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What changed in Harmony Biosciences Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Harmony Biosciences Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+432 added−550 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-22)

Top changes in Harmony Biosciences Holdings, Inc.'s 2024 10-K

432 paragraphs added · 550 removed · 315 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

99 edited+52 added−135 removed171 unchanged
Biggest changeOur recent efforts regarding pediatric exclusivity include the submission of the pediatric sNDA and the planned initiation of a Phase 3 study in PWS in the first quarter of 2024. ​ Expand Pitolisant Franchise Potentially up to 2040 and Beyond In July 2022, we entered into the 2022 LCA with Bioprojet whereby we obtained exclusive rights to manufacture, use and commercialize one or more new products based on pitolisant in the United States and Latin America, with the potential to add additional indications and formulations upon the agreement of both parties (see “Strategic Agreements” below).
Biggest changeIn July 2022, we entered into the 2022 LCA with Bioprojet whereby we obtained exclusive rights to manufacture, develop and commercialize one or more next generation pitolisant based products in the United States and Latin America. Two of the next generation formulations, pitolisant Gastro-Resistant (“pitolisant GR”) and pitolisant High-Dose (“pitolisant HD”) are currently in clinical development.
Competition Our industry is highly competitive and subject to rapid and significant change as research provides a deeper understanding of rare neurological disorders, including narcolepsy, and as new therapies are developed. We face potential competition from multiple sources, including large pharmaceutical, biotechnology and specialty pharmaceutical companies.
Our industry is highly competitive and subject to rapid and significant change as research provides a deeper understanding of rare neurological disorders, including narcolepsy, and as new therapies are developed. We face potential competition from multiple sources, including large pharmaceutical, biotechnology and specialty pharmaceutical companies.
We cannot guarantee that patents will be granted with respect to any patent applications we may file in the future, nor can we be sure that any patents that may be granted to us in the future will be commercially useful in protecting our products, the methods of use or manufacture of those products.
We cannot guarantee that patents will be granted with respect to any patent applications we may file in the future, nor can we be sure that any patents that may be granted to us in the future will be commercially useful in protecting our products, the methods of use, or the manufacture of those products.
Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.
Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending NDAs or sNDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.
In August 2021, we acquired HBS-102, a Melanin-concentrating hormone receptor 1 (MCHR1) antagonist previously developed as CSTI-100/ALB-127258(a)/ALB-127258 (the “Compound”), along with intellectual property and other assets related to the development, manufacture, and commercialization of the Compound from ConSynance Therapeutics, Inc.
In August 2021, we acquired HBS-102, a Melanin-concentrating hormone receptor type 1 (MCHR1) antagonist previously developed as CSTI-100/ALB-127258(a)/ALB-127258 (the “Compound”), along with intellectual property and other assets related to the development, manufacture, and commercialization of the Compound from ConSynance Therapeutics, Inc.
A second patent family comprises three issued U.S. patents (Nos. 8,716,308; 9,296,743; and 9,650,378), and issued patents in Australia, Brazil, Canada, China, Germany, Spain, France, the United Kingdom, Israel, Italy, Japan, Korea, Mexico, and New Zealand.
A second patent family comprises three issued U.S. patents (Nos. 8,716,308; 9,296,743; and 9,650,378), and issued patents in Australia, Brazil, Canada, China, Germany, Spain, France, United Kingdom, Israel, Italy, Japan, Korea, Mexico, and New Zealand.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined: ● Phase 1: The product candidate is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness. ● Phase 2: The product candidate is administered to a limited patient population with a specified disease or condition to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and appropriate dosage. ● Phase 3: The product candidate is administered to an expanded patient population to further evaluate dosage, to provide substantial evidence of efficacy and to further test for safety, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined: ● Phase 1: The product candidate is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness. ● Phase 2: The product candidate is administered to a limited patient population with a specified disease or condition to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and appropriate dosage. 16 Table of Contents ● Phase 3: The product candidate is administered to an expanded patient population to further evaluate dosage, to provide substantial evidence of efficacy and to further test for safety, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.
Our current supply chain for WAKIX involves several manufacturers that specialize in specific operations of the manufacturing process, specifically, intermediate and starting material manufacturing, drug substance manufacturing, and drug product manufacturing, labeling and secondary packaging, and distribution services: ● Interor S.A. manufactures our BF4 and BF6 intermediate and starting material used in the active pharmaceutical ingredient (“API”). ● Corden Pharma Chenôve SAS, a full-service contract development and manufacturing organization (“CDMO”) manufactures our API. ● Patheon UK Limited, a CDMO owned by Thermo Fisher Scientific Inc., manufactures our finished product tablets and fills them into unlabeled bottles. ● Pharma Packaging Solutions, LLC dba Tjoapack, LLC, handles our labeling and secondary packaging. ● Cardinal Health, Inc. is our third-party logistics provider. ● Inmar Rx Solutions, Inc., an advanced technology and data analytics company, specializes in reverse distribution of our product and manages our pharmaceutical returns and product recall, if needed.
Our current supply chain for WAKIX involves several manufacturers that specialize in specific operations of the manufacturing process, specifically, intermediate and starting material manufacturing, drug substance manufacturing, and drug product manufacturing, labeling and secondary packaging, and distribution services: ● Interor S.A. manufactures our BF4 and BF6 intermediate and starting material used in the active pharmaceutical ingredient (“API”). ● Corden Pharma Chenôve SAS, a full-service contract development and manufacturing organization (“CDMO”) manufactures our API. ● Patheon UK Limited, a CDMO owned by Thermo Fisher Scientific Inc., manufactures our finished product tablets and fills them into unlabeled bottles. ● Pharma Packaging Solutions, LLC dba Tjoapack, LLC, handles our labeling and secondary packaging. 11 Table of Contents ● Cardinal Health, Inc. is our third-party logistics provider. ● Inmar Rx Solutions, Inc., an advanced technology and data analytics company, specializes in reverse distribution of our product and manages our pharmaceutical returns and product recall, if needed.
We also have registered trademark protection in the United States for “KNOW NARCOLEPSY,” “REM AT THE WRONG TIME” and “NON-REM AT THE WRONG TIME,” as well as our brand and logo “HB,” “HB HARMONY BIOSCIENCES” and “HARMONY BIOSCIENCES.” 21 Table of Contents Government Regulation The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements upon companies involved in the clinical development, manufacture, marketing and distribution of drugs, such as those we are developing.
We also have registered trademark protection in the United States for “KNOW NARCOLEPSY,” “REM AT THE WRONG TIME” and “NON-REM AT THE WRONG TIME,” as well as our brand and logo “HB,” “HB HARMONY BIOSCIENCES” and “HARMONY BIOSCIENCES.” Government Regulation The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements upon companies involved in the clinical development, manufacture, marketing and distribution of drugs, such as those we are developing.
During the exclusivity period, the FDA may not approve or even accept for review an 26 Table of Contents abbreviated new drug application (“ANDA”) or an NDA submitted under Section 505(b)(2) (“505(b)(2) NDA”) submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval.
During the exclusivity period, the FDA may not approve or even accept for review an abbreviated new drug application (“ANDA”) or an NDA submitted under Section 505(b)(2) (“505(b)(2) NDA”) submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval.
WAKIX competes with currently FDA-approved products for the treatment of EDS or cataplexy in adult patients with narcolepsy, all of which are controlled substances. Jazz Pharmaceuticals’ Xyrem (sodium oxybate) is an FDA-approved product for the treatment of cataplexy or EDS in patients 7 years of age and older with narcolepsy.
WAKIX competes with currently FDA-approved products for the treatment of EDS or cataplexy in adult patients with narcolepsy and EDS in children six years and older with narcolepsy, all of which are controlled substances. Jazz Pharmaceuticals’ Xyrem (sodium oxybate) is an FDA-approved product for the treatment of cataplexy or EDS in patients 7 years of age and older with narcolepsy.
The patents have claims directed to certain human MCH-1 receptor-selective antagonists as compositions of matter, and are expected to expire in June 2031 (the ‘308 patent) and January 20 Table of Contents 2029 (the ‘743 and ‘378 patents, as well as the international patents).
The patents have claims directed to certain human MCH-1 receptor-selective 13 Table of Contents antagonists as compositions of matter, and are expected to expire in June 2031 (the ‘308 patent) and January 2029 (the ‘743 and ‘378 patents, as well as the international patents).
These laws include U.S. federal and state anti-kickback and false claims laws, civil monetary penalties laws, consumer protection and transparency laws as well as similar foreign laws in the jurisdictions outside the U.S., including, without limitation, those laws described below.
These laws include U.S. federal and state anti-kickback and false claims laws, civil monetary penalties laws, consumer protection and transparency laws as well as similar foreign laws in the jurisdictions outside the United States, including, without limitation, those laws described below.
We do not currently own or operate facilities for product manufacturing, storage and distribution, or testing, but we have contracted directly with third parties for each of these functions. 18 Table of Contents Manufacturing is subject to extensive regulation that imposes various procedural and documentation requirements that govern record keeping, manufacturing processes and controls, personnel, quality control and quality assurance, and more.
We do not currently own or operate facilities for product manufacturing, storage and distribution, or testing, but we have contracted directly with third parties for each of these functions. Manufacturing is subject to extensive regulation that imposes various procedural and documentation requirements that govern record keeping, manufacturing processes and controls, personnel, quality control and quality assurance, and more.
In addition, if an orphan designated product receives marketing approval for a disease or condition broader than what is designated, it may not be entitled to orphan exclusivity. DEA Regulation The Controlled Substances Act of 1970 (“CSA”) establishes registration, security, recordkeeping, reporting, storage, distribution and other requirements administered by the DEA.
In addition, if an orphan designated product receives marketing approval for a disease or condition broader than what is designated, it may not be entitled to orphan exclusivity. 20 Table of Contents DEA Regulation The Controlled Substances Act of 1970 (“CSA”) establishes registration, security, recordkeeping, reporting, storage, distribution and other requirements administered by the DEA.
The market is expected to continue to grow based on several factors, including, but 6 Table of Contents not limited to, the introduction of new innovative therapies that offer novel mechanisms of action resulting in improved safety/tolerability profiles while delivering clinically meaningful efficacy, additional investment in education, increased rates of diagnosis, and population growth.
The market is expected to continue to grow based on several factors, including, but not limited to, the introduction of new innovative therapies that offer novel mechanisms of action resulting in improved safety/tolerability profiles while delivering clinically meaningful efficacy, additional investment in education, increased rates of diagnosis, and population growth.
Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product.
Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product.
Pursuant to the 2017 LCA, we agreed to pay royalties on the net sales of the product at tiered royalty rates of 13% to 24% based on annual 19 Table of Contents total net sales during the period commencing on first commercial sale of the product and ending on the latest of 10 years from first commercial sale of the product, expiration of all regulatory exclusivity, or expiration of the last Bioprojet patent covering the product.
Pursuant to the 2017 LCA, we agreed to pay royalties on the net sales of the product at tiered royalty rates of 13% to 24% based on annual total net sales during the period commencing on first commercial sale of the product and ending on the latest of 10 years from first commercial sale of the product, expiration of all regulatory exclusivity, or expiration of the last Bioprojet patent covering the product.
The 2022 LCA also requires a fixed trademark royalty and a tiered royalty based on net sales upon commercialization, payable to Bioprojet on a quarterly basis for 10 years from the first commercial sale of each new product, the expiration of all regulatory exclusivity, or the expiration of the last Bioprojet patent covering the products.
The 2022 LCA also requires a fixed trademark royalty and a tiered royalty based on net sales upon 12 Table of Contents commercialization, payable to Bioprojet on a quarterly basis for 10 years from the first commercial sale of each new product, the expiration of all regulatory exclusivity, or the expiration of the last Bioprojet patent covering the products.
In addition, the FDA currently requires as a condition of accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. Fast-track designation, breakthrough therapy designation, priority review, and accelerated approval do not change the standards for approval but may expedite the development or approval process.
In addition, the FDA currently requires as a condition of accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. 18 Table of Contents Fast-track designation, breakthrough therapy designation, priority review, and accelerated approval do not change the standards for approval but may expedite the development or approval process.
Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed, among other things, to bring more transparency to product pricing, review the relationship between 31 Table of Contents pricing and manufacturer patient programs and reform government program reimbursement methodologies for pharmaceutical products in an attempt to control drug costs.
Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed, among other things, to bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for pharmaceutical products in an attempt to control drug costs.
Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.
Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in 19 Table of Contents varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.
The European Commission has adopted an adequacy decision in favor of the United Kingdom, enabling data transfers from EU member states to the United Kingdom without additional safeguards. However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission re-assesses and renews or extends that decision.
The European Commission has adopted an adequacy decision in favor of the United Kingdom, enabling data transfers from EU member states to the United 23 Table of Contents Kingdom without additional safeguards. However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission re-assesses and renews or extends that decision.
In the U.S., HIPAA imposes privacy, security and breach reporting obligations with respect to individually identifiable health information upon “covered entities” (health plans, health care clearinghouses and certain health care providers), and their respective business associates, individuals or entities that create, received, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity.
In the United States, HIPAA imposes privacy, security and breach reporting obligations with respect to individually identifiable health information upon “covered entities” (health plans, health care clearinghouses and certain health care providers), and their respective business associates, individuals or entities that create, received, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity.
Additionally, the ACA increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs; required collection of rebates for drugs paid by Medicaid managed care organizations; required manufacturers to participate in a coverage gap discount program, under which they must agree to offer point-of-sale discounts (increased to 70 percent pursuant to the Bipartisan Budget Act of 2018, effective as of January 1, 2019) off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified federal government programs, implemented a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected expanded the types of entities eligible for the 340B drug discount program; expanded eligibility criteria for Medicaid programs; created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and established a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Additionally, the ACA increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs; required collection of rebates for drugs paid by Medicaid managed care organizations; required manufacturers to participate in a coverage gap discount program, which was replaced by a new manufacturer discount program on January 1, 2025 (as discussed below), under which they were required to offer point-of-sale discounts (increased to 70 percent pursuant to the Bipartisan Budget Act of 2018, effective as of January 1, 2019) off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified federal government programs, implemented a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected expanded the types of entities eligible for the 340B drug discount program; expanded eligibility criteria for Medicaid programs; created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and established a Center for 24 Table of Contents Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
One third-party payor’s decision to cover a particular medical product or service does not ensure that other payors will also provide coverage for the medical product or service and the level of coverage and reimbursement can differ significantly from payor 30 Table of Contents to payor.
One third-party payor’s decision to cover a particular medical product or service does not ensure that other payors will also provide coverage for the medical product or service and the level of coverage and reimbursement can differ significantly from payor to payor.
The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. 24 Table of Contents FDA Expedited Development and Review Programs The FDA has a number of programs intended to expedite the development or review of a marketing application for an investigational drug.
The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. ​ FDA Expedited Development and Review Programs The FDA has a number of programs intended to expedite the development or review of a marketing application for an investigational drug.
We believe we aligned with the FDA on the proposed Phase 3 registrational study design for further investigation of pitolisant as a potential treatment to address the unmet medical need for children, adolescents and adults with PWS experiencing EDS, for which there is currently no approved treatment.
We have aligned with the FDA on the proposed Phase 3 study design to support further investigation of pitolisant as a potential treatment to address the unmet medical need for children, adolescents and adults with PWS experiencing EDS, for which there is currently no approved treatment.
Topline results from this clinical proof-of-concept trial were reported in November 2022 and showed a positive signal on improvement in the primary outcome related to EDS. An end-of-phase 2 meeting with the FDA was held in June 2023.
Topline results from this clinical proof-of-concept trial were reported in November 2022 and showed a positive signal on improvement in the primary outcome related to EDS. Based on the positive signals from our Phase 2 proof-of-concept signal detection clinical trial, an End-of-Phase 2 meeting with the FDA was held in June 2023.
The process required by the FDA before a drug may be marketed in the United States generally involves the following: ● completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s Good Laboratory Practice (“GLP”) regulations and other applicable regulations; ● submission to the FDA of an IND which must become effective before human clinical trials may begin; ● approval by an independent institutional review board (“IRB”) or ethics committee at each clinical site before each trial may be initiated; ● performance of adequate and well-controlled human clinical trials in accordance with Good Clinical Practice (“GCP”) regulations to evaluate the safety and efficacy of the proposed drug product for each indication; ● submission to the FDA of an NDA after completion of all pivotal trials; ● satisfactory completion of an FDA advisory committee review, if applicable; ● satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practice (“cGMP”) requirements and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; ● satisfactory completion of potential inspection of selected clinical investigation sites to assess compliance with GCPs; and ● FDA review and approval of the NDA to permit commercial marketing of the product for particular indications for use in the United States.
The process required by the FDA before a drug may be marketed in the United States generally involves the following: ● completion of certain preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s Good Laboratory Practice (“GLP”) regulations and other applicable regulations; ● submission to the FDA of an IND which must become effective before human clinical trials may begin; ● approval by an independent institutional review board (“IRB”) or ethics committee at each clinical site before each trial may be initiated; ● performance of adequate and well-controlled human clinical trials in accordance with Good Clinical Practice (“GCP”) regulations to evaluate the safety and efficacy of the proposed drug product for each indication; ● submission to the FDA of an NDA after completion of all pivotal trials; ● satisfactory completion of an FDA advisory committee review, if applicable; ● satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practice (“cGMP”) requirements and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; ● satisfactory completion of potential inspection of selected clinical investigation sites to assess compliance with GCPs; and ● FDA review and approval of the NDA to permit commercial marketing of the product for particular indications for use in the United States. 15 Table of Contents Preclinical Studies Once a product candidate is identified for development, it enters the preclinical testing stage.
One U.S. patent, No. 8,207,197, which has claims directed to a polymorph, i.e., a specific crystalline form, of pitolisant and, methods for preparing that polymorph of pitolisant, is expected to expire in March 2030 based on a granted request for patent term extension, but without taking into consideration any possible pediatric exclusivity.
Patent, No. 8,207,197, which has claims directed to the polymorph, i.e., a specific crystalline form, of pitolisant in WAKIX, and methods for preparing that polymorph of pitolisant, is expected to expire in March 2030 based on a granted request for patent term extension, and patent term adjustment, but without taking into consideration any possible pediatric exclusivity. A second U.S.
It is considered a mid-line condition, with physical symptoms including characteristic palate abnormalities, heart defects, immune dysfunction, and esophageal / GI issues, as well as debilitating neuropsychiatric and behavioral symptoms, including anxiety, social withdrawal, ADHD, cognitive impairment and autism spectrum disorder.
It is considered a mid-line condition, with physical 9 Table of Contents symptoms including characteristic palate abnormalities, heart defects, immune dysfunction, and esophageal / GI issues, as well as debilitating neuropsychiatric and behavioral symptoms, including anxiety, social withdrawal, ADHD, cognitive impairment and autism spectrum disorder.
A complete response letter usually describes the specific deficiencies in the NDA identified by the FDA and may require additional clinical data, such as an additional clinical trial or other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing.
A complete response letter usually describes the specific deficiencies in the 17 Table of Contents NDA identified by the FDA and may require additional clinical data, such as an additional clinical trial or other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing.
Germantown Pike Plymouth Meeting, Pennsylvania. In December 2020, we leased additional office space at this same location, which increased our footprint to approximately 35,781 square feet of office space. As of December 31, 2023, 85 of our employees are located at our corporate headquarters.
Facilities Our corporate headquarters are located at 630 W. Germantown Pike Plymouth Meeting, Pennsylvania. In December 2020, we leased additional office space at this same location, which increased our footprint to approximately 35,781 square feet of office space. As of December 31, 2024, 77 of our employees are located at our corporate headquarters.
The first patent family includes U.S. patent No. 8,637,501, which has claims to certain melanin-concentrating hormone (MCH-1) receptor antagonists as compositions of matter, as well as methods of making the antagonists, and methods of use for treating obesity, anxiety, and depression, and processes for preparing the compounds, which is expected to expire in April 2031 without taking into consideration any possible patent term extension.
Patent No. 8,637,501, which has claims to certain melanin-concentrating hormone (MCH-1) receptor antagonists as compositions of matter, as well as methods of making the antagonists, and methods of use for treating obesity, anxiety, and depression, which is expected to expire in April 2031 based on patent term adjustment and without taking into consideration any possible patent term extension.
The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold.
Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold.
Federal government price reporting laws require manufacturers to calculate and report complex pricing metrics to government programs. 28 Table of Contents The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Security requirements vary by controlled substance schedule, with the most stringent requirements applying to Schedule I and Schedule II substances. Required security measures include background checks on employees and physical control of inventory through measures such as cages, surveillance cameras and inventory reconciliations.
The DEA typically inspects a facility to review its security measures prior to issuing a registration. Security requirements vary by controlled substance schedule, with the most stringent requirements applying to Schedule I and Schedule II substances. Required security measures include background checks on employees and physical control of inventory through measures such as cages, surveillance cameras and inventory reconciliations.
Topline study results include: ● Approximately 83% of patients who completed the 8-week open-label treatment period with pitolisant were responders (as defined by a decrease on the ESS of ≥3 points) and experienced a robust clinical response, with an average ESS change from baseline of – 9.4 points. ● A positive trend favoring pitolisant was observed during the 4-week double-blind randomized withdrawal period, however no statistically significant difference was observed between pitolisant and placebo groups on ESS, the primary endpoint. ● Positive trends favoring pitolisant were also observed across additional prespecified endpoints including the IH Severity Scale, which approached statistical significance, as well as on the Sleep Inertia Questionnaire.
Topline study results include: ● Approximately 83% of patients who completed the 8-week open-label treatment period with pitolisant were responders (as defined by a decrease on the ESS of ≥3 points) and experienced a robust clinical response, with an average ESS change from baseline of – 9.4 points. ● A positive trend favoring pitolisant was observed during the 4-week double-blind randomized withdrawal period, however no statistically significant difference was observed between pitolisant and placebo groups on ESS, the primary endpoint. ● Positive trends favoring pitolisant were also observed across additional prespecified endpoints including the IH Severity Scale, which approached statistical significance, as well as on the Sleep Inertia Questionnaire. ● Approximately 88% of patients in the Double-Blind Randomized Withdrawal Phase continued into a long-term extension study, which is ongoing. 7 Table of Contents ● The safety and tolerability profile of pitolisant in adult patients with idiopathic hypersomnia was consistent with the established safety profile of pitolisant and no new safety signals were observed.
The term of individual patents in our portfolio depends upon the legal term of patents in the countries in which they are obtained. In the United States, the patent term is 20 years from the earliest date of filing a non-provisional patent application.
The term of individual patents in our portfolio depends upon the legal term of patents in the countries in which they are obtained. In the United States, and in other foreign jurisdictions where we have sought patent protection, the patent term is 20 years from the earliest date of filing a non-provisional patent application.
Individually identifiable health information is considered sensitive data that merits stronger safeguards. 29 Table of Contents In addition, certain state laws govern the privacy and security of health information in certain circumstances, some of which may be more stringent, broader in scope or offer greater individual rights with respect to PHI than HIPAA, many of which may differ from each other, thus, complicating compliance efforts.
In addition, certain state laws govern the privacy and security of health information in certain circumstances, some of which may be more stringent, broader in scope or offer greater individual rights with respect to PHI than HIPAA, many of which may differ from each other, thus, complicating compliance efforts.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards.
Our Solution WAKIX (pitolisant) represents a novel approach to narcolepsy treatment. We believe that WAKIX offers a meaningfully differentiated product profile over current treatment options for the following reasons: ● First-in-class molecule with a novel MOA . WAKIX is the only selective H 3 receptor antagonist/inverse agonist approved by the FDA.
We believe that WAKIX offers a meaningfully differentiated product profile over current treatment options for the following reasons: ● First-in-class molecule with a novel MOA . WAKIX is a first-in-class molecule with a novel mechanism of action (“MOA”) and is the only selective H 3 receptor antagonist/inverse agonist approved by the FDA.
Patients with 22q deletion syndrome are managed by multidisciplinary care providers, and there are currently no FDA approved treatments for this disorder. An open-label phase 2 proof-of-concept study showed positive signals for ZYN002 in the treatment of behavioral symptoms associated with 22q.
Patients with 22q deletion syndrome are managed by multidisciplinary care providers, and there are currently no FDA approved treatments for this disorder. An open-label phase 2 proof-of-concept study conducted by Zynerba showed positive signals for ZYN-002 in the treatment of behavioral symptoms associated with 22q. We plan to initiate a Phase 3 registrational study in 22q deletion syndrome in 2025.
Customers and Suppliers For the year ended December 31, 2023, three customers accounted for 100% of gross product revenue; Caremark LLC accounted for 37% of gross product revenue; PANTHERx Specialty Pharmacy LLC accounted for 31% of gross product revenue; and Accredo Health Group, Inc. accounted for 32% of gross product revenue.
Customers For the year ended December 31, 2024, three customers accounted for 100% of gross product revenue; Caremark LLC accounted for 39% of gross product revenue; Accredo Health Group, Inc. accounted for 34% of gross product revenue; and PANTHERx Specialty Pharmacy LLC accounted for 27% of gross product revenue.
Post-approval trials, sometimes referred to as Phase 4 studies, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication.
Post-approval trials, sometimes referred to as Phase 4 studies, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of such Phase 4 clinical trials as a condition of approval of an NDA.
We believe that these novel characteristics differentiate it from other narcolepsy treatments. 7 Table of Contents ● First-and-only non-scheduled treatment for narcolepsy . WAKIX is the first-and-only FDA-approved treatment for narcolepsy that is not scheduled as a controlled substance by the DEA. We believe one of the most significant unmet needs is the availability of non-scheduled treatment options.
WAKIX is the first-and-only FDA-approved treatment for narcolepsy that is not scheduled as a controlled substance by the DEA. We believe one of the most significant unmet needs is the availability of non-scheduled treatment options. ​ ● WAKIX is not a stimulant.
We believe the ability of WAKIX to be taken as monotherapy or concomitantly with other narcolepsy medications affords HCPs the flexibility to better manage their patients with narcolepsy. ● WAKIX is a once-daily oral tablet administered in the morning upon wakening . Patients have identified a need for treatment options that are easier to take and are dosed less frequently.
We believe the ability of WAKIX to be taken as monotherapy or concomitantly with other narcolepsy medications affords HCPs the flexibility to better manage their patients with narcolepsy. ​ ● WAKIX is a once-daily oral tablet administered in the morning upon wakening .
The federal civil and criminal false claims laws, including the civil False Claims Act, prohibit, among other things, any individual or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
A person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. 21 Table of Contents The federal civil and criminal false claims laws, including the civil False Claims Act, prohibit, among other things, any individual or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA. 23 Table of Contents Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMPs.
Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMPs.
Our WAKIX patent portfolio is comprised of three U.S. patents exclusively licensed to us from Bioprojet under the 2017 LCA.
Our WAKIX patent portfolio comprises of four U.S. patents and a U.S. patent application exclusively licensed to us from Bioprojet under the 2017 LCA. One U.S.
To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, implementation of corporate compliance programs, and reporting of payments or transfers of value to healthcare professionals.
To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, implementation of corporate compliance programs, and reporting of payments or transfers of value to healthcare professionals. 22 Table of Contents Data Privacy and Security Laws Pharmaceutical companies may be subject to U.S. federal and state health information privacy, security and data breach notification laws, which may govern the collection, use, disclosure and protection of health-related and other personal information.
We consider our relationship with our employees to be good. We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees.
None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good. We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees.
The hypothalamus controls both sleep-wake states and hunger-satiety; therefore, two of the main symptoms in patients with PWS are EDS and hyperphagia. Other features include low muscle tone, short stature, behavioral problems and cognitive impairment.
The hypothalamus controls both sleep-wake states and hunger-satiety; therefore, two of the main symptoms in patients with PWS are hyperphagia and EDS.
Our product, WAKIX (pitolisant), is a first-in-class molecule with a novel mechanism of action (“MOA”) specifically designed to increase histamine signaling in the brain by binding to H 3 receptors. In August 2019, WAKIX was approved by the U.S.
Our lead product, WAKIX® (pitolisant) (“WAKIX”), is a first-in-class therapy with a novel mechanism of action designed to enhance histamine signaling in the brain by binding to H 3 receptors.
Food and Drug Administration (the “FDA”) for the treatment of excessive daytime sleepiness (“EDS”) in adult patients with narcolepsy, and its U.S. commercial launch was initiated in November 2019. In October 2020, WAKIX was approved by the FDA for the treatment of cataplexy in adult patients with narcolepsy.
In August 2019, WAKIX was approved by the FDA for the treatment of EDS in adult patients with narcolepsy, and its U.S. commercial launch was initiated in November 2019. In October 2020, WAKIX was approved by the FDA for the treatment of cataplexy in adult patients with narcolepsy. WAKIX represents a novel approach to narcolepsy treatment.
In addition, we support philanthropic organizations, patient-focused associations, local and national charitable organizations, and areas of need across the country by providing monetary donations or supplying 32 Table of Contents food, medical supplies and other resources.
In addition, we support philanthropic organizations, patient-focused associations, local and national charitable organizations, and areas of need across the country by providing monetary donations or supplying food, medical supplies and other resources. We collaborate with patient advocacy organizations to understand the needs of patients living with rare, neurological disorders, and are committed to addressing those needs.
We acquired full development and commercialization rights for HBS-102 globally, but we have provided an indication-limited grant-back license to ConSynance for the development and commercialization of the Compound in Greater China.
We acquired full development and commercialization rights for HBS-102 globally, but we have provided an indication-limited grant-back license to ConSynance for the development and commercialization of the Compound in Greater China. We conducted a preclinical PoC study to assess the effect of HBS-102 on hyperphagia, weight gain and other metabolic parameters in a mouse model of PWS.
In December 2020, we initiated a Phase 2 proof-of-concept signal detection clinical trial to evaluate pitolisant for the treatment of EDS and other key symptoms in patients with PWS, including behavioral symptoms and cognitive impairment.
It is estimated that approximately 15,000 to 20,000 people in the United States suffer from PWS, and over half of the patients living with PWS experience EDS. ​ In December 2020, we initiated a Phase 2 proof-of-concept clinical trial to evaluate pitolisant for the treatment of EDS and other key symptoms in patients with PWS, including behavioral symptoms and cognitive impairment.
Consistent with this objective, in July 2022, we entered into a License and Commercialization Agreement (the “2022 LCA”) with Bioprojet whereby we obtained exclusive rights to manufacture, use and commercialize one or more new products based on pitolisant in the United States and Latin America, with the potential to add additional indications and formulations upon the agreement of both parties.
Next Gen Pitolisant Formulations: Pitolisant Gastro-Resistant and Pitolisant High-Dose In July 2022, we entered into the 2022 LCA with Bioprojet whereby we obtained exclusive rights to manufacture, develop and commercialize one or more new products based on pitolisant in the United States and Latin America, with the 8 Table of Contents potential to add additional indications and formulations upon the agreement of both parties (see “Strategic Agreements” below).
Trial conducted by Bioprojet; received EMA approval on March 15, 2023. ​ Develop Pitolisant in New Patient Populations in Pursuit of Additional Indications We believe that pitolisant’s ability to regulate histamine and histaminergic signaling gives it the potential to provide therapeutic benefit in other disorders that are mediated through the H 3 receptor and histamine signaling and offers a portfolio in a product opportunity with pitolisant.
We believe that pitolisant’s ability to regulate histamine and histaminergic signaling gives it the potential to provide therapeutic benefit in other disorders that are mediated through the H 3 receptor and histamine signaling and offers a portfolio in a product opportunity.
An IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the trial includes an efficacy 22 Table of Contents evaluation. Some preclinical testing may continue even after the IND is submitted.
An IND is a request for authorization from the FDA to administer an investigational drug product to humans. An IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the trial includes an efficacy evaluation.
There also are continuing, annual program user fee requirements for any marketed products, as well as new application fees for supplemental applications with clinical data. 25 Table of Contents Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and these certain state agencies for compliance with cGMPs and other laws and regulations.
Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and these certain state agencies for compliance with cGMPs and other laws and regulations.
The registration is specific to the particular location, activity and controlled substance schedule. For example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules of controlled substances are authorized. The DEA typically inspects a facility to review its security measures prior to issuing a registration.
Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlled substance. The registration is specific to the particular location, activity and controlled substance schedule. For example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules of controlled substances are authorized.
The 2022 LCA will expand our opportunity in narcolepsy, and potentially other indications mutually agreed upon by the parties. We have made progress in the development of two formulations, NG1 and NG2.
The 2022 LCA will expand our opportunity in narcolepsy, and potentially other indications mutually agreed upon by the parties. Pursuant to the 2022 LCA with Bioprojet, we have made progress in the development of two new formulations of pitolisant, pitolisant GR and pitolisant HD. Both formulations entered into clinical studies in the fourth quarter of 2023.
Pursuant to our Right of Use Agreement with Paragon, we also utilize office space at 330 N. Wabash Ave, Suite 3500, Chicago, Illinois 60611, where 8 of our employees are located.
Pursuant to our Right of Use Agreement with Paragon, we also utilize office space at 330 N.
The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. Changes in either the patent laws or their interpretation in the United States may diminish our ability to protect our technology or product candidates and could affect the value of such intellectual property.
Changes in either the patent laws or their interpretation in the United States, or in other foreign jurisdictions where we have sought patent protection, may diminish our ability to protect our technology or product candidates and could affect the value of such intellectual property.
A second U.S. patent, No. 8,486,947, has claims directed to methods of treating excessive daytime sleepiness by administering pitolisant, which is expected to expire in September 2029 without taking into consideration any possible patent term extension. Our HBS-102 patent portfolio comprises three patent families.
Patent, No. 8,486,947, has claims directed to methods of treating excessive daytime sleepiness by administering pitolisant, which is expected to expire in September 2029 based on patent term adjustment. U.S. Patent No. 12,145,916 has composition claims directed to a second polymorph of pitolisant, and is expected to expire in March 2044, not including any possible extension of patent term.
Conversely, WAKIX is priced higher than other competitors such as Provigil (modafinil), Nuvigil, Sunosi (armodafinil) and certain generic competitors, such as methylphenidate and amphetamine, which may contribute to third-party payor preferences for those lower-priced treatment options relative to WAKIX. Manufacturing, Supply and Distribution We sell WAKIX to, a limited number of specialty distributors, that, in turn, distribute WAKIX to patients.
Conversely, WAKIX is priced higher than other competitors such as Provigil (modafinil), Nuvigil, Sunosi (armodafinil) and certain generic competitors, such as methylphenidate and amphetamine, which may contribute to third-party payor preferences for those lower-priced treatment options relative to WAKIX. PWS and DM1. There are currently no FDA approved therapies for PWS.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressures. Facilities Our corporate headquarters are located at 630 W.
For that and other reasons, it is currently unclear how the IRA will be effectuated, or the impact of the IRA on our business. ​ We expect that additional state and federal healthcare reform measures, particularly in light of the new presidential administration, will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressures.
In April 2022, we initiated a Phase 3 registrational trial, the INTUNE Study, to evaluate the efficacy and safety of pitolisant in adult patients with IH. We completed enrollment in the INTUNE study in May 2023 and we announced topline data in October 2023.
Pitolisant received orphan drug designation by the FDA for the treatment of IH in September 2023 and Fast Track designation for the treatment of IH in November 2023. In April 2022, we initiated a Phase 3 registrational trial, the INTUNE Study, to evaluate the efficacy and safety of pitolisant in adult patients with IH.
An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, among other things, to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer an investigational drug product to humans.
Preclinical tests include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, among other things, to the FDA as part of an IND.
The underlying cause of DM1 is a mutation in the DMPK gene on chromosome 19. DM1 is the most common form of adult-onset muscular dystrophy and affects as many as 160,000 patients in the United States.
Myotonic Dystrophy Type 1 DM1, otherwise known as dystrophia myotonica, is the most common form of adult-onset muscular dystrophy and affects as many as 160,000 patients in the United States.
FXS is a rare genetic disorder that is the leading known cause of both inherited intellectual disability and autism spectrum disorder, affecting 1 in 3,600 to 4,000 males and 1 in 4,000 to 6,000 females.
We are currently seeking the following indications for our product candidate, ZYN-002, a pharmaceutically manufactured 100% synthetic, patent protected permeation enhanced cannabidiol gel: Fragile X Syndrome FXS is a rare genetic disorder that is the leading known cause of both inherited intellectual disability and autism spectrum disorder, affecting 1 in 3,600 to 4,000 males and 1 in 4,000 to 6,000 females.
After approval, most changes to the approved product, such as adding new indications, certain manufacturing changes and additional labeling claims are subject to further FDA review and approval.
After approval, most changes to the approved product, such as adding new indications, certain manufacturing changes and additional labeling claims are subject to further FDA review and approval. There also are continuing, annual program user fee requirements for any marketed products, as well as new application fees for supplemental applications with clinical data.
Where applicable, the agreements provide that all inventions to which the individual contributed as an inventor shall be assigned to us, and as such, will become our property. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information.
Where applicable, the agreements provide that all inventions to which the individual contributed as an inventor shall be assigned to us, and as such, will become our property.
Bioprojet also granted us an exclusive license to use certain trademarks and trade names in connection with the commercialization of the product under the Bioprojet License Agreement. Under the 2017 LCA, we cannot, directly or indirectly, develop, market, sell, promote or file an NDA with respect to any product that would compete with pitolisant in the field.
Bioprojet also granted us an exclusive license to use certain trademarks and trade names in connection with the commercialization of the product under the Bioprojet License Agreement.
The IRA permits the Secretary of the Department of Health and Human Services, or HHS, to implement many of these provisions through guidance, as opposed to regulation, for the initial years.
While the IRA includes an exemption for orphan drugs with a single approved indication, rare disease therapies with multiple indications may become subject to Medicare price negotiations. The IRA permits the Secretary of the Department of Health and Human Services, or HHS, to implement many of these provisions through guidance, as opposed to regulation, for the initial years.
Other potential future competitive products are currently in development, including Axsome Therapeutics’ AXS-12 (reboxetine) product candidate, Suven Life Sciences’ SUVN-G3031 H3 inverse agonist product candidate, NLS Pharmaceutics mazindol ER product candidate and orexin 2 receptor agonist product candidates from Takeda, Jazz Pharmaceuticals/Sumitomo Pharma and Alkermes among others.
Other potential future competitive products are currently in development, including Axsome Therapeutics’ AXS-12 (reboxetine) product candidate, Suven Life Sciences’ SUVN-G3031 H3 inverse agonist product candidate, NLS Pharmaceutics mazindol ER product candidate and orexin 2 receptor agonist product candidates from Takeda, Jazz Pharmaceuticals/Sumitomo Pharma, Centessa and Alkermes among others. 10 Table of Contents We believe WAKIX offers a meaningfully differentiated product profile that is competitive with each of the products listed above, some of which are only approved for EDS while others (Xyrem, Xywav, Lumryz and generic sodium oxybate) are approved for the treatment of both EDS and cataplexy in patients with narcolepsy.
It received Breakthrough Therapy designation for the treatment of cataplexy in patients with narcolepsy and Fast Track status for the treatment of EDS and cataplexy in patients with narcolepsy in April 2018. Our operations are conducted by our wholly owned subsidiaries, Harmony Biosciences, LLC, which was formed in May 2017 and Zynerba.
It received Breakthrough Therapy designation for the treatment of cataplexy in patients with narcolepsy and Fast Track designation for the treatment of EDS and cataplexy in patients with narcolepsy in April 2018.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.
Biggest changePublications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. 61 Table of Contents Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions.
From time to time, we may publicly disclose interim, “topline” or preliminary data from our clinical trials, which is based on a preliminary analysis of then-available topline data, and the results and related findings and conclusions are subject to change following completion of the study or a full analyses of all data related to the particular trial.
From time to time, we may publicly disclose interim, “topline” or preliminary data from our clinical trials, which is based on a preliminary analysis of then-available topline data, and the results and related findings and conclusions are subject to change following completion of the study or full analyses of all data related to the particular trial.
Orphan drug exclusivity in the United States may be unavailable where the indication for which the product candidate is approved is broader than the orphan-designated indication or is otherwise different from the orphan-designated disease or condition. Even if we obtain orphan drug exclusivity for a drug candidate, that exclusivity may not effectively protect the candidate from competition.
Orphan drug exclusivity in the United States may be unavailable where the indication for which the product candidate is approved is broader than the orphan-designated indication or is otherwise different from the orphan-designated disease or condition. Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the candidate from competition.
The patents that we in-license now or the patents and patent applications that we own or in-license in the future may not have patentable claims that protect our current and future product candidates in the relevant jurisdictions where we intend to commercialize such products.
The patents and patent applications that we in-license now or the patents and patent applications that we own or in-license in the future may not have patentable claims that protect our current and future product candidates in the relevant jurisdictions where we intend to commercialize such products.
Our commercial success will largely depend on our licensor’s ability to obtain and maintain patent and other intellectual property in the United States for pitolisant, and our target indications, and our ability to maintain obtain and maintain patent and other intellectual property in the United States for any product candidates.
Our commercial success will largely depend on our licensor’s ability to obtain and maintain patent and other intellectual property in the United States for pitolisant, and our target indications, and our ability to obtain and maintain patent and other intellectual property in the United States for any product candidates.
Relationships we enter into may pose a number of risks, including the following: ● current or future third parties have, and future third-party collaborators may have, significant discretion in determining the efforts and resources that they will apply; ● third parties may not perform their obligations as expected; ● third parties may not pursue development and commercialization of any product candidates that we decide to develop as drugs and that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical study or trial results, changes in the third parties’ strategic focus or available funding, or external factors, such as a strategic transaction that may divert resources or create competing priorities; ● third parties may delay preclinical studies or clinical trials, provide insufficient funding for a preclinical study or clinical trial, stop a preclinical study or clinical trial or abandon one of our product candidates, repeat or conduct clinical studies or new clinical trials or require a new formulation of a product candidate for clinical testing; ● third parties could independently develop, or develop with other third parties, products that compete directly or indirectly with our products and product candidates if the third parties believe that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; ● product candidates discovered in collaboration with us may be viewed by our current or future collaborators as competitive with their own product candidates or products, which may cause such third parties to cease to devote resources to the commercialization of our product candidates; ● third parties may fail to comply with applicable regulatory requirements regarding the development, manufacture, packaging, labeling, holding, distribution and/or marketing of a product candidate or product; ● third parties with marketing and distribution rights to pitolisant or any future product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products; ● disagreements with third parties, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or terminations of the research, development or commercialization of pitolisant or any future product candidates, might lead to additional responsibilities for us with respect to pitolisant or any future product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; ● third parties may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; ● third parties may infringe the intellectual property rights of other third parties, which may expose us to litigation and potential liability; 37 Table of Contents ● if one of our third parties is involved in a business combination, the collaborator might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us; and ● relationships may be terminated by the collaborator, and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.
Relationships we enter into may pose a number of risks, including the following: ● current or future third parties have, and future third-party collaborators may have, significant discretion in determining the efforts and resources that they will apply; ● third parties may not perform their obligations as expected; ● third parties may not pursue development and commercialization of any product candidates that we decide to develop as drugs and that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical study or trial results, changes in the third parties’ strategic focus or available funding, or external factors, such as a strategic transaction that may divert resources or create competing priorities; ● third parties may delay preclinical studies or clinical trials, provide insufficient funding for a preclinical study or clinical trial, stop a preclinical study or clinical trial or abandon one of our product candidates, repeat or conduct clinical studies or new clinical trials or require a new formulation of a product candidate for clinical testing; ● third parties could independently develop, or develop with other third parties, products that compete directly or indirectly with our products and product candidates if the third parties believe that the competitive products are 30 Table of Contents more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; ● product candidates discovered in collaboration with us may be viewed by our current or future collaborators as competitive with their own product candidates or products, which may cause such third parties to cease to devote resources to the commercialization of our product candidates; ● third parties may fail to comply with applicable regulatory requirements regarding the development, manufacture, packaging, labeling, holding, distribution and/or marketing of a product candidate or product; ● third parties with marketing and distribution rights to pitolisant or any future product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products; ● disagreements with third parties, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or terminations of the research, development or commercialization of pitolisant or any future product candidates, might lead to additional responsibilities for us with respect to pitolisant or any future product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; ● third parties may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; ● third parties may infringe the intellectual property rights of other third parties, which may expose us to litigation and potential liability; ● if one of our third parties is involved in a business combination, the collaborator might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us; and ● relationships may be terminated by the collaborator, and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.
Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the healthcare fraud statute implemented under HIPAA or specific intent to violate it in order to have committed a violation; ● the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices; ● federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; ● federal price reporting laws, which require manufacturers to calculate and report complex pricing metrics to government programs, where such reported prices may be used in the calculation of reimbursement and/or discounts on approved products; ● state law equivalents of each of the above federal laws, such as state anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and may be broader in scope than their federal equivalents; ● federal transparency requirements detailing interactions with and payments to healthcare providers, such as the federal reporting requirements under the Physician Payments Sunshine Act, which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the HHS 59 Table of Contents information related to payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other health care professionals (physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants, and certified nurse midwives), and teaching hospitals and physician ownership and investment interests, including such ownership and investment interests held by a physician’s immediate family members.
Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the healthcare fraud statute implemented under HIPAA or specific intent to violate it in order to have committed a violation; ● the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices; ● federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; ● federal price reporting laws, which require manufacturers to calculate and report complex pricing metrics to government programs, where such reported prices may be used in the calculation of reimbursement and/or discounts on approved products; ● state law equivalents of each of the above federal laws, such as state anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and may be broader in scope than their federal equivalents; ● federal transparency requirements detailing interactions with and payments to healthcare providers, such as the federal reporting requirements under the Physician Payments Sunshine Act, which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the HHS 52 Table of Contents information related to payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other health care professionals (physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants, and certified nurse midwives), and teaching hospitals and physician ownership and investment interests, including such ownership and investment interests held by a physician’s immediate family members.
Among the provisions of the ACA of importance to the pharmaceutical industry and our potential product candidates are the following: ● an annual, non-deductible fee payable by any entity that manufactures or imports specified branded prescription drugs and biologic agents (other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certain government healthcare programs; ● an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program for branded and generic drugs; ● a methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; ● the Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries under their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; 63 Table of Contents ● extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; ● expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability; ● expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; ● establishment of a Center for Medicare and Medicaid Innovation at the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending; and ● a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
Among the provisions of the ACA of importance to the pharmaceutical industry and our potential product candidates are the following: ● an annual, non-deductible fee payable by any entity that manufactures or imports specified branded prescription drugs and biologic agents (other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certain government healthcare programs; ● an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program for branded and generic drugs; ● a methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; ● the Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries under their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; 56 Table of Contents ● extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; ● expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability; ● expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; ● establishment of a Center for Medicare and Medicaid Innovation at the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending; and ● a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
Doing business internationally involves a number of risks, including but not limited to: ● multiple, conflicting and changing laws and regulations, such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; ● failure by us to obtain and maintain regulatory approvals for the use of our products in various countries; ● additional potentially relevant third-party patent rights; ● complexities and difficulties in obtaining protection and enforcing our intellectual property; ● difficulties in staffing and managing foreign operations; ● complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems; 44 Table of Contents ● limits in our ability to penetrate international markets; ● global macroeconomic conditions, including an increase in inflation rates or interest rates, labor shortages, supply chain shortages, disruptions and instability in the banking industry and other parts of the financial services sector, or other economic, political, or legal uncertainties or adverse developments; ● financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and exposure to foreign currency exchange rate fluctuations; ● terrorism and/or political instability, unrest and wars, such as the conflicts involving Ukraine and Russia or Israel and its surrounding regions, which could delay or disrupt our business, and if such political unrest escalates or spills over to or otherwise impacts additional regions it could heighten many of the other risk factors included in this Item 1A; ● natural disasters (including as a result of climate change), which could cause significant damage to the infrastructure upon which our business operations rely, and the timing, nature or severity of which we may be unable to prepare for; ● economic instability, outbreak of disease or epidemics such as the COVID-19 pandemic, boycotts, curtailment of trade and other business restrictions; ● certain expenses including, among others, expenses for travel, translation and insurance; and ● regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S.
Doing business internationally involves a number of risks, including but not limited to: ● multiple, conflicting and changing laws and regulations, such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; ● failure by us to obtain and maintain regulatory approvals for the use of our products in various countries; ● additional potentially relevant third-party patent rights; ● complexities and difficulties in obtaining protection and enforcing our intellectual property; ● difficulties in staffing and managing foreign operations; ● complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems; ● limits in our ability to penetrate international markets; ● global macroeconomic conditions, including an increase in inflation rates or interest rates, labor shortages, supply chain shortages, disruptions and instability in the banking industry and other parts of the financial services sector, or other economic, political, or legal uncertainties or adverse developments; ● financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and exposure to foreign currency exchange rate fluctuations; ● terrorism and/or political instability, unrest and wars, such as the conflicts involving Ukraine and Russia or Israel and its surrounding regions, which could delay or disrupt our business, and if such political unrest escalates or spills over to or otherwise impacts additional regions it could heighten many of the other risk factors included in this Item 1A; ● natural disasters (including as a result of climate change), which could cause significant damage to the infrastructure upon which our business operations rely, and the timing, nature or severity of which we may be unable to prepare for; ● economic instability, outbreak of disease or epidemics such as the COVID-19 pandemic, boycotts, curtailment of trade and other business restrictions; ● certain expenses including, among others, expenses for travel, translation and insurance; and ● regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S.
Additionally, if we or others later identify undesirable side effects caused by WAKIX, either in the post-marketing setting or in clinical trials in other potential indications for which we develop pitolisant, or in clinical trials for other product candidates, a number of potentially significant negative consequences could result, including but not limited to: ● the delay, prevention or withdrawal of approvals by regulatory authorities; 52 Table of Contents ● the requirement to suspend marketing of a product or withdraw it from the marketplace; ● the requirement of additional warnings on the prescribing label or limitations on product access; ● requirements to conduct costly post-marketing studies; ● requirements to change the manner in which a product is administered; ● the requirement of a REMS plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers and/or other elements to assure safe use; ● designation as a controlled substance by the DEA; ● a product may become less competitive ● fines, injunctions or civil and criminal penalties; ● litigation and the potential to be held liable for harm caused to patients; and ● an adverse effect on our reputation.
Additionally, if we or others later identify undesirable side effects caused by WAKIX, either in the post-marketing setting or in clinical trials in other potential indications for which we develop pitolisant, or in clinical trials for other product candidates, a number of potentially significant negative consequences could result, including but not limited to: ● the delay, prevention or withdrawal of approvals by regulatory authorities; 45 Table of Contents ● the requirement to suspend marketing of a product or withdraw it from the marketplace; ● the requirement of additional warnings on the prescribing label or limitations on product access; ● requirements to conduct costly post-marketing studies; ● requirements to change the manner in which a product is administered; ● the requirement of a REMS plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers and/or other elements to assure safe use; ● designation as a controlled substance by the DEA; ● a product may become less competitive; ● fines, injunctions or civil and criminal penalties; ● litigation and the potential to be held liable for harm caused to patients; and ● an adverse effect on our reputation.
In addition to the risks discussed elsewhere in this section, our ability to generate revenue from sales of WAKIX depends on a number of factors, including, but not limited to: ● the effectiveness of our sales and marketing strategy and operations, and obtaining market acceptance of WAKIX, including garnering market share from existing and future treatment alternatives; ● maintaining compliance with all regulatory requirements applicable to WAKIX and our commercial activities, including the post-marketing requirements and post-marketing commitments required by the FDA; ● increased pricing pressure from, changes in policies by, or restrictions on reimbursement imposed by, third-party payors, including our ability to maintain adequate coverage and reimbursement for WAKIX; 33 Table of Contents ● the continued acceptability of the safety profile of WAKIX and the occurrence of any unexpected side effects, adverse reactions or misuse, including the potential business impact of withdrawing the product (either voluntarily or as mandated by the FDA), loss of support by the advocacy communities or loss of positive corporate reputation resulting in unfavorable media coverage; ● successfully managing third-party service providers involved in the manufacturing and development of pitolisant; ● successfully completing the development of pitolisant in other indications by demonstrating safety, tolerability and efficacy profiles that are satisfactory to the FDA; ● obtaining regulatory approvals to market pitolisant for other indications; ● complying with the terms of the license agreement with Bioprojet; ● negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter; ● maintaining, protecting and expanding the portfolio of intellectual property rights, including patents, trade secrets and knowhow, especially in light of potential competition from generic versions of pitolisant; and ● attracting, hiring and retaining qualified personnel.
In addition to the risks discussed elsewhere in this section, our ability to generate revenue from sales of WAKIX depends on a number of factors, including, but not limited to: ● the effectiveness of our sales and marketing strategy and operations, and obtaining market acceptance of WAKIX, including garnering market share from existing and future treatment alternatives; ● maintaining compliance with all regulatory requirements applicable to WAKIX and our commercial activities, including the post-marketing requirements and post-marketing commitments required by the FDA; ● increased pricing pressure from, changes in policies by, or restrictions on reimbursement imposed by, third-party payors, including our ability to maintain adequate coverage and reimbursement for WAKIX; ● the continued acceptability of the safety profile of WAKIX and the occurrence of any unexpected side effects, adverse reactions or misuse, including the potential business impact of withdrawing the product (either voluntarily or as mandated by the FDA), loss of support by the advocacy communities or loss of positive corporate reputation resulting in unfavorable media coverage; ● successfully managing third-party service providers involved in the manufacturing and development of pitolisant; ● successfully completing the development of pitolisant in other indications by demonstrating safety, tolerability and efficacy profiles that are satisfactory to the FDA; ● obtaining regulatory approvals to market pitolisant for other indications; ● complying with the terms of the license agreement with Bioprojet; ● negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter; ● maintaining, protecting and expanding the portfolio of intellectual property rights, including patents, trade secrets and knowhow, especially in light of potential competition from generic versions of pitolisant; and ● attracting, hiring and retaining qualified personnel.
If a third party successfully challenges all of the patents that might otherwise be eligible for listing in the Orange Book for one of our products, we will not be entitled to the 30-month stay of FDA approval upon the filing of an ANDA for a generic drug containing, for example, pitolisant, and relies in whole or in part on studies conducted by or for us.
If a third party successfully challenges all of the patents that might otherwise be eligible for listing in the Orange Book for one of our products, we will not be entitled to the 30-month stay of FDA approval upon the filing of an ANDA for a generic drug containing, for example, pitolisant, that relies in whole or in part on studies conducted by or for us.
Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing our in-licensed patents, any patents that may be issued as a result of our future patent applications, or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action may be too high or not in the best interest of our company or our shareholders.
Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing our owned or in-licensed patents, any patents that may be issued as a result of our future patent applications, or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action may be too high or not in the best interest of our company or our shareholders.
The degree of market acceptance of WAKIX or any other product candidates we develop, if approved for commercial sale, will depend on a number of factors, some of which are beyond our control, including: ● the safety and efficacy of the product as demonstrated in clinical trials; ● the perception of physicians, patients, third-party payors and others in the medical community of the relative safety, efficacy, convenience, effect on quality-of-life and cost-effectiveness of the product, compared to those of other available treatments; ● the product’s approved labeling, including the description of the product’s approved indications, the description of its efficacy, including the endpoints in which it showed an improvement, and the prevalence and severity of any side effects, including any associated limitations or warnings; ● the cost of treatment in relation to alternative treatments, including any similar generic treatments; ● our ability to differentiate WAKIX or other approved products from other treatments in the same space; 34 Table of Contents ● the adoption of WAKIX as a first-line therapy for EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy; ● the prevalence and severity of any side effects, including those that may be discovered following approval and commercialization; ● the willingness of the target patient population to try new treatments and of physicians to prescribe these treatments; ● the strength of marketing and distribution support and timing of market introduction of competitive products; ● the publicity concerning our products or competing products and treatments; ● product liability litigation alleging injuries relating to our products or similar classes of drugs; ● any post-approval study requirements for our products and the results thereof; and ● sufficient third-party insurance coverage and reimbursement.
The degree of market acceptance of WAKIX or any other product candidates we develop, if approved for commercial sale, will depend on a number of factors, some of which are beyond our control, including: ● the safety and efficacy of the product as demonstrated in clinical trials; ● the perception of physicians, patients, third-party payors and others in the medical community of the relative safety, efficacy, convenience, effect on quality-of-life and cost-effectiveness of the product, compared to those of other available treatments; ● the product’s approved labeling, including the description of the product’s approved indications, the description of its efficacy, including the endpoints in which it showed an improvement, and the prevalence and severity of any side effects, including any associated limitations or warnings; ● the cost of treatment in relation to alternative treatments, including any similar generic treatments; ● our ability to differentiate WAKIX or other approved products from other treatments in the same space; ● the adoption of WAKIX as a first-line therapy for EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy; ● the prevalence and severity of any side effects, including those that may be discovered following approval and commercialization; ● the willingness of the target patient population to try new treatments and of physicians to prescribe these treatments; ● the strength of marketing and distribution support and timing of market introduction of competitive products; ● the publicity concerning our products or competing products and treatments; ● product liability litigation alleging injuries relating to our products or similar classes of drugs; ● any post-approval study requirements for our products and the results thereof; and ● sufficient third-party insurance coverage and reimbursement.
These provisions include: ● providing for a classified board of directors with staggered, three-year terms; ● authorizing our board of directors to issue preferred stock with voting or other rights or preferences that could discourage a takeover attempt or delay changes in control; ● prohibiting cumulative voting in the election of directors; ● providing that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; 75 Table of Contents ● prohibiting the adoption, amendment or repeal of our Bylaws or Certificate of Incorporation regarding the election and removal of directors without the required approval of at least 66.67% of the shares entitled to vote at an election of directors; ● prohibiting stockholder action by written consent; ● limiting the persons who may call special meetings of stockholders; and ● requiring advance notification of stockholder nominations and proposals.
These provisions include: ● providing for a classified board of directors with staggered, three-year terms; ● authorizing our board of directors to issue preferred stock with voting or other rights or preferences that could discourage a takeover attempt or delay changes in control; ● prohibiting cumulative voting in the election of directors; ● providing that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; 69 Table of Contents ● prohibiting the adoption, amendment or repeal of our Bylaws or Certificate of Incorporation regarding the election and removal of directors without the required approval of at least 66.67% of the shares entitled to vote at an election of directors; ● prohibiting stockholder action by written consent; ● limiting the persons who may call special meetings of stockholders; and ● requiring advance notification of stockholder nominations and proposals.
The FDA or comparable regulatory authorities can delay, limit or deny approval of a drug candidate for many reasons or require us to conduct additional preclinical or clinical testing, including, but not limited to, the following: ● a drug candidate may not be deemed safe or effective, or the clinical and other benefits may be deemed to not outweigh the candidate’s risks; 48 Table of Contents ● regulatory authorities may disagree with the design or execution of our clinical trials plan; ● the population studied in clinical trials may not be sufficiently broad or representative to assure safety in the full population for which we seek approval; ● we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; ● regulatory authorities may not find the data from nonclinical and clinical studies and trials sufficient or may disagree with our interpretation of data from nonclinical or clinical studies; ● serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates, or other products containing the active ingredient in our product candidates; ● regulatory authorities may disagree with us regarding the formulation, labeling and/or the product specifications of our product candidates; ● clinical trial site inspection(s) by the FDA or other regulatory authorities may result in unacceptable findings that could negatively impact approval of pitolisant; ● regulatory authorities might not accept or deem acceptable a third-party manufacturers’ processes or facilities; or ● regulatory authorities may change their approval policies or adopt new regulations.
The FDA or comparable regulatory authorities can delay, limit or deny approval of a drug candidate for many reasons or require us to conduct additional preclinical or clinical testing, including, but not limited to, the following: ● a drug candidate may not be deemed safe or effective, or the clinical and other benefits may be deemed to not outweigh the candidate’s risks; ● regulatory authorities may disagree with the design or execution of our clinical trials plan; ● the population studied in clinical trials may not be sufficiently broad or representative to assure safety in the full population for which we seek approval; ● we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; ● regulatory authorities may not find the data from nonclinical and clinical studies and trials sufficient or may disagree with our interpretation of data from nonclinical or clinical studies; ● serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates, or other products containing the active ingredient in our product candidates; ● regulatory authorities may disagree with us regarding the formulation, labeling and/or the product specifications of our product candidates; ● clinical trial site inspection(s) by the FDA or other regulatory authorities may result in unacceptable findings that could negatively impact approval of pitolisant; ● regulatory authorities might not accept or deem acceptable a third-party manufacturers’ processes or facilities; or ● regulatory authorities may change their approval policies or adopt new regulations.
During the development of certain of our product candidates, we received Fast Track Designation from the FDA and we may also seek further designations for some or all of our other product candidates. The Fast Track program is intended to expedite or facilitate the process for reviewing new product candidates that meet certain criteria.
During the development of certain of our product candidates, we received Fast Track designation from the FDA and we may also seek further designations for some or all of our other product candidates. The Fast Track program is intended to expedite or facilitate the process for reviewing product candidates that meet certain criteria.
Regulators, IRBs of the institutions in which clinical trials are being conducted or data monitoring committees may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, 54 Table of Contents failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.
Regulators, IRBs of the institutions in which clinical trials are being conducted or data monitoring committees may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, 47 Table of Contents failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.
In addition, we expect to rely on CROs and clinical trial sites to ensure proper and timely conduct of our future clinical trials, and, while we intend to enter into agreements governing their services, we will be limited in our ability to compel their actual performance. 56 Table of Contents Even if we receive orphan drug designation for our product candidates, we may not be able to maintain the benefits associated with orphan drug designation, including marketing exclusivity, which may cause our product revenue to be reduced.
In addition, we expect to rely on CROs and clinical trial sites to ensure proper and timely conduct of our future clinical trials, and, while we intend to enter into agreements governing their services, we will be limited in our ability to compel their actual performance. 49 Table of Contents Even if we receive orphan drug designation for our product candidates, we may not be able to maintain the benefits associated with orphan drug designation, including marketing exclusivity, which may cause our product revenue to be reduced.
Any of our existing suppliers or manufacturers may: ● fail to supply us with product on a timely basis or in the requested amount due to unexpected damage to or destruction of facilities or equipment or otherwise; 39 Table of Contents ● fail to increase manufacturing capacity and produce drug product and components in larger quantities and at higher yields in a timely or cost-effective manner, or at all, to sufficiently meet our commercial needs; ● be unable to meet our production demands due to issues related to their reliance on sole-source suppliers and manufacturers; ● supply us with product that fails to meet regulatory requirements; ● become unavailable through business interruption or financial insolvency; ● lose regulatory status as an approved source; ● be unable or unwilling to (i) honor current supply agreements or (ii) renew current supply agreements when such agreements expire on a timely basis, on acceptable terms or at all; or ● discontinue production or manufacturing of necessary drug substances or products.
Any of our existing suppliers or manufacturers may: ● fail to supply us with product on a timely basis or in the requested amount due to unexpected damage to or destruction of facilities or equipment or otherwise; ● fail to increase manufacturing capacity and produce drug product and components in larger quantities and at higher yields in a timely or cost-effective manner, or at all, to sufficiently meet our commercial needs; ● be unable to meet our production demands due to issues related to their reliance on sole-source suppliers and manufacturers; ● supply us with product that fails to meet regulatory requirements; ● become unavailable through business interruption or financial insolvency; ● lose regulatory status as an approved source; ● be unable or unwilling to (i) honor current supply agreements or (ii) renew current supply agreements when such agreements expire on a timely basis, on acceptable terms or at all; or ● discontinue production or manufacturing of necessary drug substances or products.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other U.S. federal healthcare programs or healthcare programs in other jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our 37 Table of Contents business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other U.S. federal healthcare programs or healthcare programs in other jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
Competition that our products may face from generic versions of our products could materially and adversely affect our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those product candidates. 53 Table of Contents We may incur unexpected costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
Competition that our products may face from generic versions of our products could materially and adversely affect our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those product candidates. 46 Table of Contents We may incur unexpected costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties 60 Table of Contents and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.
Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties 53 Table of Contents and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.
A public health epidemic, including COVID-19, poses the risk that we or our employees, contractors, suppliers, distributors and other partners, as well as physicians treating narcolepsy patients, may be prevented from conducting business and patient-care activities for an indefinite period of time, including due to shutdowns and quarantines that may be requested or mandated by governmental authorities.
A public health epidemic, such as the COVID-19 pandemic, poses the risk that we or our employees, contractors, suppliers, distributors and other partners, as well as physicians treating narcolepsy patients, may be prevented from conducting business and patient-care activities for an indefinite period of time, including due to shutdowns and quarantines that may be requested or mandated by governmental authorities.
Our Certificate of Incorporation and Bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. 76 Table of Contents In addition, as permitted by Section 145 of the DGCL, our amended and restated bylaws and our indemnification agreements that we have entered into with our directors and officers provide that: ● we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law.
Our Certificate of Incorporation and Bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. 70 Table of Contents In addition, as permitted by Section 145 of the DGCL, our amended and restated bylaws and our indemnification agreements that we have entered into with our directors and officers provide that: ● we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law.
Our TLA Credit Agreement (as defined below) contains certain restrictive covenants that either limit our ability to, or require a mandatory prepayment in the event that, we or our subsidiaries engage in new lines of business, incur additional indebtedness or liens, make certain investments, make certain payments, pay cash dividends, merge with other companies or consummate certain changes of control, make certain acquisitions, transfer or dispose of certain assets, liquidate or dissolve, amend certain material agreements, enter into sale and leaseback transactions, enter into various other specified transactions, or change our name, location, or executive office without notice.
Our TLA Credit Agreement (as defined below) contains certain restrictive covenants that either limit our ability to, or require a mandatory prepayment in the event that, we or our subsidiaries engage in new lines of business, incur additional indebtedness or liens, make certain investments, make certain payments, pay cash dividends, merge with other companies or consummate certain changes of control, make certain acquisitions, transfer or dispose of certain assets, liquidate or dissolve, amend certain material agreements, enter into sale and leaseback transactions, enter into various other specified 39 Table of Contents transactions, or change our name, location, or executive office without notice.
The extent to which COVID-19 or any future pandemics impact our operations and those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, additional or modified government actions, the severity of the pandemic, speed of the spread of a virus, and the actions taken to contain the virus or treat its impact, among others.
The extent to which any future pandemics impact our operations and those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, additional or modified government actions, the severity of the pandemic, speed of the spread of a virus, and the actions taken to contain the virus or treat its impact, among others.
Various states also independently regulate controlled substances. Though state-controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may separately schedule drugs as well. While some 62 Table of Contents states automatically schedule a drug when the DEA does so, in other states there must be rulemaking or a legislative action.
Various states also independently regulate controlled substances. Though state-controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may separately schedule drugs as well. While some 55 Table of Contents states automatically schedule a drug when the DEA does so, in other states there must be rulemaking or a legislative action.
JPMorgan Chase Bank, N.A. and the other Lenders may elect to accelerate the repayment of all unpaid principal of the Loans, accrued interest and other amounts owed under the TLA Credit Agreement upon consummation of a specified 46 Table of Contents change of control transaction or the occurrence of certain events of default (as specified in the TLA Credit Agreement), including, among other things: ● our default in a payment obligation under the TLA Credit Agreement; ● our breach of the covenants or other terms of the TLA Credit Agreement; ● our failure to properly maintain the collateral; ● the occurrence of a specified change of control transaction occurring; ● one or more judgments resulting in liability greater than $20.0 million; and ● certain specified insolvency and bankruptcy-related events.
JPMorgan Chase Bank, N.A. and the other Lenders may elect to accelerate the repayment of all unpaid principal of the Loans, accrued interest and other amounts owed under the TLA Credit Agreement upon consummation of a specified change of control transaction or the occurrence of certain events of default (as specified in the TLA Credit Agreement), including, among other things: ● our default in a payment obligation under the TLA Credit Agreement; ● our breach of the covenants or other terms of the TLA Credit Agreement; ● our failure to properly maintain the collateral; ● the occurrence of a specified change of control transaction occurring; ● one or more judgments resulting in liability greater than $20.0 million; and ● certain specified insolvency and bankruptcy-related events.
Our internal information technology systems and infrastructure, and those of our current and any future collaborators, contractors and consultants and other third parties on which we rely, are vulnerable to damage or unauthorized access or use resulting from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, denial-of-service attacks, cyber- attacks or cyber-intrusions over the Internet, hacking, phishing and other social engineering attacks, attachments to emails, persons inside our organization (including employees or contractors), lost or stolen devices, or persons with access to systems inside our organization.
Our internal information technology systems and infrastructure, and those of our current and any future collaborators, contractors and consultants and other third parties on which we rely, are vulnerable to damage or unauthorized access or use resulting from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, denial-of-service attacks, cyber- attacks or cyber-intrusions over the Internet, hacking, phishing and other social engineering 36 Table of Contents attacks, attachments to emails, persons inside our organization (including employees or contractors), lost or stolen devices, or persons with access to systems inside our organization.
For example, the COVID-19 pandemic affected our ability to access HCPs, and caused fewer patients to visit their HCP, resulting in fewer prescriptions being written. Additionally, the effects of COVID-19 disrupted the supply chain and could disrupt the manufacturing or shipment of WAKIX and of drug substance and finished drug product.
For example, the COVID-19 pandemic affected our ability to access HCPs, and caused fewer patients to visit their HCP, resulting in fewer prescriptions being written. Additionally, the effects of COVID-19 disrupted the supply chain and future pandemics could disrupt the manufacturing or shipment of WAKIX and of drug substance and finished drug product.
Moreover, if our operating results do not meet the expectations of the investor community, one 74 Table of Contents or more of the analysts who cover our company may change their recommendations regarding our company, and our stock price could decline. Our quarterly operating results may fluctuate significantly. Our operating results are subject to quarterly fluctuations.
Moreover, if our operating results do not meet the expectations of the investor community, one or more of the analysts who cover our company may change their recommendations regarding our company, and our stock price could decline. 68 Table of Contents Our quarterly operating results may fluctuate significantly. Our operating results are subject to quarterly fluctuations.
We have licensed certain intellectual property rights covering pitolisant from Bioprojet, and we may license intellectual property rights from others in the future. If, for any reason, our license agreement with Bioprojet or any future licensor is terminated or we otherwise lose the rights associated with a license, it could adversely affect our business.
We have licensed certain intellectual property rights covering pitolisant and related compositions from Bioprojet, and we may license intellectual property rights from others in the future. If, for any reason, our license agreement with Bioprojet or any future licensor is terminated or we otherwise lose the rights associated with a license, it could adversely affect our business.
For example, as a part of the regulatory approval for WAKIX for the treatment of EDS in adult 57 Table of Contents patients with narcolepsy, we are required to conduct post-marketing studies in women exposed to pitolisant in pregnancy, including a registry-based observational cohort study to assess maternal, fetal, and infant outcomes of women exposed to pitolisant during pregnancy, and another study of a different design such as a case control study or a retrospective cohort study using electronic medical record data, and a lactation study.
For example, as a part of the regulatory approval for WAKIX for the treatment of EDS in adult patients with narcolepsy, we are required to conduct post-marketing studies in women exposed to pitolisant in pregnancy, including a registry-based observational cohort study to assess maternal, fetal, and infant outcomes of women exposed to pitolisant during pregnancy, and another study of a different design such as a case control study or a retrospective cohort study using electronic medical record data, and a lactation study.
Pursuant to our license and commercialization agreements, we obtained intellectual property rights in connection with the commercialization of pitolisant in the United States and its territories, commonwealths and 35 Table of Contents protectorates, including Puerto Rico, which includes an exclusive license to use certain intellectual property owned by Bioprojet related to clinically developing and commercializing the pitolisant product candidate for narcolepsy, obstructive sleep apnea, idiopathic hypersomnia and Parkinson’s Disease.
Pursuant to our license and commercialization agreements, we obtained intellectual property rights in connection with the commercialization of pitolisant in the United States and its territories, commonwealths and protectorates, including Puerto Rico, which includes an exclusive license to use certain intellectual property owned by Bioprojet related to clinically developing and commercializing the pitolisant product candidate for narcolepsy, obstructive sleep apnea, idiopathic hypersomnia and Parkinson’s Disease.
Additionally, we and/or other parties in our value chain are subject to or are expected to be subject to additional climate and other ESG-related obligations arising from legislation and regulation in the United States, the European Union 45 Table of Contents and other jurisdictions, including new reporting requirements, even as the availability and quality of the information that may be required to comply with such laws and regulations remains limited.
Additionally, we and/or other parties in our value chain are subject to or are expected to be subject to additional climate and other ESG-related obligations arising from legislation and regulation in the United States, the European Union and other jurisdictions, including new reporting requirements, even as the availability and quality of the information that may be required to comply with such laws and regulations remains limited.
See “Part I—Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below. Risks Related to Our Business We are substantially dependent on the commercial success of our only approved product, WAKIX.
See “Part I—Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below. 26 Table of Contents Risks Related to Our Business We are substantially dependent on the commercial success of our only approved product, WAKIX.
While any proposed measures will require authorization through additional legislation to become effective, the probability of their success is uncertain. 64 Table of Contents Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
While any proposed measures will require authorization through additional legislation to become effective, the probability of their success is uncertain. 57 Table of Contents Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure, drug price reporting and other transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, 58 Table of Contents sell and distribute our product candidates, if approved.
These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, 51 Table of Contents sell and distribute our product candidates, if approved.
If we adopt an alternative name, we would lose the benefit of our existing trademark applications for such product candidate, and may be required to expend significant additional resources in an effort to identify a suitable product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.
If we adopt an alternative name, we would lose the benefit of our existing trademark applications for such product candidate, and may be required to expend significant additional resources in an effort to identify a suitable product 60 Table of Contents name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.
As part of our risk management 42 Table of Contents policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However, in the event of an accident or incident at these facilities, we cannot assure our investors that the amounts of insurance will be sufficient to satisfy any damages and losses.
As part of our risk management policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However, in the event of an accident or incident at these facilities, we cannot assure our investors that the amounts of insurance will be sufficient to satisfy any damages and losses.
The revised SCCs must be used for relevant new data transfers from September 27, 2021; existing 61 Table of Contents standard contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022.
The revised SCCs must be used for relevant new data transfers from September 27, 2021; existing 54 Table of Contents standard contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our 66 Table of Contents confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments.
Certain U.S. state laws allow for, and in some instances in the absence of specific instructions from the prescribing physician mandate, the dispensing of generic products rather than branded products when a generic version is available. 40 Table of Contents Generic competition often results in decreases in the prices at which branded products can be sold.
Certain U.S. state laws allow for, and in some instances in the absence of specific instructions from the prescribing physician mandate, the dispensing of generic products rather than branded products when a generic version is available. Generic competition often results in decreases in the prices at which branded products can be sold.
In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in 73 Table of Contents executing such an agreement with each party who in fact develops intellectual property that we regard as our own.
In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own.
Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, 68 Table of Contents which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products.
Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products.
Although we have obtained regulatory approval for WAKIX in the United States for the treatment of EDS or cataplexy in adult patients with narcolepsy, it is possible that we may not obtain regulatory approval for pitolisant for other indications, or for any other product candidates we may seek to develop in the future.
Although we have obtained regulatory approval for WAKIX in the United States for the treatment of EDS or cataplexy in adult patients with narcolepsy, it is possible 41 Table of Contents that we may not obtain regulatory approval for pitolisant for other indications, or for any other product candidates we may seek to develop in the future.
Our regulatory approval for WAKIX for the treatment of EDS or cataplexy in adult patients with narcolepsy, and any other regulatory approvals we may receive for pitolisant or any future product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, which must comply with applicable GCP regulations.
Our regulatory approval for WAKIX for the treatment of EDS or cataplexy in adult patients with narcolepsy, and for EDS in children six years and older with narcolepsy, and any other regulatory approvals we may receive for pitolisant or any future product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, which must comply with applicable GCP regulations.
Public health pandemics, including the COVID-19 pandemic, may result in disruptions to our commercialization, clinical trials, manufacturing and other business operations, which could have a material adverse effect on our business, financial condition, operating results, cash flows and prospects.
Public health pandemics, such as the COVID-19 pandemic, may result in disruptions to our commercialization, clinical trials, manufacturing and other business operations, which could have a material adverse effect on our business, financial condition, operating results, cash flows and prospects.
As our operations and business grow, we may become subject to or affected by new or additional data protection laws and regulations and face increased scrutiny or attention from regulatory authorities. In the U.S., HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information.
As our operations and business grow, we may become subject to or affected by new or additional data protection laws and regulations and face increased scrutiny or attention from regulatory authorities. In the United States, HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information.
Our future financial performance and our ability to successfully develop and commercialize WAKIX or any future product candidates will depend, in part, on our ability to effectively manage any future growth. Our management will have to dedicate a significant amount of its attention to managing these growth activities.
Our future financial performance and our ability to successfully develop and commercialize WAKIX or any future product candidates will depend, in part, on our ability to effectively manage any future growth. Our management will have 34 Table of Contents to dedicate a significant amount of its attention to managing these growth activities.
We would also be exposed to a risk of loss, negative publicity, harm to our reputation, governmental investigation and/or enforcement actions, claims or litigation and potential 43 Table of Contents liability, which could materially adversely affect our business, results of operations and financial condition.
We would also be exposed to a risk of loss, negative publicity, harm to our reputation, governmental investigation and/or enforcement actions, claims or litigation and potential liability, which could materially adversely affect our business, results of operations and financial condition.
If the third party submits a paragraph IV certification to the FDA, a notice of the paragraph IV certification must also be sent to us once the third party’s ANDA is accepted for filing by the FDA. We may then initiate a lawsuit to defend the patents identified in the notice.
If the third party submits a paragraph IV certification to the FDA, a notice of the paragraph IV certification must also be sent to us 63 Table of Contents once the third party’s ANDA is accepted for filing by the FDA. We may then initiate a lawsuit to defend the patents identified in the notice.
In our efforts to market WAKIX for the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy, our revenue is dependent, in part, on the size of the markets in the United States, or in other territories where we may seek and obtain regulatory approval, the number of competitors in such markets, the acceptance of the price of WAKIX in those markets and the ability to obtain reimbursement at any price.
In our efforts to market WAKIX for the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy, and for EDS in children six years and older with narcolepsy, our revenue is dependent, in part, on the size of the markets in the United States, or in other territories where we may seek and obtain regulatory approval, the number of competitors in such markets, the acceptance of the price of WAKIX in those markets and the ability to obtain reimbursement at any price.
As of December 31, 2023, our directors, officers, five percent or greater stockholders, and their respective affiliates beneficially owned in the aggregate approximately 64% of our outstanding voting stock. As a result, these stockholders have the ability to influence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval.
As of December 31, 2024, our directors, officers, five percent or greater stockholders, and their respective affiliates beneficially owned in the aggregate approximately 55% of our outstanding voting stock. As a result, these stockholders have the ability to influence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval.
Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. In addition, many pharmaceutical manufacturers must calculate and report certain price reporting metrics to the government, such as average manufacture price and best price.
Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. In addition, many pharmaceutical manufacturers 43 Table of Contents must calculate and report certain price reporting metrics to the government, such as average manufacture price and best price.
Our and their assignment agreements may not be self- executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
Our and their assignment agreements may not be self- executing or may be breached, and we may be forced to bring claims against 67 Table of Contents third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, disclosure, retention, and security of personal data, such as information that we may collect in connection with clinical trials in the U.S. and abroad.
The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, disclosure, retention, and security of personal data, such as information that we may collect in connection with clinical trials in the United States and abroad.
These data include, among other things, the average manufacturer price (“AMP”) and, in the case of innovator products, the best price (“BP”) for each drug which, in general, represents the lowest price available from the manufacturer to any entity in the U.S. in any pricing structure, calculated to include all sales and associated rebates, discounts and other price concessions.
These data include, among other things, the average manufacturer price (“AMP”) and, in the case of innovator products, the best price (“BP”) for each drug which, in general, represents the lowest price available from the manufacturer to any entity in the United States in any pricing structure, calculated to include all sales and associated rebates, discounts and other price concessions.
These 340B covered entities include a 65 Table of Contents variety of community health clinics and other entities that receive health services grants from the Public Health Service, as well as hospitals that serve a disproportionate share of low-income patients.
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 hospitals that serve a disproportionate share of low-income patients.
Additionally, any agreements for future debt or preferred equity financings, if available, may involve covenants limiting or restricting our ability to take specific actions, such as incurring 47 Table of Contents additional debt, making capital expenditures or declaring dividends, which could adversely affect our ability to conduct our business.
Additionally, any agreements for future debt or preferred equity financings, if available, may involve covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely affect our ability to conduct our business.
For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. 66 Table of Contents Separately, in response to the COVID-19 pandemic, the FDA postponed most inspections at domestic and foreign manufacturing facilities at various points.
For example, in recent years, the U.S. government has 59 Table of Contents shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. Separately, in response to the COVID-19 pandemic, the FDA postponed most inspections at domestic and foreign manufacturing facilities at various points.
While we received approval for the indications of the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy, WAKIX is not indicated to treat any other conditions. We are prohibited from promoting WAKIX for any other indication unless we are granted FDA approval for such indication.
While we received approval for the indications of the treatment of EDS and cataplexy in adult patients with narcolepsy and for EDS in children six years and older with narcolepsy, WAKIX is not indicated to treat any other conditions. We are prohibited from promoting WAKIX for any other indication unless we are granted FDA approval for such indication.
Foreign Corrupt Practices Act, its books and records provisions, or its anti-bribery provisions. Any of these factors could significantly harm our future international expansion and operations and, consequently, our results of operations.
Foreign Corrupt Practices Act, its books and records provisions, or its anti-bribery provisions. 38 Table of Contents Any of these factors could significantly harm our future international expansion and operations and, consequently, our results of operations.
We could also be asked to conduct post marketing clinical studies to verify the safety and efficacy of future product candidates in general or in specific patient subsets.
We could also be asked to conduct post marketing clinical studies to verify the 50 Table of Contents safety and efficacy of future product candidates in general or in specific patient subsets.
We cannot guarantee that WAKIX or any other product candidates we may seek to develop will ever be commercially successful, and to the extent they are not commercially successful, such product candidates would incur significant expense with no corresponding revenue.
We cannot guarantee that WAKIX or any other product candidates we may seek to develop will ever be commercially successful, and to the extent they are not commercially successful, such product candidates would incur 28 Table of Contents significant expense with no corresponding revenue.
Although a substantial amount of our effort is focused on the commercialization of WAKIX for the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy, we also may seek to identify, in-license or acquire, discover, develop and commercialize additional product candidates in the rare neurological disorders field, such as our recent acquisition of Zynerba’s pipeline, and to identify other indications for pitolisant beyond the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy.
Although a substantial amount of our effort is focused on the commercialization of WAKIX for the treatment of EDS in adult patients with narcolepsy and cataplexy in adult patients with narcolepsy, we also may seek to identify, in-license or acquire, discover, develop and commercialize additional product candidates in the rare neurological disorders field, such as our recent Epygenix acquisition, and to identify other indications for pitolisant beyond the treatment of EDS in adult patients 29 Table of Contents with narcolepsy and cataplexy in adult patients with narcolepsy.
The FDA or comparable foreign regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized.
The FDA or comparable foreign regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself 42 Table of Contents may be jeopardized.
Federal law requires that any company that participates in the Medicaid Drug Rebate Program also participate in the 340B program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B.
Federal law requires that any company that participates in the Medicaid Drug Rebate Program also participate in the 340B program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare 58 Table of Contents Part B.
Any of the events or developments described above could result in reputational harm and reduced market acceptance and demand for our products, could harm our ability to market our products in the future, could cause us to incur significant expense, could cause our senior management to be distracted from execution of our business strategy, and could have a material adverse effect on our business, reputation, financial condition, results of operations, liquidity, cash flows and/or share price. 36 Table of Contents Third-party relationships are important to our business.
Any of the events or developments described above could result in reputational harm and reduced market acceptance and demand for our products, could harm our ability to market our products in the future, could cause us to incur significant expense, could cause our senior management to be distracted from execution of our business strategy, and could have a material adverse effect on our business, reputation, financial condition, results of operations, liquidity, cash flows and/or share price.
Accordingly, in markets outside the United States, the reimbursement for WAKIX may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits. ​ ​ ​ 51 Table of Contents WAKIX has been approved by the FDA for the treatment of EDS in adult patients with narcolepsy, and cataplexy in adult patients with narcolepsy.
Accordingly, in markets outside the United States, the reimbursement for WAKIX may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits. 44 Table of Contents WAKIX has been approved by the FDA for the treatment of EDS and cataplexy in adult patients with narcolepsy, and for the treatment of EDS in children six years and older with narcolepsy.
We may need to increase the size and capabilities of our organization based on business need, and we may experience difficulties in managing our growth. We commenced operations in 2017 and, as of December 31, 2023, had approximately 250 employees.
We may need to increase the size and capabilities of our organization based on business need, and we may experience difficulties in managing our growth. We commenced operations in 2017 and, as of December 31, 2024, had 268 employees.
This tax law change will continue to have an adverse effect on our income tax liability, which could be material. In August 2022, the Inflation Reduction Act of 2022 was enacted, which, among other things, imposes a new 15% alternative minimum tax on the adjusted financial statement income of certain large corporations for tax years beginning after December 31, 2022.
This tax law change will continue to have an adverse effect on our income tax liability, which could be material. In addition, the IRA, among other things, imposes a new 15% alternative minimum tax on the adjusted financial statement income of certain large corporations for tax years beginning after December 31, 2022.
As a result of the COVID-19 pandemic, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.
We may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.
If the number of our addressable patients is not as large as we estimate or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of WAKIX. If we are not able to generate substantial revenue from the sale of WAKIX, we may not remain profitable.
If the number of our addressable patients is not as large as we estimate or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of WAKIX.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our licensed patents may be challenged in the courts or patent offices in the United States.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our licensed patents may be challenged in U.S. Federal Courts or the United States Patent and Trademark Office.
In connection with WAKIX’s approvals, we received orphan drug exclusivities for the treatment of excessive daytime sleepiness in adult patients with narcolepsy, and for the treatment of cataplexy in adult patients with narcolepsy.
In connection with WAKIX’s approvals, we received orphan drug exclusivities for the treatment of excessive daytime sleepiness in adult patients with narcolepsy, and for the treatment of cataplexy in adult patients with narcolepsy, and for the treatment of excessive daytime sleepiness in pediatric patients 6 years of age and older with narcolepsy.
If we fail to enter into relationships or do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates, bring them to market and generate revenue from sales of drugs or continue to develop our technology, and our business may be materially and adversely affected.
If we fail to enter into relationships or do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates, bring them to market and generate revenue from sales of drugs or continue to develop our technology, and our business may be materially and adversely affected. 31 Table of Contents We continue to rely on third parties to conduct our clinical trials for pitolisant and other product candidates that we decide to develop.
Patients who are prescribed medications for 49 Table of Contents the treatment of their conditions generally rely on third- party payors to reimburse all or part of the costs associated with their prescription drugs. There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs.
Patients who are prescribed medications for the treatment of their conditions generally rely on third- party payors to reimburse all or part of the costs associated with their prescription drugs. There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Regulatory approvals, pricing and reimbursement for new drug products vary widely from country to country.
Many product candidates that have received Fast Track Designation have ultimately failed to obtain approval. Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Cybersecurity Committee will report the progress of cyber risk reduction initiatives to our senior leadership and the Audit Committee on a periodic basis. Cyber Risk Management Strategy We have a cyber risk management policy and asset-based cyber risk management methodology for the continuous identification, assessment, and management of our cyber risk exposure.
Biggest changeThe Cybersecurity Committee reports the progress of cyber risk reduction initiatives to our senior leadership and the Audit Committee on a periodic basis. Cyber Risk Management Strategy We have a cyber risk management policy and asset-based cyber risk management methodology for the continuous identification, assessment, and management of our cyber risk exposure.
The methodology is as follows: ● Maintaining an up-to-date and accurate inventory of all assets (e.g., data, systems, hardware, software, and vendors). ● Categorization of all assets based on the criticality of the data processed and the assets criticality to the continuity of business operations. ● A profile is maintained of the most likely threats, their intent, and the impact the threat may have on the confidentiality, integrity, and availability of Company assets. 78 Table of Contents ● Evaluation of relevant risk-based scenarios or vulnerability of an asset and how a threat may exploit the asset. ● Implemented security controls or “mitigating factors” are considered for each scenario. ● Considering the asset, threat, risk-based scenario or vulnerability, and the mitigating factors, a likelihood and impact determination is made to calculate the final risk level. ● Risk reduction plans are determined and used to prioritize security program initiatives. ● Risk mitigations are tracked and monitored in a risk register.
The methodology is as follows: ● Maintaining an up-to-date and accurate inventory of all assets (e.g., data, systems, hardware, software, and vendors). ● Categorization of all assets based on the criticality of the data processed and the assets criticality to the continuity of business operations. ● A profile is maintained of the most likely threats, their intent, and the impact the threat may have on the confidentiality, integrity, and availability of Company assets. 72 Table of Contents ● Evaluation of relevant risk-based scenarios or vulnerability of an asset and how a threat may exploit the asset. ● Implemented security controls or “mitigating factors” are considered for each scenario. ● Considering the asset, threat, risk-based scenario or vulnerability, and the mitigating factors, a likelihood and impact determination is made to calculate the final risk level. ● Risk reduction plans are determined and used to prioritize security program initiatives. ● Risk mitigations are tracked and monitored in a risk register.
We have also outsourced elements of our information technology infrastructure, and as a result, a number of third-party vendors may or could have access to our confidential information. 77 Table of Contents The cost to mitigate, investigate and respond to potential security incidents, breaches, disruptions, network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and while we have implemented security measures to protect our data and information technology systems, our efforts to address these potential risks may not be successful, and could result in unexpected interruptions, delays, cessation of service and other harm to our business and competitive position.
We have also outsourced elements of our information technology infrastructure, and as a result, a number of third-party vendors may or could have access to our confidential information. 71 Table of Contents The cost to mitigate, investigate and respond to potential security incidents, breaches, disruptions, network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and while we have implemented security measures to protect our data and information technology systems, our efforts to address these potential risks may not be successful, and could result in unexpected interruptions, delays, cessation of service and other harm to our business and competitive position.
Third Party Support of the Cyber Risk Management Program We employ third parties to support our cyber risk management program in the following ways: ● Use of internal and external auditors to maintain compliance with regulatory requirements. 79 Table of Contents ● Use of cybersecurity consultants and managed security services providers to supplement the security program practices and evaluate the program’s effectiveness, specifically: o Governance, risk, and compliance services. o Penetration testing and vulnerability management. o Continuous security event monitoring. o Data loss prevention.
Third Party Support of the Cyber Risk Management Program We employ third parties to support our cyber risk management program in the following ways: ● Use of internal and external auditors to maintain compliance with regulatory requirements. 73 Table of Contents ● Use of cybersecurity consultants and managed security services providers to supplement the security program practices and evaluate the program’s effectiveness, specifically: o Governance, risk, and compliance services. o Penetration testing and vulnerability management. o Continuous security event monitoring. o Data loss prevention.
In the fourth quarter of 2023, we performed a risk analysis of all critical assets, determining the following are our current top cyber risks, none of which are material: ● Compromise to the confidentiality of intellectual property. ● Compromise to the confidentiality and integrity of financial records. ● Compromise to the confidentiality of employee records. ● Compromise to the confidentiality, integrity, and availability of core business systems. ● Compromise to the confidentiality, integrity, and availability of critical third-party vendors supporting the continuity of business operations.
In the fourth quarter of 2024, we performed a risk analysis of all critical assets, determining the following are our current top cyber risks, none of which are material: ● Compromise to the confidentiality of intellectual property. ● Compromise to the confidentiality and integrity of financial records. ● Compromise to the confidentiality of employee records. ● Compromise to the confidentiality, integrity, and availability of core business systems. ● Compromise to the confidentiality, integrity, and availability of critical third-party vendors supporting the continuity of business operations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. We do not own any real property. Our corporate headquarters, located in Plymouth Meeting, Pennsylvania, has a footprint of approximately 35,781 square feet of space pursuant to leases that expire in 2024. We believe that our facilities are suitable to meet our current needs.
Biggest changeItem 2. Properties. We do not own any real property. Our corporate headquarters, located in Plymouth Meeting, Pennsylvania, has a footprint of approximately 35,781 square feet of space pursuant to a lease that expires in 2025. We believe that our facilities are suitable to meet our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business.
Biggest changeItem 3. Legal Proceedings. From time to time, we may become involved in litigation relating to claims arising from the ordinary course of business.
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The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
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Our management believes that there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations or financial condition. ​ Refer to Part II, Item 8, Note 13 “Commitments and Contingencies,” of this Annual Report for a full description of our material pending legal matters .
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ANDA Litigation ​ On September 27, 2023, we and our licensor, Bioprojet, received notice from Lupin Limited (“Lupin”) pursuant to 21 U.S.C. § 355(j) et seq. and 21 C.F.R. § 314.95 et seq.
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(the “Lupin Notice Letter”) that Lupin has submitted ANDA No. 218846 (the “Lupin ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® before the expiration of U.S. Patent Nos. 8,486,947 (“’947 patent”) and 8,207,197 (“’197 patent”). On September 27, 2023, we and Bioprojet received notice from Novugen Pharma Sdn. Bhd.
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(“Novugen”) pursuant to 21 U.S.C. § 355(j) et seq. and 21 C.F.R. § 314.95 et seq. (the “Novugen Notice Letter”) that Novugen has submitted ANDA No. 218834 (the “Novugen ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® before the expiration of the ’947 patent and ’197 patent.
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The ’947 patent and ‘197 patent are listed with respect to WAKIX ® in the FDA’s Orange Book and will expire in September 2029 and March 2030, respectively.
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The Lupin Notice Letter and the Novugen Notice Letter assert that their generic product will not infringe the ’947 patent and ‘197 patent and/or that the ’947 patent and ‘197 patent are invalid or unenforceable.
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On November 9, 2023, we, Bioprojet and Bioprojet’s wholly owned subsidiary, Bioprojet Pharma SAS (“Bioprojet Pharma”), filed a complaint for patent infringement of the ’947 patent and ‘197 patent against Lupin, Novugen and certain of their affiliates and agents in the United States District Court for the District of Delaware in response to their filing of their respective ANDAs with the FDA.
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On October 12, 2023, we and Bioprojet received notice from Novitium Pharma LLC (“Novitium”), pursuant to 21 U.S.C. § 355(j) et seq. and 21 C.F.R. § 314.95 et seq.
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(the “Novitium Notice Letter”), that Novitium has submitted ANDA No. 218495 (the “Novitium ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® before the expiration of U.S.
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Patent No. 8,354,430 (the “’430 patent”), which is also listed with respect to WAKIX ® in the FDA’s Orange Book and will expire in February 2026, ’947 patent, and ’197 patent. On October 12, 2023, we and Bioprojet received notice from Zenara Pharma Pvt. Ltd.
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(“Zenara”), pursuant to 21 U.S.C. § 355(j) et seq. and 21 C.F.R. § 314.95 et seq.
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(the “Zenara Notice Letter”), that Zenara has submitted ANDA No. 218796 (the “Zenara ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® before the expiration of the ’430 patent, ’947 patent and 80 Table of Contents ’197 patent. On October 14, 2023, we and Bioprojet received notice from AET Pharma US, Inc.
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(“AET”), pursuant to 21 U.S.C. § 355(j) et seq. and 21 C.F.R. § 314.95 et seq. (the “AET Notice Letter”), that AET has submitted ANDA No. 218892 (the “AET ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® before the expiration of the ’947 patent and ’197 patent.
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On October 16, 2023, we and Bioprojet received notice from Annora Pharma Private Limited (“Annora”), pursuant to 21 U.S.C. § 355(j) et seq. and 21 C.F.R. § 314.95 et seq.
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(the “Annora Notice Letter”), that Annora has submitted ANDA No. 218832 (the “Annora ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® before the expiration of the ’430 patent, the ’947 patent and ’197 patent.
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AET’s Notice Letter asserts that AET’s generic product will not infringe the ’947 patent and ‘197 patent and/or that ’947 patent and ‘197 patent are invalid or unenforceable.
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The Annora Notice Letter asserts that its generic product will not infringe the ‘430 patent, ’947 patent and ‘197 patent and/or that the ‘430 patent, ’947 patent and ‘197 patent are invalid or unenforceable.
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The Novitium Notice Letter asserts that its generic product will not infringe the ‘430 patent, ’947 patent and ‘197 patent and/or that the ‘430 patent, ’947 patent and ‘197 patent are invalid or unenforceable.
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The Zenara Notice Letter asserts that its generic product will not infringe the ‘430 patent, ’947 patent and ‘197 patent and/or that the ‘430 patent, ’947 patent and ‘197 patent are invalid or unenforceable.
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On November 21, 2023, we, Bioprojet and Bioprojet Pharma filed a complaint for patent infringement of the ’947 patent and ‘197 patent against AET, Annora, Novitium and Zenara and certain of their affiliates and agents and for patent infringement of the ’430 patent against Annora, Novitium and Zenara and certain of their affiliates and agents in the United States District Court for the District of Delaware in response to their filing of their respective ANDAs with the FDA.
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On or around October 13, 2023, MSN Pharmaceuticals Inc. (“MSN Pharma”) sent correspondence to us and Bioprojet stating that that MSN Pharma has submitted ANDA No. 218873 (the “MSN ANDA”) to the FDA and is seeking regulatory approval to market a generic version of WAKIX ® .
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On December 8, 2023, MSN Laboratories Private Limited (“MSN”) filed a declaratory judgment action in the United States District Court for the Eastern District of Virginia against Bioprojet claiming that the ‘430 patent, ’947 patent and ‘197 patent will not be infringed by MSN’s generic version of WAKIX ® and that the ‘947 patent is invalid.
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On December 11, 2023, we, Bioprojet and Bioprojet Pharma filed a complaint in the United States District Court for the District of Delaware for patent infringement of the ‘430 patent, ’947 patent and ‘197 patent against MSN and MSN Pharma.
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On January 12, 2024, the declaratory judgment action was transferred from the United States District Court for the Eastern District of Virginia to the United States District Court for the District of Delaware. ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividend Policy We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and to repay our debt obligations, therefore we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future.
Biggest changeThe shareholder returns in the graph below are based on historical data and are not indicative of, nor intended to forecast, future performance. ​ Dividend Policy We currently intend to retain all available funds and any future earnings to fund the development and growth of our business, potential repurchase of our common stock and to repay our debt obligations, therefore we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future.
Performance Graph The following graph shows a comparison of the total cumulative shareholder returns of an investment of $100 in cash from August 19, 2020, the day we began trading, through December 31, 2023, in (i) our common stock, (ii) the Nasdaq Biotechnology Index, and (iii) the Nasdaq Composite Index.
Performance Graph The following graph shows a comparison of the total cumulative shareholder returns of an investment of $100 in cash from August 19, 2020, the day we began trading, through December 31, 2024, in (i) our common stock, (ii) the Nasdaq Biotechnology Index, and (iii) the Nasdaq Composite Index.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed and traded on the Nasdaq Global Market under the symbol “HRMY.” Holders As of February 16, 2024, we had 35 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed and traded on the Nasdaq Global Market under the symbol “HRMY.” Holders As of February 21, 2025, we had 43 holders of record of our common stock.
Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, industry trends and other factors that our board of directors may deem relevant.
Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, industry trends and other factors that our board of directors may deem relevant. 75 Table of Contents Item 6. [Reserved].
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The shareholder returns in the graph below are based on historical data and are not indicative of, nor intended to forecast, future performance. ​ ​ ​ ​ ​ ​ ​ ​ 82 Table of Contents Purchases of Equity Securities The following table summarizes information about our purchases of shares of our common stock for each of the months during the fourth quarter ended December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum Approximate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollar Value ​ ​ ​ ​ ​ ​ ​ Total Number of Shares ​ ​ of Shares of ​ ​ ​ ​ ​ Weighted Average ​ Shares of Common ​ ​ Common Stock that May ​ ​ Total Number of ​ ​ Price Paid ​ Stock Purchases ​ ​ Yet to be Purchased ​ ​ Shares of Common ​ ​ per Share of ​ as Part of Publicly ​ ​ under the Program Period Stock Purchased ​ Common Stock (1) Announced Program (2) ​ (in thousands) (3) October 1, 2023, through October 31, 2023 — ​ $ — ​ — ​ $ 200,000 November 1, 2023, through November 31, 2023 1,436,666 ​ $ 26.57 ​ 1,436,666 ​ $ 161,821 December 1, 2023, through December 31, 2023 377,987 ​ $ 31.27 ​ 377,987 ​ $ 150,000 Total ​ 1,814,653 ​ $ 27.55 ​ 1,814,653 ​ $ 150,000 ​ (1) The weighted average price paid per share of common stock excludes commissions and transaction fees.
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(2) On October 27, 2023, the Company’s Board of Directors approved a program providing for the repurchase of shares of common stock in an aggregate amount of up to $200.0 million, excluding commissions and transaction fees. The repurchase program may be suspended, terminated or modified at any time for any reason.
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Such repurchases may be pursuant to Rule 10b-18 or Rule 10b5-1 agreements as determined by our management and in accordance with the requirements of the SEC. All repurchased shares of common stock shown in the table above were retired.
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(3) The dollar amount shown (in thousands), represents, as of the end of each period, the approximate dollar value of shares of common stock that may yet be purchased under our publicly announced share repurchase program, exclusive of any commissions and transaction fees.
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The share repurchase program does not obligate us to repurchase any minimum dollar amount or number of shares of common stock.
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Initial Public Offering In August 2020, we completed the IPO of our common stock, in which we issued and sold 6,151,162 shares, including 802,325 shares pursuant to the underwriters’ over-allotment option at a price of $24.00 per share for an aggregate price of approximately $147.6 million.
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The offer and sale of the shares in our IPO was registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-240122), which was declared effective by the SEC on August 18, 2020 (the “Registration Statement”). We raised approximately $135.4 million, after deducting underwriting discounts and commissions and offering expenses of approximately $12.2 million.
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None of these expenses consisted of direct or indirect payments made by us to (i) our directors, officers or their associates, (ii) persons owning 10% or more of our common stock or (iii) to our affiliates. 83 Table of Contents As of December 31, 2023, we have applied all of the proceeds from our IPO.
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Recent Sales of Unregistered Securities Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act (or Regulation D or Regulation S promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701.
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The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. Item 6. [Reserved].

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThere are numerous risks and uncertainties associated with developing product candidates, including uncertainty related to: ● the duration, costs and timing of clinical trials of our current development programs and any further clinical trials related to new product candidates; ● the sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials; ● the impact of the COVID-19 pandemic, including any future resurgence or new variants, on the ability to initiate new clinical trials and/or maintain the continuity of ongoing clinical trials, including our ability to access sleep labs in order to conduct objective sleep testing, that could be impacted by future shelter-in-place orders and needs of the health care system to focus on managing patients affected by COVID-19; ● receiving Bioprojet’s consent to pursue additional indications for pitolisant; ● the acceptance of INDs for our planned clinical trials or future clinical trials; ● the successful and timely enrollment and completion of clinical trials; ● the successful completion of preclinical studies and clinical trials; ● successful data from our clinical programs that support an acceptable risk-benefit profile of our product candidates in the intended populations; ● the receipt and maintenance of regulatory and marketing approvals from applicable regulatory authorities; ● establishing agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our product candidate is approved; ● the entry into collaborations to further the development of our product candidates; ● obtaining and maintaining patent and trade secret protection or regulatory exclusivity for our product candidates; and ● successfully launching our product candidates and achieving commercial sales, if and when approved. 87 Table of Contents A change in the outcome of any of these variables with respect to the development of any of our programs or any product candidate we develop would significantly change the costs, timing and viability associated with the development and/or regulatory approval of such programs or product candidates.
Biggest changeThere are numerous risks and uncertainties associated with developing product candidates, including uncertainty related to: ● the duration, costs and timing of clinical trials of our current development programs and any further clinical trials related to new product candidates; ● the sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials; ● the acceptance of INDs for our planned clinical trials or future clinical trials; ● the successful and timely enrollment and completion of clinical trials; ● the successful completion of preclinical studies and clinical trials; ● successful data from our clinical programs that support an acceptable risk-benefit profile of our product candidates in the intended populations; ● the receipt and maintenance of regulatory and marketing approvals from applicable regulatory authorities; ● establishing agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our product candidate is approved; ● the entry into collaborations to further the development of our product candidates; ● obtaining and maintaining patent and trade secret protection or regulatory exclusivity for our product candidates; and ● successfully launching our product candidates and achieving commercial sales, if and when approved.
Investing Activities Net cash used in investing activities for the year ended December 31, 2023, was $46.4 million, which was primarily attributable to $127.5 million in purchases of debt securities, $37.0 million related to the acquisition of Zynerba, net of cash received, and $0.3 million in purchases of property and equipment, partially offset by $118.3 million in proceeds from sales and maturities of investments.
Net cash used in investing activities for the year ended December 31, 2023, was $46.4 million, which was primarily attributable to $127.5 million in purchases of debt securities, $37.0 million related to the acquisition of Zynerba, net of cash received, and $0.3 million in purchases of property and equipment, partially offset by $118.3 million in proceeds from sales and maturities of investments.
Financing Activities Net cash used in financing activities for the year ended December 31, 2023, was $105.6 million, which primarily consisted of $202.3 million in payments of principal and exit fees associated with the extinguishment of the Blackstone Credit Agreement, $100 million in share repurchases, $1.0 million in principal payments associated with the Blackstone Credit Agreement, and $3.8 million principal payments related to the TLA Credit Agreement, partially offset by $197.0 million in proceeds associated with the TLA Credit Agreement, net of issuance costs, and $5.1 million in proceeds from the exercise of employee stock options.
Net cash used in financing activities for the year ended December 31, 2023, was $105.6 million, which primarily consisted of $202.3 million in payments of principal and exit fees associated with the extinguishment of the Blackstone Credit Agreement, $100 million in share repurchases, $1.0 million in principal payments associated with the Blackstone Credit Agreement, and $3.8 million principal payments related to the TLA Credit Agreement, partially offset by $197.0 million in proceeds associated with the TLA Credit Agreement, net of issuance costs, and $5.1 million in proceeds from the exercise of employee stock options .
In addition, certain payments will become due upon the achievement of development milestones for new indications and formulations as agreed upon by both parties. The 2022 LCA also includes a fixed trademark royalty and a tiered royalty payable on net sales of any new products commercialized, which will be payable to Bioprojet on a quarterly basis .
In addition, certain payments will become due upon the achievement of development milestones for new indications and formulations as agreed upon by both parties. The 2022 LCA also includes a fixed trademark royalty and a tiered royalty based on net sales of any new products commercialized, which will be payable to Bioprojet on a quarterly basis.
We believe we aligned with the FDA on the proposed Phase 3 registration study design to support further investigation of pitolisant as a potential treatment to address the unmet medical need for children, adolescents and adults with PWS experiencing EDS, for which there is currently no approved treatment.
We aligned with the FDA on the proposed Phase 3 registration study design to support further investigation of pitolisant as a potential treatment to address the unmet medical need for children, adolescents and adults with PWS experiencing EDS, for which there is currently no approved treatment.
Based on the positive signals from the data from our Phase 2 proof-of-concept signal detection clinical trial to evaluate pitolisant for the treatment of EDS and other key symptoms in patients with PWS, an end-of-phase 2 meeting with the FDA was held in June 2023.
Based on the positive signals from the data from our Phase 2 proof-of-concept signal detection clinical trial to evaluate pitolisant for the treatment of EDS and other key behavioral symptoms in patients with PWS, an End-of-Phase 2 meeting with the FDA was held in June 2023.
We have based our liquidity and cash flow projections on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we expect. Term Loan A Credit Agreement On July 26, 2023, we entered into a Credit Agreement (the “TLA Credit Agreement”) with JPMorgan Chase Bank, N.A., as “Administrative Agent”, and certain lenders.
We have based our liquidity and cash flow projections on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we expect. Term Loan A Credit Agreement In July 2023, we entered into a Credit Agreement (the “TLA Credit Agreement”) with JPMorgan Chase Bank, N.A., as “Administrative Agent”, and certain lenders.
The TLA Credit Agreement provides for a five-year senior secured term loan (the “TLA Term Loan”) in an aggregate principal amount of $185.0 million. On September 21, 2023, we entered into the First Incremental Amendment (the “First Incremental Amendment”) with the Administrative Agent and Bank of America, N.A., as incremental lender.
The TLA Credit Agreement provides for a five-year senior secured term loan (the “TLA Term Loan”) in an aggregate principal amount of $185.0 million. In September 2023, we entered into the First Incremental Amendment (the “First Incremental Amendment”) with the Administrative Agent and Bank of America, N.A., as incremental lender.
Paragon Agreement We are party to a right-of-use agreement with Paragon Biosciences, LLC (“Paragon”) whereby we have access to and the right to use certain office space leased by Paragon in Chicago, Illinois. For the year ended December 31, 2023, we paid fees of $0.3 million pursuant to this agreement.
Paragon Agreement We are party to a right-of-use agreement with Paragon Biosciences, LLC (“Paragon”) whereby we have access to and the right to use certain office space leased by Paragon in Chicago, Illinois. For the year ended December 31, 2024, we paid fees of $0.3 million pursuant to this agreement.
Sales and marketing expenses include: ● employee-related expenses, such as salaries, share-based compensation, benefits and travel expenses for our sales, marketing and market access personnel; ● healthcare professional-related expenses, including marketing programs, healthcare professional promotional medical education, disease education, conference exhibits and market research; ● patient-related expenses, including patient awareness and education programs, disease awareness education, patient reimbursement programs, patient support services and market research; ● market access expenses, including payor education, specialty pharmacy programs and services to support the continued commercialization of WAKIX; and ● secondary data purchases (i.e., patient claims and prescription data), data warehouse development and data management.
Sales and marketing expenses include: ● employee-related expenses, such as salaries, share-based compensation, benefits and travel expenses for our sales, marketing and market access personnel; ● healthcare professional-related expenses, including marketing programs, healthcare professional promotional medical education, disease education, conference exhibits and market research; 80 Table of Contents ● patient-related expenses, including patient awareness and education programs, disease awareness education, patient reimbursement programs, patient support services and market research; ● market access expenses, including payor education, specialty pharmacy programs and services to support the continued commercialization of WAKIX; and ● secondary data purchases (i.e., patient claims and prescription data), data warehouse development and data management.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials, milestone payments, and the cost of submitting an NDA to the FDA (and/or other regulatory authorities).
Product candidates in later stages of clinical development generally have higher development costs in the current period than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials, milestone payments, and the cost of submitting an NDA to the FDA (and/or other regulatory authorities).
Consistent with this objective, on July 31, 2022, we entered into a License and Commercialization Agreement (the “2022 LCA”) with Bioprojet whereby we obtained exclusive rights to manufacture, use and commercialize one or more new products based on pitolisant in the United States and Latin America, with the potential to add additional indications and formulations upon the agreement of both parties.
Consistent with this objective, in July 2022, we entered into a License and Commercialization Agreement (the “2022 LCA”) with Bioprojet whereby we obtained exclusive rights to manufacture, develop and commercialize one or more new products based on pitolisant in the United States and Latin America, with the potential to add additional indications and formulations upon the agreement of both parties.
In connection with the TLA Credit Agreement, we fully extinguished the Blackstone Credit Agreement, which required a payoff amount of $207.3 million consisting of principal repayment, interest, exit fees, a ticking fee and a prepayment premium.
In connection with the TLA Credit Agreement, we extinguished the Blackstone Credit Agreement, which required a payoff amount of $207.3 million consisting of principal repayment, interest, exit fees, payment of the Ticking Fee and a prepayment premium.
The TLA Credit Agreement contains customary affirmative and negative covenants, financial covenants, representations and warranties, events of default and other provisions. We were in compliance with all covenants as of December 31, 2023.
The TLA Credit Agreement contains customary affirmative and negative covenants, financial covenants, representations and warranties, events of default and other provisions. We were in compliance with all covenants as of December 31, 2024.
Pitolisant was developed by Bioprojet and approved by the EMA in 2016 for the treatment of narcolepsy in adult patients with or without cataplexy and in 2021 for the treatment of EDS in adult patients with obstructive sleep apnea.
Sleep/Wake Franchise Pitolisant was developed by Bioprojet and approved by the EMA in 2016 for the treatment of narcolepsy in adult patients with or without cataplexy and in 2021 for the treatment of EDS in adult patients with obstructive sleep apnea.
We are taking a mechanism-based approach to managing the life cycle of pitolisant and identified idiopathic hypersomnia (“IH”), another central disorder of hypersomnolence like narcolepsy, as our next potential new indication for WAKIX, which received orphan drug designation by the FDA in September 2023 and Fast Track Designation in November 2023.
We have taken a mechanism-based approach to managing the life cycle of pitolisant and identified idiopathic hypersomnia (“IH”), another central disorder of hypersomnolence like narcolepsy, as our next potential new indication for WAKIX, which received orphan drug designation by the FDA in September 2023 and Fast Track Designation in November 2023.
On August 4, 2021, we acquired HBS-102, a Melanin-concentrating hormone receptor 1 (MCHR1) antagonist previously developed as CSTI-100/ALB-127258(a)/ALB-127258 (the “Compound”), along with intellectual property and other assets related to the development, manufacture, and commercialization of the Compound from ConSynance Therapeutics, Inc.
In August 2021, we acquired HBS-102, a Melanin-concentrating hormone receptor type 1 (MCHR1) antagonist previously developed as CSTI-100/ALB-127258(a)/ALB-127258 (the “Compound”), along with intellectual property and other assets related to the development, manufacture, and commercialization of the Compound from ConSynance Therapeutics, Inc.
We expect the cost of product sales to increase as we continue to ramp up production in order to meet future demand for WAKIX and diversify our supply chain for WAKIX. The shelf life of WAKIX is three years from date of manufacture, with the earliest expiration of current inventory expected to be May 2025.
We expect the cost of product sales to increase as we continue to ramp up production in order to meet future demand for WAKIX and diversify our supply chain for WAKIX. The shelf life of WAKIX is four years from the date of manufacture, with the earliest expiration of current inventory expected to be October 2025.
Although we expect net sales to increase over time, provisions for sales discounts and allowances may fluctuate based on the mix of sales to different customer segments and/or changes in our estimates.
Although we expect net sales to increase over time, provisions for sales discounts and allowances may fluctuate based on the mix of sales to 78 Table of Contents different customer segments and/or changes in our estimates.
A discussion of the year ended December 31, 2022, compared to the year ended December 31, 2021, has been reported previously under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 21, 2023.
A discussion of the year ended December 31, 2023, compared to the year ended December 31, 2022, has been reported previously under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 22, 2024.
As of December 31, 2023, we had outstanding debt of $196.3 million. The consolidated financial statements have been prepared as though we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
As of December 31, 2024, we had outstanding debt of $181.3 million. The consolidated financial statements have been prepared as though we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
Research and development expenses also include: ● employee-related expenses, such as salaries, share-based compensation, benefits and travel expenses for our research and development personnel; ● direct third-party costs such as expenses incurred under agreements with CROs, and contract manufacturing organizations (“CMOs”); ● manufacturing costs in connection with producing materials for use in conducting clinical trials; ● costs related to packaging and labeling of clinical supplies; ● other third-party expenses (e.g., consultants, advisors) directly attributable to the development of our product candidates; and 86 Table of Contents ● amortization expense for assets used in research and development activities.
Research and development expenses also include: ● employee-related expenses, such as salaries, share-based compensation, benefits and travel expenses for our research and development personnel; ● direct third-party costs such as expenses incurred under agreements with clinical research organizations (“CROs”), and contract manufacturing organizations (“CMOs”); ● manufacturing costs in connection with producing materials for use in conducting clinical trials; ● costs related to packaging and labeling of clinical supplies; ● other third-party expenses (e.g., consultants, advisors) directly attributable to the development of our product candidates; ● acquired in-process research and development; and ● amortization expense for assets used in research and development activities.
While the primary endpoint did not meet statistical significance, we believe the totality of the data showed favorable numerical trends for pitolisant in the treatment of adult patients with IH and we have scheduled a meeting with the FDA for March 2024 to discuss the path forward for IH.
While the primary endpoint did not meet statistical significance, we believe the totality of the data showed favorable numerical trends for pitolisant in the treatment of adult patients with IH and we met with the FDA in March 2024 to discuss the path forward for IH.
We expect our sales and marketing expenses to increase in the near- and mid-term to support WAKIX’s indications for the treatment of EDS or cataplexy in adult patients with narcolepsy and to expand our portfolio with the anticipated growth from potential additional indications.
We expect our sales and marketing expenses to increase in the near- and mid-term to support WAKIX’s indications for the treatment of EDS or cataplexy in adult patients with narcolepsy, the treatment of EDS in pediatric patients 6 years of age and older with narcolepsy and to expand our portfolio with the anticipated growth from potential additional indications .
Food and Drug Administration (the “FDA”) for the treatment of excessive daytime sleepiness (“EDS”) in adult patients with narcolepsy, and its U.S. commercial launch was initiated in November 2019. In October 2020, WAKIX was approved by the FDA for the treatment of cataplexy in adult patients with narcolepsy.
Food and Drug Administration (the “FDA”) for the treatment of EDS in adult patients with narcolepsy, and its U.S. commercial launch was initiated in November 2019. In October 2020, WAKIX was approved by the FDA for the treatment of cataplexy in adult patients with narcolepsy.
Under the terms of the Tender Offer, we paid (i) $1.1059 per share of Zynerba Common Stock (the “Common Cash Amount”), plus (ii) one contingent value right (each, a “CVR”) per share of Zynerba Common Stock (the “Common CVR Amount”), which represents the right to receive up to approximately $2.5444 per share of Zynerba Common Stock, subject to the achievement of certain clinical, regulatory and sales-based milestones.
Under the terms of the Tender Offer, we paid (i) $1.1059 per share of Zynerba Common Stock (the “Common Cash Amount”), the aggregate amount of which was $60.0 million and was paid at closing, plus (ii) one contingent value right (each, a “CVR”) per share of Zynerba Common Stock (the “Common CVR Amount”), which represents the right to receive up to approximately $2.5444 per share of Zynerba Common Stock, subject to the achievement of certain clinical, regulatory and sales-based milestones.
Blackstone Credit Agreement In August 2021, we entered into the Blackstone Credit Agreement that provided for (i) a senior secured term loan facility in an aggregate original principal amount of $200.0 million (the “Initial Term Loan”) and (ii) a senior secured delayed draw term loan facility in an aggregate principal amount up to $100.0 million (the “DDTL” and, together with the Initial Term Loans, the “Loans”).
Blackstone Credit Agreement In August 2021, we entered into the Blackstone Credit Agreement which provided for (i) a senior secured term loan facility in an aggregate original principal amount of $200.0 million (the “Initial Term Loan”) and (ii) a senior secured delayed draw term loan facility in an aggregate principal amount up to $100.0 million (the “DDTL”).
Additionally, there are payments due upon the achievement of certain milestones including $1.0 million for preclinical milestones, $19.0 million for development milestones, $44.0 million for regulatory milestones and $110.0 million for sales milestones.
There are additional payments due upon the achievement of certain milestones, including $19.0 million for development milestones, $44.0 million for regulatory milestones and $110.0 million for sales milestones.
Simultaneously, our Board of Directors approved a share repurchase program (the “October 2023 Repurchase Program”) providing for the repurchase of shares of common stock in an aggregate amount of up to $200.0 million, excluding commissions and transaction fees. The October 2023 Repurchase Program may be suspended, terminated, or modified at any time for any reason.
Share Repurchases In August 2023, our Board of Directors approved a program (the “August 2023 Repurchase Program”) providing for the repurchase of shares of common stock in an aggregate amount of up to $125.0 million, excluding commissions and transaction fees. The repurchase program may be suspended, terminated or modified at any time for any reason.
In 84 Table of Contents June 2021, we initiated a Phase 2 proof-of-concept signal detection clinical trial to evaluate pitolisant for the treatment of EDS, fatigue and cognitive dysfunction in adult patients with DM1 and announced topline results from this trial in the fourth quarter of 2023, in which clinically meaningful improvements were demonstrated in EDS and fatigue.
In June 2021, we initiated a Phase 2 proof-of-concept signal detection clinical trial to evaluate pitolisant for the treatment of EDS, fatigue and cognitive dysfunction in adult patients with DM1 and announced topline results from this trial in the fourth quarter of 2023, in which clinically meaningful improvements were demonstrated in EDS and fatigue, the two most prominent non-muscular symptoms in patients with DM1.
We base our estimates on contractual terms, historical experience and 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 readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We base our estimates on contractual terms, historical experience and 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 readily apparent from other sources.
We believe that our existing cash, cash equivalents and investments on hand as of December 31, 2023, will enable us to meet our operational liquidity needs for the next 12 months.
We believe that our existing cash, cash equivalents and investments on hand as of December 31, 2024, will enable us to meet our operational liquidity needs and fund our potential investing activities for the next 12 months.
We do not track research and development expenses on an indication-by-indication basis. A significant portion of our research and development costs are external costs, such as fees paid to CROs and CMOs, central laboratories, contractors, and consultants in connection with our clinical development programs. Internal expenses primarily relate to personnel who are deployed across multiple programs.
A significant portion of our research and development costs are external costs, such as fees paid to CROs and CMOs, central laboratories, contractors, and consultants in connection with our clinical development programs. Internal expenses primarily relate to personnel who are deployed across multiple programs.
On January 26, 2023, Bioprojet received a positive opinion from the EMA’s Committee for Medicinal Products for Human Use (“CHMP”) and in March 2023, the EMA granted approval for the marketing authorization of WAKIX for the treatment of narcolepsy in children 6 and older.
In January 2023, Bioprojet received a positive opinion from the EMA’s Committee for Medicinal Products for Human Use (“CHMP”) and in March 2023, the EMA granted approval for the marketing authorization of WAKIX for the treatment of narcolepsy with or without cataplexy in children six and older.
Net working capital excluding cash decreased by $35.0 million. Net cash provided by operating activities for the year ended December 31, 2022, consisted of our net income of $181.5 million adjusted for non-cash items of $23.4 million related to intangible amortization and depreciation and $26.9 million related to stock-based compensation expense. Net working capital excluding cash decreased by $4.1 million.
Net cash provided by operating activities for the year ended December 31, 2023, consisted of our net income of $128.9 million adjusted for non-cash items of $24.4 million related to intangible amortization and depreciation and $31.2 million related to stock-based compensation expense. Net working capital excluding cash decreased by $35.0 million.
The safety profile was consistent with the established safety profile of pitolisant. Our partner, Bioprojet completed a Phase 3 trial in pediatric patients with narcolepsy and submitted the trial data to the European Medicines Agency (the “EMA”) seeking approval for a pediatric narcolepsy indication.
Our partner, Bioprojet completed a Phase 3 trial in pediatric patients with narcolepsy and submitted the trial data to the European Medicines Agency (the “EMA”) seeking approval for a pediatric narcolepsy indication.
We define our critical accounting policies as those under GAAP that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles.
Actual results may differ from these estimates under different assumptions or conditions. 87 Table of Contents We define our critical accounting policies as those under GAAP that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles.
The increase was primarily due to a $7.6 million increase in personnel costs, a $6.5 million increase in patient engagement and marketing activities, a $2.7 million increase in travel, and a $1.2 million increase in stock compensation associated with new awards.
The increase was primarily due to a $10.0 million increase in patient engagement and marketing activities, a $2.3 million increase in stock compensation associated with new awards, and a $1.2 million increase in personnel costs.
Sales and Marketing Expenses S ales and marketing expenses increased by $18.1 million, or 22.9%, for the year ended December 31, 2023 compared to the same period in 2022.
Sales and Marketing Expenses S ales and marketing expenses increased by $13.5 million, or 13.9%, for the year ended December 31, 2024, compared to the same period in 2023.
Both the Common Cash Amount and Common CVR Amount are to be paid in cash, subject to any applicable withholding of taxes and without interest. The aggregate consideration to acquire the Zynerba Common Stock upon completion of the Tender Offer was $60 million, excluding transaction related fees, which we paid using cash on hand.
The Common CVR Amounts are to be paid in cash, subject to any applicable withholding of taxes and without interest. The aggregate consideration we paid to acquire the Zynerba Common Stock upon completion of the Tender Offer was $60.0 million, exclusive of transaction-related fees. We financed the acquisition with cash on hand.
The average number of patients on WAKIX at the end of 2023 was approximately 6,150. Additionally, as of December 31, 2023, we have secured formulary access for more than 80% of all insured lives (Commercial, Medicare and Medicaid) in the United States.
The average number of patients on WAKIX for the year ended December 31, 2024, was approximately 7,100. Additionally, as of December 31, 2024, we have secured formulary access for more than 80% of all insured lives (Commercial, Medicare and Medicaid) in the United States .
Acquisitions On October 10, 2023, we completed a tender offer (the “Tender Offer”) to acquire all of the outstanding shares of common stock of Zynerba Pharmaceuticals, Inc. (“Zynerba Common Stock”).
Zynerba Acquisition In October 2023, we completed a tender offer (the “Tender Offer”) to acquire all of the outstanding shares of common stock of Zynerba (“Zynerba Common Stock”).
The DDTL was initially available to draw down through August 9, 2022. In August 2022, we entered into an agreement to extend the expiration date of the DDTL to August 9, 2023, for which we will pay a ticking fee at a rate of 1% per annum on the undrawn portion of the DDTL, which commenced on August 10, 2022.
In August 2022, we entered into an agreement to extend the expiration date of the DDTL to August 9, 2023, for which we would pay a ticking fee at a rate of 1% per annum on the undrawn portion of the DDTL (the “Ticking Fee”), commencing August 10, 2022.
The repurchase program may be suspended, terminated or modified at any time for any reason. During the year ended December 31, 2023, we repurchased and retired 1,439,792 shares of common stock at an aggregate cost of approximately $50.0 million, excluding commissions and transaction fees.
During the year ended December 31, 2023, we repurchased and retired 1,439,792 shares of common stock at an aggregate cost of approximately $50.0 million, excluding commissions and transaction fees, under the August 2023 Repurchase Program.
We have significantly increased our research and development efforts as we advance our clinical programs in IH, PWS and DM and assess other product candidates to expand our pipeline.
We have significantly increased our research and development efforts as we advance our clinical programs and add product candidates to expand our pipeline.
Income Taxes Income tax expense was $44.5 million, representing a 25.7% effective tax rate, for the year ended December 31, 2023 compared to an income tax benefit of $76.8 million for the year ended December 31, 2022.
Income Taxes Income tax expense was $46.3 million, representing a 24.1% effective tax rate, for the year ended December 31, 2024, compared to income tax expense of $44.5 million for the year ended December 31, 2023, representing a 25.7% effective tax rate.
Loss on Debt Extinguishment Loss on debt extinguishment was $9.8 million for the year ended December 31, 2023. There was no comparable amount in the prior year periods. Interest Expense Interest expense increased by $5.0 million, or 26.4%, for the year ended December 31, 2023 compared to the same period in 2022.
Loss on Debt Extinguishment There was no loss on debt extinguishment for the year ended December 31, 2024. Loss on debt extinguishment was $9.8 million for the year ended December 31, 2023. Interest Expense Interest expense decreased by $6.3 million, or 26.4%, for the year ended December 31, 2024, compared to the same period in 2023.
We remain committed to obtaining pediatric exclusivity for WAKIX. We also seek to expand our pipeline through the acquisition of additional assets that focus on addressing the unmet needs of patients living with rare neurological diseases as well as patients living with other neurological diseases who have unmet medical needs.
We are expanding our pipeline through the acquisition of additional assets that focus on addressing the unmet needs of patients living with rare neurological diseases as well as patients living with other neurological diseases who have unmet medical needs.
In accordance with GAAP, we evaluate our estimates and judgments on an ongoing basis. Significant estimates include assumptions used in the determination of the amount of revenue recognized on sales of WAKIX, costs incurred under services type agreements related to the performance of research and development activities, and the measurement of compensation expense pursuant to stock-based awards.
Significant estimates include assumptions used in the determination of the amount of revenue recognized on sales of WAKIX, costs incurred under services type agreements related to the performance of research and development activities, the measurement of compensation expense pursuant to stock-based awards, the calculation of our income tax provision, and the determination of accounting treatment for our business combinations.
The effective tax rate of 25.7% for the year ended December 31, 2023 included 21.0% for the provision of federal income taxes and 5.7% for the provision of state income taxes, partially offset by a 2.1% benefit from research and development credits . 90 Table of Contents Liquidity, Sources of Funding and Capital Resources Overview As of December 31, 2023, we had cash, cash equivalents, and investments of $425.6 million and accumulated deficit of $143.3 million.
The effective tax rate of 24.1% for the year ended December 31, 2024, included 21.0% for the provision of federal income taxes and 6.4% for the provision of state income taxes, partially offset by a 4.7% benefit from research and development and orphan drug credits , partially offset by 1.8% related to nondeductible IPR&D expenses. 83 Table of Contents Liquidity, Sources of Funding and Capital Resources Overview As of December 31, 2024, we had cash, cash equivalents, and investments of $576.1 million and retained earnings of $2.2 million.
In October 2023, we received FDA alignment regarding the protocol for the Phase 3 TEMPO study in patients with PWS, which we believe will satisfy the requirements for both the registrational trial and one of the two requirements for pediatric exclusivity for pitolisant. In February 2024, the FDA granted Orphan Drug designation to pitolisant for the treatment of PWS.
In October 2023, we received FDA alignment regarding the study design for the Phase 3 TEMPO study in patients with PWS, which has the potential to serve as a the registrational trial and support our efforts to seek pediatric exclusivity for pitolisant. In February 2024, the FDA granted Orphan Drug designation to pitolisant for the treatment of PWS.
Sales and Marketing Expenses Our sales and marketing expenses primarily relate to the market development and commercialization activities of WAKIX for the treatment of EDS and cataplexy in adult patients with narcolepsy. Market development and commercial activities account for a significant portion of our operating expenses and are expensed as incurred.
Sales and Marketing Expenses Our sales and marketing expenses primarily relate to the market development and commercialization activities of WAKIX for the treatment of EDS and cataplexy in adult patients with narcolepsy and for EDS in children six years and older with narcolepsy.
The $30.0 million licensing fee was recorded in research and development expenses within the consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2022. 92 Table of Contents Recent Milestone Payments In March 2023, we achieved a preclinical milestone, which triggered a $0.8 million payment under the provisions of the APA, which was paid in April 2023.
In March 2023, we achieved a preclinical milestone, which triggered a $0.8 million payment under the provisions of the APA, which we recognized as an IPR&D charge recorded in research and development within the consolidated statement of operations and comprehensive income for the year ended December 31, 2023.
Pitolisant was granted Orphan Drug Designation for the treatment of narcolepsy by the FDA in 2010. It received Breakthrough Therapy designation for the treatment of cataplexy in patients with narcolepsy and Fast Track status for the treatment of EDS and cataplexy in patients with narcolepsy in April 2018.
It received Breakthrough Therapy designation for the treatment of cataplexy in patients with narcolepsy and Fast Track designation for the treatment of EDS and cataplexy in patients with narcolepsy in April 2018. In August 2019, WAKIX was approved by the U.S.
We acquired full development and commercialization rights for HBS-102 globally, but we have provided an indication-limited grant-back license to ConSynance for the development and commercialization of the Compound in Greater China.
We acquired full development and commercialization rights for HBS-102 globally, but we have provided an indication-limited grant-back license to ConSynance for the development and commercialization of the Compound in Greater China. We conducted a preclinical PoC study to assess the effect of HBS-102 on hyperphagia, weight gain and other metabolic parameters in a mouse model of PWS.
Cash Flows The following table sets forth a summary of our cash flows for the years ended December 31, 2023, and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Selected cash flow data ​ (In thousands) Cash provided by (used in): ​ ​ Operating activities ​ $ 219,387 ​ $ 144,466 Investing activities ​ (46,439) ​ (141,832) Financing activities ​ (105,552) ​ 6,841 ​ Operating Activities Net cash provided by operating activities for the year ended December 31, 2023, consisted of our net income of $128.9 million adjusted for non-cash items of $24.4 million related to intangible amortization and depreciation and $31.2 million related to stock-based compensation expense.
Cash Flows The following table sets forth a summary of our cash flows for the years ended December 31, 2024, and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 2023 Selected cash flow data ​ (In thousands) Cash provided by (used in): ​ ​ Operating activities ​ $ 219,821 ​ $ 219,387 Investing activities ​ (67,484) ​ (46,439) Financing activities ​ (10,996) ​ (105,552) ​ 86 Table of Contents Operating Activities Net cash provided by operating activities for the year ended December 31, 2024, primarily consisted of net income of $143.8 million adjusted for non-cash items of $43.6 million related to acquired IPR&D, $42.7 million related to stock-based compensation expense, and $24.1 million related to intangible amortization and depreciation, offset by $29.3 million related to deferred tax assets.
In March 2022, we made a final $40.0 million milestone payment to Bioprojet upon WAKIX attaining $500.0 million in life-to-date aggregate net sales in the United States.
Recent Milestone Payments In September 2024, we achieved a preclinical milestone, which triggered a $1.0 million payment under the provisions of the APA, which was paid in October 2024. In March 2023, we made a final $40.0 million milestone payment to Bioprojet upon WAKIX attaining $500.0 million in life-to-date aggregate net sales in the United States.
We anticipate meeting with the FDA towards the end of the first quarter of 2024. We are focusing our development efforts on other rare neurological disorders in which EDS is a prominent symptom, including Prader-Willi Syndrome (“PWS”) and myotonic dystrophy, otherwise known as dystrophia myotonica (“DM”).
In February 2025, we received a Refusal to File letter from the FDA for pitolisant in IH. ​ We are focusing our development efforts on other rare neurological disorders in which EDS is a prominent symptom, including Prader-Willi Syndrome (“PWS”) and myotonic dystrophy type 1, otherwise known as dystrophia myotonica (“DM1”).
At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of any additional indications for pitolisant or other product candidates that we move forward for regulatory approval.
We expect our research and development expenses to be significant as we advance our current clinical development programs and prepare to seek regulatory approval for additional indications for pitolisant, complete the Phase 3 clinical trials for ZYN002 and EPX100 and advance the development of Pitolisant GR, Pitolisant HD, BP1.15205 and HBS-102 toward new indications. 79 Table of Contents At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of any additional indications for pitolisant or other product candidates that we move forward for regulatory approval.
Results of Operations The following table sets forth selected items in our consolidated statements of operations for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 ​ ​ (In thousands) Net product revenue ​ $ 582,022 ​ $ 437,855 Cost of product sales ​ 121,236 ​ 83,481 Gross profit ​ 460,786 ​ 354,374 Operating expenses: ​ ​ Research and development ​ 76,063 ​ 70,886 Sales and marketing ​ 97,404 ​ 79,285 General and administrative ​ 95,289 ​ 84,017 Total operating expenses ​ 268,756 ​ 234,188 Operating income ​ 192,030 ​ 120,186 ​ ​ ​ ​ ​ ​ ​ Loss on debt extinguishment ​ (9,766) ​ — Other (expense) income, net ​ 159 ​ 169 Interest expense ​ ​ (23,757) ​ ​ (18,795) Interest income ​ 14,730 ​ 3,126 Net income before provision for income taxes ​ 173,396 ​ 104,686 Income tax (expense) benefit ​ (44,543) ​ 76,782 Net income ​ $ 128,853 ​ $ 181,468 ​ Net Product Revenue Net product revenue increased by $144.2 million, or 32.9%, for the year ended December 31, 2023, compared to the same period in 2022.
Interest Income Interest income consists primarily of cash interest earned on our cash and investment balances and accretion of the discount on our investments in debt securities. 81 Table of Contents Results of Operations The following table sets forth selected items in our consolidated statements of operations for the periods presented: ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 2023 ​ (In thousands) Net product revenue $ 714,734 ​ $ 582,022 Cost of product sales 156,815 ​ 121,236 Gross profit 557,919 ​ 460,786 Operating expenses: ​ Research and development 145,825 ​ 76,063 Sales and marketing 110,916 ​ 97,404 General and administrative 110,352 ​ 95,289 Total operating expenses 367,093 ​ 268,756 Operating income 190,826 ​ 192,030 ​ ​ ​ ​ ​ ​ Loss on debt extinguishment — ​ (9,766) Other (expense) income, net (68) ​ 159 Interest expense ​ (17,496) ​ ​ (23,757) Interest income 18,542 ​ 14,730 Net income before provision for income taxes 191,804 ​ 173,396 Income tax expense (46,311) ​ (44,543) Net income $ 145,493 ​ $ 128,853 ​ Net Product Revenue Net product revenue increased by $132.7 million, or 22.8%, for the year ended December 31, 2024, compared to the same period in 2023.
Recent Accounting Pronouncements See Note 3 to our consolidated financial statements included herein under “Part II—Item 8. Financial Statements and Supplementary Data.” for more information. ​ ​
During the year covered by this report, there were no material changes to the accounting policies and assumptions previously disclosed, except as disclosed in Note 3 to the consolidated financial statements contained herein. Recent Accounting Pronouncements See Note 3 to our consolidated financial statements included herein under “Part II—Item 8. Financial Statements and Supplementary Data.” for more information. ​
WAKIX is the first-and-only approved product for patients with narcolepsy that is not scheduled as a controlled substance by the U.S. Drug Enforcement Administration (the “DEA”). We believe that pitolisant’s ability to regulate histamine gives it the potential to provide therapeutic benefit in other rare neurological diseases that are mediated through H 3 receptors and histamine signaling.
We believe that pitolisant’s ability to regulate histamine gives it the potential to provide therapeutic benefit in other rare neurological diseases that are mediated through H 3 receptors and histamine signaling.
License Agreement In July 2022, we entered into the 2022 LCA with Bioprojet whereby we obtained exclusive rights to manufacture, use and commercialize one or more new products based on pitolisant in the United States and Latin America, with the potential to add additional indications and formulations upon the agreement of both parties.
Under the Sublicense, the Company paid Bioprojet an upfront license fee of $25.5 million and will also be obligated to pay up to $127.5 million upon achievement of development and regulatory milestones and up to $240.0 million upon achievement of sales-based milestones, as well as royalty rates in the mid-teens on potential sales in the Licensed Territories. ​ In July 2022, we entered into the 2022 LCA with Bioprojet whereby we obtained exclusive rights to manufacture, develop and commercialize one or more new products based on pitolisant in the United States and Latin America, with the potential to add additional indications and formulations upon the agreement of both parties.
The increase was primarily driven by a $22.9 million increase in clinical development work associated with PWS, ZYN002, IH, NG1/NG2 and DM1, a $4.0 million increase in personnel costs, a $1.3 million increase in stock compensation associated with new awards, a $3.8 million severance charge, and a $2.3 million IPR&D charge, both related to the acquisition of Zynerba, and a $0.8 million IPR&D charge related to preclinical milestones achieved for HBS-102 , partially offset by a $30 million licensing fee incurred upon entering the 2022 LCA with Bioprojet during the year ended December 31, 2022.
The increase was primarily driven by $43.6 million in IPR&D charges related to the Bioprojet Sublicense Agreement, the acquisition of Epygenix and a preclinical milestone achieved for HBS-102, a combined $22.3 million increase in research and development expenses for the recently acquired product candidates, ZYN002 and EPX100, a $5.3 million increase in personnel costs associated with higher headcount, a $2.7 million increase in stock compensation associated with new awards, and a $1.7 million increase in other research and development, primarily due to preclinical work related to BP1.1520, partially offset by a $2.8 million decrease in clinical development associated with pitolisant, driven by a decrease for the IH indication, a $2.3 million IPR&D charge related to the acquisition of Zynerba for the year ended December 31, 2023, and a $0.8 million IPR&D charge related to preclinical milestones achieved for HBS-102 during the year ended December 31, 2023.
We currently have adequate supply of WAKIX to cover demand into the second quarter of 2025, with additional API on-hand inventory to support at least 36 months beyond this time frame. Research and Development Expenses Research and development expenses primarily include development programs for potential new indications for pitolisant in patients with IH, PWS and DM.
We currently have adequate supply of WAKIX to cover demand into the first quarter of 2027, with additional API on-hand inventory to support at least 24 months beyond this time frame.
We acquired an exclusive license to develop, manufacture and commercialize pitolisant in the United States pursuant to our license agreement with Bioprojet (as amended, the “2017 LCA”) in July 2017. See “Part I—Item 1. Business.—Strategic Agreement—License and Commercialization Agreement with Bioprojet” for further information regarding the 2017 LCA.
We acquired an exclusive license to develop, manufacture and commercialize pitolisant in the United States pursuant to our license agreement with Bioprojet (as amended, the “2017 LCA”) in July 2017. Pitolisant was granted Orphan Drug designation for the treatment of narcolepsy by the FDA in 2010.
Based on the data from the positive Phase 3 trial conducted by Bioprojet, we submitted an sNDA for pediatric narcolepsy in December 2023. On February 21, 2024, we announced that the FDA has granted priority review of our pediatric narcolepsy sNDA and has set a Prescription Drug User Fee Act, or target action date, of June 21, 2024.
Based on the data from the positive Phase 3 trial conducted by Bioprojet, we submitted an sNDA for pediatric narcolepsy in December 2023. In June 2024, we announced that the FDA approved our sNDA for WAKIX for the treatment of EDS in pediatric patients six years of age and older with narcolepsy .
We have made progress in the development of two new formulations of pitolisant, Next Gen 1 (“NG1”) and Next Gen 2 (“NG2”). Both formulations entered clinical studies in the fourth quarter of 2023 and we anticipate data in the first half of 2024.
We have made progress in the development of two new formulations of pitolisant: pitolisant GR and pitolisant HD. Both formulations entered clinical studies in the fourth quarter of 2023. We received data from the pitolisant GR pilot bioequivalence study, which supports further development of pitolisant GR.
During the year ended December 31, 2023, the Company repurchased and retired 1,814,653 shares of common stock at an aggregate cost of $50.0 million under the October 2023 Repurchase Program, excluding commissions and transaction fees. As of December 31, 2023, the remaining amount of common stock authorized for repurchase was $150.0 million.
The October 2023 Repurchase Program may be suspended, terminated, or modified at any time for any reason. During the year ended December 31, 2024, no shares of common stock were repurchased and cancelled by the Company under the October 2023 Repurchase Program. As of December 31, 2024, the remaining amount of common stock authorized for repurchases was $150.0 million.
Asset Purchase Agreement In August 2021, we entered into the APA to acquire HBS-102, a potential first-in-class molecule with a novel mechanism of action.
As a result, the Company now has an exclusive license relating to the use of clemizole, initially for the treatment of DS and LGS. 85 Table of Contents ConSynance Agreement In August 2021, we entered into an asset purchase agreement with ConSynance Therapeutics, Inc. (the “APA”) to acquire HBS-102, a potential first-in-class molecule with a novel mechanism of action.
Cost of product sales as a percentage of net product revenue was 20.8% for the year ended December 31, 2023, compared to 19.1% for the year ended December 31, 2022. The increase in cost of product sales was due to higher royalties as a result of higher sales of WAKIX in the current year.
Cost of Product Sales Cost of product sales increased by $35.6 million, or 29.3%, for the year ended December 31, 2024, compared to the same period in 2023. Cost of product sales as a percentage of net product revenue was 21.9% for the year ended December 31, 2024, compared to 20.8% for the year ended December 31, 2023.
We recognized a loss on extinguishment of debt of $9.8 million relating to the Blackstone Credit Agreement for the year ended December 31, 2023.We have no further obligations under the Blackstone Credit Agreement. 91 Table of Contents Share Repurchases On August 1, 2023, our Board of Directors approved a program providing for the repurchase of shares of common stock in an aggregate amount of up to $125.0 million, excluding commissions and transaction fees.
In October 2023, our Board of Directors terminated the August 2023 Repurchase Program and approved a share repurchase program (the “October 2023 Repurchase Program”) providing for the repurchase of shares of common stock in an aggregate amount of up to $200.0 million, excluding commissions and transaction fees.
The increase in patient engagement and marketing activities for both comparable periods was driven by our continued growth of WAKIX and the increase in personnel costs for both comparable periods was related increased headcount and increased sales force incentives .
The increase in patient engagement and marketing activities was driven by our continued growth of WAKIX and the increase in personnel costs was related to increased headcount. General and Administrative Expenses General and administrative expenses increased by $15.1 million, or 15.8%, for the year ended December 31, 2024, compared to the same period in 2023.
Under the terms of the agreement, the Company acquired full development and commercialization rights globally, with the exception of Greater China, for $3.5 million, which was recorded in research and development expense in the Company’s statement of operations and comprehensive income (loss) for the year ended December 31, 2021.
Under the terms of the APA, we acquired full development and commercialization rights globally, with the exception of Greater China, for $3.5 million.
Net cash used in investing activities for the year ended December 31, 2022, was $141.8 million, which was primarily attributable to $110.7 million in purchases of debt securities and a final $40.0 million initial payment associated with the 2017 LCA, partially offset by $9.1 million in proceeds from sales and maturities of investments.
Investing Activities Net cash used in investing activities for the year ended December 31, 2024, was $67.5 million, which was primarily attributable to $105.3 million in purchases of debt securities, a $25.5 million license fee paid to Bioprojet, a $1.0 million milestone payment related to HBS-102, $33.1 million net cash consideration paid for the acquisition of Epygenix and $1.2 million in purchases of property and equipment, partially offset by $98.5 million from maturities of investments .
Net cash provided by financing activities for the year ended December 31, 2022 was $6.8 million, which primarily consisted of $8.8 million in proceeds from the exercise of employee stock options and stock issuances offset by $2.0 million in principal payments associated with the Blackstone Credit Agreement. 93 Table of Contents Critical Accounting Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP.
Critical Accounting Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP.
The increase was primarily due t o higher interest rates in 2023 compared to 2022 and $2.0 million in unamortized fees and ticking fees pertaining to the DDTL (defined below). Interest Income Interest income increased by $11.6 million, or 371.2%, for the year ended December 31, 2023 compared to the same period in 2022.
The decrease was primarily due t o lower interest rates as a result of refinancing into the TLA Credit Agreement (defined below). Interest Income Interest income increased by $3.8 million, or 25.9%, for the year ended December 31, 2024, compared to the same period in 2023.
Interest Expense Interest expense consists primarily of interest expense on debt facilities, amortization of debt issuance costs and amortization of premiums on our debt securities. Interest Income Interest income consists primarily of cash interest earned on our cash and investment balances and accretion of the discount on our investments in debt securities.
Loss on Debt Extinguishment Loss on debt extinguishment consists primarily of costs of extinguishment of debt during the applicable period related to the prepayment of our credit agreements. Interest Expense Interest expense consists primarily of interest expense on debt facilities, amortization of debt issuance costs and amortization of premiums on our debt securities.
The increase was primarily due to a $4.1 million severance charge associated with the acquisition of Zynerba, a $2.9 million increase in personnel costs, a $1.9 million increase in legal and professional fees due to patent lawsuits, a $1.7 million increase to stock compensation associated with new awards and a $0.9 million increase in intangible asset amortization as a result of the $40.0 million milestone payment in March 2022 upon attaining $500.0 million in life-to-date aggregate net sales of WAKIX in the United States .
The increase was primarily due to an $10.9 million increase in legal and professional fees, primarily associated with patent lawsuits, and a $6.5 million increase in stock compensation associated with new awards, partially offset by a $2.0 million decrease in insurance and a $1.0 million decrease in personnel costs driven by the severance charge associated with the acquisition of Zynerba for the year ended December 31, 2023 .
We expect to initiate the Phase 3 study in the first quarter of 2024.
The Phase 3 registrational trial, the 76 Table of Contents TEMPO study, was initiated in the first quarter of 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased on the 96 Table of Contents $196.3 million of principal outstanding as of December 31, 2023, an immediate 10% change in the SOFR would not have a material impact on our debt-related obligations, financial position or results of operations.
Biggest changeBased on the $181.3 million of principal outstanding as of December 31, 2024, an immediate 10% change in the SOFR would not have a material impact on our debt-related obligations, financial position or results of operations.
Inflation Fluctuation Risk Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations for the years ended December 31, 2023, and 2022. ​
Inflation Fluctuation Risk Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations for the years ended December 31, 2024, and 2023. ​
Based on our $358.5 million of investments in money market funds, U.S. treasury notes, corporate bonds and municipal obligations as of December 31, 2023, an immediate 10% change in market interest rates would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations.
Based on our $426.6 million of investments in money market funds, U.S. treasury notes, corporate bonds and municipal obligations as of December 31, 2024, an immediate 10% change in market interest rates would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations.
As of December 31, 2023, we had $196.3 million in borrowings outstanding.
As of December 31, 2024, we had $181.3 million in borrowings outstanding.

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