands)

2024 2023 2022

$ 198,772 $ 192,640 $ 254,382

Cost of goods sold, excluding amortization

11,314 14,796 24,282

Research and development

74,431 76,823 85,770

Selling, general and administrative

146,414 112,883 136,485

Intangible asset amortization

7,273 2,090 1,516

( 17,739 ) ( 20,291 ) ( 4,971 )

Provision (benefit) for income taxes

( 4,021 ) 3,830 5,025

Net income (loss)

$ ( 18,900 ) $ 2,509 $ 6,275

Foreign sales were not material for each of the years ended December 31, 2024, 2023 and 2022.

Legal Matters

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

As initially disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 14, 2022, in January 2022, the Company entered into a license agreement with MSN and Impax Laboratories LLC (Impax) resolving the lawsuits against MSN (the MSN/Impax License Agreement).

As initially disclosed in the Company’s Current

Report on Form 8-K filed with the Securities and Exchange Commission on January 14, 2022, in January 2022, the Company entered into a license agreement with MSN and Impax Laboratories LLC (Impax) resolving the lawsuits against MSN (the MSN/Impax License Agreement).

The MSN/Impax License Agreement grants MSN and Impax a non-exclusive license to manufacture and commercialize MSN’s generic version of HETLIOZ ® in the U.S.

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The MSN/Impax License Agreement also provides that MSN and Impax may launch a generic version of HETLIOZ ® earlier under certain limited circumstances.

In January 2023, MSN and its commercial partner, Amneal Pharmaceuticals, Inc., informed the Company of their belief that such circumstances have occurred and have since launched their generic version.

The Company disagrees with this position and continues to aggressively defend its legal rights to exclusivity for HETLIOZ ® .

In January 2023, MSN and its commercial partner, Amneal Pharmaceuticals, Inc.

(Amneal), informed the Company of their belief that such circumstances have occurred and have since launched their generic version.

The Company disagreed with this position and sought to defend its legal rights to exclusivity for HETLIOZ ® .

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

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Supreme Court to review the Federal Circuit’s decision.

In April 2024, the U.S.

Supreme Court denied the Company’s petition for a writ of certiorari.

In December 2022, the Company filed patent infringement lawsuits, including Hatch-Waxman Act claims, against each of Teva and Apotex in the U.S.

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The Company asked the NJ District Court to, among other things, order that the effective date of the FDA’s approval of Teva’s and Apotex’ generic versions of HETLIOZ ® be a date that is no earlier than the expiration of the ‘129 Patent, or such later date that the NJ District Court may determine, and enjoin each of Teva and Apotex from the commercial manufacture, use, import, offer for sale and/or sale of their generic versions of HETLIOZ ® until the expiration of the ‘129 Patent, or such later date that the NJ District Court may determine.

In February 2023, the case was transferred to the Delaware District Court, where the Company’s lawsuit remains pending.

In February 2023, the case was transferred to the Delaware District Court.

In April 2023, Teva and Apotex moved for judgment on the pleadings.

In June 2024, the Delaware District Court denied those motions, allowing the Company’s lawsuit to proceed.

The Company’s lawsuit remains pending.

In January 2023, the Company filed a lawsuit in the NJ District Court against Teva challenging Teva’s advertising and marketing practices related to its at risk launch of its generic version of HETLIOZ ® for the single indication of Non-24.

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The Company seeks to, among other things, enjoin Teva from engaging in false and misleading advertising and recover monetary damages.

In December 2023, the case was transferred to the Delaware District Court.

In December 2023, the case was transferred to the Delaware District Court following Teva’s motion to transfer and dismiss the case earlier that year.

In February 2025, the Delaware District Court denied Teva’s motion to dismiss, allowing the Company’s lawsuit to proceed.

The Company’s lawsuit remains pending.

In January 2023, the Company filed a lawsuit in the U.S.

District Court for the District of Columbia (DC District Court) against the FDA challenging the FDA’s approval of Teva’s Abbreviated New Drug Application (ANDA) for its generic version of HETLIOZ ® capsules under the Administrative Procedure Act, the Food, Drug, and Cosmetic Act (FDCA), and FDA regulations.

District Court for the District of Columbia (DC District Court) against the FDA challenging the FDA’s approval of Teva’s Abbreviated New Drug Application (ANDA) for its generic version of HETLIOZ ® capsules under the Administrative Procedure Act (APA), the Food, Drug, and Cosmetic Act (FDCA) and FDA regulations.

Under the FDCA, every ANDA must contain information to show that the labeling proposed for the generic drug is the same as the labeling approved for the listed drug.

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In September 2023, the Company amended its lawsuit to request that the DC District Court set aside the FDA’s July 2023 denial of the Company’s citizen petition, originally filed with the FDA in January 2023.

The Company’s lawsuit remains pending.

In September 2023, the Company filed a lawsuit in the DC District Court against the FDA challenging the FDA’s approval of MSN’s ANDA for its generic version of HETLIOZ ® capsules under the APA, the FDCA, and FDA regulations.

In April 2024, the Company filed a motion for summary judgment.

In February 2025, the DC District Court denied the Company’s motion and granted the FDA and Teva’s cross motions for summary judgment.

The Company is evaluating options with respect to this litigation.

Constitution.

The Company believes that MSN’s underlying approval data, particularly its bioequivalence studies, are faulty.

On this basis, the Company has asked the DC District Court to, among other things, vacate the FDA’s approval of MSN’s ANDA, declare that the approval of the ANDA was unlawful, arbitrary, and capricious and compel the FDA to order MSN to recall its generic HETLIOZ ® product.

On this basis, the Company asked the DC District Court to, among other things, vacate the

FDA’s approval of MSN’s ANDA, declare that the approval of the ANDA was unlawful, arbitrary, and capricious, is unconstitutional under the Appointments Clause, and compel the FDA to order MSN to recall its generic HETLIOZ ® product.

In December 2023, the Company filed a motion for summary judgment.

In January 2024, the FDA opposed the Company’s motion and moved to waive the administrative record, following which the court held an oral argument on the cross-motions.

The DC District Court has issued an order compelling the FDA to serve the administrative record and setting deadlines for further proceedings.

The DC District Court issued an order compelling the FDA to serve the administrative record and set deadlines for further proceedings.

In April 2024, the Company filed a motion for summary judgment.

In July 2024, the DC District Court held an oral argument on the motion to dismiss that the FDA filed in January 2024, which the Company opposed in February 2024.

In September 2024, the DC District Court granted in part the FDA’s motion to dismiss as to the Company’s APA claims and denied the FDA’s motion to dismiss as to the Company’s claims under the Appointments Clause.

The Company’s lawsuit remains pending.

In April 2024, the Company filed a lawsuit in the Delaware District Court against MSN, Amneal, and Impax alleging claims for false advertising in violation of the Lanham Act and unfair competition under several state laws as well as claims for breach of express representation and fraudulent inducement of a license agreement.

In July 2024, the defendants filed a motion to dismiss and in September 2024, the Company opposed the motion.

The Company’s lawsuit remains pending.

In December 2024, the Company filed a lawsuit in the Delaware District Court against each of Teva and Apotex in the Delaware District Court, in each case, asserting U.S.

11,918,556 (‘556 Patent), a method of administration patent that was not litigated in the prior Delaware District Court cases, will be infringed by Teva’s and Apotex’s generic versions of HETLIOZ ® , each of which was approved by the FDA.

The Company has asked the Delaware District Court to, among other things, order that the effective date of the FDA’s approval of Teva’s and Apotex’ generic versions of HETLIOZ ® be a date that is no earlier than the expiration of the ‘556 Patent, or such later date that the Delaware District Court may determine, and enjoin each of Teva and Apotex from the commercial manufacture, use, import, offer for sale and/or sale of their generic versions of HETLIOZ ® until the expiration of the ‘556 Patent, or such later date that the Delaware District Court may determine.

The Company’s lawsuit remains pending.

HETLIOZ LQ ® .

In July 2024, the Company 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 (together, the Asserted Patents) will be infringed by MSN’s generic version of HETLIOZ LQ ® for which MSN is seeking FDA approval.

The Company has asked the Delaware District Court to, among other things, enter judgment that MSN has infringed at least one claim of each of the Asserted Patents by submitting or causing to be submitted its ANDA to obtain FDA approval for the commercial manufacture, use, import, offer for sale and/or sale in the U.S.

of its generic version of HETLIOZ LQ ® before the expiration of each of the Asserted Patents, enter judgment that the use of MSN’s generic version of HETLIOZ LQ ® in the U.S.

before the expiration of each of the Asserted Patents will directly infringe at least one claim of each of the Asserted Patents, order that the effective date of any approval by the FDA of MSN’s generic version of HETLIOZ LQ ® be a date that is no earlier than the expiration of the last expiring Asserted Patent(s), or such later date as the Court may determine, enjoin MSN from the commercial manufacture, use, import, offer for sale and/or sale of its generic version of HETLIOZ LQ ® until the expiration of each of the Asserted Patents or such later date as the Court may determine, and award monetary damages, to the extent applicable.

The Company’s lawsuit remains pending, and a trial is scheduled to begin on June 15, 2026.

Other Matters .

From April 2022 to February 2024, the Company filed fourteen lawsuits in the DC District Court against the FDA to compel the FDA to produce records under the Freedom of Information Act (FOIA) regarding, among other matters:

From April 2022 to July 2024, the Company filed eighteen lawsuits in the DC District Court against the FDA to compel the FDA to produce records under the Freedom of Information Act (FOIA) regarding, among other matters:

the FDA’s denial of the Company’s supplemental New Drug Application (sNDA) for HETLIOZ ® in the treatment of jet lag disorder;

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and bioequivalence and other study reports submitted relating to the FDA’s consideration of tasimelteon ANDAs.

Three of these lawsuits were resolved in the Company’s favor in June 2023, August 2023, and January 2024, respectively, one is pending resolution and the other ten remain outstanding.

FDA has failed to respond and provide the requested documents within the statutory timeframe with respect to each of these ten outstanding requests.

Eight of these lawsuits have since been resolved in the Company’s favor and the other ten remain outstanding.

The FDA has failed to respond and provide the requested documents within the statutory timeframe with respect to each of these ten outstanding cases.

The Company has 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 FOIA.

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The Company believes that the Rule is unlawful and contrary to the intent of Congress when it passed the ACA.

Under the Rule, certain of the Company’s products would be treated as line extensions and new formulations subject to enhanced rebates, despite the statutory text and CMS’ own long-standing practice, under which such products would not constitute line extensions or new formulations.

the Rule, certain of the Company’s products would be treated as line extensions and new formulations subject to enhanced rebates, despite the statutory text and CMS’ own long-standing practice, under which such products would not constitute line extensions or new formulations.

In March 2023, the MD District Court ruled that CMS’ interpretation of the terms was reasonable and consistent with Congress’ intent.

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In January 2024, the Fourth Circuit held an oral argument.

The Company’s lawsuit remains pending.

In April 2024, the Fourth Circuit ruled against the Company.

In September 2024, the Company filed a petition for a writ of certiorari with the U.S.

Supreme Court to review the Fourth Circuit’s decision.

In January 2025, the U.S.

Supreme Court denied the Company’s petition for a writ of certiorari.

In May 2022, the Company filed a lawsuit in the DC District Court against the FDA challenging the FDA’s denial of Fast Track designation for tradipitant.

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In September 2023, the Company appealed the ruling to the U.S.

Court of Appeals for the District of Columbia Circuit, where the Company’s lawsuit remains pending.

Court of Appeals for the District of Columbia Circuit and in September 2024, the Court of Appeals held an oral argument.

In December 2024, the Court of Appeals affirmed the DC District Court’s ruling.

The Company is currently evaluating options with respect to this litigation.

In September 2022, the Company filed a lawsuit in the DC District Court against the FDA to compel the FDA to comply with two separate non-discretionary obligations under the FDCA and its implementing regulations:

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The Company has 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.

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

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

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

The Company’s lawsuit remains pending.

In March 2024, the Company and the FDA filed a consent motion for entry of final judgment in the Company’s favor on its 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 the Company’s sNDA for HETLIOZ ® in the treatment of jet lag disorder.

The Company subsequently filed a petition for review in the U.S.

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

Under the FDCA, the FDA has an obligation to either approve an sNDA or to hold a hearing on the application’s approvability.

The Company’s petition asks the DC Circuit to set aside the FDA’s order refusing to hold a hearing and refusing approval.

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

The Company’s petition remains pending.

In May 2023, the Company filed a lawsuit in the U.S.

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In January 2024, the Federal Claims Court held an oral argument on the motion to dismiss, following which the Federal Claims Court issued a decision denying in part the government’s motion, allowing the Company’s takings claim to proceed.

The Company’s lawsuit remains pending.

In April 2024, the government filed a judgment on the pleadings, to which the Company opposed in July 2024 and the government replied in August 2024.

In December 2024, the Federal Claims Court held an oral argument on the motion for judgment on the pleadings and in January 2025, the Federal Claims Court ruled against the Company.

In February 2025, the Company appealed the ruling.

In February 2024, the Company filed a lawsuit in the DC District Court against the FDA to compel the FDA to comply with its statutory obligations under the FDCA and its implementing regulations, and to challenge the FDA’s complete response letter and 60-day filing regulations, which the Company believes do not absolve the FDA of its statutory responsibilities.

Under the FDCA, the FDA has an obligation to either approve the Company’s sNDA for HETLIOZ ® in the treatment of insomnia characterized by difficulties with sleep initiation within 180 days of the filing of the sNDA or give the Company a notice of an opportunity for a hearing.

the FDCA, the FDA has an obligation to either approve the Company’s sNDA for HETLIOZ ® in the treatment of insomnia characterized by difficulties with sleep initiation within 180 days of the filing of the sNDA or give the Company a notice of an opportunity for a hearing.

The Company submitted the sNDA on May 4, 2023.

The Company has asked the DC District Court to, among other things, compel the FDA to comply with its obligations, declare that its lack of compliance violates the FDCA and the FDA regulations and declare the FDA’s complete response letter and 60-day filing regulations unlawful.

In June 2024, the Company filed a motion for summary judgment and the FDA published a notice of opportunity for a hearing.

In July 2024, the FDA opposed the Company’s motion for summary judgment.

In September 2024, the DC District Court held an oral argument on the dispositive cross motions.

The Company's lawsuit remains pending.

In March 2024, the Company filed a petition for review in the U.S.

Court of Appeals for the District of Columbia Circuit (DC Circuit) seeking review of the FDA’s final order refusing to hold a hearing or to approve the Company’s sNDA for HETLIOZ ® in the treatment of jet lag disorder.

Under the FDCA, the FDA has an obligation to either approve an sNDA or to hold a hearing on the application’s approvability.

The Company’s petition asks the DC Circuit to set aside the FDA’s order refusing to hold a hearing and refusing approval.

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

The Company’s petition remains pending.

On April 22, 2024, a purported stockholder of the Company filed a lawsuit in the Court of Chancery of the State of Delaware (Delaware Chancery Court) against the members of the Company’s board of directors and the Rights Agent, along with the Company as nominal defendant (collectively, the Defendants), captioned Steamfitters Local 449 Pension Fund v.

Polymeropoulos, et al., CA No.

2024-0416-KSJM .

The lawsuit contended, among other things, that the members of the Company’s board of directors breached their fiduciary duties in adopting the Rights Agreement.

The lawsuit sought relief declaring, in part, that provisions of the Rights Agreement be deemed unenforceable and sought to enjoin the use of such provisions as well as damages, costs, and other remedies, and also sought to enjoin for 30 days the Company’s 2024 Annual Meeting of Stockholders (the Annual Meeting) that was held on May 17, 2024.

At a hearing on May 7, 2024, the Delaware Chancery Court denied the plaintiff’s request to enjoin the Annual Meeting.

A three-day trial in the case was scheduled to begin on November 4, 2024.

On August 7, 2024, the Company amended the Rights Agreement to, among other things, clarify certain of the provisions that were the subject of the lawsuit.

On August 12, 2024, the parties filed with the Delaware Chancery Court a stipulation and order dismissing the lawsuit with prejudice, pursuant to which, the plaintiff agreed that the amendment to the Rights Agreement mooted the plaintiff’s claims.

The plaintiff filed a petition in the Delaware Chancery Court for an award of attorney’s fees and reimbursement of expenses, which the Company is opposing.

In February 2025, the Delaware Chancery Court held a hearing, and a decision remains pending.

In August 2024, the Company filed a lawsuit against the FDA in the DC District Court challenging FDA decisionmakers’ authority under the Appointments Clause of the U.S.

Constitution to render a decision on the Company’s new drug application for tradipitant to treat symptoms of gastroparesis.

In September 2024, the Company filed a motion for a preliminary injunction to enjoin the FDA from subjecting the Company’s NDA for tradipitant for the treatment of symptoms of gastroparesis to a final decision prior to the PDUFA target date of September 18, 2024.

In September 2024, the DC District Court denied the motion.

The Company filed a motion for summary judgment in December 2024, and in January 2025, the FDA opposed the motion and cross-moved to dismiss and for summary judgment.

The Company’s lawsuit remains pending.

In January 2025, the Company and a co-plaintiff filed a lawsuit against the FDA in the Middle District of Florida District Court (Florida District Court) challenging the FDA’s partial clinical hold preventing the Company from studying the effects of tradipitant for the prevention of motion sickness for more than 90 total doses per patient over a period of two years.

The FDA based its partial clinical hold on the Company’s refusal to perform a repeat-dose toxicity study in a non-rodent species of at least a 6-month duration.

However, under the FDA Modernization Act 2.0, nonclinical studies may include non-animal alternatives.

The Company believes that the FDA’s basis for the partial clinical hold is contrary to law and in excess of the FDA’s statutory authority.

The Company and co-plaintiff have asked the Florida District Court to, among other things, set aside the FDA’s partial clinical hold and declare the FDA’s partial clinical hold as unlawful.

The Company’s lawsuit remains pending.

VANDA PHARMACEUTICALS INC.

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

3.2 Amended and Restated Bylaws of the registrant, as amended and restated on December 13, 2023 (filed as Exhibit 3.1 to the registrant’s current report on Form 8-K (File No.

001-34186) on December 15, 2023 and incorporated herein by reference).

3.2 Amended and Restated Bylaws of the registrant, as amended and restated on October 2, 2024 (filed as Exhibit 3.1 to the registrant’s current report on Form 8-K (File No.

001-34186) on October 3, 2024 and incorporated herein by reference).

3.3 Amended and Restated Certificate of Designation of Rights, Preferences and Privileges of Series A Junior Participating Preferred Stock of Vanda Pharmaceuticals Inc.

(filed as Exhibit 3.1 to the registrant’s current report on Form 8-K (File No.

001-34186) on April 17, 2024, and incorporated herein by reference).

4.1 Specimen certificate representing the common stock of the registrant (filed as Exhibit 4.4 to Amendment No.

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001-34186) on February 24, 2022 and incorporated herein by reference).

Rights Agreement, dated as of April 17, 2024, by and between Vanda Pharmaceuticals Inc.

and Equiniti Trust Company, LLC as rights agent (filed as Exhibit 4.1 to the registrant’s current report on Form 8-K (File No.

001-34186) on April 17, 2024, and incorporated herein by reference).

Amendment No.

1 to the Rights Agreement, dated as of May 3, 2024, by and between Vanda Pharmaceuticals Inc.

and Equiniti Trust Company, LLC, as rights agent (filed as Exhibit 4.1 to the registrant’s current report on Form 8-K (File No.

001-34186) on May 3, 2024, and incorporated herein by reference).

Amendment No.

2 to the Rights Agreement, dated as of August 7, 2024, by and between Vanda Pharmaceuticals Inc.

and Equiniti Trust Company, LLC, as rights agent (filed as Exhibit 4.1 to the registrant’s current report on Form 8-K (File No.

001-34186) on August 8, 2024, and incorporated herein by reference).

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

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

Number Description

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

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

Number Description

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

and the registrant (relating to HETLIOZ®) (filed as Exhibit 10.12 to the registrants annual report on Form 10-K (File No.

and the registrant (relating to HETLIOZ®) (filed as Exhibit 10.12 to the registrant’s annual report on Form 10-K (File No.

001-34186) on February 24, 2022 and incorporated herein by reference).

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10.23† Vanda Pharmaceuticals Inc.

Amended and Restated 2016 Equity Incentive Plan, as amended effective as of June 8, 2023 (filed as Exhibit 10.1 to the registrant’s registration statement on Form S-8 (File No.

333-272522) on June 8, 2023 and incorporated herein by reference).

Amended and Restated 2016 Equity Incentive Plan, as amended effective as of May 17, 2024 (filed as Exhibit 10.1 to the registrant’s registration statement on Form S-8 (File No.

333-279591) on May 21, 2024 and incorporated herein by reference).

10.24† UK Sub Plan under the Amended and Restated 2016 Equity Incentive Plan (filed as Exhibit 10.4 to the registrant’s registration statement on Form S-8 (File No.

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001-34186) on February 24, 2022 and incorporated herein by reference).

Number Description

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

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001-34186) on February 17, 2017 and incorporated herein by reference).

Number Description

License Agreement, dated December 7, 2016, by and between Apotex, Inc.

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001-34186) on November 9, 2023 and incorporated herein by reference).

Number Description

10.43† Form of Notice of Stock Option Grant and Stock Option Agreement for U.S.

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001-34186) on November 9, 2023 and incorporated herein by reference).

Number Description

10.46† Form of Notice of Stock Option Grant and Stock Option Agreement for UK Employees under the UK Sub Plan under Amended and Restated 2016 Equity Incentive Plan, as amended (filed as Exhibit 10.8 to the registrant’s quarterly report on Form 10-Q (File No.

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Asset Purchase Agreement, dated December 7, 2023, by and between Actelion Pharmaceuticals Ltd.

and the registrant.

and the registrant (filed as Exhibit 10.47 to the registrant’s annual report on Form 10-K (File No.

001-34186) on February 8, 2024 and incorporated herein by reference).

S ecurities Trading Polic y

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

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Certification of the Chief Executive Officer and Chief Financial Officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.

P olicy Relating to Recovery of Erroneously Awarded Compensation

Policy Relating to Recovery of Erroneously Awarded Compensation (filed as Exhibit 97 to the registrant’s annual report on Form 10-K (File No.

001-34186) on February 8, 2024 and incorporated herein by reference).

101* The following financial information from this annual report on Form 10-K for the fiscal year ended December 31, 2024, formatted in Inline Extensible Business Reporting Language (iXBRL) and furnished electronically herewith:

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(ii) Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022;

(iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021;

(iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023 and 2022;

(iv) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024, 2023 and 2022;

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* Filed herewith.

Furnished herewith.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures