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Item 1A. Risk Factors

2026-02-12 compared with 2025-02-14 · 280 added, 289 removed, 815 unchanged (41% of the section changed)

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Risks Related to our Business and Industry

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

We are dependent on the commercial success of our commercial products.

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

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

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

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

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In December 2022, the U.S.

District Court for the District of Delaware (Delaware District Court) ruled in favor of certain generic drug companies in our patent litigation alleging that the companies’ generic versions of HETLIOZ ® capsules, for which they were seeking FDA approval, infringed our patents covering HETLIOZ ® .

We appealed the decision to the U.S.

Court of Appeals for the Federal Circuit (Federal Circuit).

In May 2023, a three-judge panel of the Federal Circuit affirmed the Delaware District Court’s ruling.

In August 2023, the Federal Circuit denied our request for a rehearing.

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

In April 2024, the U.S.

Supreme Court denied our petition.

Court of Appeals for the Federal Circuit (Federal Circuit) in May 2023.

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

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(Apotex) and MSN Pharmaceuticals Inc.

MSN Laboratories Private Limited (MSN).

and MSN Laboratories Private Limited (MSN).

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

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

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

PONVORY ® tablets were approved in Canada for the treatment of RMS in adults in April 2021.

In December 2023, we acquired the U.S.

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

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

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

We initiated our commercial launch of PONVORY ® in RMS in the U.S.

in the third quarter of 2024.

We have no Canadian operations and no history of commercializing products in Canada.

NEREUS TM capsules were approved in the U.S.

for the preventing of vomiting induced by motion in December 2025.

Our ability to generate significant product revenue from sales of our commercial products both in the U.S.

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

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• gain broad acceptance of our products from physicians, health care payors, patients, pharmacists and the medical community;

• minimize the impact of disruptions caused by public health crises;

• maintain commercial manufacturing arrangements with third-party manufacturers;

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• obtain regulatory approval to expand the labeling of our approved products for additional indications;

• obtain regulatory approval for HETLIOZ ® or Fanapt ® in additional countries;

• obtain regulatory approval for Fanapt ® , HETLIOZ ® or NEREUS TM in additional countries;

• maintain our existing regulatory approval for HETLIOZ ® in Europe and PONVORY ® in Canada;

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

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

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

Many of these factors are outside of our control, and any one of them could result in increased costs, decreased expected revenues and further diversion of management time and energy, which could materially harm our business, financial condition and results of operations.

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

This activity represents a significant investment in the commercial success of our commercial products, which is uncertain.

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

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

If we fail to continue to develop sales, marketing and distribution capabilities, if sales efforts are not effective or if costs of developing sales, marketing and distribution capabilities exceed their cost effectiveness, our business, results of operations and financial condition could be materially adversely affected.

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

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

If we fail to continue to develop sales, marketing and distribution capabilities, if sales efforts are not effective or if costs of developing sales, marketing and distribution capabilities exceed their cost effectiveness, our business, financial condition and results of operations could be materially adversely affected.

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

We filed several Hatch-Waxman lawsuits in the Delaware District Court against Teva, Apotex, and MSN asserting infringement of patents covering HETLIOZ ® 20 mg capsules.

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

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

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

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

In August 2023, the Federal Circuit denied our request for a rehearing.

In January 2024, we filed a petition for a writ of certiorari with the U.S.

Supreme Court to review the Federal Circuit’s decision.

In April 2024, the U.S.

Supreme Court denied our petition.

The consolidated lawsuits against Teva and Apotex were tried in March 2022.

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

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

and 10,376,487 were invalid, which was affirmed by the Federal Circuit in May 2023.

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

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

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

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

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

District Court for the Southern District of Florida against Apotex, asserting infringement of U.S.

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

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

Specifically, in December 2022 we filed Hatch-Waxman lawsuits, which are currently pending in the Delaware District Court, against each of Teva and Apotex, asserting infringement of U.S.

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

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

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

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

We also filed patent infringement lawsuits against each of Teva and Apotex in the Delaware District Court, in each case, asserting infringement of U.S.

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

A trial is scheduled to begin in these cases on August 3, 2026.

These lawsuits do not affect the sale of HETLIOZ ® in the E.U.

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with respect to HETLIOZ ® .

These lawsuits do not relate to the HETLIOZ LQ ® oral suspension formulation.

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

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as well if supply costs and availability are affected.

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

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

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

Future performance of our commercial products may be impacted by a number of factors including competing products or unanticipated safety issues.

If our commercial products are not successful in gaining broad commercial acceptance, our business would be harmed.

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

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

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

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

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

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

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

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

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

HHS has continued to issue guidance as these programs are implemented.

In August 2024, CMS announced prices for the first ten drugs under the drug price negotiation program, with the negotiated prices going into effect in 2026, and, in March 2025, announced the next fifteen drugs for the second round of negotiations, with negotiated prices going into effect in 2027.

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

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

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

may introduce additional unpredictability regarding the future of the IRA.

Moreover, the change in presidential administration in 2025 and associated executive branch policy priorities have introduced additional unpredictability regarding the future implementation of the IRA.

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

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

Healthcare reform efforts or any future legislation or regulatory actions aimed at controlling and reducing healthcare costs, including through measures designed to limit reimbursement, restrict access or impose unfavorable pricing modifications on pharmaceutical products, such as the executive order recently issued by the Trump administration calling for most favored drug pricing in the U.S., which would tie the price of drugs in the U.S.

to the lowest price in a group of other countries, could impact our ability to obtain or maintain reimbursement, or price, for our products at satisfactory levels, or at all, which could materially harm our business and financial results.

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

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

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

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

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

If the FDA does not approve our NDA filing for the use of NEREUS TM for patients with gastroparesis, our business may be harmed, and the market price of our stock could decline.

In February 2022, we announced results from a Phase III clinical study (3301) evaluating the efficacy and safety of NEREUS TM in treating the symptoms of gastroparesis.

The study did not meet its prespecified primary endpoint, which was the difference between drug and placebo on the change of the severity of nausea from baseline at week 12 of treatment.

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

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

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

On September 18, 2024, the FDA informed us that it did not view this data as constituting substantial evidence of efficacy for NEREUS TM in any indication for the treatment of gastroparesis or its symptoms, for any length of treatment.

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

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

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

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

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

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

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

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

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

Despite these results, however, the FDA informed us in December 2018 that in order to treat patients beyond 12 weeks, we would have to conduct a nine-month non-rodent chronic toxicity study.

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

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

we ultimately did not prevail.

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

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

Moreover, in July 2020, the FDA authorized tradipitant through an expanded access program (EAP) for a single patient.

An EAP allows a patient to request the use of tradipitant, prior to NDA approval, for up to six months with an option to request renewal.

Since then, certain patients who experienced a benefit in tradipitant studies have requested and received expanded access, while others have been denied treatment under the EAP.

Moreover, in July 2020, the FDA authorized NEREUS TM through an expanded access program (EAP) for a single patient.

An EAP allows a patient to request the use of NEREUS TM , prior to NDA approval, for up to six months with an option to request renewal.

Since then, certain patients who experienced a benefit in NEREUS TM studies have requested and received expanded access, while others have been denied treatment under the EAP.

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

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

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

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

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

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

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

However, because long-term safety data is not normally a requirement for short-term indications, and with a preclinical profile that has not precluded clinical development, we believe the package was complete for any NDA filing to treat patients for 12 weeks or less.

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

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

However, because long-term safety data is not normally a requirement for short-term indications, and with a preclinical profile that has not precluded clinical development, we

believe the package was complete for any NDA filing to treat patients for 12 weeks or less.

For example, the FDA has communicated to us that it is considering an indication for the short-term relief of nausea in gastroparesis.

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

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

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

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

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

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

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

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

On September 18, 2024, we received a Complete Response Letter (CRL) from the FDA.

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

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

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

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

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

We received a CRL in August 2019 in which the FDA asserted that the measures of the study were of unclear clinical significance and declined to approve our sNDA.

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

We filed a lawsuit against the FDA in September 2022 demanding that the FDA immediately publish in the Federal Register a notice of opportunity for a hearing on the jet lag disorder sNDA.

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

We have asked the U.S.

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

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

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

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

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

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

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

In August 2025, the DC Circuit issued a decision in our favor against the FDA, setting aside the FDA’s refusal to hold a hearing on our sNDA for HETLIOZ ® for the treatment of jet lag disorder and remanding the case back to the FDA.

In October 2025, we announced that we entered into a collaborative framework with the FDA for the resolution of certain of our disputes regarding HETLIOZ ® and NEREUS TM (the FDA Agreement), pursuant to which the FDA agreed to conduct an expedited re-review of the sNDA and we sought a temporary abeyance in these proceedings.

In January 2026, the FDA notified us that, following its re-review of the sNDA, it has determined that the sNDA cannot be approved in its current form.

In January 2026, we requested that the FDA Commissioner resume hearing proceedings.

We continue to evaluate our options with respect to obtaining FDA approval for HETLIOZ ® for the treatment of jet lag disorder.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We might not obtain the necessary regulatory approvals to commercialize current product candidates, including Bysanti TM and imsidolimab.

We cannot assure you that we will receive the approvals necessary to commercialize product candidates we are currently developing or that we may acquire or seek to develop in the future.

We will need FDA approval to commercialize our product candidates in the U.S.

In order to obtain FDA approval of any product candidate, we must submit to the FDA an NDA or a Biologics License Application (BLA) demonstrating that the product candidate is safe for humans and effective for its intended use.

Our Bysanti TM NDA for bipolar I disorder and schizophrenia has been accepted for filing with a PDUFA target action date of February 21, 2026 and our imsidolimab BLA has been submitted for generalized pustular psoriasis.

This demonstration requires significant research, pre-clinical studies, and clinical trials.

Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing.

We cannot predict whether our research and clinical approaches will result in products that the FDA considers safe for humans and effective for their indicated uses.

The FDA has substantial discretion in the product approval process and might require us to conduct additional pre-clinical and clinical testing, perform post-marketing studies or otherwise limit or impose conditions on any additional approvals we obtain.

The approval process might also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during our product candidate’s regulatory review.

Delays in obtaining regulatory approvals might:

• delay commercialization of, and our ability to derive product revenues from, our product candidates;

• impose costly procedures on us;

• diminish any competitive advantages that we might otherwise enjoy.

Even if we comply with all FDA requests, the FDA might ultimately reject one or more of our NDAs or BLAs.

Even if we are able to obtain regulatory approval for a particular product candidate, the approval might limit the indicated medical uses for the product, limit our ability to promote, sell, and distribute the product, require that we conduct costly post-marketing surveillance and/or require that we conduct ongoing post-marketing studies.

Failure to obtain FDA approval of one or more of our product candidates could severely undermine our business.

Disruptions at the FDA and other government agencies caused by, among other things, government shutdowns, could hinder their ability to hire, retain or deploy key leadership and other personnel, conduct inspections of manufacturing facilities or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, government shut-downs, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions.

Average review times at the FDA have fluctuated in recent years as a result.

In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs and biologics or modifications to approved drugs and biologics to be reviewed or approved by necessary government agencies, which would adversely affect our business.

For example, over the last several years, the U.S.

government has periodically shut down and certain regulatory agencies, such as the FDA, had to furlough critical employees and stop critical activities.

If another prolonged government shut-down occurs, or if funding shortages, staffing limitations or further global health concerns emerge, such events could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

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

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

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

classification and other requirements.

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

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

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

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

Despite recent trade negotiations between the U.S.

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

In addition, the U.S.

Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which, coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks.

Economic conditions, and uncertainty as to the general direction of the macroeconomic environment, are beyond our control and may make any necessary debt or equity financing more difficult, costly and dilutive.

Economic conditions, and uncertainty as to the general direction of the macroeconomic environment, are beyond our control and may make any necessary debt or equity

financing more difficult, costly and dilutive.

While we believe we have adequate capital resources to meet current working capital and capital expenditure requirements, an economic downturn or significant increase in our expenses could require additional financing on less than attractive rates or on terms that are excessively dilutive to existing stockholders.

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If such third parties are unable to satisfy their commitments to us, our business and results of operations would be adversely affected.

Our business may be materially adversely affected by the imposition of duties and tariffs and other trade barriers and retaliatory countermeasures implemented by the U.S.

and other governments.

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

Recently there have been significant changes to U.S.

trade policies, sanctions, legislation, treaties and tariffs, including, but not limited to, trade policies and tariffs affecting products from outside of the U.S.

While pharmaceutical products are currently excluded from reciprocal tariffs, we could be subject to increased costs associated with active pharmaceutical ingredients (APIs), raw materials, laboratory equipment, and research material and components imported from other countries if these exclusions are removed.

Department of Commerce is conducting a Section 232 investigation to assess the national security implications of pharmaceutical and API imports.

The outcome of this investigation could result in additional trade restrictions, including tariffs.

Additionally, the U.S.

Supreme Court has recently heard arguments as to whether the president can legally use the International Emergency Economic Powers Act to impose tariffs.

The extent and duration of increased tariffs and the resulting impact on general economic conditions and our business are uncertain and depend on various factors, such as negotiations between the U.S.

and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted and availability and cost of alternative sources of supply.

Any new or additional tariffs on goods imported to the U.S.

could also increase the cost of some of our products and reduce our margins.

The imposition of additional tariffs or other trade barriers could increase our costs in certain markets.

Additionally, it is possible that U.S.

policy changes and uncertainty about such changes could increase market volatility and currency exchange rate fluctuations.

As a result of these dynamics, we cannot predict the impact to our business of any future changes to the U.S.’s or other countries’ trading relationships or the impact of new laws or regulations adopted by the U.S.

or other countries.

Global health crises and pandemics may adversely impact our business.

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

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

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

We received a complete response letter (CRL) in August 2019 in which the FDA asserted that the measures of the study were of unclear clinical significance and declined to approve our sNDA.

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

We filed a lawsuit against the FDA in September 2022 demanding that the FDA immediately publish in the Federal Register a notice of opportunity for a hearing on the jet lag disorder sNDA.

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

We have asked the U.S.

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

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

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

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

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

Our petition remains pending.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

If we are unable to identify or enter into an agreement with any material third-party collaborator, our business, results of operations or financial condition could be adversely affected.

The launch of generic versions of HETLIOZ ® and further generic competition may make it more difficult for us to identify or attract third-party collaborators and obtain favorable commercial terms in any such agreement or arrangement.

If we are unable to identify or enter into an agreement with any material third-party collaborator, our business, financial condition or results of operations could be adversely affected.

Any arrangements we do enter into may not be scientifically or commercially successful.

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

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

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

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

We acquired the U.S.

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

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

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

The failure to meet the challenges involved and to realize the anticipated benefits of the acquisition could adversely affect our business, financial condition and results of operations.

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

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

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

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

In addition, we have no Canadian operations and no history of commercializing products in Canada.

As a result, we will have to either build our own Canadian sales force or enter into an agreement with one or more third-party collaborators for the sale and distribution of PONVORY ® in Canada.

There is no guarantee that we will be successful in building our own Canadian sales force or that we will be able to identify or enter into an agreement with any such third-party collaborator on favorable terms, or at all.

All of these factors could decrease or delay the expected accretive effect of the acquisition and negatively impact our stock price and harm our business.

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

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

We rely on, and will continue to rely on, outsourcing arrangements for many of our activities, including preclinical and clinical development and supply of our commercial and other products.

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

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

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

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

Disruptions to our commercial products’ supply chains could materially affect our level of success in commercializing these products, thereby reducing our future earnings and prospects.

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

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

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

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

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

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

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

Federal law requires that any company that participates in the MDRP also participate in the Public Health Service Act’s 340B drug pricing discount program (340B program), in order for the manufacturer’s drugs to be eligible for coverage under Medicaid and Medicare Part B.

The 340B program is administered by the Health Resources and Services Administration (HRSA) and requires us to agree to charge statutorily defined covered entities no more than the 340B “ceiling price” for our covered drugs when used in an outpatient setting.

The 340B program is administered by the Health Resources and Services Administration

(HRSA) and requires us to agree to charge statutorily defined covered entities no more than the 340B “ceiling price” for our covered drugs when used in an outpatient setting.

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

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

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively known as the Affordable Care Act or ACA) expanded the 340B program to include additional entity types, including certain free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals, but exempts drugs designated under section 526 of the FDCA as “orphan drugs” from the ceiling price requirements for these covered entities.

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

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HRSA has also finalized an administrative dispute resolution process through which 340B covered entities may pursue claims against participating manufacturers for overcharges.

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

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

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

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

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

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There can be no assurance that our submissions will not be found to be incomplete or incorrect.

In addition, recent statutory and regulatory changes, including removal of the statutory cap on Medicaid inflation-based rebates, can materially affect rebate liability for certain products.

Efforts to ensure that our business arrangements with third parties, and our business generally, will comply with applicable healthcare laws and regulations may involve substantial costs.

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Any of the above sanctions could have a material adverse impact on our revenues or our reputation, and cause us to incur significant additional expenses.

In addition, if our products face any safety or efficacy issues, including drug interaction problems, under the federal Food, Drug, and Cosmetic Act (FDCA), the FDA has broad authority to force us to take any number of actions, including, but not limited to, the following:

In addition, if our products face any safety or efficacy issues, including drug interaction problems, under the federal FDCA, the FDA has broad authority to force us to take any number of actions, including, but not limited to, the following:

• Requiring us to conduct post-approval clinical studies to assess product efficacy or known risks or new signals of serious risks, or to evaluate unexpected serious risks;

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Further, our partners, including our licensors, are subject to similar requirements and obligations as well as the attendant risks and uncertainties.

If our partners, including our licensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could be negatively impacted, which could have a material adverse effect on our business.

If our partners, including our licensors, suffer material and adverse effects from such risks and

uncertainties, our rights and benefits for our licensed products could be negatively impacted, which could have a material adverse effect on our business.

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

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

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

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

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

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

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

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

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

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

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however, relevant compliance laws are broad in scope and there may not be regulations, guidance or court decisions that definitively interpret these laws in the context of particular industry practices.

We cannot guarantee that we, our employees, our partners, our consultants or our contractors are or will be in compliance with all federal and state regulations.

cannot guarantee that we, our employees, our partners, our consultants or our contractors are or will be in compliance with all federal and state regulations.

If we, our partners, or our representatives fail to comply with any of these laws or regulations, a range of fines, penalties or other sanctions and regulatory actions could be imposed on us, including, but not limited to, restrictions on how we market and sell our products, significant fines, exclusions from government healthcare programs, including Medicare and Medicaid, litigation, or other sanctions.

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• not provide us accurate or timely information regarding their inventories, the number of patients who are using HETLIOZ ® or complaints about HETLIOZ ® ;

• reduce their efforts or discontinue to sell or support or otherwise not effectively sell or support HETLIOZ ® , particularly in light of the recent entry into the market of generic versions of HETLIOZ ® ;

• reduce their efforts or discontinue to sell or support or otherwise not effectively sell or support HETLIOZ ® , particularly in light of the entry into the market of generic versions of HETLIOZ ® ;

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

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

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

In addition, if any of these

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

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

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

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

There is also increasing use of data analytics, machine learning and artificial intelligence software, which our competitors may be able to use or implement more effectively than we are able to do.

Any of these consequences could have a material adverse effect on our business, financial condition and results of operations or cash flows.

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

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

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

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

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

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

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

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

In August 2023, the Federal Circuit denied our request for a rehearing.

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

In April 2024, the U.S.

Supreme Court denied our petition.

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

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

District Court for the Southern District of Florida against Apotex, in each case, asserting infringement of U.S.

In December 2022, the Delaware District Court ruled in favor of Teva and Apotex in our patent litigation relating to their filing of ANDAs for generic versions of HETLIOZ ® in the U.S., which was affirmed by the Federal Circuit in May 2023.

Also in December 2022, we filed Hatch-Waxman lawsuits, which are currently pending in the Delaware District Court against each of Teva and Apotex, asserting infringement of U.S.

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

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

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

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

We also filed patent infringement lawsuits against each of Teva and Apotex in the Delaware District Court, in each case, asserting infringement of U.S.

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

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

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

A trial is scheduled to begin in these cases on August 3, 2026.

These lawsuits do not affect the sale of HETLIOZ ® in the E.U.

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

with respect to HETLIOZ ® .

These lawsuits do not relate to the HETLIOZ LQ ® oral suspension formulation.

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

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

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

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

In June 2025, we filed an amended complaint against MSN, further alleging that U.S.

10,071,977, 11,566,011, and 11,918,556 will also be infringed by MSN’s generic version of HETLIOZ LQ ® .

Our lawsuit remains pending, and a trial is scheduled to begin on September 14, 2026.

30-month stay is in place until December 3, 2026.

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

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

While the full impact of the CREATES Act is unclear at this time, its provisions do have the potential to facilitate the development and future approval of generic versions of our products, introducing generic competition that could have a material adverse effect on our business, results of operations and financial condition.

Certain states have also taken similar actions.

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The number of preclinical and clinical trials that will be required for FDA or foreign regulatory approval varies depending on the product, the disease or condition that the product is in development for, and the requirements applicable to that particular product.

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

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

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

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

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

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

• the FDA or foreign agency may not meet, or may extend, the PDUFA date or its foreign equivalent with respect to a particular NDA or foreign application;

• the FDA or foreign agency may not agree with our regulatory approval strategies or components of the regulatory filings, such as clinical trial designs.

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

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

• may interpret data from preclinical and clinical trials in different ways than we do;

• may not approve our or our partners’ manufacturing processes or facilities;

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

• may change its approval policies or adopt new regulations;

• may not meet, or may extend, the PDUFA date or its foreign equivalent with respect to a particular NDA or foreign application;

• may not agree with our regulatory approval strategies or components of the regulatory filings, such as clinical trial designs.

For example, if certain of our methods for analyzing trial data are not accepted by the FDA or the applicable foreign agency, we may fail to obtain regulatory approval for our products.

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

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

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

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

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

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

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

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

For example, despite the positive results of the completed trials for our commercial products, as well as various FDA approvals of these commercial products, we are uncertain whether any of these products will ultimately prove to be effective and safe in humans long term and in all uses.

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

Additionally, incidents of product misuse may occur.

These events, among others, could result in product recalls, product liability actions or withdrawals or additional regulatory controls, any of which could have a material adverse effect on our business, results of operations and financial condition.

In addition, if after receiving marketing approval of a product, we or others identify undesirable side effects caused by such product, we could face one or more of the following:

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Preclinical studies and clinical trials required to demonstrate the safety and efficacy of our products are time-consuming and expensive and together take several years to complete.

Before obtaining regulatory approvals for the commercial sale of any of our products, we must demonstrate through preclinical testing and clinical trials that such product is safe and effective for use in humans.

Before obtaining regulatory approvals for the commercial sale of any of our products, we must demonstrate through preclinical testing and clinical trials that such product is

safe and effective for use in humans.

We have incurred, and we will continue to incur, substantial expense for, and devote a significant amount of time to, preclinical testing and clinical trials.

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As of December 31, 2025, we had an accumulated deficit of $394.8 million and we cannot estimate with precision the extent of our future income or loss.

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

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

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

and we may not succeed in commercializing our commercial products outside of the U.S.

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

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In addition, the amount we spend on developing, obtaining and maintaining regulatory approval for and commercializing our products, among other expenditures described in this Annual Report, will impact our profitability.

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

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

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

We have deferred tax assets and recorded a valuation allowance against all of our deferred tax assets during the year ended December 31, 2025 based on our assessment that it is not more likely than not that we will be able to realize the benefits of our NOLs and other favorable tax attributes prior to their expiration.

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

Changes in circumstances may affect the likelihood of such realization, which in turn may trigger the need for additional valuation allowance against our deferred tax assets and adversely affect our net income and financial condition.

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

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

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

Changes in circumstances may affect the likelihood of such realization.

If we determine that we can realize our deferred tax assets, we may reduce the valuation allowance, which could result in volatility in our net income and effective tax rate.

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

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

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

The limitation resulting from a change in ownership could affect our ability to utilize NOLs and credit carryforwards (tax attributes) to offset future taxable income.

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

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

• our level of success in commercializing our commercial products, as well as other products that may be approved, globally;

• outcomes of ongoing and potential patent litigation;

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

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

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

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

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

Our inability to adequately establish, supervise and conduct (either ourselves or through third parties) all aspects of the formulation and manufacturing processes would have a material adverse

effect on our ability to develop and commercialize our products.

In addition, if we are not able to continue to operate our business relationships in a manner that is sufficiently profitable for us and our suppliers, certain members of our supply chain could compete with us through supply to competitors, such as generic drug companies, through breach of our agreements or otherwise.

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We do not have any control over the process or timing of the acquisition of these materials by these manufacturers.

Moreover, we currently do not have any agreements for the commercial production of these materials.

If the manufacturers are unable to obtain these materials for our clinical trials, including due to supply chain issues caused by global health crises, product testing, potential regulatory approval of our products and commercial scale manufacturing could be delayed, significantly affecting our ability to further develop and commercialize our products.

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If we lose key scientists or management personnel, or if we fail to recruit additional highly skilled personnel, our ability to identify, develop, and commercialize new products will be impaired.

We are highly dependent on principal members of our management team and scientific staff, including our Chief Executive Officer, Mihael H.

We are highly dependent on principal members of our management team and scientific staff, including our President, Chief Executive Officer and Chairman of the Board, Mihael H.

Polymeropoulos, M.D.

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

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

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

Uncertainties resulting from the initiation and continuation of products liability litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

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

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

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

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

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

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As a result, we may be subject to lengthy price regulations that delay or prevent the commercial launch of HETLIOZ ® in a particular Member State and negatively impact the revenues that are generated from the sale of HETLIOZ ® in that country.

If reimbursement of HETLIOZ ® is unavailable or limited in scope or amount, or if pricing for HETLIOZ ® is set at unsatisfactory levels or takes too long to establish, or if there is competition from lower priced cross-border sales, our results of operations will be negatively affected.

If reimbursement of

HETLIOZ ® is unavailable or limited in scope or amount, or if pricing for HETLIOZ ® is set at unsatisfactory levels or takes too long to establish, or if there is competition from lower priced cross-border sales, our results of operations will be negatively affected.

We may not be able to effectively market and sell our future products, if approved, in the U.S.

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Most significantly, in August 2022, President Biden signed the IRA into law.

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

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

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

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

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

HHS has continued to issue guidance as these programs are implemented.

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

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

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

may introduce additional unpredictability regarding the future of the IRA.

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

Reductions in

reimbursement levels may negatively impact the prices we can charge or the frequency with which products are prescribed or administered.

Reductions in reimbursement levels may negatively impact the prices we can charge or the frequency with which products are prescribed or administered.

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

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We are subject to stringent laws, rules, regulations, policies, industry standards and contractual obligations regarding data privacy and security in foreign jurisdictions and may be subject to additional related laws, rules, regulations, policies, industry standards and contractual obligations in other jurisdictions into which we expand.

Many of these provisions are subject to change and reinterpretation depending on the jurisdiction and could result in claims, changes to our business practices, monetary penalties, increased cost of operations or other harm to our business activities.

Many of these provisions are

subject to change and reinterpretation depending on the jurisdiction and could result in claims, changes to our business practices, monetary penalties, increased cost of operations or other harm to our business activities.

The regulatory framework for privacy and personal information security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.

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laws, rules, regulations and standards are not successful, or are perceived to be unsuccessful, it could adversely affect our business.

In July 2020, the European Court of Justice (ECJ) invalidated the E.U.-U.S.

In its July 2020 decision in the Schrems II case, the European Court of Justice (ECJ) invalidated the E.U.-U.S.

Privacy Shield, which had enabled the transfer of personal data from the E.U.

for companies that had self-certified to the Privacy Shield.

While we did not rely on the Privacy Shield, the ECJ decision also raised questions about the continued validity of the European Commission’s then in effect Standard Contractual Clauses, on which we relied.

The EC has presented a new set of Standard Contractual Clauses, to be included in agreements involving personal data transfers outside the E.U.

In addition, in July 2023, the European Commission adopted its adequacy decision for the E.U.-U.S.

While we did not rely on the Privacy Shield, the ECJ decision also raised questions about the lawfulness of transfers of personal data to countries not benefitting from an adequacy decision in general, including those made in reliance on contractual safeguards such as the Standard Contractual Clauses approved by the European Commission, in the absence of robust technical and organizational measures to prevent access to the personal data by national authorities.

In July 2023, the European Commission adopted an adequacy decision for the E.U.-U.S.

Data Privacy Framework (DPF).

companies with the DPF certification can lawfully transfer personal data from the E.U.

without additional transfer mechanisms.

However, the validity of such mechanism is currently challenged by NYOB, an Austrian non-profit organization seeking to enforce digital rights (particularly privacy, and data protection rights) in the E.U.

In addition, E.U.

regulators have issued additional guidance regarding considerations and requirements that we and other companies must consider and undertake when using the Standard Contractual Clauses.

Uncertainty regarding the validity of the existing transfer mechanisms could restrict our activities in those jurisdictions, limit our ability to provide our products and services in those jurisdictions, require us to modify our policies and practices, and cause us to engage in additional contractual negotiations, or increase our costs and obligations and impose limitations upon our ability to efficiently transfer personal data from the E.U.

for conducting our business activities.

This position was mirrored in the U.K.

following the adoption of the U.K.

GDPR extension to the E.U.-U.S.

An essential element of the U.S.

legal framework on which the E.U.

adequacy decision and the U.K.

adequacy regulations are based is Executive Order 14086 (EO 14086) and accompanying regulations adopted by the U.S.

Attorney General.

These instruments were adopted to address the issues raised by the ECJ in the Schrems II judgment.

While we are not a participant in the DPF or U.K.

extension, the safeguards in EO 14086 apply to all data transfers under the GDPR or U.K.

GDPR, regardless of the transfer mechanism used.

However, the validity of the European Commission’s adequacy decision in relation to the E.U.-U.S.

DPF is currently being challenged in European courts.

If it is invalidated, this could impact our ability to transfer personal data between the E.U.

and U.S., restrict our activities in those jurisdictions, limit our ability to provide our products and services in those jurisdictions, require us to modify our policies and practices, and cause us to engage in additional contractual negotiations, or increase our costs and obligations.

Risks related to intellectual property and other legal matters

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Our competitors may seek to market generic versions of any approved products by submitting ANDAs to the FDA in which they claim that patents owned or licensed by us are invalid, unenforceable and/or not infringed.

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

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

In August 2023, the Federal Circuit denied our request for a rehearing.

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

In April 2024, the U.S.

Supreme Court denied our petition.

See Note 18, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report, which is incorporated herein by reference, for additional information.

Alternatively, our competitors may seek approval to market their own products similar to, or otherwise competitive with, our products.

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Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement or lack of statutory subject matter.

Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the U.S.

Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent

withheld relevant material information from the U.S.

Patent and Trademark Office (USPTO), or made a materially misleading statement, during prosecution.

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We have been and continue to be involved in a number of lawsuits with a variety of generic drug manufacturers who have filed ANDAs relating to certain of our patents.

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

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

In August 2023, the Federal Circuit denied our request for a rehearing.

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

In April 2024, the U.S.

Supreme Court denied our petition.

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

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

District Court for the Southern District of Florida against Apotex, in each case, asserting infringement of U.S.

In December 2022, the Delaware District Court ruled in favor of Teva and Apotex in our patent litigation relating to their filing of ANDAs for generic versions of HETLIOZ ® in the U.S, which was affirmed by the Federal Circuit in May 2023.