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Item 7. Management’s Discussion and Analysis

2026-02-12 compared with 2025-02-14 · 116 added, 147 removed, 235 unchanged (53% of the section changed)

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We are committed to the use of technologies that support sound science, including genetics and genomics, in drug discovery, clinical trials and the commercial positioning of our products.

Our commercial portfolio is currently comprised of three products:

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

Our commercial portfolio is currently comprised of four products:

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

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

In addition, we have a number of drugs and/or indications for current products in development, including:

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

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

In addition, we have a number of drugs and/or additional indications for current products in development, including:

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

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

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

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

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

• NEREUS TM (tradipitant) for the prevention of vomiting induced by GLP-1 receptor agonists, the treatment of gastroparesis and the treatment of atopic dermatitis;

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

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

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

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

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

• VQW-765, a small molecule alpha-7 nicotinic acetylcholine receptor partial agonist, for the treatment of social/performance anxiety and psychiatric disorders;

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

Operational Highlights

• Fanapt ® was approved in the second quarter of 2024 for the acute treatment of bipolar I disorder.

We initiated the commercial launch of Fanapt ® in this indication in the third quarter of 2024.

In the fourth quarter of 2024, as compared to the fourth quarter of 2023, new patient starts, as reflected by new to brand prescriptions (NBRx), increased by over 160% and Fanapt ® net product sales increased by 18%.

• We initiated a Phase III program for the long acting injectable (LAI) formulation of Fanapt ® in the fourth quarter of 2024.

• We plan to initiate a study of the Fanapt ® LAI as a once-a-month injectable for the treatment of hypertension to address both treatment resistance and treatment compliance.

• We submitted a Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) in the fourth quarter of 2024 for Fanapt ® for bipolar I disorder and schizophrenia.

• We expect to submit a New Drug Application (NDA) for Bysanti™ to the FDA for the treatments of acute bipolar I disorder and schizophrenia in the first quarter of 2025.

Exclusivity, including pending patent applications, could extend into the 2040s.

• We initiated a Phase III clinical study for Bysanti™ as a once-daily adjunctive treatment for MDD in the fourth quarter of 2024.

Results are expected in 2026.

• We have initiated clinical programs for HETLIOZ ® in pediatric insomnia and DSPD and these programs are ongoing.

• Our MAA for HETLIOZ ® and HETLIOZ LQ ® for SMS is pending with the EMA.

• We initiated the commercial launch of PONVORY ® for the treatment of relapsing forms of multiple sclerosis in the third quarter of 2024.

• Investigational New Drug (IND) applications for PONVORY ® in the treatments of psoriasis and ulcerative colitis were accepted by the FDA in the fourth quarter of 2024.

• The NDA for tradipitant for the treatment of motion sickness was submitted to the FDA in the fourth quarter of 2024.

• We initiated a clinical trial to study tradipitant in the prevention of vomiting induced by a GLP-1 analog, Wegovy (semaglutide), in the fourth quarter of 2024.

• We have accepted the opportunity for a hearing with the FDA on the approvability of the NDA for tradipitant for the treatment of symptoms of gastroparesis.

• In February 2025, we announced that we entered into an exclusive, global license agreement with AnaptysBio, Inc.

(Anaptys) for the development and commercialization of imsidolimab (IL-36R antagonist mAb).

We expect to initiate and complete the technology transfer activities in 2025 and immediately begin preparing the Biologics License Application (BLA) and MAA for GPP for the US and EU.

The imsidolimab BLA for GPP is expected to be submitted to the FDA in 2025.

Early-Stage Program Highlights

• VQW-765, an alpha-7 nicotinic acetylcholine receptor partial agonist, is currently in clinical development for the treatment of acute performance anxiety in social situations.

We expect to initiate a Phase III program in 2025.

• The IND application for VCA-894A in the treatment of CMT2S, an inherited peripheral neuropathy for which there is no available treatment, was accepted by the FDA in 2024.

Previously in 2023, VCA-894A was granted Orphan Drug Designation for the same indication.

The Phase I clinical study for VCA-894A expects to enroll the patient by mid-2025.

• In December 2024, we announced that the FDA has granted Orphan Drug Designation for VGT-1849A, a selective ASO-based JAK2 inhibitor for the treatment of polycythemia vera (PV), a form of a rare hematologic malignancy that is estimated to affect 1 in 2,000 Americans.

Key Operational Highlights – Commercial

• Fanapt ® experienced significant growth, with total prescriptions (TRx) increasing by 36% and Fanapt ® net product sales increasing by 25% in the fourth quarter of 2025 as compared to the fourth quarter of 2024.

Fanapt ® total prescriptions increased by 28% and Fanapt ® net product sales increased by 24% for the full year 2025 as compared to the full year 2024.

New to brand prescriptions (NBRx) increased by 108% in the fourth quarter of 2025 as compared to the fourth quarter of 2024 and increased by 149% for the full year 2025 as compared to the full year 2024.

• During 2025, our direct-to-consumer campaign, launched in the first quarter, continued to drive meaningful gains in brand awareness for us and our products, Fanapt ® and PONVORY ® .

We maintained strategic investments in our commercial infrastructure, including increased brand visibility through targeted sponsorships, with the goal of supporting long-term market leadership and future commercial launches.

Fanapt ® performance remains the focus of our commercial initiatives and encourages us to continue to invest in this differentiated medicine, and, if approved, the franchise-extending launch of Bysanti TM .

Key Operational Highlights – Regulatory & Clinical Development

• The FDA has approved NEREUS TM for the prevention of vomiting induced by motion.

• Bysanti TM New Drug Application (NDA) for bipolar I disorder and schizophrenia is under review by the FDA, with a Prescription Drug User Fee Act (PDUFA) target action date of February 21, 2026.

• A Bysanti TM Phase III clinical study for use as a once-daily adjunctive treatment for major depressive disorder (MDD) is enrolling patients and results are expected in 2026.

• We announced positive results of a clinical study of NEREUS TM in the prevention of vomiting induced by a GLP-1 analog, Wegovy ® (semaglutide).

A Phase III clinical program is anticipated to be initiated in the first half of 2026.

• Imsidolimab Biologics License Application (BLA) in generalized pustular psoriasis (GPP) was submitted to the FDA in the fourth quarter of 2025.

• A Phase III study of VQW-765 in the treatment of adults with social anxiety disorder has been initiated and study results are expected by the end of 2026.

• The Phase III study of the LAI formulation of iloperidone in the treatment of schizophrenia in relapse-prevention is enrolling patients.

• A clinical study of the LAI formulation of iloperidone in people with treatment-resistant hypertension is ongoing and we are enrolling patients.

• On January 8, 2026, we announced that we had received a decision letter from the FDA Center for Drug Evaluation and Research (CDER) concluding that the supplemental New Drug Application (sNDA) for HETLIOZ ® for the treatment of jet lag disorder cannot be approved in the current form.

This letter followed CDER’s re-review of the jet lag sNDA under our collaborative framework agreement with the FDA.

We have requested that the FDA Commissioner resume hearing proceedings.

Since we began operations, we have devoted substantially all of our resources to the in-licensing, clinical development and commercialization of our products.

Our ability to generate meaningful product sales and achieve profitability largely depends on our level of success in commercializing Fanapt ® and HETLIOZ ® in the U.S.

and Europe and PONVORY ® in the U.S and Canada, on our ability, alone or with others, to complete the development of our products and to obtain the regulatory approvals for and to manufacture, market and sell our products.

Our ability to generate meaningful product sales and achieve profitability largely depends on our level of success in commercializing Fanapt ® in the United States (U.S.), HETLIOZ ® in the U.S.

and Europe, PONVORY ® in the U.S.

and NEREUS TM in the U.S., on our ability, alone or with others, to complete the development of our products and to obtain the regulatory approvals for and manufacture, market and sell our products.

The results of our operations will vary significantly from year-to-year and quarter-to-quarter and depend on a number of factors, including risks related to our business, risks related to our industry, and other risks that are detailed in Part I, Item 1A, Risk Factors, of this Annual Report.

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The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported revenues and expenses during the reported periods.

We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources.

We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the

basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

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We recognize revenue when control of the product is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for those product sales, which is typically once the product physically arrives at the customer.

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

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

Fanapt ® is available in the U.S.

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Outside the U.S., we have a distribution agreement for the commercialization of Fanapt ® in Israel and sell HETLIOZ ® in Germany.

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

Receivables are carried at transaction price paid by the wholesalers, specialty pharmacies and specialty distributors, net of estimated prompt-pay discounts and allowance for credit losses.

Payment terms differ by customer, but are based on customary commercial terms and typically range between thirty and sixty days.

Allowance for credit losses is measured using historical loss rates based on the aging of receivables and incorporating current conditions and forward-looking estimates.

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If actual results in the future vary from our estimates, we adjust our estimate in the period identified, which would affect net product sales in the period such variances become known.

During the year ended December 31, 2024, we constrained the variable consideration for HETLIOZ ® net product sales.

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

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

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

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

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

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

Furthermore, inventory stocking of HETLIOZ ® at specialty pharmacy customers since the entrance of generic competition in early 2023 has resulted in longer periods to resolve these uncertainties related to variable consideration.

We currently record sales allowances for the following:

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We expect that these direct customers will earn prompt payment discounts and, therefore, we deduct the full amount of these discounts from total product sales when revenues are recognized.

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

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

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

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• Medicare Part D rebates:

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

We account for the Medicare Part D coverage gap using a point of sale model.

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

Prior to January 1, 2025, the Medicare Part D prescription drug benefit required manufacturers to fund approximately 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients for applicable drugs.

We accounted for the Medicare Part D coverage gap using a point of sale model.

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

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

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

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

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

The Medicare Part D benefit redesign has resulted in overall higher discounts for our Medicare payor segment relative to the previous Medicare Part D prescription drug coverage gap discount program.

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

Under the Medicare Part D benefit redesign, we are a specified manufacturer whose applicable drugs for applicable beneficiaries who are Low Income Subsidy eligible under section 1860D-14(a) of the Social Security Act are subject to lower applicable discounts during the phase-in period.

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

• Service fees:

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We generally offer direct customers a limited right to return, as contractually defined with our customers.

activity for product sold for which the return period has past, prescription trends and other relevant factors.

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

We do not expect returned products to be resalable.

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Balances at December 31, 2025 $ 63,356 $ 14,709 $ 78,065

The provision for rebates and chargebacks of $82.2 million and $85.9 million for the years ended December 31, 2024 and 2023, respectively, and their ending balances at December 31, 2024 and 2023, primarily represent Medicaid rebates.

The provision for discounts, returns and other of $33.4 million and $28.5 million for the years ended December 31, 2024 and 2023, primarily represents wholesaler distribution fees applicable to sales of Fanapt ® and estimated product returns of Fanapt ® , and co-pay assistance costs and prompt pay discounts applicable to the sales of all of our commercial products.

The ending balances of discounts, returns and other as of December 31, 2024 and 2023 primarily represent estimated product returns of Fanapt ® and wholesaler distribution fees applicable to sales of Fanapt ® .

The provision of $104.7 million and $82.2 million for rebates and chargebacks for the years ended December 31, 2025 and 2024, respectively, and their ending balances at December 31, 2025 and 2024, primarily represent Medicaid rebates.

The provision of $42.5 million and $33.4 million for discounts, returns and other for the years ended December 31, 2025 and 2024, and their ending balances at December 31, 2025 and 2024, primarily represent service fees, estimated product returns, co-pay assistance costs and prompt pay discounts.

Stock-based compensation.

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

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

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

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

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Our assessments include, but are not limited to:

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

(i) an evaluation by the project manager of the work that has been completed during the period, (ii) measurement of

progress prepared internally and/or provided by the third-party service provider, (iii) analyses of data that justify the progress, and (iv) management’s judgment.

In the event that we do not identify certain costs that have begun to be incurred or we under- or over-estimate the level of services performed or the costs of such services, our reported expenses for such period would be too low or too high.

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When we determine that the carrying value of our intangible assets may not be recoverable based upon the existence of one or more of the indicators of impairment, we measure any impairment based on the amount that carrying value exceeds fair value.

As a result of the unfavorable events and subsequent developments in the 2022 and 2023 related to the HETLIOZ ® patent litigation (see Note 18, Legal Matters , to the consolidated financial statements included in Part II, Item 8 of this Annual Report) we performed impairment reviews for our HETLIOZ ® asset group in those years and determined, based upon our review of undiscounted cash flows, that the carrying value of our HETLIOZ ® asset group, inclusive of the intangible asset, is recoverable.

Accordingly, we have not recorded an intangible asset impairment charge in any period.

The litigation and subsequent developments 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 ® .

Furthermore, the litigation and subsequent events do not relate to the HETLIOZ LQ ® oral suspension formulation.

Our expected cash flows continue to support our estimated useful economic life of the intangible asset through 2035.

Income taxes.

We assess the need for a valuation allowance against our deferred tax assets each quarter through the review of all available positive and negative evidence.

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

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

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

In 2024, we generated our first pretax loss since 2017, largely due to expenditures on the commercial launches of Fanapt ® in bipolar I disorder and PONVORY ® in RMS.

Projected taxable income includes significant assumptions related to revenue, which could be affected by the success of the commercial launches of Fanapt ® in bipolar I disorder and PONVORY ® in RMS and HETLIOZ ® generic competition, commercial and research and development activities, and our ability to obtain regulatory approval from the FDA for products or new indications in development, among other factors.

Projected pretax income includes significant assumptions related to revenue, which could be affected by the success of the commercial launches of Fanapt ® in bipolar I disorder, PONVORY ® in RMS and NEREUS TM in the prevention of vomiting induced by motion, which was approved on December 30, 2025, and HETLIOZ ® generic competition, as well as commercial and research and development activities, including spend on our commercial launches and late-stage clinical activities, and our ability to obtain regulatory approval from the FDA for products or new indications in development, among other factors.

In the fourth quarter of 2025, after considering all available positive and negative evidence, including but not limited to historical, current and future projected results and significant risks and uncertainties related to forecasts, we concluded that it is not more likely than not that substantially all of our deferred tax assets in the U.S.

are realizable in future periods and recorded a valuation allowance against all net deferred tax assets in the U.S., resulting in a non-cash income tax expense of $113.7 million for the year ended December 31, 2025.

If we have cumulative pretax income in future periods and if our projections indicate pretax income in future periods or if there are meaningful changes to our business operations, the conclusion about the appropriateness of the valuation allowance could change in a future period.

A future reduction of the valuation allowance, in whole or in part, would result in a non-cash income tax benefit during the period of reduction.

The potential timing and amount of any future valuation allowance release has yet to be determined and requires an analysis that is highly dependent upon historical and future projected earnings, among other factors.

Any such adjustment could have a material impact on our financial position and results of operations.

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

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

As of December 31, 2024, after considering all available positive and negative evidence, we concluded, consistent with prior periods, that it was more likely than not that substantially all of our deferred tax assets in the U.S.

are realizable in future periods.

We maintain a valuation allowance against certain state net deferred tax assets.

If our results are not in line with our projections or if our projections change, the conclusion about the appropriateness of the valuation allowance could change in a future period.

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

Any such adjustment could have a material impact on our results of operations.

Recent Accounting Pronouncements

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Results of Operations

acquired rights to PONVORY ® in the U.S.

and Canada in December 2023, the impact of the Medicare Part D benefit redesign effective January 1, 2025 under the Inflation Reduction Act of 2022, any possible payments made or received pursuant to license agreements, progress of our research and development efforts, the timing and outcome of clinical trials and related possible regulatory approvals and the status of existing and future potential litigation involving our products and intellectual property.

For HETLIOZ ® , the FDA has approved ANDAs for Teva and Apotex, both of which have since launched their generic versions of HETLIOZ ® at risk in the U.S.

In December 2022, the U.S.

District Court for the District of Delaware (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.

The Federal Circuit affirmed this ruling, and the U.S.

Supreme Court denied our petition for a writ of certiorari in April 2024.

The FDA has also approved the ANDA for MSN Pharmaceuticals, Inc.

and MSN Laboratories Private Limited (MSN).

The license agreement that we entered into when we settled our patent litigation with MSN (MSN/Impax License Agreement) grants MSN and Impax Laboratories LLC (Impax) a non-exclusive license to manufacture and commercialize MSN’s generic version of HETLIOZ ® in the U.S.

effective as of March 13, 2035, unless prior to that date we obtain pediatric exclusivity for HETLIOZ ® , in which case the license will be effective as of July 27, 2035, or earlier under certain limited circumstances.

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

In April 2024, we filed litigation against MSN, Impax, and Amneal alleging fraudulent inducement of the license agreement.

See Note 18, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report.

HETLIOZ ® could face even more competition from other generic companies in the U.S.

in the near term in light of the patent litigation rulings against us.

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

On September 18, 2024, the FDA declined to approve our NDA of tradipitant for the treatment of symptoms in gastroparesis, providing us with a Complete Response Letter (CRL).

We will continue to pursue the marketing authorization for tradipitant and will continue to support the expanded access program that is currently serving several dozen patients with gastroparesis.

We anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, including our and our partners’ ability to continue to successfully commercialize our products, including activities related to Fanapt ® for the acute treatment of manic or mixed episodes associated with bipolar I disorder in adults, PONVORY ® for the treatment of RMS and NEREUS TM for the prevention of vomiting induced by motion, which was approved in December 2025, the impact of regulatory changes to the pharmaceutical industry such as the Medicare Part D provisions of the Inflation Reduction Act of 2022, any possible payments made or received pursuant to license agreements, progress of our research and development efforts, the timing and outcome of clinical trials and related possible regulatory approvals and the status of existing and future potential litigation involving our products and intellectual property.

See Note 18, Legal Matters , to the consolidated financial statements included in Part IV of this Annual Report for information on material legal matters.

Year ended December 31, 2025 compared to year ended December 31, 2024

Total revenues increased by $17.3 million, or 9%, to $216.1 million for the year ended December 31, 2025 compared to $198.8 million for the year ended December 31, 2024.

The impact of the Medicare Part D benefit redesign under the Inflation Reduction Act of 2022, which begins January 1, 2025, is uncertain and will affect all of our products.

Revenues may decline in future periods, potentially significantly, as a result of the Medicare Part D program benefit redesign.

Revenue from net product sales were as follows:

Revenue from net product sales was as follows:

Year Ended December 31,

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Fanapt ® net product sales increased by $23.0 million, or 24%, to $117.3 million for the year ended December 31, 2025 compared to $94.3 million for the year ended December 31, 2024.

The increase to net product sales was attributable to an increase in price net of deductions and volume.

The increase to net product sales was primarily attributable to an increase in volume.

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

An amount of variable consideration related to Fanapt ® net product sales is subject to dispute, of which approximately $3.0 million was recognized for the three months ended December 31, 2025.

HETLIOZ ® net product sales decreased by $5.2 million, or 7%, to $71.4 million for the year ended December 31, 2025 compared to $76.7 million for the year ended December 31, 2024.

The decrease to net product sales was attributable to a decrease in volume, partially offset by an increase in price, net of deductions, including the impact of changes in constrained revenue.

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

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

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

Going forward, HETLIOZ ® net product sales may reflect lower unit sales as a result of reduction of the elevated inventory levels at specialty pharmacy customers or

may be variable depending upon when specialty pharmacy customers need to purchase again.

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

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

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

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

In December 2023, we completed the acquisition of the U.S.

and Canadian rights to PONVORY ® from Actelion Pharmaceuticals Ltd.

(Janssen), a Johnson & Johnson Company.

PONVORY ® net product sales were $27.8 million for the year ended December 31, 2024 and $1.6 million for the year ended December 31, 2023, which reflects sales during the post-acquisition period.

The decrease to net product sales was attributable to a decrease in volume and price, net of deductions.

Since the entrance of generic competition in the first quarter of 2023, inventory levels at our specialty pharmacy customers have been elevated relative to inventory levels prior to the entrance of generic competition.

The elevated levels of inventory have resulted in longer periods to resolve uncertainties related to variable consideration.

HETLIOZ ® net product sales have been and may continue to be variable depending on when specialty pharmacy customers purchase again.

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

PONVORY ® net product sales decreased by $0.4 million, or 2%, to $27.4 million for the year ended December 31, 2025 compared to $27.8 million for the year ended December 31, 2024.

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

During the fourth quarter of 2024, we recognized approximately $3.0 million of variable consideration that may be subject to dispute but that we believe is not probable of significant revenue reversal.

An amount of variable consideration related to PONVORY ® net product sales is subject to dispute, of which approximately $3.0 million was recognized for the three months ended December 31, 2024.

Cost of goods sold.

Cost of goods sold decreased by $3.5 million, or 24%, to $11.3 million for the year ended December 31, 2024 compared to $14.8 million for the year ended December 31, 2023.

Cost of goods sold increased by $1.7 million, or 15%, to $13.0 million for the year ended December 31, 2025 compared to $11.3 million for the year ended December 31, 2024.

Cost of goods sold includes third-party manufacturing costs of product sold, third-party royalty costs and distribution and other costs.

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decreased from 10% to 5% in December 2022 and ended in April 2024.

There were no-third party royalty costs on net sales of PONVORY ® .

Third-party royalty costs on HETLIOZ ® net product sales in Germany will end in October 2026 and third-party royalty costs on Fanapt ® net product sales in the U.S.

will end in November 2026.

There are no third-party royalty costs on net sales of PONVORY ® .

Third-party royalty costs on NEREUS TM net product sales in the U.S.

are tiered, up to the low double digits, and will begin once we initiate the commercial launch of NEREUS TM .

We evaluate the risk of excess inventory and product expiry by evaluating current and future product demand relative to product shelf life and build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance, patient usage, and generic competition.

Our inventory balance consisted of $2.1 million of Fanapt ® product, $7.8 million of HETLIOZ ® product and $0.3 million of PONVORY ® product as of December 31, 2025.

Our inventory balance consisted of $3.0 million of Fanapt ® product and $7.2 million of HETLIOZ ® product as of December 31, 2023.

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

Research and development expenses.

Research and development expenses decreased by $2.4 million, or 3%, to $74.4 million for the year ended December 31, 2024 compared to $76.8 million for the year ended December 31, 2023.

The decrease was primarily due to a decrease associated with our Fanapt ® , tradipitant and other development programs, which include expenses incurred on product discovery such as ASO, partially offset by an increase in expenses associated with our PONVORY ® and CFTR development programs.

Research and development expenses increased by $34.8 million, or 47%, to $109.3 million for the year ended December 31, 2025 compared to $74.4 million for the year ended December 31, 2024.

The increase was primarily due to an upfront payment to AnaptysBio, Inc.

for the exclusive, global license to develop, manufacture, and commercialize imsidolimab and drug supply as well as an increase in expenses for our Fanapt ® and Bysanti TM development programs, partially offset by a decrease in expenses for our NEREUS TM development program.

The following table summarizes the costs of our product development initiatives for the years ended December 31, 2025 and 2024.

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$ 17,352 $ 9,401

Milsaperidone

Tradipitant 23,608 32,781

CFTR 6,344 1,490

12,560 10,528

16,429 23,608

VTR-297 3,554 2,642

CFTR 9,290 6,344

VQW-765 3,565 743

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(1) We record direct costs, including personnel costs and related benefits, on a project-by-project basis.

Many of our research and development costs are not attributable to any individual project because we share resources across several

development projects.

Many of our research and development costs are not attributable to any individual project because we share resources across several development projects.

We record indirect costs that support a number of our research and development activities in the aggregate, including stock-based compensation.

We expect to incur significant research and development expenses as we continue to develop our products.

In addition, we expect to incur licensing costs in the future that could be substantial, as we continue our efforts to expand our product pipeline.

We expect to incur significant research and development expenses as we continue to develop our products and continue our efforts to expand our product pipeline.

Selling, general and administrative expenses.

Selling, general and administrative expenses increased by $91.5 million, or 63%, to $238.0 million for the year ended December 31, 2025 compared to $146.4 million for the year ended December 31, 2024.

The increase in selling, general and administrative expenses was primarily the result of an increase in spending on commercial activities related to our commercial launches of Fanapt ® in bipolar disorder and PONVORY ® in RMS, as well as legal and other corporate activities.

During 2024, we commenced a host of commercial activities as part of our commercial launches of Fanapt ® in bipolar disorder and PONVORY ® in RMS, including an expansion of our sales force and the development of prescriber awareness and comprehensive marketing programs.

Selling, general and administrative expenses may increase in future periods as a result of these ongoing commercial launches, which were initiated in the third quarter of 2024.

We initiated a direct-to-consumer campaign that started in the first quarter of 2025, elevating brand awareness of the company and the key products Fanapt ® and PONVORY ® .

Selling, general and administrative expenses may increase in future periods as a result of the ongoing commercial launches as well as the other future commercial launches.

Intangible asset amortization .

Intangible asset amortization was $7.0 million for the year ended December 31, 2025 compared to $7.3 million for the year ended December 31, 2024.

Amortization expense increased in 2024 due to amortization on the intangible asset from the rights to PONVORY ® in the U.S.

and Canada which were acquired in December 2023.

Intangible asset amortization will increase in 2026 due to the amortization of the NEREUS TM intangible asset, which was capitalized in December 2025.

Other income, net .

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Other income primarily consists of investment income on our marketable securities.

Provision for income taxes.

We recorded an income tax benefit of $4.0 million and provision for income taxes of $3.8 million for the years ended December 31, 2024 and 2023, respectively.

Our income tax expense or benefit is determined by applying the statutory tax rates in jurisdictions where we operate to each period’s income before income taxes.

Adjustments are made for permanent differences in taxability or deductibility of pretax items as well as for other items, such as tax credits that are generated from our research and development activities.

Provision (benefit) for income taxes.

We recorded an income tax provision of $81.8 million and a benefit for income taxes of $4.0 million for the years ended December 31, 2025 and 2024, respectively.

The income tax expense as of December 31, 2025 was primarily due to the recording of a valuation allowance against all of our deferred tax assets.

The income tax expense or benefit is determined by applying the statutory tax rates in jurisdictions where we operate to each period’s income before income taxes.

Adjustments are made for permanent differences in taxability or deductibility of pretax items as well as for

other items, such as tax credits that are generated from our research and development activities.

See Note 15, Income Taxes, to the consolidated financial statements in Part II, Item 8 of this Annual Report for additional information.

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Deposits held with these institutions may exceed the amount of insurance provided on such deposits, but we do not anticipate any losses with respect to such deposits.

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

Our non-cancellable purchase commitments for agreements longer than one year primarily relate to commitments for data services.

Our non-cancellable purchase commitments for agreements with a remaining non-cancellable term longer than one year from December 31, 2025 primarily relate to commitments for marketing activities and data services.

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

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Based on our current operating plans, which include costs and expenses in connection with our U.S.

commercial activities, continued clinical development of tradipitant and our other products, pursuit of regulatory approval of tradipitant, pursuit of further regulatory approvals for our currently approved products, and payments due upon achievement of milestones under our license agreements, we believe that our cash, cash equivalents and marketable securities and cash received from product sales will be sufficient for at least the next 12 months.

Our future cash requirements and the adequacy of our available funds will depend on many factors, primarily including our ability to generate revenue, the scope and costs of our commercial, manufacturing and process development activities, the magnitude of our discovery, preclinical and clinical development programs, and potential costs to acquire or license the rights to additional products.

commercial activities, including the commercial launch of NEREUS TM for the prevention of vomiting induced by motion, continued clinical development of NEREUS TM , Bysanti TM and our other products, pursuit of regulatory approval of Bysanti TM and imsidolimab, pursuit of further regulatory approvals for our currently approved products and payments due upon achievement of milestones under our license agreements, we believe that our cash, cash equivalents and marketable securities and cash received from product sales will be sufficient for at least the next 12 months.

Our future cash requirements and the adequacy of our available funds will depend on many factors, primarily including a regulatory approval of Bysanti TM and imsidolimab, our ability to generate revenue, the scope and costs of our commercial, manufacturing and process development activities, including the commercial launch of NEREUS TM , the magnitude of our discovery, preclinical and clinical development programs, and potential costs to acquire or license the rights to additional products.

We may need or desire to obtain additional capital to finance our operations through debt, equity or alternative financing arrangements.

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Operating activities:

Net income (loss)

$ (220,474) $ (18,900) $ (201,574)

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(1,991) (155) (1,836)

Tax obligations paid in connection with settlement of restricted stock units

(915) — (915)

Financing activities (2,906) (155) (2,751)

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Operating Activities.

Cash flows used in operating activities during the year ended December 31, 2024 were $15.8 million, a decrease of $28.6 million compared to cash provided by operating activities of $12.8 million during the year ended December 31, 2023.

The decrease reflects a decrease of $21.4 million in net income, a decrease of $1.3 million in non-cash charges primarily due to an increase in deferred income taxes, partially offset by higher intangible asset amortization due to the PONVORY ® acquisition, and a decrease of $5.8 million from the net change in operating assets and liabilities.

The decrease from net change in operating assets and liabilities includes an increase in accounts receivable, product revenue allowances, and prepaid expenses due to timing.

Cash flows used in operating activities during the year ended December 31, 2025 were $109.4 million, a decrease of $93.7 million compared to $15.8 million during the year ended December 31, 2024.

The decrease reflects an increase of $201.6 million in net loss, an increase of $93.0 million in non-cash charges primarily due to the recording of a valuation allowance against all of our deferred tax assets and an increase of $14.9 million from the net change in operating assets and liabilities.

Our net loss for the year ended December 31, 2025 includes expenses associated with the $15.0 million payment related to the exclusive, global license agreement with Anaptys Bio, Inc.

for the development and commercialization of imsidolimab.

The increase from net change in operating assets and liabilities due to timing for our accounts payable and accrued liabilities.

We generally pay approved invoices when due, with vendor terms typically ranging from 30 to 45 days.

Investing Activities.

Cash flows used in investing activities during the year ended December 31, 2024 were $17.4 million, a decrease in cash of $5.4 million compared to $12.1 million during the year ended December 31, 2023.

Cash flows provided by investing activities during the year ended December 31, 2025 were $94.9 million, an increase of $112.3 million compared to cash flows used in investing activities of $17.4 million during the year ended December 31, 2024.

The change in investing activities primarily reflects the net use of cash and cash equivalents and maturities of the investments in our portfolio of marketable securities.

The $4.2 million asset acquisition cash flow during year ended December 31, 2024 relates to the payment of the remaining consideration for the PONVORY ® acquisition that was accrued as of December 31, 2023.

The $10.0 million milestone payment owed to Eli Lilly and Company for the FDA’s approval of NEREUS TM for the prevention of vomiting induced by motion was accrued as of December 31, 2025.

Financing Activities.

Financing activities include principal payments for our finance lease liabilities and exercise of stock options.

Cash flows provided by financing activities during the year ended December 31, 2024 were $0.2 million.

There were no principal payments on finance leases during the year ended December 31, 2023 or exercises of stock options during the years ended December 31, 2024 and 2023.

Cash flows used in financing activities during the year ended December 31, 2025 were $2.9 million, a decrease of $2.8 million compared to $0.2 million during the year ended December 31, 2024.

Financing activities include principal payments for our finance lease liabilities and tax obligations paid in connection with settlement of restricted stock units.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

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We have not used derivative financial instruments for speculation or trading purposes.

We deposit our cash with financial institutions that we consider to be of high credit quality and purchase marketable securities that are generally investment grade, liquid, short-term fixed income securities and money-market instruments denominated in U.S.

denominated in U.S.

Our marketable securities consist of commercial paper, corporate notes and U.S.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis