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What changed in Vanda Pharmaceuticals Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Vanda Pharmaceuticals 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.

+583 added−508 removedSource: 10-K (2025-02-14) vs 10-K (2024-02-08)

Top changes in Vanda Pharmaceuticals Inc.'s 2024 10-K

583 paragraphs added · 508 removed · 442 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

169 edited+50 added−20 removed232 unchanged
Biggest changeShift work and excessive sleepiness disorder treatments include Nuvigil ® (armodafinil) and Provigil ® (modafinil) both by Teva. • For Fanapt ® in the treatment of schizophrenia, the atypical antipsychotics competitors are Risperdal ® (risperidone), including the LAI formulation Risperdal Consta ® and Invega ® (paliperidone), including the LAI formulation Invega ® Sustenna ® , each by Johnson & Johnson, the LAI formulation Zyprexa ® Relprevv TM (olanzapine) by Cheplapharm, Abilify ® (aripiprazole) by Otsuka America Pharmaceutical Inc., Abilify Maintena ® (the LAI formulation of Abilify ® ) by Lundbeck/Otsuka America Pharmaceutical Inc., Geodon ® (ziprasidone) by Viatris, Inc., Saphris ® (asenapine) by Allergan, Latuda ® (lurasidone) by Sunovion Pharmaceuticals Inc., Rexulti ® (brexpiprazole) by Lundbeck/Otsuka America Pharmaceutical, Inc., Aristada ® (aripiprazole lauroxil) extended-release injectable suspension by Alkermes, plc, Vraylar ® (cariprazine) by AbbVie Inc., Perseris ® (risperidone) extended-release injectable suspension by Indivior plc, Caplyta ® (lumapteperone) by Intra-Cellular Therapies, Inc., Lybalvi ® (olanzapine and samidorphan) by Alkermes, plc, and generic clozapine and quetiapine, as well as the typical antipsychotics haloperidol, chlorpromazine, thioridazine, and sulpiride (all of which are generic). • For PONVORY ® in the treatment of RMS, the competitors include Avonex ® (interferon beta-1a), Tysabri ® (natalizumab) and Plegridy ® (peginterferon beta-1a), all by Biogen Inc., Vumerity ® (diroximel fumerate) by Biogen Inc./Alkermes, plc, Betaseron ® (interferon beta-1b) by Bayer Healthcare Pharmaceuticals Inc., Rebif ® (interferon beta-1a) and Mavenclad ® (cladribine), both by Merck KGaA, Extavia ® (interferon beta-1b) and Mayzent ® (siponimod), both by Novartis AG, Lemtrada ® (alemtuzumab) by Sanofi, Ocrevus ® (ocrelizumab) by Roche Holding AG/Biogen Inc., Zeposia ® (ozanimod) by BMS, Briumvi ® (ubiltuximab) by TG Therapeutics, Inc., Kesimpta ® (ofatumumab) by Novartis, Tyruko ® (natalizumab) by Sandoz Group AG and generic dimethyl fumarate, fingolimod, glatiramer acetate and teriflunomide.
Biggest changeShift work and excessive sleepiness disorder treatments include Nuvigil ® (armodafinil) and Provigil ® (modafinil) both by Apotex. • For PONVORY ® in the treatment of RMS, the competitors include Avonex ® (interferon beta-1a), Tysabri ® (natalizumab), Tecfidera ® (Dimethyl fumarate) and Plegridy ® (peginterferon beta-1a), all by Biogen Inc., Vumerity ® (diroximel fumerate) by Biogen Inc./Alkermes, plc, Betaseron ® (interferon beta-1b) by Bayer Healthcare Pharmaceuticals Inc., Rebif ® (interferon beta-1a) and Mavenclad ® (cladribine), both by Merck KGaA, Extavia ® (interferon beta-1b), Mayzent ® (siponimod), Gilenya ® (fingolimod) and Kesimpta ® (ofatumumab), all by Novartis AG, Lemtrada ® (alemtuzumab) and Aubagio ® (teriflunomide), both by Sanofi, Ocrevus ® (ocrelizumab) by Roche Holding AG/Biogen Inc., Zeposia ® (ozanimod) by BMS, Briumvi ® (ubiltuximab) by TG Therapeutics, Inc., Tyruko ® (natalizumab) by Sandoz Group AG and Copaxone ® (glatiramer acetate) by Teva.
The FDA determined the action target action date under the Prescription Drug User Fee Act Amendments of 2017 to be August 16, 2019 and, on that date, we received a complete response letter (CRL) from the FDA. The FDA asserted in the CRL that the measures demonstrating improved sleep were of unclear clinical significance.
The FDA determined the target action date under the Prescription Drug User Fee Act Amendments of 2017 to be August 16, 2019 and, on that date, we received a complete response letter (CRL) from the FDA. The FDA asserted in the CRL that the measures demonstrating improved sleep were of unclear clinical significance.
A Phase III, multi-center, placebo-controlled, 4-week trial evaluated patients with chronic primary insomnia. Two transient insomnia studies induced by phase advance of the sleep-wake cycle were also conducted with five-hour and eight-hour phase advance, which showed a significant effect the first night in improving sleep parameters.
A Phase III, multi-center, placebo-controlled, 4-week trial evaluated patients with chronic primary insomnia. Two studies of transient insomnia induced by phase advance of the sleep-wake cycle were also conducted with five-hour and eight-hour phase advance, which showed a significant effect the first night in improving sleep parameters.
Either party may terminate the agreement under certain circumstances, including a material breach of the agreement by the other.
Either party may terminate the agreement under certain circumstances, including a material breach of the agreement by the other.
A comprehensive list of active patents for our U.S. commercial products is available in the Approved Drug Products with Therapeutic Equivalence Evaluations (Orange Book) for our commercial products and is also provided in the table below. Members of these patent families are also issued or pending in a number of territories, such as Europe and Japan.
A comprehensive list of active patents for our U.S. commercial products is available in the Approved Drug Products with Therapeutic Equivalence Evaluations (Orange Book) and is also provided in the table below. Members of these patent families are also issued or pending in a number of territories, such as Europe and Japan.
Analogous state laws Analogous state fraud and abuse laws and regulations, such as state anti-kickback and false claims laws, can apply to the business practices of pharmaceutical companies, including but not limited to research, distribution, sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors and are generally broad and are enforced by many different federal and state agencies as well as through private actions.
Analogous state laws Analogous state fraud and abuse laws and regulations, such as state anti-kickback and false claims laws, can apply to the business practices of pharmaceutical companies, including but not limited to research, distribution, sales or marketing arrangements as well as claims involving healthcare items or services reimbursed by non-governmental third-party payors, and are generally broad and are enforced by many different federal and state agencies as well as through private actions.
The decentralized procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and assessment report, each member state must decide whether to recognize approval. This procedure is referred to as the mutual recognition procedure.
This authorization is referred to as a marketing authorization approval. The decentralized procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining Member States. Within 90 days of receiving the applications and assessment report, each member state must decide whether to recognize approval.
For example, the E.U. provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.
For example, the E.U. provides options for its Member States to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. E.U.
Federal law provides for a period of three years of exclusivity following approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage form, route of administration or combination, or for a new use, the approval of which was required to be supported by new clinical trials conducted by or for the sponsor, during which FDA cannot grant effective approval of an ANDA based on that listed drug.
Federal law also provides for a period of three years of exclusivity following approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage form, route of administration or combination, or for a new use, the approval of which was required to be supported by new clinical trials conducted by or for the sponsor, during which the FDA cannot grant effective approval of an ANDA based on that listed drug.
Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable not only to covered entities (e.g., health care providers and health plans), but also to business associates (i.e., independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity).
Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable not only to covered entities (e.g., certain health care providers and health plans), but also to business associates (i.e., independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity).
The JET study showed effectiveness in treating travelers who traveled either five or eight time zones from Washington, D.C. to London and San Francisco or Los Angeles to London, respectively. The results support the previously reported pivotal JET5 and JET8 Phase III studies, which demonstrated improvements in patients who experienced circadian advances of five and eight hours, respectively.
The JET study showed effectiveness in treating travelers who traveled either five or eight time zones from Washington, D.C. to London and San Francisco or Los Angeles to London, respectively. The results support the previously reported pivotal JET5 and JET8 Phase III clinical studies, which demonstrated improvements in patients who experienced circadian advances of five and eight hours, respectively.
Either party may terminate the Fanapt ® manufacturing agreement under certain circumstances upon specified written notice to the other party. In December 2020, we entered into a non-exclusive manufacturing agreement for the manufacture of commercial supplies of both 48 mL and 158 mL HETLIOZ LQ ® bottles.
Either party may terminate the HETLIOZ ® manufacturing agreement under certain circumstances upon specified written notice to the other party. In December 2020, we entered into a non-exclusive manufacturing agreement for the manufacture of commercial supplies of both 48 mL and 158 mL HETLIOZ LQ ® bottles.
Foreign regulation Foreign drug development, review and approval processes Regardless of whether a sponsor obtains FDA approval for a product, it must obtain approval by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries.
Foreign regulation Foreign drug development, review and approval processes Regardless of whether a sponsor obtains FDA approval for a product, it must obtain approval by the comparable regulatory authorities of foreign countries before it can commence clinical trials or marketing of the product in those countries.
For more on patent litigation, see Note 17, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” in Part I, Item 1A of this Annual Report, each of which is incorporated herein by reference.
For more on patent litigation, see Note 18, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” in Part I, Item 1A of this Annual Report, each of which is incorporated herein by reference.
Patent applications for these active ingredients remain pending. Although the NCE patents protecting Fanapt ® and HETLIOZ ® have expired, Fanapt ® remains protected by additional patents and HETLIOZ ® remains protected by additional patents, some of which we have asserted against current generic competitors.
Patent applications for these active ingredients remain pending. Although the NCE patents protecting Fanapt ® and HETLIOZ ® have expired, Fanapt ® remains protected by additional patents and HETLIOZ ® and HETLIOZ LQ ® remain protected by additional patents, some of which we have asserted against current generic competitors.
See Note 17, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” in Part I, Item 1A of this Annual Report, each of which is incorporated herein by reference, for additional information.
See Note 18, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” in Part I, Item 1A of this Annual Report, each of which is incorporated herein by reference, for additional information.
See Note 17, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” in Part I, Item 1A of this Annual Report, each of which is incorporated herein by reference, for additional information.
See Note 18, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” in Part I, Item 1A of this Annual Report, each of which is incorporated herein by reference, for additional information.
FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical holds on post-marketing clinical trials, enforcement letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or 24 Table of Contents communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties, any of which could have a material adverse effect on our business.
FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical holds on post-marketing clinical trials, enforcement letters, product recalls, product seizures, total or partial suspension of 26 Table of Contents production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties, any of which could have a material adverse effect on our business.
In November 2013, a U.S. patent (U.S. 8,586,610) directed to a method of treating patients with Fanapt ® based on genotype was issued to us by the U.S. Patent and Trademark Office.
In November 2013, a U.S. patent (U.S. 8,586,610) directed to a method of treating patients with Fanapt ® based on genotype was issued to us by the U.S. Patent and Trademark Office (USPTO).
In addition, sedative-hypnotic treatments for certain sleep related disorders include, Ambien ® (zolpidem) by Sanofi (including Ambien CR ® ), Lunesta ® (eszopiclone) by Woodward Pharma Services ., Rozerem ® (ramelteon) by Takeda Pharmaceuticals Company Limited, Silenor ® (doxepin) by Currax Pharmaceuticals LLC, Belsomra ® (suvorexant) by Merck & Co., Inc., Dayvigo ® (lemborexant) by Eisai Inc., generic products such as agomelatine, zaleplon, trazodone and doxepin, and over-the-counter remedies such as Benadryl ® and Tylenol PM ® .
In addition, sedative-hypnotic treatments for certain sleep-related disorders include, Ambien ® (zolpidem), including Ambien CR ® , by Cosette Pharmaceuticals, Inc., Lunesta ® (eszopiclone) by Woodward Pharma Services LLC, Rozerem ® (ramelteon) by Takeda Pharmaceuticals Company Limited, Silenor ® (doxepin) by Currax Pharmaceuticals LLC, Belsomra ® (suvorexant) by Merck & Co., Inc., Dayvigo ® (lemborexant) by Eisai Inc., generic products such as agomelatine, zaleplon, trazodone and doxepin, and over-the-counter remedies such as Benadryl ® and Tylenol PM ® .
The scope of the FCPA includes interactions with certain healthcare professionals in many countries. Violation of the FCPA could result in substantial civil and criminal penalties and remedies, including fines, disgorgement, and/or imprisonment.
The scope of the FCPA includes interactions with certain healthcare professionals in many countries. Violation of the FCPA could result in substantial civil and criminal penalties and remedies, including fines, disgorgement, debarment and/or imprisonment.
District Court for the District of Columbia (DC District Court) to, among other things, compel the FDA to comply with its obligations and declare that its lack of compliance violates the FDCA and the FDA regulations.
District Court for the District of Columbia (DC District Court) to, among other things, compel the FDA to comply with its obligations and declare that the FDA’s lack of compliance violates the FDCA and the FDA regulations.
In addition, we have filed for patents based on our own discoveries that seek to provide additional protection for HETLIOZ ® and Fanapt ® .
In addition, we have filed for patents based on our own discoveries that seek to provide additional protection for Fanapt ® and HETLIOZ ® and HETLIOZ LQ ® .
More recently, in March 2021, President Biden signed into law the American Rescue Plan Act of 2021, which eliminated the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.
More recently, in March 2021, President Biden signed into law the American Rescue Plan Act of 2021, which, beginning January 1, 2024, eliminated the statutory Medicaid drug rebate cap, previously set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs.
The NCE patent covering tradipitant expired in April 2023, except in the U.S., where it expires normally in June 2024, subject to any extension that may be received under the Hatch-Waxman Act. We have filed additional patent applications based on discoveries made during recent studies with tradipitant.
The NCE patent covering tradipitant expired in April 2023, except in the U.S., where it expired in June 2024, subject to any extension that may be received under the Hatch-Waxman Act. We have filed additional patent applications based on discoveries made during recent studies with tradipitant.
This patent, which was listed in the Orange Book in January 2015, is set to expire in 2027, potentially further extending the U.S. marketing exclusivity for Fanapt ® . Additional method of treatment patents have been issued in the U.S. and listed in the Orange Book, with the latest expiration date in December 2031.
This patent, which was listed in the Orange Book in January 2015, is set to expire in 2027, and potentially further extends the U.S. marketing exclusivity for Fanapt ® . Additional method of treatment patents have been issued in the U.S. and listed in the Orange Book, with the latest expiration date in December 2031.
Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new drug.
Specifically, the applicant must certify for each listed patent that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new drug.
As of December 31, 2023, remaining milestones include $10.0 million and $5.0 million milestones for the first approval of a marketing authorization for tradipitant in the U.S. and the E.U., respectively, and up to $80.0 million for sales milestones. We are obligated to use commercially reasonable efforts to develop and commercialize tradipitant.
As of December 31, 2024, remaining milestones include $10.0 million and $5.0 million milestones for the first approval of a marketing authorization for tradipitant in the U.S. and the E.U., respectively, and up to $80.0 million for sales milestones. We are obligated to use commercially reasonable efforts to develop and commercialize tradipitant.
Under E.U. regulatory systems, a sponsor may submit Marketing Authorization Applications either under a centralized or decentralized procedure. The centralized procedure, which is available for drugs produced by biotechnology or which are highly innovative, provides for the grant of a single marketing authorization that is valid for all E.U. member states. This authorization is a marketing authorization approval.
Under E.U. regulatory systems, a sponsor may submit Marketing Authorization Applications either under a centralized or decentralized procedure. The centralized procedure, which is available for drugs produced by biotechnology or which are highly innovative, provides for the grant of a single marketing authorization that is valid for all E.U. Member States.
E.U. member states may approve a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug product on the market. Other member states allow companies to fix their own prices for drug products but monitor and control company profits.
Member States may approve a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug product on the market. Other Member States allow companies to fix their own prices for drug products but monitor and control company profits.
This three-year exclusivity period protects against FDA approval of ANDAs and 505(b)(2) NDAs for the condition of the new drug’s approval. As a general matter, three-year exclusivity does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for generic versions of the original, unmodified drug product.
This three-year exclusivity period protects against FDA approval of ANDAs and 505(b)(2) NDAs for the condition of the new drug’s approval. As a general matter, three-year exclusivity granted for a new drug does not prohibit the FDA from approving additional ANDAs or 505(b)(2) NDAs for generic versions of the original, unmodified drug product.
While the transition period has now concluded, decisions are still to be made on how to adapt the U.K. data protection provisions further to Brexit. We are also subject to evolving and strict rules on the transfer of personal data out of the E.U., in particular to the U.S.
While the transition period has now concluded, decisions are still to be made on how to adapt the U.K. data protection provisions further to Brexit. Companies are also subject to evolving and strict rules on the transfer of personal data out of the E.U., in particular to the U.S.
Patents for the aqueous microcrystals LAI formulation of Fanapt ® expire in 2023 in the U.S. and in some markets in Europe. We have pending patent applications covering the use of iloperidone and plan on filing additional applications based on discoveries made throughout the development plan of this molecule.
Patents for the aqueous microcrystals LAI formulation of Fanapt ® expired in 2023 in the U.S. and in some markets in Europe. We have pending patent applications covering the use of iloperidone and plan on filing additional applications based on discoveries made throughout the development plan of this molecule.
A sponsor may seek FDA 25 Table of Contents designation of a compound as a “breakthrough therapy” if the product is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.
A sponsor may seek FDA designation of a compound as a “breakthrough therapy” if the product is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.
Sponsors typically use the meetings at the end of the Phase II trials to discuss Phase II clinical results and present plans for the pivotal Phase III clinical trials that they believe will support approval of the new drug. Meetings at other times may be made upon request.
Sponsors typically use the meetings at the end of the Phase II trials to discuss Phase II clinical results and present plans for the pivotal Phase III clinical trials that they believe will support approval of the new drug. Meetings at other times may be scheduled upon request.
These changes include the Budget Control Act of 2011, which, among other things, included aggregate reductions of Medicare payments to providers that started in 2013 and will stay in effect through 2031 unless additional congressional action is taken.
These changes include the Budget Control Act of 2011, which, among other things, included aggregate reductions of Medicare payments to providers that started in 2013 and will stay in effect through 2032 unless additional congressional action is taken.
We have also filed and plan on filing additional patent applications covering the use of iloperidone (Fanapt ® active ingredient) LAI formulations. Patents for the microsphere LAI formulation of Fanapt ® expired in 2022 in some markets in Europe and will expire in 2024 in the U.S.
We have also filed and plan on filing additional patent applications covering the use of iloperidone (Fanapt ® active ingredient) LAI formulations. Patents for the microsphere LAI formulation of Fanapt ® expired in 2022 in some markets in Europe and expired in 2024 in the U.S.
Before approving an NDA, the FDA may also inspect one or more clinical trial sites to assure compliance with GCP requirements. 23 Table of Contents After the FDA evaluates an NDA, it will issue an approval letter or a CRL.
Before approving an NDA, the FDA may also inspect one or more clinical trial sites to assure compliance with GCP requirements. 25 Table of Contents After the FDA evaluates an NDA, it will issue an approval letter or a CRL.
In addition to requiring reporting transfers of value, some states have imposed price reporting requirements. These state laws apply to items 28 Table of Contents and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.
In addition to requiring reporting transfers of value, some states have imposed price reporting requirements. These state laws apply to items 30 Table of Contents and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.
In certain instances, the FDA may mandate the performance of such clinical trials as a condition of approval of an NDA. 22 Table of Contents During the development of a new drug, sponsors are given several opportunities to meet with the FDA.
In certain instances, the FDA may mandate the performance of such clinical trials as a condition of approval of an NDA. 24 Table of Contents During the development of a new drug, sponsors are given several opportunities to meet with the FDA.
Three-year exclusivity is available to the holder of an NDA, including a 505(b)(2) NDA, for a particular condition of approval, or change to a marketed product, such as a new formulation for a previously approved product, if one or more new clinical trials, other than bioavailability or bioequivalence trials, was essential to the approval of the application and was conducted or sponsored by the applicant.
Three-year exclusivity is available to the holder of an NDA, including a 505(b)(2) NDA, for a particular condition of approval, or change to a marketed product, such as a new formulation, route of administration or indication for a previously approved product, if one or more new clinical trials, other than bioavailability or bioequivalence trials, was essential to the approval of the application and was conducted or sponsored by the applicant.
While there are no EC approved treatments for Non-24 other than HETLIOZ ® , and only recently has the FDA approved generics for the treatment of Non-24, there are a number of drugs approved and prescribed for patients with sleep disorders. The most commonly prescribed drugs are hypnotics.
While there are no EC approved treatments for Non-24 other than HETLIOZ ® , and the FDA has approved generics for the treatment of Non-24, there are a number of drugs approved and prescribed for patients with sleep disorders. The most commonly prescribed drugs are hypnotics.
Orphan drug designation provides potential financial and regulatory incentives, including study design assistance, tax credits, waiver of FDA user fees, and up to seven years of market 6 Table of Contents exclusivity upon marketing approval. In February 2011, the European Medicines Agency (EMA) designated HETLIOZ ® as an orphan medicinal product for the same indication.
Orphan drug designation provides potential financial and regulatory incentives, including study design assistance, tax credits, waiver of FDA user fees, and up to seven years of market exclusivity upon marketing approval. In February 2011, the European Medicines Agency (EMA) designated HETLIOZ ® as an orphan medicinal product for the same indication.
Enrollment in the Phase I/II clinical study (1101) of VTR-297 in hematologic malignancies is ongoing. VTR-297 is a small molecule HDAC inhibitor with potential use as a treatment for several oncology indications. In January 2024, the FDA approved our Investigational New Drug (IND) application to evaluate VTR-297 for the treatment of onychomycosis.
Enrollment in the Phase I/II clinical study (1101) of VTR-297 in hematologic malignancies is ongoing. VTR-297 is a small molecule HDAC inhibitor with potential use as a treatment for several oncology indications. In January 2024, the FDA approved our Investigational New Drug (IND) application to evaluate VTR-297 for the treatment of onychomycosis, a fungal infection of the nail.
We have paid UCSF $1.6 million in upfront fees and development milestones. As of December 31, 2023, remaining milestones include $11.9 million for development milestones and $33.0 million for future regulatory approval and sales milestones.
We have paid UCSF $1.6 million in upfront fees and development milestones. As of December 31, 2024, remaining milestones include $11.9 million for development milestones and $33.0 million for future regulatory approval and sales milestones.
The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance. The breakthrough therapy designation is a distinct status from both accelerated approval and priority review, which can also be granted to the same drug if relevant criteria are met.
The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance. The breakthrough therapy designation is a distinct status from 27 Table of Contents both accelerated approval and priority review, which can also be granted to the same drug if relevant criteria are met.
These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning 21 Table of Contents 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.
These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning 23 Table of Contents letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and/or civil or criminal penalties.
Despite our disagreement with the FDA, the preclinical package has allowed us to continue to 10 Table of Contents conduct all of the efficacy studies necessary for New Drug Application (NDA) filing. Moreover, in July 2020, the FDA authorized tradipitant through an expanded access program (EAP) for a single patient.
Despite our disagreement with the FDA, the preclinical package has allowed us to continue to conduct all of the efficacy studies necessary for New Drug Application (NDA) filing. Moreover, in July 2020, the FDA authorized tradipitant through an expanded access program (EAP) for a single patient.
Under the Fanapt ® manufacturing agreement, we are responsible for sourcing the supply of the active pharmaceutical ingredient (iloperidone), and have agreed to order from Patheon at least 70% of the total expected yearly production of new units of Fanapt ® tablets for the U.S. and other specified countries each year for the term of the agreement.
Under the Fanapt ® manufacturing agreement, we are responsible for supplying the active pharmaceutical ingredient (iloperidone) and have agreed to order from Patheon at least 70% of the total expected yearly production of new units of Fanapt ® tablets for the U.S. and other specified countries each year for the term of the agreement.
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (beginning October 1, 2022); and replaces the Medicare Part D coverage gap discount program with a new discounting program (beginning in 2025).
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare, with prices that can be negotiated subject to a cap, with the first drug price negotiations effective January 1, 2026; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation beginning October 1, 2022; and replaces the Medicare Part D coverage gap discount program with a new discounting program beginning January 1, 2025.
To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product to other available therapies, which can be costly and time-consuming. The collection and processing of personal data in the E.U. is governed by the General Data Protection Regulation (GDPR), which became applicable in May 2018.
To obtain reimbursement or pricing approval in some countries, companies may be required to conduct a clinical trial that compares the cost-effectiveness of their product to other available therapies, which can be costly and time-consuming. The collection and processing of personal data in the E.U. is governed by the General Data Protection Regulation (GDPR), which became applicable in May 2018.
To access these documents from the main page of our website, click on “Investor” at the top of the page, then click on “Learn More” under “Corporate Governance” and then click on the desired document.
To access these documents from the main page of our website, click on “Investors” at the top of the page, then click on “Learn More” under “Corporate Governance” and then click on the desired document.
These meetings may occur prior to the submission of an IND, at the end of Phase II clinical trials, or before an NDA is ultimately submitted.
These meetings may occur prior to the submission of an IND, at the end of Phase I and Phase II clinical trials, or before an NDA is ultimately submitted.
False Claims Act 27 Table of Contents The False Claims Act prohibits, among other things, knowingly presenting, or causing to be presented false or fraudulent claims for payment of government funds and knowingly making, or causing to be made or used, a false record or statement to get a false claim paid.
False Claims Act The federal False Claims Act prohibits, among other things, knowingly presenting, or causing to be presented false or fraudulent claims for payment of government funds and knowingly making, or causing to be made or used, a false record or 29 Table of Contents statement to get a false claim paid.
Among the provisions of the ACA of importance to pharmaceutical companies are: • an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee does not apply to sales of certain products approved exclusively for orphan indications; • 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; • expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program (MDRP) by increasing the minimum rebate for both branded and generic drugs and extending rebate liability to prescriptions for individuals enrolled in Medicaid managed care plans; • introduced a new methodology for the reporting of average manufacturer price by manufacturers under the MDRP for drugs that are inhaled, infused, instilled, implanted or injected; • expanded the types of entities eligible for the 340B drug discount program; • established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a point‑of‑sale‑discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; • established a new Patient‑Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; • added a requirement to annually report product samples that manufacturers and distributors provide to physicians; 30 Table of Contents • expanded healthcare fraud and abuse laws, including the False Claims Act and the federal Anti-Kickback Statute, and enhanced penalties for noncompliance; and • established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Among the provisions of the ACA of importance to pharmaceutical companies are: • added an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee does not apply to sales of certain products approved exclusively for orphan indications; • expanded the 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; • expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program (MDRP) by increasing the minimum rebate for both branded and generic drugs and extending rebate liability to prescriptions for individuals enrolled in Medicaid managed care plans and otherwise made amendments to the MDRP; • expanded the types of entities eligible for the 340B drug discount program; • established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a point‑of‑sale‑discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; • established a new Patient‑Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; • added a requirement to annually report product samples that manufacturers and distributors provide to physicians; • expanded healthcare fraud and abuse laws, including the False Claims Act and the federal Anti-Kickback Statute, and enhanced penalties for noncompliance; and 32 Table of Contents • established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Member States, limit our ability to collect, use and share such personal data or cause our costs to increase, and harm our reputation, business and financial condition. Further, the U.K.’s exit from the E.U., often referred to as Brexit, has created uncertainty with regard to applicable data protection regulation in the U.K.
Member States, limit a company’s ability to collect, use and share such personal data or cause their costs to increase, and harm their reputation, business and financial condition. Further, the U.K.’s exit from the E.U., often referred to as Brexit, has created uncertainty with regard to applicable data protection regulation in the U.K.
We have paid Lilly $5.0 million in upfront fees and development milestones, including a $2.0 million development milestone paid in December 2023 for the filing of the first marketing authorization for tradipitant in the U.S. or the E.U.
We have paid Lilly $5.0 million in upfront fees and development milestones, including a $2.0 million development milestone paid in December 2023 for the filing of the first 14 Table of Contents marketing authorization for tradipitant in the U.S. or the E.U.
However, there are numerous factors that could cause interruptions in the supply of our products, including regulatory reviews, changes in our sources for manufacturing, disputes with a 20 Table of Contents manufacturer, or financial instability of manufacturers, all of which could negatively impact our operation and our financial results.
However, there are numerous factors that could cause interruptions in the supply of our products, including regulatory reviews, changes in our sources for manufacturing, disputes with a 22 Table of Contents manufacturer, or financial instability of manufacturers, all of which could negatively impact our operations and our financial results.
For example, the California Consumer Privacy Act (CCPA), which became effective on January 1, 2020, established a new legal framework governing covered businesses’ collection and use of personal information of California residents by, among other things, creating an expanded definition of covered personal information, establishing new privacy rights for California residents, imposing an opt-in standard for certain disclosures of personal information about minors, and creating a new and potentially severe statutory damages framework for businesses subject to certain data breaches resulting from the failure to implement and maintain reasonable security procedures and practices.
For example, the California Consumer Privacy Act (CCPA), which became effective on January 1, 2020, as further amended by the California Privacy Rights Act, along with corresponding regulations, established a new legal framework governing covered businesses’ collection and use of personal information of California residents by, among other things, creating an expanded definition of covered personal information, establishing new privacy rights for California residents, imposing an opt-in standard for certain disclosures of personal information about minors, and creating a new and potentially severe statutory damages framework for businesses subject to certain data breaches resulting from the failure to implement and maintain reasonable security procedures and practices.
The GDPR provides that E.U. 29 Table of Contents Member States may supplement the GDPR with their own additional laws and regulations in relation to the personal data processing, in particular regarding sensitive personal data (e.g., genetic, biometric or health data), which could result in differences between E.U.
The GDPR provides that E.U. Member States may supplement the GDPR with their own additional laws and regulations in relation to certain processing of personal data, in particular regarding sensitive personal data (e.g., genetic, biometric or health data), which could result in differences between E.U.
Human Capital We had 203 full-time employees as of December 31, 2023, compared with 290 employees as of December 31, 2022. None of our employees are represented by a labor union. We have not experienced any work stoppages and consider our employee relations to be good.
Human Capital We had 368 full-time employees as of December 31, 2024, compared with 203 employees as of December 31, 2023. None of our employees are represented by a labor union. We have not experienced any work stoppages and consider our employee relations to be good.
Accordingly, securing patents, regulatory data package protection, and other proprietary rights are an essential element of our business strategies. 14 Table of Contents PONVORY ® , tradipitant and VQW-765 are covered by NCE and other patents and patent applications related to their respective medicinal uses. In addition, NCE patent protection has been sought for VTR-297 and CFTR.
Accordingly, securing patents, regulatory data package protection, and other proprietary rights are an essential element of our business strategies. PONVORY ® , tradipitant and VQW-765 are covered by NCE and other patents and patent applications related to their respective medicinal uses. In addition, NCE patent protection has been sought for VTR-297 and CFTR activators and inhibitors.
In May 2023, we announced positive results from the first Phase III study of tradipitant in motion sickness, confirming the previously reported results demonstrating that tradipitant is effective in the prevention of vomiting associated with motion sickness. A second Phase III study of tradipitant in motion sickness is ongoing.
In May 2023, we announced positive results from the first Phase III clinical study of tradipitant in motion sickness, confirming the previously reported results demonstrating that tradipitant is effective in the prevention of vomiting associated with motion sickness.
Foreign fraud and abuse laws and other regulatory matters Outside the U.S., companies are subject to similar regulations in those countries where we market and sell products, including with respect to transparency, bribery and other laws mentioned above. In some foreign countries, including major markets in the E.U. and Japan, the pricing of prescription pharmaceuticals is subject to governmental control.
Foreign fraud and abuse laws and other regulatory matters Outside the U.S., companies are subject to similar regulations, including with respect to transparency, bribery and other laws mentioned above. In some foreign countries, including major markets in the E.U. and Japan, the pricing of prescription pharmaceuticals is subject to governmental control.
In December 2022, the royalty on net sales in the U.S. decreased from 10% to 5%. This U.S. royalty will end in April 2024.
In the U.S., the royalty on net sales decreased from 10% to 5% in December 2022. This U.S. royalty ended in April 2024.
The class of melatonin agonists includes Rozerem ® (ramelteon) by Takeda Pharmaceuticals Company Limited, and the food supplement melatonin.
The class of melatonin agonist treatments includes Rozerem ® (ramelteon) by Takeda Pharmaceuticals Company Limited, and the food supplement melatonin.
For example, the FDA has communicated to us that it is considering an indication for the short-term relief of nausea in gastroparesis. While this short-term indication is not preferred, we would consider accepting this limited indication while continuing to pursue a chronic indication. However, the FDA may not deem the safety information sufficient even for a short-term indication.
For example, the FDA has communicated to us that it is considering an indication for the short-term relief of nausea in gastroparesis. While this short-term indication is not preferred, we would consider accepting this limited indication while continuing to pursue a chronic indication.
In addition, regulatory approval of prices is required in most countries other than the U.S. Companies face the risk that the resulting prices would be insufficient to generate an acceptable return.
This procedure is referred to as the mutual recognition procedure. In addition, regulatory approval of prices is required in most countries other than the U.S. Companies face the risk that the resulting prices would be insufficient to generate an acceptable return.
No further royalties on manufacturing know-how are payable by us. We are also obligated to pay Sanofi a fixed royalty on Fanapt ® net sales equal up to 6% on Sanofi know-how not related to manufacturing under certain conditions for a period of up to 10 years in markets where the NCE patent has expired or was not issued.
We are also obligated to pay Sanofi a fixed royalty on Fanapt ® net sales equal up to 6% on Sanofi know-how not related to manufacturing under certain conditions for a period of up to 10 years in markets where the new chemical entity (NCE) patent has expired or was not issued.
Canada also employs a data exclusivity regime for innovative drugs that provides an eight-year period of data protection from the date of market approval by Health Canada. An additional six months of data exclusivity is provided for drugs studied in clinical trials relating to use in pediatric populations.
The ponesimod compound patent Canadian Patent No. 2545582 expired in November 2024. Canada also employs a data exclusivity regime for innovative drugs that provides an eight-year period of data protection from the date of market approval by Health Canada. An additional six months of data exclusivity is provided for drugs studied in clinical trials relating to use in pediatric populations.
PONVORY ® was launched commercially in the U.S. in April 2021 and in Canada in November 2021 by one of the Johnson & Johnson Companies. There are a number of drugs approved and prescribed to treat patients with MS. See Competition below for a discussion of these commonly prescribed drugs.
PONVORY ® was launched commercially in the U.S. in April 2021 and in Canada in November 2021 by one of the Johnson & Johnson Companies. There are a number of drugs approved and prescribed to treat patients with MS.
Failure to report relevant data may result in civil fines and/or penalties. Foreign Corrupt Practices Act The Foreign Corrupt Practices Act (FCPA), prohibits U.S. corporations and their representatives and intermediaries from offering, promising, authorizing or making payments to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business abroad.
Foreign Corrupt Practices Act The Foreign Corrupt Practices Act (FCPA), prohibits U.S. corporations and their representatives and intermediaries from offering, promising, authorizing or making payments to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business abroad.
VQW-765 We are evaluating VQW-765 for the treatment of psychiatric disorders. In December 2022, we announced results from our Phase II study, VP-VQW-765-2201 (Study 2201), of a single-dose treatment to alleviate acute performance anxiety in social situations.
In December 2022, we announced results from our Phase II clinical study, VP-VQW-765-2201 (Study 2201), of a single-dose treatment to alleviate acute performance anxiety in social situations.
These receptors are thought to be involved in the control of circadian rhythms. HETLIOZ ® is believed to reset the master body clock in the suprachiasmatic nucleus, located in the hypothalamus, resulting in the entrainment and alignment of the body’s melatonin and cortisol rhythms to the 24-hour day-night cycle.
HETLIOZ ® is believed to reset the master body clock in the suprachiasmatic nucleus, located in the hypothalamus, resulting in the entrainment and alignment of the body’s melatonin and cortisol rhythms to the 24-hour day-night cycle.
See Competition below for a discussion of commonly prescribed drugs for patients with sleep disorders. HETLIOZ ® for SMS (capsules and oral suspension) In December 2020, HETLIOZ ® capsules and oral suspension (HETLIOZ LQ ® ) were approved in the U.S. for the treatment of adults and children, respectively, with nighttime sleep disturbances in SMS.
See Competition below for a discussion of commonly prescribed drugs for patients with sleep disorders. 7 Table of Contents HETLIOZ ® for SMS (capsules and oral suspension) In December 2020, HETLIOZ ® capsules and oral suspension (HETLIOZ LQ ® ) were approved in the U.S. for the treatment of nighttime sleep disturbances in SMS in adults 16 years and older and children 3 years to 15 years old, respectively.
Other patents Aside from the NCE patents and other in-licensed patents discussed above, we have obtained or filed numerous patents and patent applications, most of which have been filed in key markets including the U.S., relating to our products and product candidates. In addition, we have filed numerous other patent applications relating to drugs not presently in clinical studies.
The NCE patent expired normally in 2023 in the U.S., Europe and other markets. Other patents Aside from the NCE patents and other in-licensed patents discussed above, we have obtained or filed numerous patents and patent applications, most of which have been filed in key markets including the U.S., relating to our products and product candidates.
In connection with the settlement agreement with Novartis relating to Fanapt ® , we received an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize VQW-765, a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist. The NCE patent expired normally in 2023 in the U.S., Europe, and other markets.
In connection with the settlement 20 Table of Contents agreement with Novartis relating to Fanapt ® , we received an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize VQW-765, a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist.
For HETLIOZ ® in the treatment of Non-24, Teva has launched at risk, and the FDA has approved the Abbreviated New Drug Applications (ANDA) for Apotex and MSN.
For HETLIOZ ® in the treatment of Non-24, Teva and Apotex have launched their respective Abbreviated New Drug Application (ANDA) products at risk, and the FDA has also approved the ANDA for MSN.
If approved, tradipitant will be the first novel drug to be approved by the FDA for the treatment of gastroparesis in over 40 years and tradipitant is the first novel drug to be accepted for review by the FDA for gastroparesis in over 30 years. The FDA may disregard such safety data when reviewing the NDA.
Tradipitant is the first novel drug to be accepted for review by the FDA for gastroparesis in over 30 years and, if approved, will be the first novel drug to be approved by the FDA for the treatment of gastroparesis in over 40 years.
HETLIOZ ® is the first product approved by the FDA for patients with Non-24 and for patients with SMS.
HETLIOZ ® is the first product approved by the United States Food and Drug Administration (FDA) for patients with Non-24 and for patients with SMS.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeExamples of such adverse developments include, but are not limited to: • the FDA determining that additional clinical studies are required with respect to the jet lag disorder or insomnia programs; • safety, efficacy or other concerns arising from clinical or non-clinical studies in the jet lag disorder or insomnia programs, or the manufacturing processes or facilities used for the jet lag disorder program; or • the FDA determining that the jet lag disorder or insomnia programs raise safety concerns or do not demonstrate substantial evidence of efficacy. 39 Table of Contents If the FDA does not approve our sNDA for Fanapt ® for the treatment of bipolar I disorder, our business will be significantly harmed, and the market price of our stock could decline.
Biggest changeExamples of such potential adverse developments include, but are not limited to: • the FDA determining that it believes additional clinical studies are required with respect to tradipitant for the treatment of gastroparesis; • safety, efficacy or other concerns arising from clinical or non-clinical studies in this program; or • the FDA determining that the tradipitant clinical trial program for gastroparesis does not demonstrate adequate safety and substantial evidence of efficacy.
Risks Related to our Business and Industry We are dependent on the commercial success of HETLIOZ ® , Fanapt ® and PONVORY ® . In the U.S., HETLIOZ ® competes with generic versions of HETLIOZ ® and we could experience increased generic competition in the near term.
Risks Related to our Business and Industry We are dependent on the commercial success of Fanapt ® , HETLIOZ ® and PONVORY ® . In the U.S., HETLIOZ ® competes with generic versions of HETLIOZ ® and we could experience increased generic competition in the near term.
Our ability to generate significant product revenue from sales of HETLIOZ ® , Fanapt ® and PONVORY ® both in the U.S. and abroad, in the near term will depend on, among other things, our ability to: • defend our patents and intellectual property from generic competition; • properly price and obtain adequate coverage and reimbursement of these products by governmental authorities, private health insurers, managed care organizations and other third-party payors; • gain broad acceptance of our products from physicians, health care payors, patients, pharmacists and the medical community; • minimize the impact of disruptions caused by public health crises; • maintain commercial manufacturing arrangements with third-party manufacturers; • produce, through a validated process, sufficiently large quantities of inventory of our products to meet demand; • continue to maintain and grow a wide variety of internal sales, distribution and marketing capabilities sufficient to sustain sales trajectories of our products; • maintain compliance with ongoing labeling, packaging, storage, advertising, promotion, recordkeeping, safety and other post-market requirements; • obtain regulatory approval to expand the labeling of our approved products for additional indications; • obtain regulatory approval for HETLIOZ ® or Fanapt ® in additional countries; • maintain our existing regulatory approval for HETLIOZ ® in Europe and PONVORY ® in Canada; • adequately protect against and effectively respond to any claims by holders of patents and other intellectual property rights that our products infringe their rights; and • adequately protect against and effectively respond to any unanticipated adverse effects or unfavorable publicity that develops in respect to our products, as well as the emergence of new or existing competitive products, which may be proven to be more clinically effective and cost-effective.
Our ability to generate significant product revenue from sales of Fanapt ® , HETLIOZ ® and PONVORY ® both in the U.S. and abroad, in the near term will depend on, among other things, our ability to: • defend our patents and intellectual property from generic competition; • properly price and obtain adequate coverage and reimbursement of these products by governmental authorities, private health insurers, managed care organizations and other third-party payors; • gain broad acceptance of our products from physicians, health care payors, patients, pharmacists and the medical community; • minimize the impact of disruptions caused by public health crises; • maintain commercial manufacturing arrangements with third-party manufacturers; • produce, through a validated process, sufficiently large quantities of inventory of our products to meet demand; • continue to maintain and grow a wide variety of internal sales, distribution and marketing capabilities sufficient to sustain sales trajectories of our products; • maintain compliance with ongoing labeling, packaging, storage, advertising, promotion, recordkeeping, safety and other post-market requirements; • obtain regulatory approval to expand the labeling of our approved products for additional indications; • obtain regulatory approval for HETLIOZ ® or Fanapt ® in additional countries; • maintain our existing regulatory approval for HETLIOZ ® in Europe and PONVORY ® in Canada; • adequately protect against and effectively respond to any claims by holders of patents and other intellectual property rights that our products infringe their rights; and • adequately protect against and effectively respond to any unanticipated adverse effects or unfavorable publicity that develops in respect to our products, as well as the emergence of new or existing competitive products, which may be proven to be more clinically effective and cost-effective.
This activity represents a significant investment in the commercial success of HETLIOZ ® , Fanapt ® and PONVORY ® , which is uncertain.
This activity represents a significant investment in the commercial success of Fanapt ® , HETLIOZ ® and PONVORY ® , which is uncertain.
Between April 2018 and March 2021, we filed numerous Hatch-Waxman lawsuits in the Delaware District Court against Teva, MSN and Apotex asserting that our patents would be infringed by their generic versions of HETLIOZ ® . In January 2022, we entered into a license agreement with MSN and Impax Laboratories LLC (Impax), resolving the lawsuits against MSN.
Between April 2018 and March 2021, we filed numerous Hatch-Waxman lawsuits in the Delaware District Court against Teva, Apotex and MSN asserting that our patents would be infringed by their generic versions of HETLIOZ ® . In January 2022, we entered into a license agreement with MSN and Impax Laboratories LLC (Impax), resolving the lawsuits against MSN.
In addition, while we believe that HETLIOZ ® is difficult to manufacture and that building capacity to manufacture HETLIOZ ® is time-consuming and expensive, which may limit the amount of tasimelteon supply available to generic companies, we do not have direct visibility into the supply levels of any of the generic companies and we rely on our own experience together with information from third parties, which information may not be reliable.
In addition, while we believe that HETLIOZ ® is difficult to manufacture and that building capacity to manufacture HETLIOZ ® is time-consuming and expensive, which may limit the amount of tasimelteon supply available to generic companies, we do not have direct visibility into the supply levels of any of the generic companies and we rely on our own experience together with information from third parties, which may not be reliable.
Future performance of HETLIOZ ® , Fanapt ® and PONVORY ® may be impacted by a number of factors including competing products or unanticipated safety issues. If HETLIOZ ® , Fanapt ® or PONVORY ® is not successful in gaining broad commercial acceptance, our business would be harmed.
Future performance of Fanapt ® , HETLIOZ ® and PONVORY ® may be impacted by a number of factors including competing products or unanticipated safety issues. If Fanapt ® , HETLIOZ ® or PONVORY ® is not successful in gaining broad commercial acceptance, our business would be harmed.
Future performance of HETLIOZ ® , Fanapt ® and PONVORY ® sales will be dependent on several factors, including our ability to educate physicians and to increase physician awareness of the benefits of our products relative to competing products.
Future performance of Fanapt ® , HETLIOZ ® and PONVORY ® sales will be dependent on several factors, including our ability to educate physicians and to increase physician awareness of the benefits of our products relative to competing products.
We rely on, and will continue to rely on, outsourcing arrangements for many of our activities, including preclinical and clinical development and supply of HETLIOZ ® , HETLIOZ LQ ® , Fanapt ® , PONVORY ® and our other products.
We rely on, and will continue to rely on, outsourcing arrangements for many of our activities, including preclinical and clinical development and supply of Fanapt ® , HETLIOZ ® , HETLIOZ LQ ® , PONVORY ® and our other products.
We and our partners also are subject to numerous federal, state, local and foreign laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices, the environment and the use and disposal of hazardous substances used in connection with discovery, research and development work.
We and our partners are also subject to numerous federal, state, local and foreign laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices, the environment and the use and disposal of hazardous substances used in connection with discovery, research and development work.
We have agreements in place with Patheon Pharmaceuticals Inc. and Patheon Inc. (collectively, Patheon), subsidiaries of Thermo Fisher Scientific, for the manufacture of HETLIOZ ® and Fanapt ® . In January 2014, we entered into a manufacturing agreement with Patheon for the manufacture of commercial supplies of HETLIOZ ® 20 mg capsules at Patheon’s Cincinnati, Ohio manufacturing site.
We have agreements in place with Patheon Pharmaceuticals Inc. and Patheon Inc. (collectively, Patheon), subsidiaries of Thermo Fisher Scientific, for the manufacture of Fanapt ® and HETLIOZ ® . In January 2014, we entered into a manufacturing agreement with Patheon for the manufacture of commercial supplies of HETLIOZ ® 20 mg capsules at Patheon’s Cincinnati, Ohio manufacturing site.
As our development activities and commercialization efforts progress and we sell our products, this coverage may be inadequate, we may be unable to obtain adequate coverage at an acceptable cost or we may be unable to get adequate coverage at all or our insurer may disclaim coverage as to a future claim.
As our development activities and commercialization efforts progress and we sell our products, this coverage may be inadequate, we may be unable to obtain adequate coverage at an acceptable cost, we may be unable to get adequate coverage at all or our insurer may disclaim coverage as to a future claim.
This statute marks the most significant action by Congress with respect to the pharmaceutical industry since adoption of the ACA in 2010.
This statute marks the most significant action by Congress with respect to the pharmaceutical industry since adoption of the ACA in 2010.
The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years. On March 15, 2023 and June 30, 2023, HHS issued guidance regarding implementation of the Medicare drug price negotiation program in initial price applicability year 2026.
The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years. On March 15, 2023 and June 30, 2023, HHS issued guidance regarding implementation of the Medicare drug price negotiation program in initial price applicability year 2026.
Member States, limit our ability to collect, use and share such personal data or cause our costs to increase, and harm our reputation, business and financial condition. Failure to comply with the GDPR may result in fines up to the higher of €20,000,000 or 4% of the total worldwide annual revenue of the preceding financial year and other administrative penalties.
Member States, limit our ability to collect, use and share such personal data or cause our costs to increase, and harm our reputation, business and financial condition. Failure to comply with the GDPR may result in fines up to the higher of €20,000,000 or 4% of total worldwide annual revenue of the preceding financial year and other administrative penalties.
We have been and continue to be involved in number of lawsuits with a variety of generic drug manufacturers who have filed ANDAs relating to certain of our patents.
We have been and continue to be involved in a number of lawsuits with a variety of generic drug manufacturers who have filed ANDAs relating to certain of our patents.
Such litigation is often time-consuming and costly, and may result in generic competition if such patents are not upheld or if the generic competitor is found not to infringe such patents. Between April 2018 and March 2021, we filed numerous Hatch-Waxman lawsuits in the Delaware District Court against Teva, MSN and Apotex asserting that U.S. Patent Nos.
Such litigation is often time-consuming and costly, and may result in generic competition if such patents are not upheld or if the generic competitor is found not to infringe such patents. Between April 2018 and March 2021, we filed numerous Hatch-Waxman lawsuits in the Delaware District Court against Teva, Apotex and MSN asserting that U.S. Patent Nos.
We appealed the decision to the Federal Circuit and in May 2023, a three-judge panel of the Federal Circuit affirmed the Delaware District Court’s ruling. In August 2023, the Federal Circuit denied our request for a rehearing. In January 2024, we filed a petition for a writ of certiorari with the U.S. Supreme Court to review the Federal Circuit’s decision.
We appealed the decision to the Federal Circuit and in May 2023, a three-judge panel of the Federal Circuit affirmed the Delaware District Court’s ruling. In August 2023, the Federal Circuit denied our request for a rehearing. In January 2024, we filed a petition for a writ of certiorari with the U.S. Supreme Court to review the Federal Circuit’s decision.
The ACA expanded the 340B program to include additional entity types: certain free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals, but exempts drugs designated under section 526 of the Federal Food, Drug and Cosmetic Act as “orphan drugs” from the ceiling price requirements for these covered entities.
The ACA expanded the 340B program to include additional entity types, including certain free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals, but exempts drugs designated under section 526 of the Federal Food, Drug and Cosmetic Act as “orphan drugs” from the ceiling price requirements for these covered entities.
If we lose our relationship with any one or more of these parties, we could experience a significant delay in both identifying another comparable provider and then contracting for its services. We may be unable to retain an alternative provider on reasonable terms, if at all.
If we lose our relationship with any one or more of these parties, we could experience a significant delay in both identifying another comparable provider and contracting for its services. We may be unable to retain an alternative provider on reasonable terms, if at all.
For example, despite the positive results of the completed trials for HETLIOZ ® , Fanapt ® and PONVORY ® , as well as the FDA’s approval of the NDA for HETLIOZ ® for the treatment of Non-24 in January 2014, the NDA for Fanapt ® for the treatment of schizophrenia in May 2009, the EC’s grant of the centralized marketing authorization for HETLIOZ ® for the treatment of Non-24 in totally blind adults in July 2015, the FDA’s approval of the sNDA and NDA for HETLIOZ ® capsule and liquid formulation for the treatment of adults and children, respectively, with nighttime sleep disturbances in SMS in December 2020, and the NDA for PONVORY ® for the treatment of RMS in adults in March 2021 and Health Canada’s approval of PONVORY ® for the treatment of adults with RMS in April 2021, we are uncertain whether either of these products will ultimately prove to be effective and safe in humans long term and in all uses.
For example, despite the positive results of the completed trials for Fanapt ® , HETLIOZ ® and PONVORY ® , as well as the FDA’s approval of the NDA for HETLIOZ ® for the treatment of Non-24 in January 2014, the NDA for Fanapt ® for the treatment of schizophrenia in May 2009, the EC’s grant of the centralized marketing authorization for HETLIOZ ® for the treatment of Non-24 in totally blind adults in July 2015, the FDA’s approval of the sNDA and NDA for HETLIOZ ® capsule and liquid formulation for the treatment of adults and children, respectively, with nighttime sleep disturbances in SMS in December 2020, and the NDA for PONVORY ® for the treatment of RMS in March 2021 and Health Canada’s approval of PONVORY ® for the treatment of RMS in April 2021, we are uncertain whether any of these products will ultimately prove to be effective and safe in humans long term and in all uses.
Our ability to enroll patients in, and the commencement and rate of completion of, clinical trials for our products may be affected by many factors, including: • the size and nature of the patient population; • the design of the trial protocol for our clinical trials; • the eligibility and exclusion criteria for the trial in question; • the availability of competing therapies and competing clinical trials, and physician and patient perception of our product candidates and our other product candidates being studied in relation to these other potential options; • the availability of raw materials and the possibility of raw materials expiring prior to their use; • difficulty in maintaining contact with patients after treatment, resulting in incomplete data; • poor effectiveness of our products during clinical trials; • unforeseen safety issues or side effects; • the number and location of clinical sites in our clinical trials; • the proximity and availability of clinical trial sites for prospective patients; • the availability of time and resources at the institutions where clinical trials are and will be conducted; • the availability of adequate financing to fund ongoing clinical trial expenses; • the study endpoints that rely on subjective patient reported outcomes; • the impact of global health crises; and 49 Table of Contents • governmental or regulatory delays and changes in regulatory requirements and guidelines.
Our ability to enroll patients in, and the commencement and rate of completion of, clinical trials for our products may be affected by many factors, including: • the size and nature of the patient population; • the design of the trial protocol for our clinical trials; • the eligibility and exclusion criteria for the trial in question; • the availability of competing therapies and competing clinical trials, and physician and patient perception of our product candidates and our other product candidates being studied in relation to these other potential options; • the availability of raw materials and the possibility of raw materials expiring prior to their use; • difficulty in maintaining contact with patients after treatment, resulting in incomplete data; • poor effectiveness of our products during clinical trials; • unforeseen safety issues or side effects; • the number and location of clinical sites in our clinical trials; • the proximity and availability of clinical trial sites for prospective patients; • the availability of time and resources at the institutions where clinical trials are and will be conducted; • the availability of adequate financing to fund ongoing clinical trial expenses; • the study endpoints that rely on subjective patient reported outcomes; • the impact of global health crises; and • governmental or regulatory delays and changes in regulatory requirements and guidelines.
Our amended and restated certificate of incorporation and bylaws: • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; • do not provide for cumulative voting in the election of directors, which would allow holders of less than a majority of the stock to elect some directors; 62 Table of Contents • establish a classified board of directors, as a result of which the successors to the directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following their election; • require that directors only be removed from office for cause; • provide that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office; • limit who may call special meetings of stockholders; • prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders; and • establish advance notice requirements for nominating candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
Our amended and restated certificate of incorporation and bylaws: • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; • do not provide for cumulative voting in the election of directors, which would allow holders of less than a majority of the stock to elect some directors; • establish a classified board of directors, as a result of which the successors to the directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following their election; • require that directors only be removed from office for cause; • provide that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office; • limit who may call special meetings of stockholders; • prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders; and • establish advance notice requirements for nominating candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
Our long-term capital requirements are expected to depend on many factors, including, among others: • our level of success in commercializing HETLIOZ ® , Fanapt ® and PONVORY ® , as well as other products that may be approved, globally; • outcomes of ongoing and potential patent litigation; • costs of developing and maintaining sales, marketing and distribution channels and our ability to sell our products; • market acceptance of our products; • costs involved in establishing and maintaining manufacturing capabilities for commercial quantities of our products; • the number of potential formulations and products in development; • progress with preclinical studies and clinical trials; • time and costs involved in obtaining regulatory (including FDA) approval; • costs involved in preparing, filing, prosecuting, maintaining and enforcing patent, trademark and other intellectual property claims; • cost of evaluating and acquiring new products from third parties; • competing technological and market developments; • costs for recruiting and retaining employees and consultants; • costs for training physicians; and • legal, accounting, insurance and other professional and business-related costs.
Our long-term capital requirements are expected to depend on many factors, including, among others: • our level of success in commercializing Fanapt ® , HETLIOZ ® and PONVORY ® , as well as other products that may be approved, globally; • outcomes of ongoing and potential patent litigation; • costs of developing and maintaining sales, marketing and distribution channels and our ability to sell our products; 53 Table of Contents • market acceptance of our products; • costs of establishing and maintaining manufacturing capabilities for commercial quantities of our products; • the number of potential formulations and products in development; • progress with preclinical studies and clinical trials; • time and costs involved in obtaining regulatory (including FDA) approval; • costs of preparing, filing, prosecuting, maintaining and enforcing patent, trademark and other intellectual property claims; • cost of evaluating and acquiring new products from third parties; • competing technological and market developments; • costs of recruiting and retaining employees and consultants; • costs of training physicians; and • legal, accounting, insurance and other professional and business-related costs.
If the FDA does not approve our sNDAs for HETLIOZ ® for the treatment of jet lag disorder or insomnia, continued development of tasimelteon for the treatment of jet lag disorder and insomnia will be significantly delayed or terminated, our business will be significantly harmed, and the market price of our stock could decline.
If the FDA does not approve our sNDAs for HETLIOZ ® for the treatment of jet lag disorder or insomnia, continued development of tasimelteon for the treatment of jet lag disorder and insomnia may be significantly delayed or terminated, our business will be significantly harmed, and the market price of our stock could decline.
In addition to FDA and related regulatory requirements, our general operations, and the research, development, manufacture, sale and marketing of our products, are subject to extensive additional federal and state healthcare regulation, including the federal Anti-Kickback Statute, the Prescription Drug Marketing Act, and the federal False Claims Act (FCA), the federal Health Insurance Portability and Accountability Act of 1996, the federal Physician Payment Sunshine Act and the Foreign Corrupt Practices Act (and their state analogues), as discussed above in Part I, Item 1 under the heading Government Regulation - Fraud and abuse laws and other U.S. regulatory matters .
In addition to FDA and related regulatory requirements, our general operations, and the research, development, manufacture, sale and marketing of our products, are subject to extensive additional federal and state healthcare regulation, including the federal Anti-Kickback Statute, the Prescription Drug Marketing Act, the federal False Claims Act (FCA), the federal Health Insurance Portability and Accountability Act of 1996, the federal Physician Payments Sunshine Act and the Foreign Corrupt Practices Act (and their state analogues), as discussed above in Part I, Item 1 under the heading Government Regulation - Fraud and abuse laws and other U.S. regulatory matters .
Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the U.S. Patent and Trademark Office, or made a materially misleading statement, during prosecution.
Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the U.S. Patent and Trademark Office (USPTO), or made a materially misleading statement, during prosecution.
We may also be subject to additional sanctions, including, but not limited, to the following: • Warning letters, public warnings and untitled letters; • Court-ordered seizures or injunctions; 43 Table of Contents • Civil or criminal penalties, or criminal prosecutions; • Variation, suspension or withdrawal of regulatory approvals for our products; • Changes to the package insert of our products, such as additional warnings regarding potential side effects or potential limitations on the current dosage or administration; • Requirements to communicate with physicians and other customers about concerns related to actual or potential safety, efficacy, or other issues involving our products; • Implementation of risk mitigation programs and post-approval obligations; • Restrictions on our continued manufacturing, marketing, distribution or sale of our products; • Temporary or permanent closing of the facilities of our third-party contract manufacturers; • Interruption or suspension of clinical trials; and • Refusal by regulators to consider or approve applications for additional indications.
We may also be subject to additional sanctions, including, but not limited, to the following: • Warning letters, public warnings and untitled letters; • Court-ordered seizures or injunctions; • Civil or criminal penalties, or criminal prosecutions; • Variation, suspension or withdrawal of regulatory approvals for our products; • Changes to the package insert of our products, such as additional warnings regarding potential side effects or potential limitations on the current dosage or administration; • Requirements to communicate with physicians and other customers about concerns related to actual or potential safety, efficacy, or other issues involving our products; • Implementation of risk mitigation programs and post-approval obligations; • Restrictions on our continued manufacturing, marketing, distribution or sale of our products; • Temporary or permanent closing of the facilities of our third-party contract manufacturers; • Interruption or suspension of clinical trials; and • Refusal by regulators to consider or approve applications for additional indications.
If we fail to continue to develop sales, marketing and distribution capabilities, if sales efforts are not effective or if costs of developing sales, marketing and distribution capabilities exceed their cost effectiveness, our business, results of operations and financial condition could be materially adversely affected. 34 Table of Contents As a result of the decision in favor of generic drug companies in connection with our HETLIOZ ® patent litigation, we have faced generic competition in the near term and our revenues and results of operations could be further affected by the launch of additional generic versions of HETLIOZ ® in the U.S.
If we fail to continue to develop sales, marketing and distribution capabilities, if sales efforts are not effective or if costs of developing sales, marketing and distribution capabilities exceed their cost effectiveness, our business, results of operations and financial condition could be materially adversely affected. 36 Table of Contents As a result of the decision in favor of generic drug companies in connection with our HETLIOZ ® patent litigation, we have faced generic competition in the near term and our revenues and results of operations could be further affected by the launch of additional generic versions of HETLIOZ ® in the U.S.
We have encountered third-party payors that refuse to cover or reimburse prescriptions written for HETLIOZ ® . This rate may increase further as a result of the recent entry into the market of generic versions of HETLIOZ ® .
We have encountered third-party payors that refuse to cover or reimburse prescriptions written for HETLIOZ ® . This rate may increase further as a result of the entry into the market of generic versions of HETLIOZ ® .
See Note 17, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” each of which is incorporated herein by reference, for additional information.
See Note 18, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” each of which is incorporated herein by reference, for additional information.
See Note 17, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” each of which is incorporated herein by reference, for additional information.
See Note 18, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful ,” each of which is incorporated herein by reference, for additional information.
See Note 17, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful, ” each of which is incorporated herein by reference, for additional information.
See Note 18, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “ We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful, ” each of which is incorporated herein by reference, for additional information.
In August 2023, the Federal Circuit denied our request for a rehearing. In January 2024, we filed a petition for a writ of certiorari with the U.S Supreme Court to review the Federal Circuit’s decision.
In August 2023, the Federal Circuit denied our request for a rehearing. In January 2024, we filed a petition for a writ of certiorari with the U.S Supreme Court to review the Federal Circuit’s decision. In April 2024, the U.S. Supreme Court denied our petition.
In January 2014, the U.S. Food and Drug Administration (FDA) approved our New Drug Application (NDA) for HETLIOZ ® for the treatment of Non-24 and in April 2014, we commenced the U.S. commercial launch of HETLIOZ ® .
Food and Drug Administration (FDA) approved our New Drug Application (NDA) for HETLIOZ ® for the treatment of Non-24 and in April 2014, we commenced the U.S. commercial launch of HETLIOZ ® .
District Court for the District of Columbia (DC District Court) to, among other things, compel the FDA to comply with its obligations and declare that its lack of compliance violates the FDCA and the FDA regulations.
District Court for the District of Columbia (DC District Court) to, among other things, compel the FDA to comply with its obligations and declare that the FDA’s lack of compliance violates the FDCA and the FDA regulations.
In addition, if our products face any safety or efficacy issues, including drug interaction problems, under the federal Food, Drug, and Cosmetic Act (FDCA), the FDA has broad authority to force us to take any number of actions, including, but not limited to, the following: • Requiring us to conduct post-approval clinical studies to assess product efficacy or known risks or new signals of serious risks, or to evaluate unexpected serious risks; • Mandating changes to a product’s label; • Requiring us to implement a risk evaluation and mitigation strategy (REMS) where necessary to assure safe use of the drug; or • Removing an already approved product from the market.
In addition, if our products face any safety or efficacy issues, including drug interaction problems, under the federal Food, Drug, and Cosmetic Act (FDCA), the FDA has broad authority to force us to take any number of actions, including, but not limited to, the following: • Requiring us to conduct post-approval clinical studies to assess product efficacy or known risks or new signals of serious risks, or to evaluate unexpected serious risks; • Mandating changes to a product’s label; 46 Table of Contents • Requiring us to implement a risk evaluation and mitigation strategy (REMS) where necessary to assure safe use of the drug; or • Removing an already approved product from the market.
The limitation resulting from a “change in ownership” could affect our ability to utilize NOLs and credit carryforwards (tax attributes) to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period (generally three years).
The limitation resulting from a change in ownership could affect our ability to utilize NOLs and credit carryforwards (tax attributes) to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period (generally three years).
However, there is no assurance that we will receive the extensions of our patents or other exclusive rights available under the Hatch-Waxman Act or similar foreign legislation.
There is no assurance that we will receive the extensions of our patents or other exclusive rights available under the Hatch-Waxman Act or similar foreign legislation.
See Note 17, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report, which is incorporated herein by reference, for information regarding ongoing litigation related to similar matters. Further, the FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products.
See Note 18, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report, which is incorporated herein by reference, for information regarding ongoing litigation related to similar matters. Further, the FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products.
The use of specialty pharmacies involves certain risks, including, but not limited to, risks that these specialty pharmacies will: • not provide us accurate or timely information regarding their inventories, the number of patients who are using HETLIOZ ® or complaints about HETLIOZ ® ; 45 Table of Contents • reduce their efforts or discontinue to sell or support or otherwise not effectively sell or support HETLIOZ ® , particularly in light of the recent entry into the market of generic versions of HETLIOZ ® ; • not devote the resources necessary to sell HETLIOZ ® in the volumes and within the time frames that we expect; • be unable to satisfy financial obligations to us or others; or • cease operations.
The use of specialty pharmacies involves certain risks, including, but not limited to, risks that these specialty pharmacies will: • not provide us accurate or timely information regarding their inventories, the number of patients who are using HETLIOZ ® or complaints about HETLIOZ ® ; • reduce their efforts or discontinue to sell or support or otherwise not effectively sell or support HETLIOZ ® , particularly in light of the recent entry into the market of generic versions of HETLIOZ ® ; • not devote the resources necessary to sell HETLIOZ ® in the volumes and within the time frames that we expect; • be unable to satisfy financial obligations to us or others; or • cease operations.
While our clinical trials have since resumed patient enrollment, we may experience future disruptions as a result of the lasting effects of the COVID-19 pandemic or other health crises that could adversely impact our sales activities, supply chain, our ongoing and planned clinical trials, and other regulatory activities, including: 38 Table of Contents • curtailment of our sales force or patient access to healthcare providers, which may reduce the number of prescription refills or new patient starts, thereby adversely affecting our revenues; • interruption of, or delays in receiving, supplies of the active pharmaceutical ingredients that our contract manufacturing organizations use to manufacture our products and any related interruption of, or delays in receiving, supplies of our products from these organizations, due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems; • delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff; • diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials; • delays or difficulties in enrolling patients in our clinical trials; • interruption of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures (such as procedures that are deemed non-essential), which may impact the integrity of subject data and clinical study endpoints; • limitations on our employee resources or those of third-party clinical research organizations towards the development of our products, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and • interruption or delays in the operations of regulatory agencies, which may impact review and approval timelines.
While our clinical trials have since resumed patient enrollment, we may experience future disruptions as a result of other health crises that could adversely impact our sales activities, supply chain, our ongoing and planned clinical trials, and other regulatory activities, including: • curtailment of our sales force or patient access to healthcare providers, which may reduce the number of prescription refills or new patient starts, thereby adversely affecting our revenues; • interruption of, or delays in receiving, supplies of the active pharmaceutical ingredients that our contract manufacturing organizations use to manufacture our products and any related interruption of, or delays in receiving, supplies of our products from these organizations, due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems; • delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff; • diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials; 41 Table of Contents • delays or difficulties in enrolling patients in our clinical trials; • interruption of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures (such as procedures that are deemed non-essential), which may impact the integrity of subject data and clinical study endpoints; • limitations on our employee resources or those of third-party clinical research organizations towards the development of our products, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and • interruption or delays in the operations of regulatory agencies, which may impact review and approval timelines.
If we fail to adequately fund our research and development activities and commercialization efforts, we may be unable to continue operations or we may be forced to share our rights to commercialize our products with third parties on terms that may not be attractive to us. Our activities will necessitate significant uses of working capital throughout 2024 and beyond.
If we fail to adequately fund our research and development activities and commercialization efforts, we may be unable to continue operations or we may be forced to share our rights to commercialize our products with third parties on terms that may not be attractive to us. Our activities will necessitate significant uses of working capital throughout 2025 and beyond.
Technological developments or the approval by the FDA or foreign regulators of new therapeutic indications for existing products may make our products obsolete or may make them more difficult to market successfully, any of which could have a material adverse effect on our business, results of operations and financial condition.
Technological developments or the approval by the FDA or foreign regulators of new therapeutic indications for existing products may make our products obsolete or may make them more difficult to market successfully, either of which could have a material adverse effect on our business, results of operations and financial condition.
The generic companies could potentially find or develop sources of qualified HETLIOZ ® supply that are not known to us and that are more efficient or inexpensive than our sources. Furthermore, generic companies could potentially convince our suppliers or third-party manufacturers to prioritize supply to the generic companies ahead of any applicable contractual commitments to supply us.
The generic companies could potentially find or develop sources of qualified tasimelteon supply that are not known to us and that are more efficient or inexpensive than our sources. Furthermore, generic companies could potentially convince our suppliers or third-party manufacturers to prioritize supply to the generic companies ahead of any applicable contractual commitments to supply us.
The GDPR provides that E.U. Member States may supplement the GDPR with their own additional laws and regulations in relation to the personal data processing, in particular regarding sensitive personal data, (e.g., genetic, biometric or health data), which could result in differences between E.U.
The GDPR provides that E.U. Member States may supplement the GDPR with their own additional laws and regulations in relation to certain processing of personal data, in particular regarding sensitive personal data, (e.g., genetic, biometric or health data), which could result in differences between E.U.
Specifically, the applicant must certify in the application that: 58 Table of Contents I. there is no patent information listed for the reference drug; II. the listed patent has expired for the reference drug; III. the listed patent for the reference drug has not expired, but will expire on a particular date and approval is sought after patent expiration; or IV. the listed patent for the reference drug is invalid, unenforceable, or will not be infringed by the manufacture, use or sale of the product for which the ANDA or 505(b)(2) NDA is submitted.
Specifically, the applicant must certify in the application that: I. there is no patent information listed for the reference drug; II. the listed patent has expired for the reference drug; III. the listed patent for the reference drug has not expired, but will expire on a particular date and approval is sought after patent expiration; or IV. the listed patent for the reference drug is invalid, unenforceable, or will not be infringed by the manufacture, use or sale of the product for which the ANDA or 505(b)(2) NDA is submitted.
We also own HETLIOZ ® U.S. method of treatment patents (directed to the approved method of treatment as described in the HETLIOZ ® label approved by the FDA), which expire normally between 2033 and 2041, and four drug substance patents that expire in 2035. Additionally, the U.S.
We also own HETLIOZ ® U.S. method of treatment patents (directed to the approved method of treatment as described in the HETLIOZ ® label approved by the FDA), which expire normally between 2033 and 2041, and drug substance patents that expire in 2035.
If the FDA does not approve our tradipitant NDA filing for the use of tradipitant for patients with gastroparesis or accept our sNDA filing for the use of tradipitant for patients with motion sickness; or if the FDA determines that our clinical trial results for tradipitant for the treatment of gastroparesis or for the treatment of motion sickness do not demonstrate adequate safety and substantial evidence of efficacy, continued development of tradipitant will be significantly delayed or terminated, our business will be significantly harmed, and the market price of our stock could decline.
If the FDA does not accept our NDA filing for the use of tradipitant for patients with motion sickness; or if the FDA determines that our clinical trial results for tradipitant for the treatment of motion sickness do not demonstrate adequate safety and substantial evidence of efficacy, continued development of tradipitant will be significantly delayed or terminated, our business will be significantly harmed, and the market price of our stock could decline.
For example, federal enforcement agencies have recently pursued 44 Table of Contents enforcement actions against pharmaceutical companies’ product and patient assistance programs, including relationships with specialty pharmacies, and support for charitable foundations providing patients with co-pay assistance. In addition, Relators have filed lawsuits involving manufacturer reimbursement support services as well as promotion of pharmaceutical products beyond labeled claims.
For example, federal enforcement agencies have recently pursued enforcement actions against pharmaceutical companies’ product and patient assistance programs, including relationships with specialty pharmacies, and support for charitable foundations providing patients with co-pay assistance. In addition, Relators have filed lawsuits involving manufacturer reimbursement support services as well as promotion of pharmaceutical products beyond labeled claims.
Although we have received marketing authorization for HETLIOZ ® capsules from the EC, pricing negotiations with governmental authorities may take a considerable amount of time in those Member States that impose price controls. For example, we launched HETLIOZ ® commercially in Germany in August 2016, and concluded our pricing negotiations with German authorities in October 2017.
Although we have received marketing authorization for HETLIOZ ® capsules from the EC, pricing negotiations 56 Table of Contents with governmental authorities may take a considerable amount of time in those Member States that impose price controls. For example, we launched HETLIOZ ® commercially in Germany in August 2016, and concluded our pricing negotiations with German authorities in October 2017.
If an application for a generic version of a branded product or a Section 505(b)(2) application relies on a prior FDA finding of safety and effectiveness of a previously-approved product including an alternative strength thereof, the applicant is required to certify to the FDA concerning any patents listed for the referenced product in the Orange Book.
If an application for a generic version of a branded product or a Section 505(b)(2) application relies on a prior FDA finding of safety and effectiveness of a previously-approved product, including an alternative strength thereof, the applicant is 61 Table of Contents required to certify to the FDA concerning any patents listed for the referenced product in the Orange Book.
Please see Note 17, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report, which is incorporated herein by reference, for additional information. Alternatively, our competitors may seek approval to market their own products similar to or otherwise competitive with our products.
See Note 18, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report, which is incorporated herein by reference, for additional information. Alternatively, our competitors may seek approval to market their own products similar to, or otherwise competitive with, our products.
In the past, following periods of volatility in the market price of their stock, many companies, including us, have been the subjects of securities class action litigation. Any such litigation can result in substantial costs and diversion of management’s attention and resources and could harm our stock price, business results of operations and financial condition.
In the past, following periods of volatility in the market price of their stock, many companies, including us, have been the subjects of securities class action litigation. Any such litigation can result in substantial costs and diversion of management’s attention and resources and 64 Table of Contents could harm our stock price, business, results of operations and financial condition.
Even after obtaining regulatory approvals for the sale of our products, the commercial success of these products will depend, among other things, on their acceptance by physicians, patients, third-party payors and other members of the medical 40 Table of Contents community as therapeutic and cost-effective alternatives to competing products and treatments.
Even after obtaining regulatory approvals for the sale of our products, the commercial success of these products will depend, among other things, on their acceptance by physicians, patients, third-party payors and other members of the medical community as therapeutic and cost-effective alternatives to competing products and treatments.
While we are not currently party to any material commercial collaborative arrangements, areas in which we may potentially enter into third-party collaboration arrangements include joint sales and marketing arrangements for sales and marketing in certain E.U. countries and elsewhere outside of the U.S., and future product development arrangements.
While we are not currently party to any material commercial collaborative arrangements, areas in which we may potentially 42 Table of Contents enter into third-party collaboration arrangements include joint sales and marketing arrangements for sales and marketing in certain E.U. countries and elsewhere outside of the U.S., and future product development arrangements.
This could prevent the commercialization or limit the commercial potential of our 53 Table of Contents products. Even if we are able to maintain insurance that we believe is adequate, our results of operations and financial condition may be materially adversely affected by a product liability claim.
This could prevent the commercialization or limit the commercial potential of our products. Even if we are able to maintain insurance that we believe is adequate, our results of operations and financial condition may be materially adversely affected by a product liability claim.
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, 56 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.
We expect that it would take a significant amount of time if we were required to replace one or more of our specialty pharmacies. Our revenues from Fanapt ® are substantially dependent on sales through a limited number of wholesalers, and such revenues may fluctuate from quarter to quarter.
We expect that it would take a significant amount of time if we were required to replace one or more of our specialty pharmacies. Our revenues from Fanapt ® and PONVORY ® are substantially dependent on sales through a limited number of customers, and such revenues may fluctuate from quarter to quarter.
Moreover, we may need to raise additional funds through public or 63 Table of Contents private debt or equity financing to acquire any businesses, which would result in dilution for stockholders or the incurrence of indebtedness and may not be available on terms which would otherwise be acceptable to us.
Moreover, we may need to raise additional funds through public or private debt or equity financing to acquire any businesses, which would result in dilution for stockholders or the incurrence of indebtedness and may not be available on terms which would otherwise be acceptable to us.
Furthermore, these third-party contractors, whether foreign or domestic, may experience regulatory compliance difficulty, mechanical shut downs, employee strikes, or other unforeseeable events that may delay or limit production.
Furthermore, these third-party contractors, whether foreign or domestic, may experience regulatory compliance difficulties, mechanical shut downs, employee strikes, or other unforeseeable events that may delay or limit production.
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (beginning October 1, 2022); and replaces the Medicare Part D coverage gap discount program with a new discounting program (beginning in 2025).
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare, with prices that can be negotiated subject to a cap, with the first drug price negotiations effective January 1, 2026; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation beginning October 1, 2022; and replaces the Medicare Part D coverage gap discount program with a new discounting program beginning January 1, 2025.
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (beginning October 1, 2022); and replaces the Medicare Part D coverage gap discount program with a new discounting program (beginning in 2025).
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare, with prices that can be negotiated subject to a cap, with the first drug price negotiations effective January 1, 2026; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation beginning October 1, 2022; and replaces the Medicare Part D coverage gap discount program with a new discounting program beginning January 1, 2025.
Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks.
In addition, the U.S. Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which, coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks.
Healthcare reform efforts or any future legislation or regulatory actions aimed at controlling and reducing healthcare costs, including through measures designed to limit reimbursement, restrict access or impose unfavorable pricing modifications 36 Table of Contents on pharmaceutical products, could impact our ability to obtain or maintain reimbursement for our products at satisfactory levels, or at all, which could materially harm our business and financial results.
Healthcare reform efforts or any future legislation or regulatory actions aimed at controlling and reducing healthcare costs, including through measures designed to limit reimbursement, restrict access or impose unfavorable pricing modifications on pharmaceutical products, could impact our ability to obtain or maintain reimbursement for our products at satisfactory levels, or at all, which could materially harm our business and financial results.
District Court for the District of Columbia (DC District Court) challenging the FDA’s position, but we ultimately did not prevail. Despite our disagreement with the FDA, the preclinical package has allowed us to continue to conduct all of the efficacy studies necessary for NDA filing.
District Court for the District of Columbia (DC District Court) challenging the FDA’s position, but 39 Table of Contents we ultimately did not prevail. Despite our disagreement with the FDA, the preclinical package has allowed us to continue to conduct all of the efficacy studies necessary for NDA filing.
We may not succeed in maintaining or gaining additional market acceptance of HETLIOZ ® , Fanapt ® and PONVORY ® in the U.S. and we may not succeed in commercializing HETLIOZ ® or Fanapt ® outside of the U.S or PONVORY ® in Canada.
We may not succeed in maintaining or gaining additional market acceptance of our products in the U.S. and we may not succeed in commercializing Fanapt ® or HETLIOZ ® outside of the U.S or PONVORY ® in Canada.
Such restatements and recalculations increase our costs for complying with the laws and regulations governing the MDRP and the 340B program discussed below. Pursuant to the IRA, certain figures we report under the MDRP will also be used to compute rebates under Medicare Part D triggered by price increases that outpace inflation.
Such restatements and recalculations increase our costs for complying with the laws and regulations governing the MDRP and the 340B program discussed below. Pursuant to the IRA, certain figures we report under the MDRP 44 Table of Contents will also be used to compute rebates under Medicare Part D triggered by price increases that outpace inflation.
For example, our stock price suffered a significant decline following our announcement of the Delaware District Court’s ruling in favor of the Defendants. As a result of these factors, holders of our common stock might be unable to sell their shares at or above the price they paid for such shares.
For example, our stock price suffered a significant decline following our announcement of the Delaware District Court’s ruling in favor of Teva and Apotex. As a result of these factors, holders of our common stock might be unable to sell their shares at or above the price they paid for such shares.
In May 2023, we announced positive results from the first Phase III study of tradipitant in motion sickness, confirming the previously reported results demonstrating that tradipitant is effective in the prevention of vomiting associated with motion sickness. Our second Phase III study of tradipitant in motion sickness is ongoing.
In May 2023, we announced positive results from the first Phase III study of tradipitant in motion sickness, confirming the previously reported results demonstrating that tradipitant is effective in the prevention of vomiting associated with motion sickness.
An adjustment to such net operating loss carryforwards, including an adjustment from a taxing authority, could result in higher tax costs, penalties and interest, thereby adversely impacting our financial condition.
An adjustment to such net operating loss carryforwards or other tax attributes, including an adjustment from a taxing authority, could result in higher tax costs, penalties and interest, thereby adversely impacting our financial condition.
Financial instability or a general decline in economic conditions in the U.S. and other countries caused by political instability and conflict and economic challenges caused by general health crises such as the COVID-19 pandemic have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused record inflation globally and could adversely affect our operations.
Financial instability or a general decline in economic conditions in the U.S. and other countries caused by political instability and conflict and economic challenges caused by general health crises have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused record inflation globally and could adversely affect our operations.
If we fail to complete successfully, or have difficulty enrolling a sufficient number of patients for, our clinical trials, we or they may not receive the regulatory approvals needed to market that product. Any such failure or difficulty could have a material adverse effect on our business. We may not be able to achieve sustained profitability.
If we fail to complete our clinical trials successfully or have difficulty enrolling a sufficient number of patients for them, we may not receive the regulatory approvals needed to market that product. Any such failure or difficulty could have a material adverse effect on our business. 52 Table of Contents We may not be able to achieve sustained profitability.
Reductions in reimbursement levels may negatively impact the prices we can charge or the frequency with which products are prescribed or administered. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.
Reductions in 57 Table of Contents reimbursement levels may negatively impact the prices we can charge or the frequency with which products are prescribed or administered. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.
In December 2022, following conclusion of the trial, the Delaware District Court issued its ruling in favor of the Defendants, finding that the Defendants’ use of a generic HETLIOZ ® , for which they were seeking FDA approval, did not infringe one of our HETLIOZ ® patents and the asserted claims of certain of our other HETLIOZ ® patents were invalid.
In December 2022, following conclusion of the trial, the Delaware District Court issued its ruling in favor of Teva and Apotex, finding that their use of a generic HETLIOZ ® , for which they were seeking FDA approval, did not infringe one of our HETLIOZ ® patents and the asserted claims of certain of our other HETLIOZ ® patents were invalid.
Moreover, FDA authorization of an EAP is not a guarantee of or a step in obtaining full FDA approval of an NDA.
Moreover, FDA authorization of an EAP is not a guarantee of or a step towards obtaining full FDA approval of an NDA.
We have been engaged in identifying and developing drug products since March 2003, which has required, and will continue to require, significant research and development expenditures. The continued commercialization of HETLIOZ ® , Fanapt ® and PONVORY ® will also require substantial additional expenditures.
We have been engaged in identifying and developing drug products since March 2003, which has required, and will continue to require, significant research and development expenditures. The continued commercialization of our products will also require substantial additional expenditures.
We regularly review potential transactions related to technologies, products or product rights and businesses complementary to our business. These transactions could include: • mergers; • acquisitions; • asset purchases; • strategic alliances; • licensing agreements; and • co-promotion and similar agreements.
We regularly review potential transactions related to technologies, products or product rights and businesses complementary to our business. These transactions could include: • mergers; • acquisitions; • asset purchases; • strategic alliances; • licensing agreements; and 66 Table of Contents • co-promotion and similar agreements.
See Part I, Item 1, Competition, for a discussion of the primary competitors for HETLIOZ ® , Fanapt ® and PONVORY ® . In addition, we may face competition from newly developed generic products. Under the Hatch-Waxman Act, newly approved drugs and indications may benefit from a statutory period of non-patent marketing exclusivity.
See Part I, Item 1, Competition, for a discussion of the primary competitors for our commercial products. In addition, we may face competition from newly developed generic products. Under the Hatch-Waxman Act, newly approved drugs and indications may benefit from a statutory period of non-patent marketing exclusivity.
In December 2022, the Delaware District Court ruled in favor of the Defendants in our patent litigation relating to the Defendants’ filing of ANDAs for generic versions of HETLIOZ ® in the U.S. We appealed the decision to the Federal Circuit, and in May 2023, a three-judge panel of the Federal Circuit affirmed the Delaware District Court’s ruling.
In December 2022, the Delaware District Court ruled in favor of Teva and Apotex in our patent litigation relating to their filing of ANDAs for generic versions of HETLIOZ ® in the U.S. We appealed the decision to the Federal Circuit, and in May 2023, a three-judge panel of the Federal Circuit affirmed the Delaware District Court’s ruling.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs part of this process, and our processes to provide for the availability of critical data and systems, maintain regulatory compliance, identify and manage our risks from cybersecurity threats and to protect against, detect and respond to cybersecurity incidents, as such term is defined in Item 106(a) of Regulation S-K, we undertake the below listed activities, among others: • comparing our processes to benchmark standards, such as those set by the National Institute of Standards and Technology (NIST); • closely monitor emerging data protection laws and implement changes to our processes designed to comply; • conduct annual customer data handling and use requirements training for employees; • conduct annual cybersecurity management and incident training for employees involved in our systems and processes that handle sensitive data; • through policy, practice and contract (as applicable) require employees, as well as third-parties who provide services on our behalf, to treat customer information and data with care; • run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies; • conduct regular network and endpoint monitoring, vulnerability assessments, and penetration testing to improve our information systems, as such term is defined in Item 106(a) of Regulation S-K; • leverage the NIST incident handling framework to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; and • carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident. 65 Table of Contents Our incident response plan coordinates the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess severity for, escalate, contain, investigate and remediate the incident, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.
Biggest changeAs part of this process, and our processes to provide for the availability of critical data and systems, maintain regulatory compliance, identify and manage our risks from cybersecurity threats and to protect against, detect and respond to cybersecurity incidents, as such term is defined in Item 106(a) of Regulation S-K, we undertake the below listed activities, among others: • compare our processes to benchmark standards, such as those set by the National Institute of Standards and Technology (NIST); • closely monitor emerging data protection laws and implement changes to our processes designed to comply; • conduct annual customer data handling and use requirements training for employees; • conduct annual cybersecurity management and incident training for employees involved in our systems and processes that handle sensitive data; • through policy, practice and contract, as applicable, require employees, as well as third-parties who provide services on our behalf, to treat customer information and data with care; • run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies; • conduct regular network and endpoint monitoring, vulnerability assessments, and penetration testing to improve our information systems, as such term is defined in Item 106(a) of Regulation S-K; • leverage the NIST incident handling framework to help us govern, identify, protect, detect, respond and recover when there is an actual or potential cybersecurity incident; and • carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident.
These risks include, among other things, operational risks; intellectual property theft; fraud; extortion; harm to employees or customers; violation of privacy or security laws and other litigation and legal risk; and reputational risks. We have implemented several cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage such material risks.
These risks include, among other things, operational risks, 68 Table of Contents intellectual property theft, fraud, extortion, harm to employees or customers, violation of privacy or security laws and other litigation and legal risk and reputational risks. We have implemented several cybersecurity processes, technologies and controls to aid in our efforts to assess, identify and manage such material risks.
Cybersecurity Governance Cybersecurity is an important part of our risk management processes and an area of increasing focus for our Board and management. Our Audit Committee is responsible for the oversight of risks from cybersecurity threats.
Cybersecurity Governance 69 Table of Contents Cybersecurity is an important part of our risk management processes and an area of increasing focus for our Board and management. Our Audit Committee is responsible for the oversight of risks from cybersecurity threats.
Added
Our incident response plan coordinates the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess severity for, escalate, contain, investigate and remediate the incident, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition, we have 2,880 square feet of office space in London, England under an operating lease that has a lease term ending in 2026, and other short-term leases. We believe that these facilities are suitable and adequate 66 Table of Contents to meet our anticipated near-term needs.
Biggest changeIn addition, we have 2,880 square feet of office space in London, England under an operating lease that has a lease term ending in 2026, and other short-term leases. We believe that these facilities are suitable and adequate to meet our anticipated near-term needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS Information with respect to this item may be found in Note 17, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this annual report on Form 10-K, which is incorporated herein by reference.
Biggest changeITEM 3. LEGAL PROCEEDINGS Information with respect to this item may be found in Note 18, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this annual report on Form 10-K, which is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAn investment of $100 (with reinvestment of dividends) is assumed to have been made in our common stock and in each of the indexes on December 31, 2018 and its relative performance is tracked through December 31, 2023.
Biggest changeAn investment of $100 (with reinvestment of dividends) is assumed to have been made in our common stock and in each of the indexes on December 31, 2019 and its 70 Table of Contents relative performance is tracked through December 31, 2024.
The following graph and related information is being furnished solely to accompany this annual report on Form 10-K pursuant to Item 201(e) of Regulation S-K and shall not be deemed “soliciting materials” or to be “filed” with the SEC (other than as provided in Item 201), nor shall such information be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, and irrespective of any general incorporation language in any such filing. 67 Table of Contents
The following graph and related information is being furnished solely to accompany this annual report on Form 10-K pursuant to Item 201(e) of Regulation S-K and shall not be deemed “soliciting materials” or to be “filed” with the SEC (other than as provided in Item 201), nor shall such information be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, and irrespective of any general incorporation language in any such filing.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is quoted on The Nasdaq Global Market under the symbol “VNDA.” As of February 1, 2024, there were nine holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is quoted on The Nasdaq Global Market under the symbol “VNDA.” As of February 7, 2025, there were ten holders of record of our common stock.

Item 7. Management's Discussion & Analysis

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

77 edited+29 added−22 removed39 unchanged
Biggest changeIn addition, we have a number of drugs in development, including: • HETLIOZ ® (tasimelteon) for the treatment of jet lag disorder, insomnia, delayed sleep phase disorder (DSPD) and pediatric Non-24; • Fanapt ® (iloperidone) for the treatment of bipolar I disorder and a long acting injectable (LAI) formulation for the treatment of schizophrenia; • PONVORY (ponesimod) for the treatment of inflammatory/autoimmune disorders, including but not limited to ulcerative colitis, psoriasis, Crohn's disease, atopic dermatitis, eosinophilic esophagitis and alopecia areata; • Tradipitant (VLY-686), a small molecule neurokinin-1 (NK-1) receptor antagonist, for the treatment of gastroparesis, motion sickness and atopic dermatitis; • VHX-896, the active metabolite of iloperidone; • Portfolio of Cystic Fibrosis Transmembrane Conductance Regulator (CFTR) activators and inhibitors, including VSJ-110 for the treatment of dry eye and ocular inflammation and VPO-227 for the treatment of secretory diarrhea disorders, including cholera; • VTR-297, a small molecule histone deacetylase (HDAC) inhibitor for the treatment of onychomycosis, hematologic malignancies and with potential use as a treatment for several oncology indications; • VQW-765, a small molecule nicotinic acetylcholine receptor partial agonist, for the treatment of social/performance anxiety and psychiatric disorders; and • Antisense oligonucleotide (ASO) molecules, including VCA-894A for the treatment of Charcot-Marie-Tooth Disease, Type 2S (CMT2S), caused by cryptic slice site variants within IGHMBP2.
Biggest changeIn addition, we have a number of drugs and/or indications for current products in development, including: • Fanapt ® (iloperidone) long acting injectable (LAI) formulation for the treatment of schizophrenia; • Bysanti TM (milsaperidone), the active metabolite of Fanapt ® (iloperidone), for the acute treatment of manic or mixed episodes associated with bipolar I disorder and for the treatment of schizophrenia and major depressive disorder (MDD); • HETLIOZ ® (tasimelteon) for the treatment of jet lag disorder, insomnia, pediatric insomnia, delayed sleep phase disorder (DSPD) and pediatric Non-24; • PONVORY ® (ponesimod) for the treatment of psoriasis and ulcerative colitis; • Tradipitant (VLY-686), a small molecule neurokinin-1 (NK-1) receptor antagonist, for the treatment of gastroparesis, motion sickness and atopic dermatitis; • Imsidolimab, an IL-36R antagonist, for the treatment of generalized pustular psoriasis (GPP); • VTR-297, a small molecule histone deacetylase (HDAC) inhibitor for the treatment of onychomycosis and hematologic malignancies and with potential use as a treatment for several oncology indications; • Portfolio of Cystic Fibrosis Transmembrane Conductance Regulator (CFTR) activators and inhibitors, including VSJ-110 for the treatment of dry eye and ocular inflammation and VPO-227 for the treatment of secretory diarrhea disorders, including cholera; • VQW-765, a small molecule nicotinic acetylcholine receptor partial agonist, for the treatment of social/performance anxiety and psychiatric disorders; and • Antisense oligonucleotide (ASO) molecules, including VCA-894A for the treatment of Charcot-Marie-Tooth Disease, Type 2S (CMT2S), caused by cryptic slice site variants within the IGHMBP2 gene and VGT-1849A for the treatment of polycythemia vera (PV), a form of a rare hematologic malignancy. 72 Table of Contents Operational Highlights Fanapt ® • Fanapt ® was approved in the second quarter of 2024 for the acute treatment of bipolar I disorder.
Our ability to generate meaningful product sales and achieve profitability largely depends on our level of success in commercializing HETLIOZ ® and Fanapt ® in the U.S. and Europe and PONVORY ® in the U.S and Canada, on our ability, alone or with others, to complete the development of our products, and to obtain the regulatory approvals for and to manufacture, market and sell our products.
Our ability to generate meaningful product sales and achieve profitability largely depends on our level of success in commercializing Fanapt ® and HETLIOZ ® in the U.S. and Europe and PONVORY ® in the U.S and Canada, on our ability, alone or with others, to complete the development of our products and to obtain the regulatory approvals for and to manufacture, market and sell our products.
Because billing for services often lags delivery of service by a substantial amount of time, we often are required to estimate a significant portion of our accrued clinical expenses.
Because billing for services often lags delivery of service by a substantial amount of time, we are often required to estimate a significant portion of our accrued clinical expenses.
If we raise additional capital by issuing equity securities, the terms and prices for these financings may be much more favorable to the new investors than the terms obtained by our existing stockholders. These financings also may significantly dilute the ownership of our existing stockholders.
If we raise additional capital by issuing equity securities, the terms and prices for these financings may be much more favorable to the new investors than the terms obtained by our existing stockholders. These financings may also significantly dilute the ownership of our existing stockholders.
We also have long-term contractual obligations related to our operating leases and license agreements. See Note 8, Leases , and Note 11, Commitments and Contingencies , respectively, to the consolidated financial statements in Part II, Item 8 of this Annual Report for more information about these commitments. We do not have any off-balance sheet arrangements.
We also have long-term contractual obligations related to our leases and license agreements. See Note 8, Leases , and Note 11, Commitments and Contingencies , respectively, to the consolidated financial statements in Part II, Item 8 of this Annual Report for more information about these commitments. We do not have any off-balance sheet arrangements.
We assess the need for a valuation allowance against our deferred tax asset each quarter through the review of all available positive and negative evidence. Deferred tax assets are reduced by a tax valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.
We assess the need for a valuation allowance against our deferred tax assets each quarter through the review of all available positive and negative evidence. Deferred tax assets are reduced by a tax valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.
(we, our or Vanda) is a leading global biopharmaceutical company focused on the development and commercialization of innovative therapies to address high unmet medical needs and improve the lives of patients. We strive to advance novel approaches to bring important new medicines to market through responsible innovation.
(we, our, us or Vanda) is a leading global biopharmaceutical company focused on the development and commercialization of innovative therapies to address high unmet medical needs and improve the lives of patients. We strive to advance novel approaches to bring important new medicines to market through responsible innovation.
Sales of generic versions of HETLIOZ ® have resulted in and could continue to result in a reduction in the demand for HETLIOZ ® and/or the price at which we can sell it and/or create volatility in net product sales in future periods, which could have a material impact on our revenues and results of operations.
In addition, sales of generic versions of HETLIOZ ® have resulted in and could continue to result in a reduction in the demand for HETLIOZ ® and/or the price at which we can sell it and/or create volatility in net product sales in future periods, which could have a material impact on our revenues and results of operations.
We account for the Medicare Part D coverage gap using a point of sale model. Estimates for expected Medicare Part D coverage gap are based in part on historical activity and, where available, actual and pending prescriptions when we have validated the insurance benefits.
We account for the Medicare Part D coverage gap using a point of sale model. Estimates for expected Medicare Part D rebates are based, in part, on historical activity and, where available, actual and pending prescriptions when we have validated the insurance benefits.
The allowances for rebates are based on statutory or contracted discount rates and estimated patient utilization. • Chargebacks: Chargebacks are discounts that occur when contracted indirect customers purchase directly from specialty pharmacies and wholesalers.
The allowances for rebates are based on statutory or contracted discount rates and estimated patient utilization. • Chargebacks: Chargebacks are discounts that occur when contracted indirect customers purchase directly from wholesalers, specialty pharmacies and specialty distributors.
Costs related to the acquisition of intellectual property are expensed as incurred if the underlying technology is developed in connection with our research and development efforts and has no alternative future use. 73 Table of Contents Clinical trials are inherently complex, often involve multiple service providers, and can include payments made to investigator physicians at study sites.
Costs related to the acquisition of intellectual property are expensed as incurred if the underlying technology is developed in connection with our research and development efforts and has no alternative future use. 76 Table of Contents Clinical trials are inherently complex, often involve multiple service providers and can include payments made to investigator physicians at study sites.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
The specialty pharmacy or wholesaler, in turn, charges back the difference between the price initially paid by the specialty pharmacy or wholesaler and the discounted price paid to the specialty pharmacy or wholesaler by the contracted customer. • Medicare Part D coverage gap: The Medicare Part D prescription drug benefit requires manufacturers to fund approximately 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients for applicable drugs.
The wholesaler, specialty pharmacy or specialty distributor, in turn, charges back the difference between the price initially paid by the wholesaler, specialty pharmacy or specialty distributor and the discounted price paid to the wholesaler, specialty pharmacy or specialty distributor by the contracted customer. • Medicare Part D rebates: The Medicare Part D prescription drug benefit requires manufacturers to fund approximately 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients for applicable drugs.
The ending balances of discounts, returns and other as of December 31, 2023 and 2022 primarily represent estimated product returns of Fanapt ® and wholesaler distribution fees applicable to sales of Fanapt ® . Stock-based compensation.
The ending balances of discounts, returns and other as of December 31, 2024 and 2023 primarily represent estimated product returns of Fanapt ® and wholesaler distribution fees applicable to sales of Fanapt ® . Stock-based compensation.
A summary of our significant accounting policies appears in the notes to our audited consolidated financial statements for the year ended December 31, 2023 included in this Annual Report.
A summary of our significant accounting policies appears in the notes to our audited consolidated financial statements for the year ended December 31, 2024 included in this Annual Report.
The FDA has approved ANDAs for Teva and Apotex, both of which have since launched their generic versions of HETLIOZ ® at risk in the U.S.
For HETLIOZ ® , the FDA has approved ANDAs for Teva and Apotex, both of which have since launched their generic versions of HETLIOZ ® at risk in the U.S. In December 2022, the U.S.
HETLIOZ ® is available in the U.S. for distribution through a limited number of specialty pharmacies and is not available in retail pharmacies. Fanapt ® is available in the U.S. for distribution through a limited number of wholesalers and is available in retail pharmacies. PONVORY ® is available in the U.S. for distribution primarily through specialty pharmacies.
Fanapt ® is available in the U.S. for distribution through a limited number of wholesalers and is available in retail pharmacies. HETLIOZ ® is available in the U.S. for distribution through a limited number of specialty pharmacies and is not available in retail pharmacies.
We consider several factors in the estimation process, including expiration dates of product shipped to customers, inventory levels within the distribution channel, product shelf life, historical return activity, including activity for product sold for which the return period has past, prescription trends and other relevant factors. We do not expect returned goods to be resalable.
We consider several factors in the estimation process, including expiration dates of product shipped to customers, inventory levels within the distribution channel, product shelf life, historical return activity, including 75 Table of Contents activity for product sold for which the return period has past, prescription trends and other relevant factors. We do not expect returned products to be resalable.
We expect that the specialty pharmacies and wholesalers will earn prompt payment discounts and, therefore, deduct the full amount of these discounts from total product sales when revenues are recognized. • Rebates: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program as well as contracted rebate programs with other payors, including the new Medicare Part D inflationary rebate effective October 1, 2022.
We expect that these direct customers will earn prompt payment discounts and, therefore, we deduct the full amount of these discounts from total product sales when revenues are recognized. • Rebates: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program as well as contracted rebate programs with other payors, including the Medicare Part D inflationary rebate effective October 1, 2022.
As a result of the unfavorable events and subsequent developments in the fourth quarter of 2022 and second quarter of 2023 related to the HETLIOZ ® patent litigation (see Note 17, Legal Matters , to the consolidated financial statements included in Part II, Item 8 of this Annual Report) we performed impairment reviews for our HETLIOZ ® asset group and determined, based upon our review of undiscounted cash flows, that the carrying value of our HETLIOZ ® asset group, inclusive of the intangible asset, is recoverable.
As a result of the unfavorable events and subsequent developments in the 2022 and 2023 related to the HETLIOZ ® patent litigation (see Note 18, Legal Matters , to the consolidated financial statements included in Part II, Item 8 of this Annual Report) we performed impairment reviews for our HETLIOZ ® asset group in those years and determined, based upon our review of undiscounted cash flows, that the carrying value of our HETLIOZ ® asset group, inclusive of the intangible asset, is recoverable.
Further, HETLIOZ ® net product sales will likely decline in future periods, potentially significantly, related to continued generic competition in the U.S. Additionally, we constrained HETLIOZ ® net product sales for the year ended December 31, 2023 to an amount not probable of significant revenue reversal.
Further, HETLIOZ ® net product sales will likely decline in future periods, potentially significantly, related to continued generic competition in the U.S. We constrained HETLIOZ ® net product sales for the years ended December 31, 2024 and 2023 to an amount not probable of significant revenue reversal.
The license agreement that we entered into when we settled our litigation with MSN (MSN/Impax License Agreement) grants MSN and Impax Laboratories LLC (Impax) a non-exclusive license to manufacture and commercialize MSN’s generic version of HETLIOZ ® in the U.S. effective as of March 13, 2035, unless prior to that date we obtain pediatric exclusivity for HETLIOZ ® , in which case the license will be effective as of July 27, 2035.
The license agreement that we entered into when we settled our patent litigation with MSN (MSN/Impax License Agreement) grants MSN and Impax Laboratories LLC (Impax) a non-exclusive license to manufacture and commercialize MSN’s generic version of HETLIOZ ® in the U.S. effective as of March 13, 2035, unless prior to that date we obtain pediatric exclusivity for HETLIOZ ® , in which case the license will be effective as of July 27, 2035, or earlier under certain limited circumstances.
Based on our current operating plans, which include costs and expenses in connection with our continued clinical development of tradipitant and our other products, pursuit of regulatory approval of tradipitant, U.S. commercial activities for HETLIOZ ® , Fanapt ® and PONVORY ® , pursuit of regulatory approval of HETLIOZ ® and Fanapt ® in other regions and in other indications, and payments due upon achievement of milestones under our license agreements, we believe that our cash, cash equivalents and marketable securities and cash received from product sales will be sufficient for at least the next 12 months.
Based on our current operating plans, which include costs and expenses in connection with our U.S. commercial activities, continued clinical development of tradipitant and our other products, pursuit of regulatory approval of tradipitant, pursuit of further regulatory approvals for our currently approved products, and payments due upon achievement of milestones under our license agreements, we believe that our cash, cash equivalents and marketable securities and cash received from product sales will be sufficient for at least the next 12 months.
This discussion and analysis generally addresses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
This discussion and analysis generally addresses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Our marketable securities consist of investments in government sponsored and corporate enterprises and commercial paper. Our liquidity resources as of December 31, 2023 and 2022 are summarized as follows: (in thousands) December 31, 2023 December 31, 2022 Cash and cash equivalents $ 135,821 $ 135,029 Marketable securities: U.S.
Our marketable securities consist of investments in government-sponsored and corporate enterprises and commercial paper. Our liquidity resources as of December 31, 2024 and 2023 are summarized as follows: (in thousands) December 31, 2024 December 31, 2023 Cash and cash equivalents $ 102,316 $ 135,821 Marketable securities: U.S.
If actual results in the future vary from our estimates, we adjust our estimate in the period identified, which would affect net product sales in the period such variances become known. During the year ended December 31, 2023, we constrained the variable consideration for HETLIOZ ® net product sales.
If actual results in the future vary from our estimates, we adjust our estimate in the period identified, which would affect net product sales in the period such variances become known. 74 Table of Contents During the year ended December 31, 2024, we constrained the variable consideration for HETLIOZ ® net product sales.
Our non-cancellable purchase commitments for agreements longer than one year are not material. Various other long-term agreements entered into for services with other third-party vendors, such as inventory purchase arrangements, are cancellable in nature or contain variable commitment terms within the agreement that are within our control.
Our non-cancellable purchase commitments for agreements longer than one year primarily relate to commitments for data services. Various other long-term agreements entered into for services with other third-party vendors, such as inventory purchase commitments, are cancellable in nature or contain variable commitment terms within the agreement that are within our control.
In addition, we expect to incur licensing costs in the future that could be substantial, as we continue our efforts to expand our product pipeline. Selling, general and administrative expenses.
We expect to incur significant research and development expenses as we continue to develop our products. In addition, we expect to incur licensing costs in the future that could be substantial, as we continue our efforts to expand our product pipeline. Selling, general and administrative expenses.
See Note 15, Income Taxes, to the consolidated financial statements in Part II, Item 8 of this Annual Report for additional information. 76 Table of Contents Liquidity and Capital Resources As of December 31, 2023, our total cash and cash equivalents and marketable securities were $388.3 million compared to $466.9 million at December 31, 2022.
See Note 15, Income Taxes, to the consolidated financial statements in Part II, Item 8 of this Annual Report for additional information. Liquidity and Capital Resources As of December 31, 2024, our total cash and cash equivalents and marketable securities were $374.6 million compared to $388.3 million at December 31, 2023.
HETLIOZ ® is the first product approved by the U.S. Food and Drug Administration (FDA) for patients with Non-24 and for patients with SMS.
HETLIOZ ® is the first product approved by the United States Food and Drug Administration (FDA) for patients with Non-24 and for patients with SMS.
Uncertainties related to variable consideration are generally resolved in the quarter subsequent to period end, with the exception of Medicaid rebates, which are dependent upon the timing of when states submit reimbursement claims, Medicare inflationary rebates, and product returns that are resolved during the product expiry period specified in the customer contract.
Uncertainties related to variable consideration are generally resolved in the quarter subsequent to period end, with the exception of Medicaid rebates, which are dependent upon the timing of when states submit reimbursement claims, Medicare inflationary rebates, which are expected to be billed on an annual basis beginning in 2025, and product returns that are resolved during the product expiry period specified in the customer contract.
Due to transactions that resulted in increased inventory stocking at specialty pharmacy customers of HETLIOZ ® in 2023, the time it takes to resolve these uncertainties is expected to be longer than we have historically experienced. We currently record sales allowances for the following: • Prompt-pay: Specialty pharmacies and wholesalers are generally offered discounts for prompt payment.
Due to increased inventory stocking at specialty pharmacy customers of HETLIOZ ® in 2024 and 2023, the time it takes to resolve these uncertainties could be longer than we have historically experienced. We currently record sales allowances for the following: • Prompt-pay: Wholesalers, specialty pharmacies and specialty distributors, our direct customers, are generally offered discounts for prompt payment.
Many of our research and development costs are not attributable to any individual project because we share resources across several development projects. We record indirect costs that support a number of our research and development activities in the aggregate, including stock-based compensation. We expect to incur significant research and development expenses as we continue to develop our products.
Many of our research and development costs are not attributable to any individual project because we share resources across several 79 Table of Contents development projects. We record indirect costs that support a number of our research and development activities in the aggregate, including stock-based compensation.
In the normal course of our business, we regularly enter into agreements with third-party vendors under fee service arrangements which generally may be terminated on 90 days’ notice without incurring additional charges, other than charges for work completed or materials procured but not paid for through the effective date of termination and other costs incurred by our contractors in closing out work in progress as of the effective date of termination.
Deposits held with these institutions may exceed the amount of insurance provided on such deposits, but we do not anticipate any losses with respect to such deposits. 80 Table of Contents In the normal course of our business, we regularly enter into agreements with third-party vendors under fee service arrangements which generally may be terminated on 90 days’ notice without incurring additional charges, other than charges for work completed or materials procured but not paid for through the effective date of termination and other costs incurred by our contractors in closing out work in progress as of the effective date of termination.
We recognize revenue when control of the product is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for those product sales, which is typically once the product physically arrives at the customer.
We recognize revenue when control of the product is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for those product sales, which is typically once the product physically arrives at the customer. Sales tax, value-added taxes and usage-based taxes are excluded from revenues.
Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in Part II, Item 8 of this Annual Report for information on recent accounting pronouncements.
Any such adjustment could have a material impact on our results of operations. Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in Part II, Item 8 of this Annual Report for information on recent accounting pronouncements.
The analysis is highly dependent upon historical and projected taxable income. Projected taxable income includes significant assumptions related to revenue, commercial expenses and research and development activities, which could be affected by the HETLIOZ ® generic competition and our ability to obtain regulatory approval from the FDA for products or new indications in development, among other factors.
Projected taxable income includes significant assumptions related to revenue, which could be affected by the success of the commercial launches of Fanapt ® in bipolar I disorder and PONVORY ® in RMS and HETLIOZ ® generic competition, commercial and research and development activities, and our ability to obtain regulatory approval from the FDA for products or new indications in development, among other factors.
The provision for discounts, returns and other of $28.5 million and $30.6 million for the years ended December 31, 2023 and 2022, represents wholesaler distribution fees applicable to sales of Fanapt ® and estimated product returns of Fanapt ® , and co-pay assistance costs and prompt pay discounts applicable to the sales of both HETLIOZ ® and Fanapt ® .
The provision for discounts, returns and other of $33.4 million and $28.5 million for the years ended December 31, 2024 and 2023, primarily represents wholesaler distribution fees applicable to sales of Fanapt ® and estimated product returns of Fanapt ® , and co-pay assistance costs and prompt pay discounts applicable to the sales of all of our commercial products.
Accordingly, we did not record an intangible asset impairment charge during the years ended December 31, 2023 and 2022. The litigation and subsequent developments do not affect the sale of HETLIOZ ® in the E.U. and there is no generic litigation pending outside of the U.S. with respect to HETLIOZ ® .
Accordingly, we have not recorded an intangible asset impairment charge in any period. The litigation and subsequent developments do not affect the sale of HETLIOZ ® in the E.U. and there is no generic litigation pending outside of the U.S. with respect to HETLIOZ ® .
Our inventory balance consisted of $7.2 million and $8.0 million of HETLIOZ ® product and $3.0 million and $3.4 million of Fanapt ® product as of December 31, 2023 and 2022, respectively. 75 Table of Contents Research and development expenses.
Our inventory balance consisted of $2.0 million of Fanapt ® product, $7.3 million of HETLIOZ ® product and $0.2 million of PONVORY ® product as of December 31, 2024. Our inventory balance consisted of $3.0 million of Fanapt ® product and $7.2 million of HETLIOZ ® product as of December 31, 2023. Research and development expenses.
Intangible asset amortization . Intangible asset amortization was $2.1 million for the year ended December 31, 2023 compared to $1.5 million for the year ended December 31, 2022. Amortization expense increased in 2023 due to amortization on the intangible asset from the recently acquired rights to PONVORY ® in the U.S. and Canada. Other income .
Amortization expense increased in 2024 due to amortization on the intangible asset from the rights to PONVORY ® in the U.S. and Canada which were acquired in December 2023. Other income, net . Other income, net was $17.7 million for the year ended December 31, 2024 compared to $20.3 million for the year ended December 31, 2023.
In December 2022, the U.S. District Court for the District of Delaware (Delaware District Court) ruled in favor of Teva and Apotex in our patent litigation relating to their filing of ANDAs for generic versions of HETLIOZ ® in the U.S., and in May 2023, a three-judge panel of the Federal Circuit affirmed this ruling.
District Court for the District of Delaware (Delaware District Court) ruled in favor of Teva and Apotex in our patent litigation relating to their filing of ANDAs for generic versions of HETLIOZ ® in the U.S. The Federal Circuit affirmed this ruling, and the U.S. Supreme Court denied our petition for a writ of certiorari in April 2024.
Where appropriate, our estimates of variable consideration included in the transaction price consider a range of possible outcomes. Allowances for rebates, chargebacks and co-pay assistance are based upon the insurance benefits of the end customer, which are estimated using historical activity and, where available, actual and pending prescriptions for which we have validated the insurance benefits.
Allowances for rebates, chargebacks and co-pay assistance are based upon the insurance benefits of the end customer, which are estimated using historical activity and, where available, actual and pending prescriptions for which we have validated the insurance benefits.
Research and development expenses decreased by $8.9 million, or 10%, to $76.8 million for the year ended December 31, 2023 compared to $85.8 million for the year ended December 31, 2022.
Research and development expenses decreased by $2.4 million, or 3%, to $74.4 million for the year ended December 31, 2024 compared to $76.8 million for the year ended December 31, 2023.
Treasury and government agencies 185,115 177,170 Corporate debt 67,328 154,660 Total marketable securities 252,443 331,830 Total cash, cash equivalents and marketable securities $ 388,264 $ 466,859 As of December 31, 2023, we maintained all of our cash, cash equivalents and marketable securities in two financial institutions.
Treasury and government agencies 227,830 185,115 Corporate debt 44,497 67,328 Total marketable securities 272,327 252,443 Total cash, cash equivalents and marketable securities $ 374,643 $ 388,264 As of December 31, 2024, we maintained all of our cash, cash equivalents and marketable securities in two financial institutions.
Cash flows provided by operating activities during the year ended December 31, 2023 were $12.8 million, a decrease of $19.2 million compared to $32.0 million during the year ended December 31, 2022.
Cash flows used in operating activities during the year ended December 31, 2024 were $15.8 million, a decrease of $28.6 million compared to cash provided by operating activities of $12.8 million during the year ended December 31, 2023.
If we are unable to obtain additional financing, we may be required to reduce the scope of our future activities, which could harm our business, financial condition and operating results.
If we are unable to obtain additional financing, we may be required to reduce the scope of our future activities, which could harm our business, financial condition and operating results. There can be no assurance that any additional financing required in the future will be available on acceptable terms, if at all.
Cash flows provided by financing activities during the year ended December 31, 2022 were $0.7 million. There were no exercises of stock options during the year ended December 31, 2023.
Cash flows provided by financing activities during the year ended December 31, 2024 were $0.2 million. There were no principal payments on finance leases during the year ended December 31, 2023 or exercises of stock options during the years ended December 31, 2024 and 2023.
There was no right of return asset as of December 31, 2023 or 2022. 72 Table of Contents The following table summarizes sales discounts and allowance activity as of and for the years ended December 31, 2023, 2022 and 2021: (in thousands) Rebates & Chargebacks Discounts, Returns and Other Total Balances at December 31, 2020 26,870 8,873 35,743 Provision related to current period sales 83,965 31,176 115,141 Adjustments for prior period sales (853) 193 (660) Credits/payments made (78,128) (30,641) (108,769) Balances at December 31, 2021 31,854 9,601 41,455 Provision related to current period sales 92,109 30,636 122,745 Adjustments for prior period sales (2,647) 1,396 (1,251) Credits/payments made (83,857) (31,609) (115,466) Balances at December 31, 2022 37,459 10,024 47,483 Provision related to current period sales 85,916 28,488 114,404 Adjustments for prior period sales (267) 276 9 Credits/payments made (82,957) (28,361) (111,318) Balances at December 31, 2023 $ 40,151 $ 10,427 $ 50,578 The provision for rebates and chargebacks of $85.9 million and $92.1 million for the years ended December 31, 2023 and 2022, respectively, and their ending balances at December 31, 2023 and 2022, primarily represent Medicaid rebates applicable to sales of Fanapt ® and, to a lesser extent, Medicaid rebates applicable to sales of HETLIOZ ® .
The following table summarizes sales discounts and allowance activity as of and for the years ended December 31, 2024, 2023 and 2022: (in thousands) Rebates & Chargebacks Discounts, Returns and Other Total Balances at December 31, 2021 31,854 9,601 41,455 Provision related to current period sales 92,109 30,636 122,745 Adjustments for prior period sales (2,647) 1,396 (1,251) Credits/payments made (83,857) (31,609) (115,466) Balances at December 31, 2022 37,459 10,024 47,483 Provision related to current period sales 85,916 28,488 114,404 Adjustments for prior period sales (267) 276 9 Credits/payments made (82,957) (28,361) (111,318) Balances at December 31, 2023 40,151 10,427 50,578 Provision related to current period sales 82,233 33,449 115,682 Adjustments for prior period sales (3,246) 3 (3,243) Credits/payments made (69,199) (31,488) (100,687) Balances at December 31, 2024 $ 49,939 $ 12,391 $ 62,330 The provision for rebates and chargebacks of $82.2 million and $85.9 million for the years ended December 31, 2024 and 2023, respectively, and their ending balances at December 31, 2024 and 2023, primarily represent Medicaid rebates.
Third-party royalty costs on HETLIOZ ® net product sales in the U.S. decreased from 10% to 5% in December 2022 and are expected to end in the second quarter of 2024.
Third-party royalty costs were 6% of Fanapt ® net product sales and 5% of HETLIOZ ® net product sales in Germany. Third-party royalty costs on HETLIOZ ® net product sales in the U.S. decreased from 10% to 5% in December 2022 and ended in April 2024. There were no-third party royalty costs on net sales of PONVORY ® .
The transaction price is determined based upon the consideration to which we will be entitled in exchange for transferring product to the customer. Our product sales are recorded net of applicable product revenue allowances for which reserves are established and include discounts, rebates, chargebacks, service fees, co-pay assistance and product returns that are applicable for various government and commercial payors.
Our product sales are recorded net of applicable product revenue allowances for which reserves are established and include discounts, rebates, chargebacks, service fees, co-pay assistance and product returns that are applicable for various government and commercial payors. Where appropriate, our estimates of variable consideration included in the transaction price consider a range of possible outcomes.
The MSN/Impax License Agreement also provides that MSN and Impax may launch a generic version of HETLIOZ ® earlier under certain limited circumstances. In January 2023, MSN and its commercial partner, Amneal Pharmaceuticals, Inc., informed us of their belief that such circumstances had occurred and have since launched their generic version.
In January 2023, MSN and its commercial partner, Amneal Pharmaceuticals, Inc., informed us of their belief that such circumstances had occurred and have since launched their generic version. In April 2024, we filed litigation against MSN, Impax, and Amneal alleging fraudulent inducement of the license agreement.
Our commercial portfolio is currently comprised of three products, HETLIOZ ® for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) and for the treatment of nighttime sleep disturbances in Smith-Magenis Syndrome (SMS), Fanapt ® for the treatment of schizophrenia and PONVORY ® , which we acquired the U.S. and Canadian rights to on December 7, 2023, for the treatment of relapsing forms of multiple sclerosis (MS), to include clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease, in adults.
Our commercial portfolio is currently comprised of three products: Fanapt ® for the acute treatment of manic or mixed episodes associated with bipolar I disorder and the treatment of schizophrenia, HETLIOZ ® for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) and for the treatment of nighttime sleep disturbances in Smith-Magenis syndrome (SMS) and PONVORY ® for the treatment of relapsing forms of multiple sclerosis (RMS) including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease.
The constrained revenue relates to the uncertainties of payor utilization, patient demand and chargeback and rebate amounts, 71 Table of Contents including Medicaid, and other reserves related to transactions that resulted in elevated levels of inventory at specialty pharmacy customers during 2023.
The constrained revenue relates to the uncertainties of payor utilization, patient demand and chargeback and rebate amounts, including Medicaid, related to the elevated levels of inventory on hand at the specialty pharmacies.
Year Ended December 31, (in thousands) 2023 2022 Direct project costs (1) HETLIOZ ® $ 8,978 $ 12,084 Fanapt ® 11,306 26,931 Tradipitant 32,781 25,232 VTR-297 1,595 1,814 CFTR 1,490 1,168 VQW-765 988 3,570 VHX-896 6,186 2,148 Other 5,683 5,082 Total direct project costs 69,007 78,029 Indirect project costs (1) Stock-based compensation 3,323 3,964 Other indirect overhead 4,493 3,777 Total indirect project costs 7,816 7,741 Total research and development expense $ 76,823 $ 85,770 (1) We record direct costs, including personnel costs and related benefits, on a project-by-project basis.
Year Ended December 31, (in thousands) 2024 2023 Direct project costs (1) Fanapt ® $ 9,401 $ 11,306 Milsaperidone 6,872 6,186 HETLIOZ ® 10,528 8,978 PONVORY ® 5,300 839 Tradipitant 23,608 32,781 CFTR 6,344 1,490 VTR-297 2,642 1,595 VQW-765 743 988 Other 1,272 4,844 Total direct project costs 66,710 69,007 Indirect project costs (1) Stock-based compensation 2,960 3,323 Other indirect overhead 4,761 4,493 Total indirect project costs 7,721 7,816 Total research and development expense $ 74,431 $ 76,823 (1) We record direct costs, including personnel costs and related benefits, on a project-by-project basis.
Our HETLIOZ ® net product sales as reported for the three months ended March 31, 2023 reflected transactions that resulted in higher unit sales as compared to recent prior periods and a significant increase of inventory stocking at specialty pharmacy customers during 2023 and at December 31, 2023.
The higher unit sales during the three months ended March 31, 2023 resulted in a significant increase of inventory stocking at specialty pharmacy customers at March 31, 2023.
Outside the U.S., we sell HETLIOZ ® in Germany and have a distribution agreement for the commercialization of Fanapt ® in Israel. Receivables are carried at transaction price net of allowance for credit losses. Allowance for credit losses is measured using historical loss rates based on the aging of receivables and incorporating current conditions and forward-looking estimates.
Revenues and accounts receivable are concentrated with these customers. Outside the U.S., we have a distribution agreement for the commercialization of Fanapt ® in Israel and sell HETLIOZ ® in Germany. Receivables are carried at transaction price, net of allowance for credit losses.
The decrease was primarily due to a decrease in clinical trial expenses associated with our Fanapt ® development program, partially offset by an increase in our tradipitant and VHX-896 development programs.
The decrease was primarily due to a decrease associated with our Fanapt ® , tradipitant and other development programs, which include expenses incurred on product discovery such as ASO, partially offset by an increase in expenses associated with our PONVORY ® and CFTR development programs.
Results of Operations We anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, including our and our partners’ ability to continue to successfully commercialize our products, including activities related to recently acquired PONVORY ® , any possible payments made or received pursuant to license agreements, progress of our research and development efforts, the timing and outcome of clinical trials and related possible regulatory approvals and the status of existing and future potential litigation involving our products and intellectual property.
Results of Operations We anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, including our and our partners’ ability to continue to successfully commercialize our products, including activities related to Fanapt ® for the acute treatment of manic or mixed episodes associated with bipolar I disorder in adults which was approved in April 2024 and 77 Table of Contents acquired rights to PONVORY ® in the U.S. and Canada in December 2023, the impact of the Medicare Part D benefit redesign effective January 1, 2025 under the Inflation Reduction Act of 2022, any possible payments made or received pursuant to license agreements, progress of our research and development efforts, the timing and outcome of clinical trials and related possible regulatory approvals and the status of existing and future potential litigation involving our products and intellectual property.
Adjustments are made for permanent differences in taxability or deductibility of pretax items as well as for other items, such as tax credits that are generated on our research and development activities.
Our income tax expense or benefit is determined by applying the statutory tax rates in jurisdictions where we operate to each period’s income before income taxes. Adjustments are made for permanent differences in taxability or deductibility of pretax items as well as for other items, such as tax credits that are generated from our research and development activities.
Year ended December 31, 2023 compared to year ended December 31, 2022 Revenues . Total revenues decreased by $61.7 million, or 24%, to $192.6 million for the year ended December 31, 2023 compared to $254.4 million for the year ended December 31, 2022.
Year ended December 31, 2024 compared to year ended December 31, 2023 Revenues . Total revenues increased by $6.1 million, or 3%, to $198.8 million for the year ended December 31, 2024 compared to $192.6 million for the year ended December 31, 2023.
We invoice and record revenue when customers, specialty pharmacies and wholesalers, receive product from the third-party logistics warehouse, which is the point at which control is transferred to the customer. Revenues and accounts receivable are concentrated with these customers.
PONVORY ® is available in the U.S. for distribution primarily through a limited number of specialty distributors and specialty pharmacies. We invoice and record revenue when our customers, wholesalers, specialty pharmacies and specialty distributors, receive product from the third-party logistics warehouse, which is the point at which control is transferred to the customer.
HETLIOZ ® net product sales could experience variability in future periods as the remaining uncertainties associated with variable consideration related to transactions in the early part of 2023 are resolved. Fanapt ® net product sales decreased by $3.9 million to $90.9 million for the year ended December 31, 2023 compared to $94.7 million for the year ended December 31, 2022.
The amount of revenue recognized during the year ended December 31, 2024 related to change in estimates on revenue constrained during 2023 was $1.3 million. HETLIOZ ® net product sales could experience variability in future periods as the remaining uncertainties associated with variable consideration related to inventory stocking by specialty pharmacy customers are resolved.
HETLIOZ ® net product sales during 2023 reflect lower unit sales as a result of generic competition. HETLIOZ ® net product sales may continue to reflect lower unit sales as a result of continued reduction of the elevated inventory levels at specialty pharmacy customers.
Going forward, HETLIOZ ® net product sales may reflect lower unit sales as a result of reduction of the elevated inventory levels at specialty pharmacy customers or 78 Table of Contents may be variable depending upon when specialty pharmacy customers need to purchase again.
Revenue from net product sales were as follows: Year Ended December 31, (in thousands) 2023 2022 Net Change Percent HETLIOZ ® net product sales $ 100,167 $ 159,655 $ (59,488) (37) % Fanapt ® net product sales 90,873 94,727 (3,854) (4) % PONVORY ® net product sales 1,600 — 1,600 N/A Total net product sales $ 192,640 $ 254,382 $ (61,742) (24) % HETLIOZ ® net product sales decreased by $59.5 million, or 37%, to $100.2 million for the year ended December 31, 2023 compared to $159.7 million for the year ended December 31, 2022.
Revenue from net product sales were as follows: Year Ended December 31, (in thousands) 2024 2023 Net Change Percent Fanapt ® net product sales $ 94,297 $ 90,873 $ 3,424 4 % HETLIOZ ® net product sales 76,675 100,167 (23,492) (23) % PONVORY ® net product sales 27,800 1,600 26,200 1638 % Total net product sales $ 198,772 $ 192,640 $ 6,132 3 % Fanapt ® net product sales increased by $3.4 million, or 4%, to $94.3 million for the year ended December 31, 2024 compared to $90.9 million for the year ended December 31, 2023.
The decrease reflects a decrease of $3.8 million in net income, a decrease of $8.6 million in non-cash charges primarily due to additional amortization of discounts on our marketable securities, and a decrease of $6.8 million from the net change in operating assets and liabilities. Investing Activities.
The decrease reflects a decrease of $21.4 million in net income, a decrease of $1.3 million in non-cash charges primarily due to an increase in deferred income taxes, partially offset by higher intangible asset amortization due to the PONVORY ® acquisition, and a decrease of $5.8 million from the net change in operating assets and liabilities.
Cash flows used in investing activities during the year ended December 31, 2023 were $12.1 million, a decrease in cash of $62.0 million compared to cash provided by investing activities of $49.9 million during the year ended December 31, 2022.
Cash flows used in investing activities during the year ended December 31, 2024 were $17.4 million, a decrease in cash of $5.4 million compared to $12.1 million during the year ended December 31, 2023. Financing Activities. Financing activities include principal payments for our finance lease liabilities and exercise of stock options.
PONVORY ® net product sales were $1.6 million for the year ended December 31, 2023, which reflects sales during the post-acquisition period. Cost of goods sold. Cost of goods sold decreased by $9.5 million, or 39%, to $14.8 million for the year ended December 31, 2023 compared to $24.3 million for the year ended December 31, 2022.
Cost of goods sold decreased by $3.5 million, or 24%, to $11.3 million for the year ended December 31, 2024 compared to $14.8 million for the year ended December 31, 2023. Cost of goods sold includes third-party manufacturing costs of product sold, third-party royalty costs and distribution and other costs.
Other income was $20.3 million for the year ended December 31, 2023 compared to $5.0 million for the year ended December 31, 2022. Other income primarily consists of investment income on our marketable securities, which increased in 2023 as a result of higher yields on our marketable securities. Provision for income taxes.
Other income primarily consists of investment income on our marketable securities. Provision for income taxes. We recorded an income tax benefit of $4.0 million and provision for income taxes of $3.8 million for the years ended December 31, 2024 and 2023, respectively.
Beginning January 1, 2025, the Medicare Part D coverage gap discount program will be replaced with a new discounting program under the Inflation Reduction Act. • Service fees: We receive sales order management, data and distribution services from certain customers, for which we are assessed fees. These fees are based on contracted terms and are known amounts.
We are a specified manufacturer whose applicable drugs for applicable beneficiaries who are LIS eligible will be subject to lower applicable discounts during the phase-in period. • Service fees: We receive sales order management, data and distribution services from certain customers, for which we are assessed fees. These fees are based on contracted terms and are known amounts.
The decrease to net product sales was attributable to a decrease in price net of deductions and a decrease in volume.
The increase to net product sales was attributable to an increase in price net of deductions and volume. We initiated the commercial launch of Fanapt ® for bipolar I disorder in adults in the third quarter of 2024.
The decrease to net product sales was attributable to a decrease in volume. In December 2023, we purchased the right to market and sell PONVORY ® in the U.S. and Canadian markets from Actelion Pharmaceuticals Ltd. (Janssen), a Johnson & Johnson Company.
In December 2023, we completed the acquisition of the U.S. and Canadian rights to PONVORY ® from Actelion Pharmaceuticals Ltd. (Janssen), a Johnson & Johnson Company. PONVORY ® net product sales were $27.8 million for the year ended December 31, 2024 and $1.6 million for the year ended December 31, 2023, which reflects sales during the post-acquisition period.
There can be no assurance that any additional financing required in the future will be available on acceptable terms, if at all. 77 Table of Contents Cash Flow The following table summarizes our net cash flows from operating, investing and financing activities for the years ended December 31, 2023 and 2022: Year Ended December 31, (in thousands) 2023 2022 Net Change Net cash provided by (used in): Operating activities: Net income $ 2,509 $ 6,275 $ (3,766) Non-cash charges 11,039 19,635 (8,596) Net change in operating assets and liabilities (747) 6,074 (6,821) Operating activities 12,801 31,984 (19,183) Investing activities: Asset acquisition (100,665) — (100,665) Purchases of property and equipment (383) (679) 296 Net purchases, sales and maturities of marketable securities 88,992 50,604 38,388 Investing activities (12,056) 49,925 (61,981) Financing activities: Proceeds from the exercise of stock options — 734 (734) Financing activities — 734 (734) Effect of exchange rate changes on cash, cash equivalents and restricted cash 47 265 (218) Net change in cash, cash equivalents and restricted cash $ 792 $ 82,908 $ (82,116) Operating Activities.
Cash Flow The following table summarizes our net cash flows from operating, investing and financing activities for the years ended December 31, 2024 and 2023: Year Ended December 31, (in thousands) 2024 2023 Net Change Net cash provided by (used in): Operating activities: Net income (loss) $ (18,900) $ 2,509 $ (21,409) Non-cash charges 9,701 11,039 (1,338) Net change in operating assets and liabilities (6,558) (747) (5,811) Operating activities (15,757) 12,801 (28,558) Investing activities: Asset acquisition (4,229) (100,665) 96,436 Purchases of property and equipment (490) (383) (107) Net purchases, sales and maturities of marketable securities (12,711) 88,992 (101,703) Investing activities (17,430) (12,056) (5,374) Financing activities: Principal payments on finance leases (155) — (155) Financing activities (155) — (155) Effect of exchange rate changes on cash, cash equivalents and restricted cash (163) 47 (210) Net change in cash, cash equivalents and restricted cash $ (33,505) $ 792 $ (34,297) 81 Table of Contents Operating Activities.
The FDA has also 74 Table of Contents approved the ANDA for MSN Pharmaceuticals, Inc. and MSN Laboratories Private Limited (MSN), and HETLIOZ ® could face even more competition from other generic companies in the U.S. in the near term in light of the patent litigation rulings against us.
See Note 18, Legal Matters , to the consolidated financial statements in Part II, Item 8 of this Annual Report. HETLIOZ ® could face even more competition from other generic companies in the U.S. in the near term in light of the patent litigation rulings against us.
Selling, general and administrative expenses decreased by $23.6 million, or 17%, to $112.9 million for the year ended December 31, 2023 compared to $136.5 million for the year ended December 31, 2022. The decrease in selling, general and administrative expenses was primarily the result of a decrease in spending on marketing, sales and commercial support activities for our commercial products.
Selling, general and administrative expenses increased by $33.5 million, or 30%, to $146.4 million for the year ended December 31, 2024 compared to $112.9 million for the year ended December 31, 2023.
Early-Stage Programs 70 Table of Contents • In January 2024, we announced that the FDA had approved the Investigational New Drug (IND) application to evaluate VCA-894A for the treatment of a patient with Charcot-Marie-Tooth disease, axonal, type 2S (CMT2S), an inherited peripheral neuropathy for which there is no available treatment. • In January 2024, we announced that the FDA had also approved the IND to evaluate VTR-297 for the treatment of onychomycosis, a fungal infection of the nail.
We expect to initiate a Phase III program in 2025. 73 Table of Contents • The IND application for VCA-894A in the treatment of CMT2S, an inherited peripheral neuropathy for which there is no available treatment, was accepted by the FDA in 2024. Previously in 2023, VCA-894A was granted Orphan Drug Designation for the same indication.
Expenses for our other development programs, which include expenses incurred on product discovery such as ASO, included a $3.0 million upfront fee expensed in the third quarter of 2022 in consideration for entering into a research and development agreement. The following table summarizes the costs of our product development initiatives for the years ended December 31, 2023 and 2022.
The following table summarizes the costs of our product development initiatives for the years ended December 31, 2024 and 2023.
Removed
Operational Highlights 69 Table of Contents HETLIOZ ® • The supplemental New Drug Application (sNDA) for HETLIOZ ® in the treatment of insomnia is under review by the FDA with a Prescription Drug User Fee Act (PDUFA) target action date of March 4, 2024.
Added
We initiated the commercial launch of Fanapt ® in this indication in the third quarter of 2024.
Removed
We announced that on February 4, 2024, we received a notification from the FDA stating that the FDA had identified deficiencies that preclude discussion of labeling and postmarketing requirements/commitments at this time. No deficiencies were disclosed by the FDA in the notification, and the FDA stated that the notification does not reflect a final decision on the information under review.

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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 changeWe are also exposed to unfavorable fluctuations of the U.S. dollar, which is our reporting currency, against the currencies of 78 Table of Contents our operating subsidiaries when their respective financial statements are translated into U.S. dollars for inclusion in our consolidated financial statements. We do not currently hedge our foreign currency exchange rate risk.
Biggest changeWe are also exposed to unfavorable fluctuations of the U.S. dollar, which is our reporting currency, against the currencies of our operating subsidiaries when their respective financial statements are translated into U.S. dollars for inclusion in our consolidated financial statements. We do not currently hedge our foreign currency exchange rate risk.

Other VNDA 10-K year-over-year comparisons