SEC Form 10-Q filed by Vanda Pharmaceuticals Inc.

5/8/25 7:06:13 AM ET

$VNDA

Biotechnology: Pharmaceutical Preparations

Health Care

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vnda-20250331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34186

VANDA PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)


Delaware						03-0491827
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2200 Pennsylvania Avenue NW, Suite 300E

Washington, DC 20037

(202) 734-3400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of Each Class	Trading Symbol(s)	Name of Exchange on Which Registered
Common Stock, par value $0.001 per share	VNDA	The Nasdaq Global Market
Series A Junior Participating Preferred Stock Purchase Right, par value $0.001 per share	-	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of May 1, 2025, there were 58,934,482 shares of the registrant’s common stock issued and outstanding.

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Vanda Pharmaceuticals Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended March 31, 2025

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		Page
PART I – FINANCIAL INFORMATION

ITEM 1	Financial Statements (Unaudited)	5

	Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024	5

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024	6

	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2025 and 2024	7

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2025 and 2024	8

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024	9

	Notes to Condensed Consolidated Financial Statements	10

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	35

ITEM 4	Controls and Procedures	36

PART II – OTHER INFORMATION

ITEM 1	Legal Proceedings	36

ITEM 1A	Risk Factors	36

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	37

ITEM 3	Defaults Upon Senior Securities	37

ITEM 4	Mine Safety Disclosures	37

ITEM 5	Other Information	37

ITEM 6	Exhibits	38

Signatures		39

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (Quarterly Report) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “project,” “target,” “goal,” “likely,” “will,” “would,” and “could,” or the negative of these terms and similar expressions or words, identify forward-looking statements. Forward-looking statements are based upon current expectations and assumptions that involve risks, changes in circumstances and uncertainties. If the risks, changes in circumstances or uncertainties materialize or the assumptions prove incorrect, the results of Vanda Pharmaceuticals Inc. (we, our, the Company or Vanda) may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The forward-looking statements in this Quarterly Report may include, but are not limited to, statements about:

•our ability to commercialize Fanapt® (iloperidone) oral tablets for the acute treatment of manic or mixed episodes associated with bipolar I disorder;

•our ability to continue to generate United States (U.S.) sales of Fanapt® oral tablets for the treatment of schizophrenia;

•our ability to obtain approval from the FDA for BysantiTM (milsaperidone) for bipolar I disorder, schizophrenia and major depressive disorder (MDD);

•our ability to continue to commercialize HETLIOZ® (tasimelteon) capsules for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) in the U.S., in light of existing and potential generic competition, and Europe and HETLIOZ® capsules and oral suspension (HETLIOZ LQ®) for the treatment of nighttime sleep disturbances in Smith-Magenis syndrome (SMS) in the U.S.;

•our ability to obtain approval from the U.S. Food and Drug Administration (FDA) for HETLIOZ® beyond the currently approved indications;

•our ability to increase market awareness of Non-24 and SMS and market acceptance of HETLIOZ®;

•our ability to commercialize PONVORY® (ponesimod) tablets for the treatment of adults with relapsing forms of multiple sclerosis, including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease in the U.S. and Canada;

•our ability to obtain approval from the FDA for PONVORY® beyond the currently approved indications;

•our ability to obtain approval from the FDA for tradipitant for the treatment of gastroparesis and motion sickness;

•our level of success in commercializing Fanapt® and HETLIOZ® in new markets;

•our ability to overcome the continued reimbursement and patient access challenges we face as a result of third-party payor coverage;

•the impact of public health crises, epidemics, pandemics or similar events on our business and operations, including our revenue, our supply chain, our commercial activities, our ongoing and planned clinical trials and our regulatory activities;

•our dependence on third-party manufacturers to manufacture Fanapt®, HETLIOZ®, HETLIOZ LQ® and PONVORY® in sufficient quantities and quality;

•our ability to prepare, file, prosecute, defend and enforce any patent claims and other intellectual property rights;

•our ability to maintain rights to develop and commercialize our products under our license agreements;

•our ability to obtain and maintain regulatory approval of our products, and the labeling for any approved products;

•our expectations regarding the timing and success of preclinical studies and clinical trials;

•the safety and efficacy of our products;

•regulatory developments in the U.S., Europe and other jurisdictions;

•limitations on our ability to utilize some or all of our prior net operating losses and orphan drug and research and development credits;

•our expectations regarding the size and growth of the current and potential markets for our products and our ability to serve those markets;

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•our expectations regarding trends with respect to our revenues, costs, expenses, liabilities and cash, cash equivalents and marketable securities;

•our ability to identify or obtain rights to new products;

•our ability to attract and retain key scientific or management personnel;

•our expectations regarding the cost, time frame, outcome, insurance coverage and effects of any litigation or other dispute;

•our ability to obtain the capital necessary to fund our research and development or commercial activities;

•potential losses incurred from product liability claims made against us; and

•the use of our existing cash, cash equivalents and marketable securities.

All forward-looking statements in this report are expressly qualified in their entirety by the cautionary statements contained throughout this report. We caution you not to rely too heavily on such forward-looking statements. Each forward-looking statement speaks only as of the date of this Quarterly Report, and we undertake no obligation, and specifically decline any obligation, to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

We encourage you to read Management’s Discussion and Analysis of Financial Condition and Results of Operations and our unaudited condensed consolidated financial statements contained in this Quarterly Report. In addition to the risks described in Part I, Item 1A, Risk Factors, of our annual report on Form 10-K (Annual Report) for the fiscal year ended December 31, 2024 and Item 1A, Risk Factors, of this Quarterly Report, other unknown or unpredictable factors also could affect our results. Therefore, the information in this report should be read together with other reports and documents that we file with the Securities and Exchange Commission from time to time, including on Form 10-Q and Form 8-K, which may supplement, modify, supersede or update those risk factors. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

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Part I — FINANCIAL INFORMATION


ITEM 1			Financial Statements (Unaudited)

VANDA PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


(in thousands, except for share and per share amounts)	March 31, 2025		December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	111,796	$	102,316
Marketable securities	229,112		272,327
Accounts receivable, net	44,603		47,101
Inventory	1,923		1,726
Prepaid expenses and other current assets	20,476		15,420
Total current assets	407,910		438,890
Property and equipment, net	2,439		2,132
Operating lease right-of-use assets	5,208		5,602
Finance lease right-of-use assets	4,828		4,943
Intangible assets, net	112,344		114,096
Deferred tax assets	89,147		81,440
Non-current inventory and other	10,060		9,101
Total assets	$	631,936	$	656,204
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	45,279	$	39,086
Product revenue allowances	58,644		60,895

Total current liabilities	103,923		99,981
Operating lease non-current liabilities	4,404		4,944
Finance lease non-current liabilities	2,947		3,146
Other non-current liabilities	9,245		9,587
Total liabilities	120,519		117,658
Commitments and contingencies (Notes 8 and 14)
Stockholders’ equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized, and no shares issued or outstanding at March 31, 2025 and December 31, 2024	—		—
Common stock, $0.001 par value; 150,000,000 shares authorized; 58,933,982 and 58,310,644 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively	59		58
Additional paid-in capital	714,761		712,706
Accumulated other comprehensive income	383		74
Accumulated deficit	(203,786)		(174,292)
Total stockholders’ equity	511,417		538,546
Total liabilities and stockholders’ equity	$	631,936	$	656,204

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

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VANDA PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	Three Months Ended
(in thousands, except for share and per share amounts)	March 31, 2025		March 31, 2024
Revenues:
Net product sales	$	50,041	$	47,462
Total revenues	50,041		47,462
Operating expenses:
Cost of goods sold excluding amortization	3,521		3,440
Research and development	35,712		21,154
Selling, general and administrative	50,084		30,085
Intangible asset amortization	1,752		2,018
Total operating expenses	91,069		56,697
Loss from operations	(41,028)		(9,235)
Other income, net	3,660		4,571
Loss before income taxes	(37,368)		(4,664)
Benefit for income taxes	(7,874)		(518)
Net loss	$	(29,494)	$	(4,146)
Net loss per share:
Basic	$	(0.50)	$	(0.07)
Diluted	$	(0.50)	$	(0.07)
Weighted average shares outstanding:
Basic	58,527,775		57,760,940
Diluted	58,527,775		57,760,940

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

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VANDA PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)


	Three Months Ended
(in thousands)	March 31, 2025		March 31, 2024
Net loss	$	(29,494)	$	(4,146)
Other comprehensive income (loss):
Net foreign currency translation gain (loss)	25		(19)
Change in net unrealized gain (loss) on marketable securities	375		(430)
Tax benefit (provision) on other comprehensive income (loss)	(91)		96
Other comprehensive income (loss), net of tax	309		(353)
Comprehensive loss	$	(29,185)	$	(4,499)

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

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VANDA PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total
(in thousands, except for share amounts)	Shares	Par Value
Balances at December 31, 2024	58,310,644	$	58	$	712,706	$	74	$	(174,292)	$	538,546

Issuance of common stock from the exercise of stock options and settlement of restricted stock units, net of shares withheld for taxes	623,338	1		(916)		—		—		(915)
Stock-based compensation expense	—	—		2,971		—		—		2,971
Net loss	—	—		—		—		(29,494)		(29,494)
Other comprehensive income, net of tax	—	—		—		309		—		309
Balances at March 31, 2025	58,933,982	$	59	$	714,761	$	383	$	(203,786)	$	511,417


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
(in thousands, except for share amounts)	Shares	Par Value
Balances at December 31, 2023	57,534,499	$	58	$	700,274	$	(30)	$	(155,392)	$	544,910

Issuance of common stock from the exercise of stock options and settlement of restricted stock units	662,024	—		—		—		—		—
Stock-based compensation expense	—	—		3,584		—		—		3,584
Net loss	—	—		—		—		(4,146)		(4,146)
Other comprehensive loss, net of tax	—	—		—		(353)		—		(353)
Balances at March 31, 2024	58,196,523	$	58	$	703,858	$	(383)	$	(159,538)	$	543,995

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

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VANDA PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Three Months Ended
(in thousands)	March 31, 2025		March 31, 2024
Cash flows from operating activities
Net loss	$	(29,494)	$	(4,146)
Adjustments to reconcile loss to net cash provided by (used in) operating activities:
Depreciation of property and equipment	231		206
Stock-based compensation	2,971		3,584
Amortization of premiums and accretion of discounts on marketable securities	(749)		(1,466)

Intangible asset amortization	1,752		2,018
Deferred income taxes	(7,797)		(246)
Other non-cash adjustments, net	1,853		641
Changes in operating assets and liabilities:
Accounts receivable	2,534		(2,587)
Prepaid expenses and other assets	(5,390)		1,781
Inventory	(1,850)		29
Accounts payable and other liabilities	5,636		1,165
Product revenue allowances	(2,844)		6,590
Net cash provided by (used in) operating activities	(33,147)		7,569
Cash flows from investing activities

Asset acquisition	—		(2,705)
Purchases of property and equipment	(436)		(7)
Purchases of marketable securities	(43,329)		(76,006)
Sales and maturities of marketable securities	87,667		60,500
Net cash provided by (used in) investing activities	43,902		(18,218)
Cash flows from financing activities
Principal payments on finance leases	(409)		—


Tax obligations paid in connection with settlement of restricted stock units	(915)		—
Net cash provided by (used in) financing activities	(1,324)		—
Effect of exchange rate changes on cash, cash equivalents and restricted cash	49		(14)
Net change in cash, cash equivalents and restricted cash	9,480		(10,663)
Cash, cash equivalents and restricted cash
Beginning of period	102,785		136,290
End of period	$	112,265	$	125,627

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

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VANDA PHARMACEUTICALS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Business Organization and Presentation

Business Organization

Vanda Pharmaceuticals Inc. (the Company or Vanda) is a global biopharmaceutical company focused on the development and commercialization of innovative therapies to address high unmet medical needs and improve the lives of patients. The Company commenced its operations in 2003.

The Company’s commercial portfolio is currently comprised of three products: Fanapt® for the acute treatment of manic or mixed episodes associated with bipolar I disorder and the treatment of schizophrenia, HETLIOZ® for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) and for the treatment of nighttime sleep disturbances in Smith-Magenis syndrome (SMS) and PONVORY® for the treatment of relapsing forms of multiple sclerosis (RMS) including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease. HETLIOZ® is the first product approved by the United States Food and Drug Administration (FDA) for patients with Non-24 and for patients with SMS. In addition, the Company has a number of drugs and/or additional indications for current products in development, including:

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

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

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

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

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

•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.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Vanda Pharmaceuticals Inc. and its wholly-owned subsidiaries and have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K (Annual Report) for the fiscal year ended December 31, 2024. The financial information as of March 31, 2025 and for the three months ended March 31, 2025 and 2024 is unaudited, but in the opinion of management, all adjustments considered necessary for a fair statement of the results for these interim periods have been included. All intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated balance sheet data as of December 31, 2024 was derived from audited financial statements but does not include all disclosures required by GAAP. The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or any future year or period.

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2. Summary of Significant Accounting Policies

There have been no material changes to the significant accounting policies previously disclosed in the Annual Report.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported periods. Management continually re-evaluates its estimates, judgments and assumptions, and management’s evaluation could change. Actual results could differ from those estimates under different assumptions or conditions.

Cash, Cash Equivalents and Restricted Cash

For purposes of the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows, cash equivalents represent highly-liquid investments with a maturity date of three months or less at the date of purchase. Cash and cash equivalents include investments in money market funds with commercial banks and financial institutions, and commercial paper of high-quality corporate issuers. Restricted cash relates primarily to amounts held as collateral for letters of credit for office space leases at the Company’s Washington, D.C. headquarters.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total end of period cash, cash equivalents and restricted cash reported within the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024 were as follows:


(in thousands)	March 31, 2025		March 31, 2024
Cash and cash equivalents	$	111,796	$	125,158


Restricted cash included in non-current inventory and other	469		469
Total cash, cash equivalents and restricted cash	$	112,265	$	125,627

Revenue from Net Product Sales

The Company’s net product sales consist of sales of Fanapt®, HETLIOZ® and PONVORY®. Net sales by product for the three months ended March 31, 2025 and 2024 were as follows:


	Three Months Ended
(in thousands)	March 31, 2025		March 31, 2024
Fanapt® net product sales	$	23,545	$	20,579
HETLIOZ® net product sales	20,872		20,053
PONVORY® net product sales	5,624		6,830
Total net product sales	$	50,041	$	47,462

The Company’s HETLIOZ® net product sales as reported for the three months ended March 31, 2023 reflected higher unit sales as compared to recent prior periods. The higher unit sales during the three months ended March 31, 2023 resulted in a significant increase of inventory stocking at specialty pharmacy customers at March 31, 2023. During the remainder of 2023, although there was continued destocking at specialty pharmacy customers, inventory levels remained elevated relative to inventory levels prior to the entrance of generic competition and remained elevated throughout 2024 and 2025. Going forward, HETLIOZ® net product sales may reflect lower unit sales as a result of the reduction of elevated levels at specialty pharmacy customers or may be variable depending upon when specialty pharmacy customers need to purchase again. Further, HETLIOZ® net product sales may decline in future periods, potentially significantly, related to continued generic competition in the U.S. The Company constrained HETLIOZ® net product sales for the three months ended March 31, 2025 and 2024 to an amount not probable of significant revenue reversal. The amount of revenue recognized during the three months ended March 31, 2025 related to changes in estimates on revenue constrained during prior periods was $1.0 million. The amount of revenue recognized during the three months ended March 31, 2024 related to changes in estimates on revenue constrained during prior periods was not material. 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. The Company’s PONVORY® net product sales for the three months ended December 31, 2024 included approximately $3.0 million of variable consideration that is subject to dispute but that the Company believes is not probable of significant revenue reversal.

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Major Customers

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 United States (U.S.) for distribution through a limited number of specialty pharmacies and is not available in retail pharmacies. PONVORY® is available in the U.S. for distribution primarily through a limited number of specialty distributors and specialty pharmacies. The Company invoices and records revenue when its customers, wholesalers, specialty pharmacies and specialty distributors, receive product from the third-party logistics warehouse, which is the point at which control is transferred to the customer. Revenues and accounts receivable are concentrated with these customers. Outside the U.S., the Company has a distribution agreement for the commercialization of Fanapt® in Israel and sells HETLIOZ® in Germany. There were four major customers that each accounted for more than 10% of total revenues and, as a group, represented 81% of total revenues for the three months ended March 31, 2025. There were four major customers that each accounted for more than 10% of accounts receivable and, as a group, represented 91% of total accounts receivable at March 31, 2025. 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.

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to provide enhancements to annual income tax disclosures. The standard will require more detailed information in the rate reconciliation table and for income taxes paid, among other enhancements. The standard is effective for years beginning after December 15, 2024 and early adoption is permitted. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Topic 220-40), which addresses the disaggregation of income statement expenses. This standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements.

3. Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of March 31, 2025, which all have contractual maturities of less than two years:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
(in thousands)
U.S. Treasury and government agencies	$	189,685	$	574	$	(99)	$	190,160
Corporate debt	38,951		6		(5)		38,952

Total marketable securities	$	228,636	$	580	$	(104)	$	229,112

The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 2024, which all have contractual maturities of less than two years:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
(in thousands)
U.S. Treasury and government agencies	$	227,720	$	371	$	(261)	$	227,830
Corporate debt	44,506		9		(18)		44,497

Total marketable securities	$	272,226	$	380	$	(279)	$	272,327

4. Fair Value Measurements

Authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

•Level 1 — defined as observable inputs such as quoted prices in active markets

•Level 2 — defined as inputs other than quoted prices in active markets that are either directly or indirectly observable

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•Level 3 — defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions

The Company’s assets classified in Level 1 and Level 2 as of March 31, 2025 and December 31, 2024 consist of cash equivalents and available-for-sale marketable securities. The valuation of Level 1 instruments is determined using a market approach and is based upon unadjusted quoted prices for identical assets in active markets. The valuation of Level 2 instruments is also determined using a market approach based upon quoted prices for similar assets in active markets, or other inputs that are observable for substantially the full term of the financial instrument. Level 2 securities include certificates of deposit, commercial paper and corporate notes that use as their basis readily observable market parameters.

The Company held certain assets that are required to be measured at fair value on a recurring basis as of March 31, 2025, as follows:


			Fair Value Measurement as of March 31, 2025 Using
	Total Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)			(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and government agencies	$	190,160	$	190,160	$	—	$	—
Corporate debt	67,884		—		67,884		—

Total assets measured at fair value	$	258,044	$	190,160	$	67,884	$	—

The Company held certain assets that are required to be measured at fair value on a recurring basis as of December 31, 2024, as follows:


			Fair Value Measurement as of December 31, 2024 Using
	Total Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(in thousands)			(Level 1)		(Level 2)		(Level 3)
U.S. Treasury and government agencies	$	227,830	$	227,830	$	—	$	—
Corporate debt	44,497		—		44,497		—

Total assets measured at fair value	$	272,327	$	227,830	$	44,497	$	—

Total assets measured at fair value as of March 31, 2025 include $28.9 million cash equivalents. Total assets measured at fair value as of December 31, 2024 include no cash equivalents.

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

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5. Inventory

Inventory consisted of the following as of March 31, 2025 and December 31, 2024:


(in thousands)	March 31, 2025		December 31, 2024
Current assets

Finished goods	1,923		1,726
Total inventory, current	$	1,923	$	1,726
Non-Current assets
Raw materials	$	934	$	934
Work-in-process	5,766		6,236
Finished goods	1,660		617
Total inventory, non-current	8,360		7,787
Total inventory	$	10,283	$	9,513

Inventory, which is recorded at the lower of cost or net realizable value, includes the cost of third-party manufacturing and other direct and indirect costs and is valued using the first-in, first-out method. The Company evaluates the risk of excess inventory and product expiry by evaluating current and future product demand relative to product shelf life, taking into account all possible alternative uses for the inventory available in the ordinary course of business. The Company builds demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance, patient usage and generic competition. The Company’s inventory balance consisted of $2.5 million of Fanapt® product, $7.3 million of HETLIOZ® product and $0.5 million of PONVORY® product as of March 31, 2025. The Company’s inventory balance consisted of $2.0 million of Fanapt® product, $7.3 million of HETLIOZ® product and $0.2 million of PONVORY® product as of December 31, 2024.

6. Intangible Assets

HETLIOZ®. In January 2014, the Company announced that the FDA had approved the NDA for HETLIOZ®. As a result of this approval, the Company met a milestone under its license agreement with Bristol-Myers Squibb (BMS) that required the Company to make a license payment of $8.0 million to BMS. In April 2018, the Company met its final milestone under its license agreement with BMS when cumulative worldwide sales of HETLIOZ® reached $250.0 million. As a result of the achievement of this milestone, the Company made a payment to BMS of $25.0 million in 2018. These milestone payments were determined to be additional consideration for the acquisition of HETLIOZ® and capitalized as an intangible asset and are being amortized on a straight-line basis over the estimated economic useful life of the related product patents.

PONVORY®. On December 7, 2023, the Company acquired the U.S. and Canadian rights to PONVORY® from Actelion Pharmaceuticals Ltd. (Janssen), a Johnson & Johnson Company. The total purchase price of $104.9 million, $100.7 million of which was paid in 2023 and the remaining $4.2 million in 2024, was allocated to the acquired intangible asset for the U.S. and Canadian rights to PONVORY®. The PONVORY® intangible asset is being amortized on a straight-line basis over the estimated economic useful life of the related product rights. During the first quarter of 2024, the estimated useful life for the PONVORY® intangible asset was changed from 2035 to 2042 based on a change in the estimated economic useful life of the related product rights.

The following is a summary of the Company’s amortizing intangible assets as of March 31, 2025:


		March 31, 2025
(in thousands)	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ®	2035	$	33,000	$	17,765	$	15,235

PONVORY®	2042	104,894		7,785		97,109
Total amortizing intangible assets		$	137,894	$	25,550	$	112,344

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


		December 31, 2024
(in thousands)	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
HETLIOZ®	2035	$	33,000	$	17,400	$	15,600

PONVORY®	2042	104,894		6,398		98,496
Total amortizing intangible assets		$	137,894	$	23,798	$	114,096

As of March 31, 2025 and December 31, 2024, the Company also had $27.9 million of fully amortized intangible assets related to Fanapt®.

Intangible assets are amortized over their estimated useful economic life using the straight-line method. Amortization expense was $1.8 million and $2.0 million for the three months ended March 31, 2025 and 2024, respectively. The following is a summary of the future intangible asset amortization schedule as of March 31, 2025:


(in thousands)	Total		2025		2026		2027		2028		2029		Thereafter
HETLIOZ®	$	15,235	$	1,097	$	1,463	$	1,463	$	1,463	$	1,463	$	8,286
PONVORY®	97,109		4,158		5,544		5,544		5,544		5,544		70,775
Total amortizing intangible assets	$	112,344	$	5,255	$	7,007	$	7,007	$	7,007	$	7,007	$	79,061

7. Accounts Payable and Accrued Liabilities

The following is a summary of the Company’s accounts payable and accrued liabilities as of March 31, 2025 and December 31, 2024:


(in thousands)	March 31, 2025		December 31, 2024
Consulting and other professional fees	$	18,190	$	9,226
Research and development expenses	11,437		11,962
Compensation and employee benefits	3,794		8,465
Operating lease liabilities	2,463		2,456
Finance lease liabilities	1,931		1,814
Royalties payable	1,474		1,665

Accounts payable and other accrued liabilities	5,990		3,498
Total accounts payable and accrued liabilities	$	45,279	$	39,086

8. Commitments and Contingencies

Guarantees and Indemnifications

The Company has entered into a number of standard intellectual property indemnification agreements in the ordinary course of its business. Pursuant to these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. The term of these indemnification agreements is generally perpetual from the date of execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. Since inception, the Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. The Company also indemnifies its officers and directors for certain events or occurrences, subject to certain conditions.

License Agreements

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

Fanapt®. Pursuant to the terms of a settlement agreement with Novartis Pharma AG (Novartis), Novartis transferred all U.S. and Canadian rights in the Fanapt® franchise to the Company on December 31, 2014. The Company paid directly to Sanofi S.A. (Sanofi) a fixed royalty of 3% of net sales through December 2019 related to manufacturing know-how. The Company is also

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obligated to pay Sanofi a fixed royalty on Fanapt® net sales equal to 6% on Sanofi know-how not related to manufacturing under certain conditions for a period of up to 10 years in markets where the new chemical entity patent has expired or was not issued. The Company is obligated to pay this 6% royalty on net sales in the U.S. through November 2026.

HETLIOZ®. In February 2004, the Company entered into a license agreement with BMS under which it received an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize HETLIOZ®. As of March 31, 2025, the Company has paid BMS $37.5 million in upfront fees and milestone obligations, including $33.0 million of regulatory approval and commercial milestones capitalized as intangible assets (see Note 6, Intangible Assets). The Company has no remaining milestone obligations to BMS. Additionally, the Company is obligated to make royalty payments on HETLIOZ® net sales to BMS. The royalty period in each territory where the Company commercializes HETLIOZ® is 10 years following the first commercial sale in the territory. In territories outside the U.S., the royalty is 5% on net sales. 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 Company is also obligated under the license agreement to pay BMS a percentage of any sublicense fees, upfront payments and milestone and other payments (excluding royalties) that it receives from a third party in connection with any sublicensing arrangement, at a rate which is in the mid-twenties. The Company is obligated to use its commercially reasonable efforts to develop and commercialize HETLIOZ®.

Tradipitant. In April 2012, the Company entered into a license agreement with Eli Lilly and Company (Lilly) pursuant to which the Company acquired an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize an NK-1 receptor antagonist, tradipitant, for all human indications. Lilly is eligible to receive future payments based upon achievement of specified development, regulatory approval and commercialization milestones as well as tiered-royalties on net sales at percentage rates up to the low double digits. As of March 31, 2025, the Company has paid Lilly $5.0 million in upfront fees and development milestones, including a $2.0 million milestone paid to Lilly during the year ended December 31, 2023 for the filing of the first application for marketing authorization for tradipitant in either the U.S. or European Union (E.U.). As of March 31, 2025, remaining milestone obligations include $10.0 million and $5.0 million milestones for the first approval of an application for marketing authorization for tradipitant in the U.S. and E.U., respectively, and up to $80.0 million for sales milestones. The Company is obligated to use its commercially reasonable efforts to develop and commercialize tradipitant.

Imsidolimab. In January 2025, the Company entered into an exclusive global license agreement with AnaptysBio, Inc. (Anaptys) under which it acquired the worldwide rights to develop, manufacture, and commercialize imsidolimab, an IL-36R antagonist. Under the terms of the agreement, which was accounted for as an asset acquisition, the Company made an upfront payment of $10.0 million to Anaptys and an additional $5.0 million payment for drug supply, $14.4 million of which is included in research and development expense on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2025. Anaptys is eligible to receive future payments based upon achievement of specified regulatory approval and commercialization milestones as well as a 10% royalty on global net sales. As of March 31, 2025, remaining milestone obligations include up to $35.0 million for future regulatory approval and sales milestones, including a $5.0 million milestone for the first approval of an application for marketing authorization for imsidolimab in the U.S. The Company is obligated to use its commercially reasonable efforts to develop and commercialize imsidolimab.

Portfolio of CFTR activators and inhibitors. In March 2017, the Company entered into a license agreement with the University of California San Francisco (UCSF), under which the Company acquired an exclusive worldwide license to develop and commercialize a portfolio of CFTR activators and inhibitors. Pursuant to the license agreement, the Company will develop and commercialize the CFTR activators and inhibitors and is responsible for all development costs, including current pre-investigational new drug development work. UCSF is eligible to receive future payments based upon achievement of specified development and commercialization milestones as well as single-digit royalties on net sales. As of March 31, 2025, the Company has paid UCSF $1.8 million in upfront fees and development milestones. As of March 31, 2025, remaining milestone obligations include $11.9 million for development milestones and $33.0 million for future regulatory approval and sales milestones. Included in the $11.9 million of development milestones are $1.1 million of milestone obligations due upon the conclusion of clinical studies for each licensed product, not to exceed $3.2 million in total for the CFTR portfolio.

VQW-765. In connection with a settlement agreement with Novartis relating to Fanapt®, the Company received an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize VQW-765, a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist. Pursuant to the license agreement, the Company is obligated to use its commercially reasonable efforts to develop and commercialize VQW-765 and is responsible for all development costs. The Company has no milestone obligations, but Novartis is eligible to receive tiered-royalties on net sales at percentage rates up to the mid-teens.

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Other Agreements

Olipass. In September 2022, the Company entered into an agreement with OliPass Corporation (OliPass) to jointly develop a set of ASO molecules based on OliPass’ proprietary modified peptide nucleic acids. As consideration for entering into the arrangement, the Company paid OliPass an upfront fee of $3.0 million, which was recorded as research and development expense in 2022. The Company is funding the research and development activities and has the option to license jointly developed intellectual property upon successful development.

Shareholder Rights Plan. On April 17, 2024, the Company’s board of directors authorized and declared a dividend distribution of one right (each, a Right) for each outstanding share of common stock of the Company to stockholders of record as of the close of business on April 29, 2024 (the Record Date). Each Right entitled the registered holder to purchase from the Company, subject to certain conditions which have not yet occurred, one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share (the Preferred Stock), of the Company at an exercise price of $25.00 (the Exercise Price), subject to adjustment. The complete terms of the Rights are set forth in a Rights Agreement, dated as of April 17, 2024, between the Company and Equiniti Trust Company, LLC, as rights agent (the Rights Agent), as amended by that certain Amendment No. 1 to the Rights Agreement, and that certain Amendment No. 2 to the Rights Agreement, each, by and between the Company and the Rights Agent (as amended, the Rights Agreement). The Rights Agreement expired by its terms on April 16, 2025.

Clinical Trial Agreement. In December 2024, the Company entered into an agreement with a third party to jointly design and complete a pediatric study for PONVORY® required by the FDA and the European Medicines Agency. Pursuant to the agreement, the Company will bear the primary responsibility for completing the clinical trial, and the third party will bear primary responsibility for manufacturing the clinical study product. All costs associated with the pediatric study will be shared equally by the Company and the third party. As the Company and the third party are both active participants in the research activities and both parties are exposed to significant risks and rewards, the agreement is being accounted for under Accounting Standards Codification (ASC) 808. Furthermore, no parts of the agreement are within the scope of ASC 606, because the Company determined that performing research and development activities on behalf of other parties is not part of the ordinary activities of its business. Therefore, reimbursements from the third party for research and development costs are recorded as reductions to research and development expense as incurred. Amounts related to activities for the pediatric study, which commenced during the first quarter of 2025, were not material for the three months ended March 31, 2025.

Purchase Commitments

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

9. Accumulated Other Comprehensive Income

The accumulated balances related to each component of other comprehensive income, net of taxes, were as follows as of March 31, 2025 and December 31, 2024:


(in thousands)	March 31, 2025		December 31, 2024
Foreign currency translation	$	12	$	(13)
Unrealized gain on marketable securities	371		87
Accumulated other comprehensive income	$	383	$	74

10. Stock-Based Compensation

As of March 31, 2025, there were 7,846,424 shares subject to outstanding options and restricted stock units (RSUs) under the 2006 Equity Incentive Plan (2006 Plan) and the Amended and Restated 2016 Equity Incentive Plan (2016 Plan, and together with the 2006 Plan, Plans). The 2006 Plan expired by its terms in April 2016, and the Company adopted the 2016 Plan. Outstanding options under the 2006 Plan remain in effect and the terms of the 2006 Plan continue to apply, but no additional awards can be granted under the 2006 Plan. In June 2016, the Company’s stockholders approved the 2016 Plan. The 2016 Plan has been amended a number of times since to increase the number of shares reserved for issuance, among other administrative

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changes. Each of the amendments to the 2016 Plan was approved by the Company’s stockholders. There is a total of 15,690,000 shares of common stock authorized for issuance under the 2016 Plan, 3,188,266 shares of which remained available for future grant as of March 31, 2025.

Stock Options

The Company has granted option awards under the Plans with service conditions (service option awards) that are subject to terms and conditions established by the compensation committee of the board of directors. Service option awards have 10-year contractual terms. Service option awards granted to employees and new directors upon their election vest and become exercisable over four years, with the first 25% of the shares subject to service option awards vesting on the first anniversary of the grant date and the remaining 75% of the shares subject to the service option awards in 36 equal monthly installments thereafter. Subsequent annual service option awards granted to directors vest and become exercisable in full on the first anniversary of the grant date. Service option awards granted to executive officers and certain other employees provide for partial acceleration of vesting if the executive officer or employee is subject to an involuntary termination, and full acceleration of vesting if the executive officer or employee is subject to an involuntary termination within 24 months after a change in control of the Company. Service option awards granted to directors provide for accelerated vesting if there is a change in control of the Company or if the director’s service terminates as a result of the director’s death or total and permanent disability.

As of March 31, 2025, $2.2 million of unrecognized compensation costs related to unvested service option awards are expected to be recognized over a weighted average period of 0.8 years. No option awards are classified as a liability as of March 31, 2025.

A summary of option activity under the Plans for the three months ended March 31, 2025 follows:


(in thousands, except for share and per share amounts)	Number of Shares	Weighted Average Exercise Price at Grant Date		Weighted Average Remaining Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2024	4,603,581	$	12.71	5.60	$	—


Expired	(91,507)	11.19

Outstanding at March 31, 2025	4,512,074	12.74		5.46	—
Exercisable at March 31, 2025	3,801,044	13.73		4.99	—
Vested and expected to vest at March 31, 2025	4,486,369	12.77		5.45	—

There were no stock option exercises during the three months ended March 31, 2025 and 2024.

Restricted Stock Units

An RSU is a stock award that entitles the holder to receive shares of the Company’s common stock as the award vests. The fair value of each RSU is based on the closing price of the Company’s stock on the date of grant. The Company has granted RSUs under the Plans with service conditions (service RSUs) that are subject to terms and conditions established by the compensation committee of the board of directors. Service RSUs granted to employees and new directors upon their election vest in four equal annual installments. Subsequent annual service RSUs granted to directors vest on the first anniversary of the date of grant. Service RSUs granted to executive officers and certain other employees provide for accelerated vesting if the executive officer or employee is subject to an involuntary termination within 24 months after a change in control. Service RSUs granted to directors provide for accelerated vesting if there is a change in control of the Company.

As of March 31, 2025, $16.0 million of unrecognized compensation costs related to unvested service RSUs are expected to be recognized over a weighted average period of 2.0 years. No RSUs are classified as a liability as of March 31, 2025.

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A summary of RSU activity for the Plans for the three months ended March 31, 2025 is as follows:


	Number of Shares	Weighted Average Grant Date Fair Value
Unvested at December 31, 2024	2,650,006	$	6.82
Granted	1,568,500	4.46
Forfeited	(30,831)	6.12
Vested	(853,325)	9.03
Unvested at March 31, 2025	3,334,350	5.15

The grant date fair value for the 853,325 shares underlying RSUs that vested during the three months ended March 31, 2025 was $7.7 million.

Stock-Based Compensation Expense

Stock-based compensation expense recognized for the three months ended March 31, 2025 and 2024 was comprised of the following:


	Three Months Ended
(in thousands)	March 31, 2025		March 31, 2024
Research and development	$	765	$	864
Selling, general and administrative	2,206		2,720
Total stock-based compensation expense	$	2,971	$	3,584

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model. Expected volatility rates are based on the historical volatility of the Company’s publicly traded common stock and other factors. The expected terms are determined based on a combination of historical exercise data and hypothetical exercise data for unexercised stock options. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has never paid cash dividends to its stockholders and does not plan to pay dividends in the foreseeable future. There were no options granted during the three months ended March 31, 2025 and 2024.

11. Income Taxes

For the three months ended March 31, 2025 and 2024, the Company recorded an income tax benefit of $7.9 million and $0.5 million, respectively. The income tax benefit for the three months ended March 31, 2025 and 2024 was primarily driven by the estimated effective tax rate for the year, as well as discrete income tax expense of $0.5 million.

The Company assesses the need for a valuation allowance against its deferred tax asset each quarter through the review of all available positive and negative evidence. Deferred tax assets are reduced by a tax valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The analysis is highly dependent upon historical and projected pretax income. As of March 31, 2025, after considering all available positive and negative evidence, including but not limited to historical, current and future projected results and significant risks and uncertainties related to forecasts, the Company concluded, consistent with prior periods, that it is more likely than not that substantially all of its deferred tax assets in the U.S. are realizable in future periods. The Company maintains a valuation allowance against certain state net deferred tax assets.

The Company generated a pretax loss for the three months ended March 31, 2025. If the Company continues to generate pretax losses and/or if the Company’s projections indicate pretax losses in future periods, the conclusion about the appropriateness of the valuation allowance could change in a future period. An increase in the valuation allowance would result in a non-cash income tax expense during the period of change. The analysis to determine that a valuation allowance is necessary is highly dependent upon historical and future projected earnings, among other factors. Any such adjustment could have a material impact on the Company’s results of operations.

12. Earnings per Share

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

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

The following table presents the calculation of basic and diluted net loss per share of common stock for the three months ended March 31, 2025 and 2024:


	Three Months Ended
(in thousands, except for share and per share amounts)	March 31, 2025		March 31, 2024
Numerator:
Net loss	$	(29,494)	$	(4,146)
Denominator:
Weighted average shares outstanding, basic and diluted	58,527,775		57,760,940


Net loss per share, basic and diluted:	$	(0.50)	$	(0.07)


Antidilutive securities excluded from calculations of diluted net loss per share	6,507,815		7,029,644

The Company incurred a net loss for the three months ended March 31, 2025 and 2024 causing inclusion of any potentially dilutive securities to have an anti-dilutive effect, resulting in dilutive loss per share and basic loss per share attributable to common stockholders being equivalent.

13. Segments

The Company operates in one reportable segment, which includes all activities related to the development and commercialization of innovative therapies to address high unmet medical needs and improve the lives of patients. The determination of a single reportable segment is consistent with the consolidated financial information regularly provided to the Company’s chief operating decision maker (CODM), which is its chief executive officer, who reviews and evaluates consolidated net income (loss) for purposes of assessing performance, making operating decisions, allocating resources and planning and forecasting for future periods. The measure of segment assets is reported on the balance sheet as total assets.

The following table presents the segment revenue and significant expense categories included within the product segment’s measure of profit or loss for the three months ended March 31, 2025 and 2024:


	Three Months Ended
(in thousands)	March 31, 2025		March 31, 2024
Revenue	$	50,041	$	47,462
Less:
Cost of goods sold excluding amortization	3,521		3,440
Research and development	35,712		21,154
Selling, general and administrative	50,084		30,085
Intangible asset amortization	1,752		2,018
Other income, net	(3,660)		(4,571)
Benefit for income taxes	(7,874)		(518)
Net loss	$	(29,494)	$	(4,146)

14. Legal Matters

HETLIOZ®. Between April 2018 and March 2021, the Company filed numerous Hatch-Waxman lawsuits in the U.S. District Court for the District of Delaware (Delaware District Court) against Teva Pharmaceuticals USA, Inc. (Teva), MSN Pharmaceuticals Inc. and MSN Laboratories Private Limited (MSN) and Apotex Inc. and Apotex Corp. (Apotex, and collectively with Teva and MSN, the HETLIOZ® Defendants) asserting that U.S. Patent Nos. RE46,604 (‘604 Patent), 9,060,995, 9,539,234, 9,549,913, 9,730,910 (‘910 Patent), 9,844,241, 10,071,977, 10,149,829 (‘829 Patent), 10,376,487 (‘487 Patent), 10,449,176, 10,610,510, 10,610,511, 10,829,465, and 10,611,744 would be infringed by the HETLIOZ® Defendants’ generic versions of HETLIOZ® for which they were seeking FDA approval. As initially disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 14, 2022, in January 2022, the Company

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entered into a license agreement with MSN and Impax Laboratories LLC (Impax) resolving the lawsuits against MSN (the MSN/Impax License Agreement). The MSN/Impax License Agreement grants MSN and Impax a non-exclusive license to manufacture and commercialize MSN’s generic version of HETLIOZ® in the U.S. effective as of March 13, 2035, unless prior to that date the Company obtains pediatric exclusivity for HETLIOZ®, in which case the license will be effective as of July 27, 2035. 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. (Amneal), informed the Company of their belief that such circumstances have occurred and have since launched their generic version. The Company disagreed with this position and sought to defend its legal rights to exclusivity for HETLIOZ®. The consolidated lawsuits against the remaining HETLIOZ® Defendants were tried in March 2022.

In December 2022, the Delaware District Court ruled that Teva and Apotex did not infringe the ‘604 Patent, and that the asserted claims of the ‘604, ‘910, ‘829 and ‘487 Patents were invalid. In December 2022, the Company appealed the Delaware District Court’s decision to the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) and an oral argument for the appeal was held in March 2023. In May 2023, a three-judge panel of the Federal Circuit affirmed the Delaware District Court’s ruling, and in June 2023, the Company requested a rehearing or rehearing en banc from the Federal Circuit. In August 2023, the Federal Circuit denied the Company’s petition for a rehearing. In January 2024, the Company 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 the Company’s petition for a writ of certiorari.

In December 2022, the Company filed patent infringement lawsuits, including Hatch-Waxman Act claims, against each of Teva and Apotex in the U.S. District Court for the District of New Jersey (NJ District Court) asserting that U.S. Patent No. 11,285,129, a method of administration patent that was not litigated in the Delaware District Court cases (‘129 Patent), will be infringed by Teva’s and Apotex’ generic versions of HETLIOZ®, each of which was approved by the FDA. The Company asked the NJ District Court to, among other things, order that the effective date of the FDA’s approval of Teva’s and Apotex’ generic versions of HETLIOZ® be a date that is no earlier than the expiration of the ‘129 Patent, or such later date that the NJ District Court may determine, and enjoin each of Teva and Apotex from the commercial manufacture, use, import, offer for sale and/or sale of their generic versions of HETLIOZ® until the expiration of the ‘129 Patent, or such later date that the NJ District Court may determine. In February 2023, the case was transferred to the Delaware District Court. In April 2023, Teva and Apotex moved for judgment on the pleadings. In June 2024, the Delaware District Court denied those motions, allowing the Company’s lawsuit to proceed. In March 2025, the Delaware District Court held a claim construction hearing, which resolved two claim term disputes in the Company’s favor and deferred ruling on a third dispute between the parties. The Company’s lawsuit remains pending.

In January 2023, the Company filed a lawsuit in the NJ District Court against Teva challenging Teva’s advertising and marketing practices related to its at risk launch of its generic version of HETLIOZ® for the single indication of Non-24. The Company believes that Teva’s advertising and marketing practices related to its generic version of HETLIOZ® promote its product for uses beyond the limited labeling that Teva sought, and the FDA approved. The Company seeks to, among other things, enjoin Teva from engaging in false and misleading advertising and recover monetary damages. In December 2023, the case was transferred to the Delaware District Court following Teva’s motion to transfer and dismiss the case earlier that year. In February 2025, the Delaware District Court denied Teva’s motion to dismiss, allowing the Company’s lawsuit to proceed. In March 2025, Teva filed its answer and asserted counterclaims against the Company for alleged violations of the Lanham Act, antitrust and state trade laws. In the same month, the Delaware District Court declined to consolidate this action with the Company’s cases alleging infringement of the ‘129 patent and the ‘556 patent (as defined below). The Company’s lawsuit remains pending.

In January 2023, the Company filed a lawsuit in the U.S. District Court for the District of Columbia (DC District Court) against the FDA challenging the FDA’s approval of Teva’s Abbreviated New Drug Application (ANDA) for its generic version of HETLIOZ® capsules under the Administrative Procedure Act, the Food, Drug, and Cosmetic Act (FDCA), and FDA regulations. Under the FDCA, every ANDA must contain information to show that the labeling proposed for the generic drug is the same as the labeling approved for the listed drug. The labeling and packaging for HETLIOZ® includes Braille, but Teva’s generic version does not. On this basis, the Company believes that Teva’s approved labeling does not comply with applicable requirements. The Company has asked the DC District Court to, among other things, vacate the FDA’s approval of Teva’s ANDA, declare that the approval of the ANDA was unlawful, arbitrary, and capricious and compel the FDA to order Teva to recall its generic HETLIOZ® product. In February 2023, Teva intervened in the lawsuit as a defendant. In September 2023, the Company amended its lawsuit to request that the DC District Court set aside the FDA’s July 2023 denial of the Company’s citizen petition, originally filed with the FDA in January 2023. In April 2024, the Company filed a motion for summary judgment. In February 2025, the DC District Court denied the Company’s motion and granted the FDA and Teva’s cross motions for summary judgment. In February 2025, the Company appealed to the U.S. Court of Appeals for the District of Columbia Circuit. The Company’s appeal remains pending.

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In September 2023, the Company filed a lawsuit in the DC District Court against the FDA challenging the FDA’s approval of MSN’s ANDA for its generic version of HETLIOZ® capsules under the APA, the FDCA, FDA regulations and the Appointments Clause of the U.S. Constitution. The Company believes that MSN’s underlying approval data, particularly its bioequivalence studies, are faulty. On this basis, the Company asked the DC District Court to, among other things, vacate the FDA’s approval of MSN’s ANDA, declare that the approval of the ANDA was unlawful, arbitrary, and capricious, is unconstitutional under the Appointments Clause, and compel the FDA to order MSN to recall its generic HETLIOZ® product. In December 2023, the Company filed a motion for summary judgment. In January 2024, the FDA opposed the Company’s motion and moved to waive the administrative record, following which the court held an oral argument on the cross-motions. The DC District Court issued an order compelling the FDA to serve the administrative record and set deadlines for further proceedings. In April 2024, the Company filed a motion for summary judgment. In July 2024, the DC District Court held an oral argument on the motion to dismiss that the FDA filed in January 2024, which the Company opposed in February 2024. In September 2024, the DC District Court granted in part the FDA’s motion to dismiss as to the Company’s APA claims and denied the FDA’s motion to dismiss as to the Company’s claims under the Appointments Clause. The Company’s lawsuit remains pending.

In April 2024, the Company filed a lawsuit in the Delaware District Court against MSN, Amneal, and Impax alleging claims for false advertising in violation of the Lanham Act and unfair competition under several state laws as well as claims for breach of express representation and fraudulent inducement of a license agreement. In July 2024, the defendants filed a motion to dismiss and in September 2024, the Company opposed the motion, to which the defendants replied in October 2024. The Company’s lawsuit remains pending.

In December 2024, the Company filed a lawsuit in the Delaware District Court against each of Teva and Apotex in the Delaware District Court, in each case, asserting U.S. Patent No. 11,918,556 (‘556 Patent), a method of administration patent that was not litigated in the prior Delaware District Court cases, will be infringed by Teva’s and Apotex’s generic versions of HETLIOZ®, each of which was approved by the FDA. The Company has asked the Delaware District Court to, among other things, order that the effective date of the FDA’s approval of Teva’s and Apotex’ generic versions of HETLIOZ® be a date that is no earlier than the expiration of the ‘556 Patent, or such later date that the Delaware District Court may determine, and enjoin each of Teva and Apotex from the commercial manufacture, use, import, offer for sale and/or sale of their generic versions of HETLIOZ® until the expiration of the ‘556 Patent, or such later date that the Delaware District Court may determine. In March 2025, Teva filed its answer and asserted counterclaims against the Company, including, among other things, for alleged violation of the antitrust laws and inequitable conduct. The Delaware District Court declined to consolidate this action with the Company’s case alleging Lanham Act violations against Teva. The Company’s lawsuit remains pending.

HETLIOZ LQ®. In July 2024, the Company filed a Hatch-Waxman lawsuit against MSN in the Delaware District Court asserting that U.S. Patent Nos. 10,179,119, 11,266,622, 11,285,129, 11,850,229, 10,610,510, 10,980,770, and 11,759,446 (together, the Asserted Patents) will be infringed by MSN’s generic version of HETLIOZ LQ® for which MSN is seeking FDA approval. The Company has asked the Delaware District Court to, among other things, enter judgment that MSN has infringed at least one claim of each of the Asserted Patents by submitting or causing to be submitted its ANDA to obtain FDA approval for the commercial manufacture, use, import, offer for sale and/or sale in the U.S. of its generic version of HETLIOZ LQ® before the expiration of each of the Asserted Patents, enter judgment that the use of MSN’s generic version of HETLIOZ LQ® in the U.S. before the expiration of each of the Asserted Patents will directly infringe at least one claim of each of the Asserted Patents, order that the effective date of any approval by the FDA of MSN’s generic version of HETLIOZ LQ® be a date that is no earlier than the expiration of the last expiring Asserted Patent(s), or such later date as the Court may determine, enjoin MSN from the commercial manufacture, use, import, offer for sale and/or sale of its generic version of HETLIOZ LQ® until the expiration of each of the Asserted Patents or such later date as the Court may determine, and award monetary damages, to the extent applicable. The Company’s lawsuit remains pending, and a trial is scheduled to begin on June 15, 2026.

Other Matters. From April 2022 to July 2024, the Company filed eighteen lawsuits in the DC District Court against the FDA to compel the FDA to produce records under the Freedom of Information Act (FOIA) regarding, among other matters: the FDA’s denial of the Company’s supplemental New Drug Application (sNDA) for HETLIOZ® in the treatment of jet lag disorder; cases in which the FDA waived its putative requirement of a 9-month non-rodent toxicity study before drugs can be tested on human patients for extended durations; communications external to and within the FDA relating to tradipitant, HETLIOZ® and Fanapt®; a warning letter that the FDA sent to the Company concerning its webpages for HETLIOZ® and Fanapt®; the FDA’s removal of a clinical trials design presentation from its website; discipline reviews relating to the FDA’s evaluations of the Company’s sNDA for HETLIOZ® and a third-party sNDA for jet lag; internal standard operating procedures or guidance relating to the FDA’s processing of incoming FOIA requests; and bioequivalence and other study reports submitted relating to the FDA’s consideration of tasimelteon ANDAs. Eight of these lawsuits have since been resolved in the Company’s favor and the other ten remain outstanding. The FDA has failed to respond and provide the requested documents within the statutory

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timeframe with respect to each of these ten outstanding cases. The Company has asked the DC District Court to, among other things, compel the FDA to comply with its obligations and declare that its lack of compliance violates FOIA.

In May 2022, the Company filed a lawsuit in the DC District Court against the FDA challenging the FDA’s denial of Fast Track designation for tradipitant. In October 2021, the Company submitted to the FDA a request for Fast Track designation for tradipitant under the Food and Drug Administration Modernization Act of 1997 (FDAMA). The FDAMA provides for expedited development and review of drugs that receive Fast Track designation from the FDA. Under the FDAMA, the FDA must designate a drug as a Fast Track product if it both (1) is intended to treat a serious or life-threatening disease or condition and (2) demonstrates the potential to address unmet medical needs for such disease or condition. Although Fast Track designation is non-discretionary when the criteria are satisfied, the FDA denied the Company’s request for Fast Track designation. The Company does not believe that the FDA based its decision on the relevant criteria. Therefore, among other reasons, the Company maintains that the FDA’s denial is unlawful. The Company has asked the DC District Court to, among other things, set aside and vacate the FDA’s denial. An oral argument was held in January 2023. In August 2023, the DC District Court ruled against the Company. In September 2023, the Company appealed the ruling to the U.S. Court of Appeals for the District of Columbia Circuit and in September 2024, the Court of Appeals held an oral argument. In December 2024, the Court of Appeals affirmed the DC District Court’s ruling. The Company is currently evaluating options with respect to this litigation.

In September 2022, the Company filed a lawsuit in the DC District Court against the FDA to compel the FDA to comply with two separate non-discretionary obligations under the FDCA and its implementing regulations: an obligation to publish a notice of an opportunity for a hearing on the Company’s sNDA for HETLIOZ® in the treatment of jet lag disorder in the Federal Register within 180 days of the filing of the sNDA, and a separate obligation to publish the same notice within 60 days of the request for a hearing. The FDA published the notice of an opportunity for a hearing on October 11, 2022. The Company has asked the DC District Court to, among other things, compel the FDA to comply with its obligations and declare that its lack of compliance violates the FDCA and the FDA regulations. In January 2024, the DC District Court held an oral argument on dispositive cross-motions, following which the DC District Court granted in part the Company’s motion for summary judgment. The DC District Court ruled that the FDA violated the statute and ordered the FDA to either finally resolve the Company’s application or commence a hearing on or before March 5, 2024. In March 2024, the Company and the FDA filed a consent motion for entry of final judgment in the Company’s favor on its Administrative Procedure Act claim for the FDA’s unreasonable delay in resolving the hearing request, following which the FDA refused to hold a hearing or approve the Company’s sNDA for HETLIOZ® in the treatment of jet lag disorder. The Company subsequently filed a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit (DC Circuit). Under the FDCA, the FDA has an obligation to either approve an sNDA or to hold a hearing on the application’s approvability. The Company’s petition asks the DC Circuit to set aside the FDA’s order refusing to hold a hearing and refusing approval. In January 2025, the DC Circuit held an oral argument. The Company’s petition remains pending.

In May 2023, the Company filed a lawsuit in the U.S. Court of Federal Claims (Federal Claims Court) against the federal government for the uncompensated taking and misuse of the Company’s trade secrets and confidential information. The Company believes that the FDA violated the Fifth Amendment’s due process clause by improperly providing confidential details from the Company’s drug master files for HETLIOZ® and Fanapt® to generic drug manufacturers during the FDA’s review of the manufacturers’ ANDAs. The Company has asked the Federal Claims Court to, among other things, declare that the FDA’s disclosure of the Company’s confidential commercial information constitutes a taking for purposes of the Fifth Amendment and award just compensation. The federal government filed a motion to dismiss the complaint, which the Company opposed. In January 2024, the Federal Claims Court held an oral argument on the motion to dismiss, following which the Federal Claims Court issued a decision denying in part the government’s motion, allowing the Company’s takings claim to proceed. In April 2024, the government filed a judgment on the pleadings, to which the Company opposed in July 2024 and the government replied in August 2024. In December 2024, the Federal Claims Court held an oral argument on the motion for judgment on the pleadings and in January 2025, the Federal Claims Court ruled against the Company. In February 2025, the Company appealed the ruling to the U.S. Court of Appeals for the Federal Circuit. The Company’s appeal remains pending.

In February 2024, the Company filed a lawsuit in the DC District Court against the FDA to compel the FDA to comply with its statutory obligations under the FDCA and its implementing regulations, and to challenge the FDA’s complete response letter and 60-day filing regulations, which the Company believes do not absolve the FDA of its statutory responsibilities. Under the FDCA, the FDA has an obligation to either approve the Company’s sNDA for HETLIOZ® in the treatment of insomnia characterized by difficulties with sleep initiation within 180 days of the filing of the sNDA or give the Company a notice of an opportunity for a hearing. The Company submitted the sNDA on May 4, 2023. The Company has asked the DC District Court to, among other things, compel the FDA to comply with its obligations, declare that its lack of compliance violates the FDCA and the FDA regulations and declare the FDA’s complete response letter and 60-day filing regulations unlawful. In June 2024, the Company filed a motion for summary judgment and the FDA published a notice of opportunity for a hearing. In July 2024,

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the FDA opposed the Company’s motion for summary judgment. In September 2024, the DC District Court held an oral argument on the dispositive cross motions. In March and April 2025, the parties provided supplemental briefing. A further hearing is scheduled for May 2025. The Company’s lawsuit remains pending.

On April 22, 2024, a purported stockholder of the Company filed a lawsuit in the Court of Chancery of the State of Delaware (Delaware Chancery Court) against the members of the Company’s board of directors and the Rights Agent, along with the Company as nominal defendant (collectively, the Defendants), captioned Steamfitters Local 449 Pension Fund v. Mihael H. Polymeropoulos, et al., CA No. 2024-0416-KSJM. The lawsuit contended, among other things, that the members of the Company’s board of directors breached their fiduciary duties in adopting the Rights Agreement. The lawsuit sought relief declaring, in part, that provisions of the Rights Agreement be deemed unenforceable and sought to enjoin the use of such provisions as well as damages, costs, and other remedies, and also sought to enjoin for 30 days the Company’s 2024 Annual Meeting of Stockholders (the Annual Meeting) that was held on May 17, 2024. At a hearing on May 7, 2024, the Delaware Chancery Court denied the plaintiff’s request to enjoin the Annual Meeting. A three-day trial in the case was scheduled to begin on November 4, 2024. On August 7, 2024, the Company amended the Rights Agreement to, among other things, clarify certain of the provisions that were the subject of the lawsuit. On August 12, 2024, the parties filed with the Delaware Chancery Court a stipulation and order dismissing the lawsuit with prejudice, pursuant to which, the plaintiff agreed that the amendment to the Rights Agreement mooted the plaintiff’s claims. The plaintiff filed a petition in the Delaware Chancery Court for an award of attorney’s fees and reimbursement of expenses, which the Company is opposing. In February 2025, the Delaware Chancery Court held a hearing, and a decision remains pending.

In August 2024, the Company filed a lawsuit against the FDA in the DC District Court challenging FDA decisionmakers’ authority under the Appointments Clause of the U.S. Constitution to render a decision on the Company’s new drug application for tradipitant to treat symptoms of gastroparesis. In September 2024, the Company filed a motion for a preliminary injunction to enjoin the FDA from subjecting the Company’s NDA for tradipitant for the treatment of symptoms of gastroparesis to a final decision prior to the PDUFA target date of September 18, 2024. In September 2024, the DC District Court denied the motion. The Company filed a motion for summary judgment in December 2024, and in January 2025, the FDA opposed the motion and cross-moved to dismiss and for summary judgment. The Company’s lawsuit remains pending.

In January 2025, the Company and a co-plaintiff filed a lawsuit against the FDA in the U.S. District Court for the Middle District of Florida (Florida District Court) challenging the FDA’s partial clinical hold preventing the Company from studying the effects of tradipitant for the prevention of motion sickness for more than 90 total doses per patient over a period of two years. The FDA based its partial clinical hold on the Company’s refusal to perform a repeat-dose toxicity study in a non-rodent species of at least a 6-month duration. However, under the FDA Modernization Act 2.0, nonclinical studies may include non-animal alternatives. The Company believes that the FDA’s basis for the partial clinical hold is contrary to law and in excess of the FDA’s statutory authority. The Company and co-plaintiff have asked the Florida District Court to, among other things, set aside the FDA’s partial clinical hold and declare the FDA’s partial clinical hold as unlawful. In March 2025, the FDA moved to dismiss the lawsuit and subsequently moved to stay summary judgment briefing in April 2025. The Company subsequently opposed the FDA’s motion to stay, following which the Florida District Court granted the FDA’s motion. The Company’s lawsuit remains pending.

In February 2025, the Company filed a lawsuit in the DC District Court against the FDA to compel the FDA to comply with its statutory obligations under the FDCA and its implementing regulations and to challenge the FDA’s reliance on PDUFA deadlines and its complete response letter and 60-day filing regulations, which the Company believes do not absolve the FDA of its statutory responsibilities. Under the FDCA, the FDA has an obligation to either approve the Company’s NDA for tradipitant to prevent vomiting induced by motion within 180 days of the filing of the NDA or give the Company a notice of an opportunity for a hearing. The Company submitted the NDA on December 30, 2024. The Company has asked the DC District Court to, among other things, compel the FDA to comply with its obligations, declare that its lack of compliance violates the FDCA and the FDA regulations and declare the FDA’s complete response letter and 60-day filing regulations and adherence to PDUFA deadlines unlawful. Separately, under the FDCA, the FDA has an obligation to commence a hearing on the Company’s NDA for tradipitant in gastroparesis within 120 days of a timely accepted notice of opportunity for a hearing, which the FDA issued on January 7, 2025. In April 2025, the Company filed a motion for summary judgment regarding its motion sickness NDA. The DC District Court has scheduled a hearing in May 2025. In April 2025, the Company also requested to file summary judgment regarding its gastroparesis NDA.

In April 2025, the Company filed a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit (DC Circuit) seeking review of the FDA’s final order refusing to hold a hearing or to approve the Company’s sNDA for HETLIOZ® in the treatment of insomnia associated with difficulties with sleep initiation. Under the FDCA, the FDA has an obligation to either approve an sNDA or to hold a hearing on the application’s approvability. The Company’s petition asks the DC Circuit to set aside the FDA’s order refusing to hold a hearing and refusing approval. The Company’s petition remains pending.

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In April 2025, the Company and two co-plaintiffs filed a lawsuit against the FDA in the U.S. District Court for the Southern District of Texas (Texas District Court) challenging the FDA’s prohibition of the Company’s proposal to disclose truthful, non-misleading information to prescribers and patients, including the co-plaintiffs, about the off-label use of HETLIOZ® to treat jet lag disorder. The Company believes that the FDA’s prohibition of truthful, non-misleading speech promoting off-label uses of drugs is content-based speech regulation and unconstitutional under the First Amendment. The Company has asked the Texas District Court to, among other things, declare that the Company has a right under the First Amendment to engage in truthful, non-misleading speech regarding the potential use of HETLIOZ® as a treatment for jet lag disorder and enjoin the FDA from taking adverse action against the Company relating to such communications. The Company’s lawsuit remains pending.

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ITEM 2			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

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

Our commercial portfolio is currently comprised of three products: Fanapt® for the acute treatment of manic or mixed episodes associated with bipolar I disorder and the treatment of schizophrenia, HETLIOZ® for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) and for the treatment of nighttime sleep disturbances in Smith-Magenis syndrome (SMS) and PONVORY® for the treatment of relapsing forms of multiple sclerosis (RMS) including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease. HETLIOZ® is the first product approved by the United States Food and Drug Administration (FDA) for patients with Non-24 and for patients with SMS. In addition, we have a number of drugs and/or additional indications for current products in development, including:

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

•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);

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

Operational Highlights

Key Operational Highlights – Commercial

Fanapt®

•Fanapt® was approved in the second quarter of 2024 for the acute treatment of bipolar I disorder. We initiated the commercial launch of Fanapt® in this indication in the third quarter of 2024. In the first quarter of 2025, as compared to the first quarter of 2024, total prescriptions (TRx) increased by approximately 14% and Fanapt® net product sales increased by 14%. Additionally, new patient starts, as reflected by new to brand prescriptions (NBRx), increased by nearly threefold in the same period.

•Fanapt® TRx for the week of April 25, 2025 reached the milestone of 2,000, making Fanapt® one of the fastest growing atypical antipsychotics. We have also announced an expansion of our psychiatry sales force to approximately 300 representatives.

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HETLIOZ®

•Through the first quarter of 2025, HETLIOZ® continues to retain the largest portion of market share despite generic competition for over two years.

PONVORY®

•We initiated the commercial launch of PONVORY® for the treatment of relapsing forms of multiple sclerosis in the third quarter of 2024. In April 2025, new patient prescriptions reached a new record high since the initiation of our commercial launch. We have re-enforced the PONVORY® sales leadership team and announced an expansion of its PONVORY® sales force to approximately 40 representatives.

Key Operational Highlights – Regulatory & Clinical Development

Key Regulatory Milestones

•Tradipitant New Drug Application (NDA) for motion sickness accepted for filing by the FDA with a Prescription Drug User Fee Act (PDUFA) target action date of December 30, 2025.

•Fanapt® Marketing Authorization Application (MAA) for bipolar I disorder and schizophrenia submitted to the European Medicines Agency (EMA) in Q4 2024.

•HETLIOZ® MAA in SMS submitted to the EMA in Q4 2024.

•Bysanti™ NDA for bipolar I disorder and schizophrenia accepted for filing by the FDA with a PDUFA target action date of February 21, 2026.

•Imsidolimab Biologics License Application (BLA) in GPP expected to be submitted to the FDA in 2025.

Key Clinical Highlights

Fanapt®

•Schizophrenia: A Phase III program for the LAI formulation of Fanapt® in the treatment of schizophrenia in relapse prevention is ongoing.

•Hypertension: We initiated a study of the Fanapt® LAI as a once-a-month injectable for uncontrolled hypertension and plan to begin enrolling patients soon.

Bysanti™

•The NDA for Bysanti™ for the acute treatment of bipolar I disorder and the treatment of schizophrenia was accepted for filing by the FDA with a PDUFA target action date of February 21, 2026. Exclusivity for Bysanti™, including pending patent applications, could extend into the 2040s.

•Bysanti™ is a new chemical entity, which was initially identified as an active metabolite of iloperidone. We discovered that milsaperidone, when administered orally, quickly interconverts to iloperidone. In clinical studies, milsaperidone and iloperidone have been shown to be bioequivalent at both low and high doses, administered both in single and multiple dose studies. The results of these clinical studies will be presented in late May, at the 2025 American Society of Clinical Psychopharmacology annual meeting in Scottsdale, Arizona.

•The Bysanti™ Phase III clinical study for use as a once-daily adjunctive treatment for MDD is ongoing. Results are expected in 2026.

HETLIOZ®

•HETLIOZ® clinical programs in pediatric insomnia and DSPD are ongoing.

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

PONVORY®

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

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Tradipitant

•The NDA for tradipitant for the treatment of motion sickness was accepted for filing by the FDA with a PDUFA target action date of December 30, 2025.

•In the fourth quarter of 2024, we initiated a clinical trial to study tradipitant in the prevention of vomiting induced by a GLP-1 analog, Wegovy (semaglutide). Results are expected in the third quarter of 2025.

Imsidolimab

•In February 2025, we announced that we entered into an exclusive, global license agreement with Anaptys for the development and commercialization of imsidolimab (IL-36R antagonist mAb). A BLA for GPP is expected to be submitted to the FDA in 2025.

Early-Stage Program Highlights

•VQW-765, an alpha-7 nicotinic acetylcholine receptor partial agonist, is currently in clinical development for the treatment of acute performance anxiety in social situations. We expect to initiate the Phase III program in 2025.

•The IND application for VCA-894A in the treatment of Charcot-Marie-Tooth disease, axonal, type 2S (CMT2S), an inherited peripheral neuropathy for which there is no available treatment, was accepted by the FDA in 2024. Previously in 2023, VCA-894A was granted Orphan Drug Designation for the same indication. The Phase I clinical study for VCA-894A expects to enroll the patient by mid-2025.

Since we began operations, we have devoted substantially all of our resources to the in-licensing, clinical development and commercialization of our products. Our ability to generate meaningful product sales and achieve profitability largely depends on our level of success in commercializing Fanapt® and HETLIOZ® in the U.S. and Europe and PONVORY® in the U.S. and Canada, on our ability, alone or with others, to complete the development of our products, and to obtain the regulatory approvals for and to manufacture, market and sell our products. The results of our operations will vary significantly from year-to-year and quarter-to-quarter and depend on a number of factors, including risks related to our business, risks related to our industry, and other risks that are detailed in Part I, Item 1A, Risk Factors, of our annual report on Form 10-K (Annual Report) for the year ended December 31, 2024 and Item 1A, Risk Factors, of this Quarterly Report.

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported revenues and expenses during the reported periods. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no significant changes in our critical accounting policies including estimates, assumptions and judgments from those described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Annual Report. A summary of our significant accounting policies appears in the notes to our audited consolidated financial statements included in the Annual Report. However, we believe that the following accounting policies are important to understanding and evaluating our reported financial results as they involve the most significant judgments and estimates used in the preparation of our condensed consolidated financial statements, and we have accordingly included them in this discussion.

Revenue from net product sales. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. 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.

Fanapt® is available in the U.S. for distribution through a limited number of wholesalers and is available in retail pharmacies. HETLIOZ® is available in the U.S. for distribution through a limited number of specialty pharmacies and is not available in retail pharmacies. PONVORY® is available in the U.S. for distribution primarily through a limited number of specialty distributors and specialty pharmacies. We invoice and record revenue when our customers, wholesalers, specialty pharmacies

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and specialty distributors, receive product from the third-party logistics warehouse, which is the point at which control is transferred to the customer. Revenues and accounts receivable are concentrated with these customers. Outside the U.S., 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. Allowance for credit losses is measured using historical loss rates based on the aging of receivables and incorporating current conditions and forward-looking estimates.

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. 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. Variable consideration may be constrained and is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the respective underlying contracts. 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 three months ended March 31, 2025 and 2024, we constrained the variable consideration for HETLIOZ® net product sales. The constrained revenue relates to the uncertainties of payor utilization, patient demand and chargeback and rebate amounts, including Medicaid, related to the elevated levels of inventory on hand at the specialty pharmacies.

Reserves for variable consideration are classified as product revenue allowances on the Condensed Consolidated Balance Sheets, with the exception of prompt-pay discounts, which are classified as reductions of accounts receivable. The reserve for product returns for which the product may not be returned for a period of greater than one year from the balance sheet date is included as a component of other non-current liabilities in the Condensed Consolidated Balance Sheets. Uncertainties related to variable consideration are generally resolved in the quarter subsequent to period end, with the exception of Medicaid rebates, which are dependent upon the timing of when states submit reimbursement claims, Medicare inflationary rebates, which are billed on an annual basis beginning in 2025, and product returns that are resolved during the product expiry period specified in the customer contract. Due to increased inventory stocking of HETLIOZ® at specialty pharmacy customers in 2025 and 2024, the time it takes to resolve these uncertainties could be longer than we have experienced prior to the entrance of generic competition. 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. 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. Rebate amounts owed after the final dispensing of the product to a benefit plan participant are based upon contractual agreements or legal requirements with public sector benefit providers, such as Medicaid and Medicare. 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. Contracted indirect customers, which currently consist primarily of Public Health Service institutions and federal government entities purchasing via the Federal Supply Schedule, generally purchase the product at a discounted price. The 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: Prior to January 1, 2025, the Medicare Part D prescription drug benefit required manufacturers to fund approximately 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients for applicable drugs. We 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. Beginning January 1, 2025, the Medicare Part D coverage gap discount program was replaced with a new discounting program under the Inflation Reduction Act of 2022. The Medicare Part D benefit redesign is expected to result in higher discounts for our Medicare payor segment relative to the current Medicare Part D prescription drug coverage gap discount program. Under the redesigned Medicare Part D program, applicable drugs dispensed to applicable beneficiaries will be subject to manufacturer discounts of 10% during the initial coverage phase and 20% during the catastrophic coverage phase. Under the Medicare Part D benefit redesign, we are a specified manufacturer whose applicable drugs for applicable

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beneficiaries who are Low Income Subsidy eligible under section 1860D-14(a) of the Social Security Act 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. We accrue service fees at the time of revenue recognition, resulting in a reduction of product sales and the recognition of an accrued liability, unless it is a payment for a distinct good or service from the customer in which case the fair value of those distinct goods or services are recorded as selling, general and administrative expense.

•Co-pay assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-pay assistance. Co-pay assistance utilization is based on information provided by our third-party administrator.

•Product returns: We generally offer direct customers a limited right to return as contractually defined with our customers. We consider several factors in the estimation process, including expiration dates of product shipped to customers, inventory levels within the distribution channel, product shelf life, historical return activity, including activity for product sold for which the return period has past, prescription trends and other relevant factors. We do not expect returned products to be resalable. There was no right of return asset as of March 31, 2025 or December 31, 2024.

The following table summarizes sales discounts and allowance activity as of and for the three months ended March 31, 2025:


(in thousands)	Rebates & Chargebacks		Discounts, Returns and Other		Total
Balances at December 31, 2024	$	49,939	$	12,391	$	62,330
Provision related to current period sales	23,955		9,989		33,944
Adjustments for prior period sales	(3,082)		(716)		(3,798)
Credits/payments made	(23,590)		(9,323)		(32,913)
Balances at March 31, 2025	$	47,222	$	12,341	$	59,563

The provision of $24.0 million for rebates and chargebacks for the three months ended March 31, 2025 and its ending balance at March 31, 2025 primarily represents Medicaid rebates applicable to sales of Fanapt® and, to a lesser extent, HETLIOZ®. The provision of $10.0 million for discounts, returns and other for the three months ended March 31, 2025 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.

Stock-based compensation. Compensation costs for all stock-based awards to employees and directors are measured based on the grant date fair value of those awards and recognized over the period during which the employee or director is required to perform service in exchange for the award. We use the Black-Scholes-Merton option pricing model to determine the fair value of stock options. The determination of the fair value of stock options on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include the expected stock price volatility over the expected term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. Expected volatility rates are based on the historical volatility of our publicly traded common stock and other factors. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. We have never paid cash dividends to our stockholders and do not plan to pay dividends in the foreseeable future. As stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Research and development expenses. Research and development expenses consist primarily of fees for services provided by third parties in connection with the clinical trials, costs of contract manufacturing services for clinical trial use, milestone payments made under licensing agreements prior to regulatory approval, costs of materials used in clinical trials and research and development, costs for regulatory consultants and filings, depreciation of capital resources used to develop products, related facilities costs, and salaries, other employee-related costs and stock-based compensation for research and development personnel. We expense research and development costs as they are incurred for products in the development stage, including manufacturing costs and milestone payments made under license agreements prior to FDA approval. Upon and subsequent to FDA approval, manufacturing and milestone payments made under license agreements are capitalized. Milestone payments are accrued when it is deemed probable that the milestone event will be achieved. 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.

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Clinical trials are inherently complex, often involve multiple service providers and can include payments made to investigator physicians at study sites. 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. Our assessments include, but are not limited to: (i) an evaluation by the project manager of the work that has been completed during the period, (ii) measurement of progress prepared internally and/or provided by the third-party service provider, (iii) analyses of data that justify the progress, and (iv) management’s judgment. In the event that we do not identify certain costs that have begun to be incurred or we under- or over-estimate the level of services performed or the costs of such services, our reported expenses for such period would be too low or too high.

Intangible assets and impairment of long-lived assets. Our intangible assets consist of capitalized license costs for products approved by the FDA or costs to acquire already commercialized products. We amortize our intangible assets on a straight-line basis over the estimated useful economic life of the related product patents. We assess the impairment of intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important that could trigger an impairment review include significant underperformance relative to expected historical or projected future operating results, a significant adverse change in legal or regulatory factors that could affect the value or patent life, including our ability to defend and enforce patent claims and other intellectual property rights and significant negative industry or economic trends. When we determine that the carrying value of our intangible assets may not be recoverable based upon the existence of one or more of the indicators of impairment, we measure any impairment based on the amount that carrying value exceeds fair value.

Income taxes. We assess the need for a valuation allowance against our deferred tax assets each quarter through the review of all available positive and negative evidence. Deferred tax assets are reduced by a tax valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. The analysis is highly dependent upon historical and projected pretax income. In 2024, we generated our first full year pretax loss since 2017, largely due to expenditures on the commercial launches of Fanapt® in bipolar I disorder and PONVORY® in RMS. Projected taxable income includes significant assumptions related to revenue, which could be affected by the success of the commercial launches of Fanapt® in bipolar I disorder and PONVORY® in RMS and HETLIOZ® generic competition, commercial and research and development activities, and our ability to obtain regulatory approval from the FDA for products or new indications in development, among other factors. Tax benefits are recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement. As of March 31, 2025, after considering all available positive and negative evidence, we concluded, consistent with prior periods, that it was more likely than not that substantially all of our deferred tax assets in the U.S. are realizable in future periods. We maintain a valuation allowance against certain state net deferred tax assets. If our results are not in line with our projections or if our projections change, the conclusion about the appropriateness of the valuation allowance could change in a future period. An increase in the valuation allowance would result in a non-cash income tax expense during the period of change. Any such adjustment could have a material impact on our results of operations.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, to the condensed consolidated financial statements included in Part I of this Quarterly Report for information on recent accounting pronouncements.

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 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. See Note 14, Legal Matters, to the condensed consolidated financial statements included in Part I of this Quarterly Report for information on material legal matters.

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Three months ended March 31, 2025 compared to three months ended March 31, 2024

Revenues. Total revenues increased by $2.6 million, or 5%, to $50.0 million for the three months ended March 31, 2025 compared to $47.5 million for the three months ended March 31, 2024. Revenues may decline in future periods, potentially significantly, as a result of the Medicare Part D program benefit redesign. Revenue from net product sales was as follows:


	Three Months Ended
(in thousands)	March 31, 2025		March 31, 2024		Net Change		Percent
Fanapt® net product sales	$	23,545	$	20,579	$	2,966	14	%
HETLIOZ® net product sales	20,872		20,053		819		4	%
PONVORY® net product sales	5,624		6,830		(1,206)		(18)	%
Total net product sales	$	50,041	$	47,462	$	2,579	5	%

Fanapt® net product sales increased by $3.0 million, or 14%, to $23.5 million for the three months ended March 31, 2025 compared to $20.6 million for the three months ended March 31, 2024. The increase to net product sales was attributable to an increase in volume. We initiated the commercial launch of Fanapt® for bipolar I disorder in adults in the third quarter of 2024.

HETLIOZ® net product sales increased by $0.8 million, or 4%, to $20.9 million for the three months ended March 31, 2025 compared to $20.1 million for the three months ended March 31, 2024. The increase to net product sales was attributable to an increase in price net of deductions, including the impact of changes in constrained revenue, partially offset by a decrease in volume. Our HETLIOZ® net product sales as reported for the three months ended March 31, 2023 reflected higher unit sales as compared to recent prior periods. The higher unit sales during the three months ended March 31, 2023 resulted in a significant increase of inventory stocking at specialty pharmacy customers at March 31, 2023. During the remainder of 2023, although there was continued destocking at specialty pharmacy customers, inventory levels remained elevated relative to inventory levels prior to the entrance of generic competition and remained elevated throughout 2024 and 2025. Going forward, HETLIOZ® net product sales may reflect lower unit sales as a result of the reduction of elevated levels at specialty pharmacy customers or may be variable depending on when specialty pharmacy customers need to purchase again. Further, HETLIOZ® net product sales may decline in future periods, potentially significantly, related to continued generic competition in the U.S. We constrained HETLIOZ® net product sales for the three months ended March 31, 2025 and 2024 to an amount not probable of significant revenue reversal. The amount of revenue recognized during the three months ended March 31, 2025 related to changes in estimates on revenue constrained during prior periods was $1.0 million. The amount of revenue recognized during the three months ended March 31, 2024 related to changes in estimates on revenue constrained during prior periods was not material. 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.

PONVORY® net product sales decreased by $1.2 million, or 18%, to $5.6 million for the three months ended March 31, 2025 compared to $6.8 million for the three months ended March 31, 2024. The decrease in net product sales was attributable to a decrease in volume. We initiated the commercial launch of PONVORY® in RMS in the third quarter of 2024. Our PONVORY® net product sales for the three months ended December 31, 2024 included approximately $3.0 million of variable consideration that is subject to dispute but that we believe is not probable of significant revenue reversal.

Cost of goods sold. Cost of goods sold increased by $0.1 million, or 2%, to $3.5 million for the three months ended March 31, 2025 compared to $3.4 million for the three months ended March 31, 2024. Cost of goods sold includes third-party manufacturing costs of product sold, third-party royalty costs and distribution and other costs. 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 are no-third party royalty costs on net sales of PONVORY®. We evaluate the risk of excess inventory and product expiry by evaluating current and future product demand relative to product shelf life and build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance, patient usage, and generic competition. Our inventory balance consisted of $2.5 million of Fanapt® product, $7.3 million of HETLIOZ® product and $0.5 million of PONVORY® product as of March 31, 2025.

Research and development expenses. Research and development expenses increased by $14.6 million, or 69%, to $35.7 million for the three months ended March 31, 2025 compared to $21.2 million for the three months ended March 31, 2024. The increase was primarily due to an upfront payment to AnaptysBio, Inc. for the exclusive, global license to develop, manufacture, and commercialize imsidolimab and drug supply and an increase in expenses associated with our Fanapt® and BysantiTM development programs, partially offset by a decrease in expenses associated with our tradipitant development program.

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The following table summarizes the costs of our product development initiatives for the three months ended March 31, 2025 and 2024:


	Three Months Ended
(in thousands)	March 31, 2025		March 31, 2024
Direct project costs (1)
Fanapt®	$	3,750	$	2,438
BysantiTM	2,690		907
HETLIOZ®	3,140		2,407
PONVORY®	2,342		1,074
Tradipitant	4,097		8,469
Imsidolimab	14,529		—
VTR-297	775		553
CFTR	1,455		2,357
VQW-765	237		196
Other	305		442
Total direct project costs	33,320		18,843
Indirect project costs (1)
Stock-based compensation	765		864
Other indirect overhead	1,627		1,447
Total indirect project costs	2,392		2,311
Total research and development expense	$	35,712	$	21,154

(1)We record direct costs, including personnel costs and related benefits, on a project-by-project basis. Many of our research and development costs are not attributable to any individual project because we share resources across several development projects. We record indirect costs that support a number of our research and development activities in the aggregate, including stock-based compensation.

We expect to incur significant research and development expenses as we continue to develop our products. In addition, we expect to incur licensing costs in the future that could be substantial, as we continue our efforts to expand our product pipeline.

Selling, general and administrative expenses. Selling, general and administrative expenses increased by $20.0 million, or 66%, to $50.1 million for the three months ended March 31, 2025 compared to $30.1 million for the three months ended March 31, 2024. The increase in selling, general and administrative expenses was primarily the result of an increase in spending on commercial activities related to our commercial launches of Fanapt® in bipolar disorder and PONVORY® in RMS, as well as legal and other corporate activities. During 2024, we commenced a host of commercial activities as part of our commercial launches of Fanapt® in bipolar disorder and PONVORY® in RMS, including an expansion of our sales force and the development of prescriber awareness and comprehensive marketing programs. Selling, general and administrative expenses may increase in future periods as a result of the ongoing commercial launches, including the further expansion of our sales force in 2025.

Intangible asset amortization. Intangible asset amortization was $1.8 million and $2.0 million for the three months ended March 31, 2025 and 2024, respectively.

Other income. Other income was $3.7 million for the three months ended March 31, 2025 compared to $4.6 million for the three months ended March 31, 2024. Other income primarily consists of investment income on our marketable securities.

Benefit for income taxes. An income tax benefit of $7.9 million and $0.5 million was recorded for the three months ended March 31, 2025 and 2024, respectively. The income tax benefit for each of the three months ended March 31, 2025 and 2024 was primarily driven by the estimated effective tax rate for the year as well as discrete income tax expense of $0.5 million.

Liquidity and Capital Resources

As of March 31, 2025, our total cash and cash equivalents and marketable securities were $340.9 million compared to $374.6 million at December 31, 2024. Our cash and cash equivalents are deposits in operating accounts and highly liquid investments with an original maturity of 90 days or less at date of purchase and consist of investments in money market funds with

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commercial banks and financial institutions and commercial paper of high-quality corporate issuers. Our marketable securities consist of investments in government sponsored and corporate enterprises and commercial paper.

Our liquidity resources as of March 31, 2025 and December 31, 2024 are summarized as follows:


(in thousands)	March 31, 2025		December 31, 2024
Cash and cash equivalents	$	111,796	$	102,316
Marketable securities:
U.S. Treasury and government agencies	190,160		227,830
Corporate debt	38,952		44,497

Total marketable securities	229,112		272,327
Total cash, cash equivalents and marketable securities	$	340,908	$	374,643

As of March 31, 2025, we maintained all of our cash, cash equivalents and marketable securities in two financial institutions. Deposits held with these institutions may exceed the amount of insurance provided on such deposits, but we do not anticipate any losses with respect to such deposits.

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

We also have long-term contractual obligations related to our leases and license agreements. There have been no material changes to our long-term contractual obligations as disclosed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report. For further information regarding our license agreements, see Note 8, Commitments and Contingencies, to the condensed consolidated financial statements included in Part I of this Quarterly Report.

We do not have any off-balance sheet arrangements.

Based on our current operating plans, which include costs and expenses in connection with our U.S. commercial activities, continued clinical development of tradipitant, BysantiTM and our other products, pursuit of regulatory approval of tradipitant, BysantiTM and imsidolimab, pursuit of further regulatory approvals for our currently approved products and payments due upon achievement of milestones under our license agreements, we believe that our cash, cash equivalents and marketable securities and cash received from product sales will be sufficient for at least the next 12 months. Our future cash requirements and the adequacy of our available funds will depend on many factors, primarily including our ability to generate revenue, the scope and costs of our commercial, manufacturing and process development activities, the magnitude of our discovery, preclinical and clinical development programs, and potential costs to acquire or license the rights to additional products.

We may need or desire to obtain additional capital to finance our operations through debt, equity or alternative financing arrangements. We may also seek capital through collaborations or partnerships with other companies. The issuance of debt could require us to grant liens on certain of our assets that may limit our flexibility and debt securities may be convertible into common stock. 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. 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.

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Cash Flow

The following table summarizes our net cash flows from operating, investing and financing activities for the three months ended March 31, 2025 and 2024:


	Three Months Ended
(in thousands)	March 31, 2025		March 31, 2024		Net Change
Net cash provided by (used in):
Operating activities:
Net loss	$	(29,494)	$	(4,146)	$	(25,348)
Non-cash charges	(1,739)		4,737		(6,476)
Net change in operating assets and liabilities	(1,914)		6,978		(8,892)
Operating activities	(33,147)		7,569		(40,716)
Investing activities:

Asset acquisition	—		(2,705)		2,705
Purchases of property and equipment	(436)		(7)		(429)
Net purchases, sales and maturities of marketable securities	44,338		(15,506)		59,844
Investing activities	43,902		(18,218)		62,120
Financing activities:
Principal payments on finance leases	(409)		—		(409)


Tax obligations paid in connection with settlement of restricted stock units	(915)		—		(915)
Financing activities	(1,324)		—		(1,324)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	49		(14)		63
Net change in cash, cash equivalents and restricted cash	$	9,480	$	(10,663)	$	20,143

Operating Activities: Cash flows used in operating activities during the three months ended March 31, 2025 were $33.1 million, a decrease of $40.7 million compared to cash provided by operating activities of $7.6 million during the three months ended March 31, 2024. The decrease reflects a decrease of $25.3 million in net income, non-cash charges, including the change in deferred income taxes, as well as the net change in operating assets and liabilities. Our net loss for the three months ended March 31, 2025 includes expenses associated with the $15.0 million payment related to the exclusive, global license agreement with Anaptys for the development and commercialization of imsidolimab. The decrease in net change in operating assets and liabilities is primarily due to timing of payments for expenses and receipt of cash for accounts receivable.

Investing Activities: Cash flows provided by investing activities during the three months ended March 31, 2025 were $43.9 million, an increase of $62.1 million compared to $18.2 million cash used in investing activities during the three months ended March 31, 2024. The change in investing activities primarily reflects the timing of net reinvestment of available cash and cash equivalents in our portfolio of marketable securities. Additionally, the $2.7 million asset acquisition cash flow during the three months ended March 31, 2024 relates to the payment of the remaining consideration for the PONVORY® acquisition that was accrued as of December 31, 2023.

Financing Activities: Financing activities include principal payments for our finance lease liabilities and tax obligations paid in connection with settlement of restricted stock units. Cash flows used in financing activities during the three months ended March 31, 2025 were $1.3 million. There were no financing cash flows for the three months ended March 31, 2024.


ITEM 3			Quantitative and Qualitative Disclosures about Market Risk

Our exposure to market risk is currently confined to our cash and cash equivalents, marketable securities and restricted cash. We currently do not hedge interest rate exposure. We have not used derivative financial instruments for speculation or trading purposes.

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

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have maturities of less than two years. We do not believe that an increase in market rates would have any significant impact on the realized value of our cash equivalents and marketable securities.

We are also exposed to risks related to changes in foreign currency exchange rates relating to our foreign operations. The functional currency of our international subsidiaries is the local currency. We are exposed to foreign currency risk to the extent that we enter into transactions denominated in currencies other than our subsidiaries’ respective functional currencies. We 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 condensed consolidated financial statements. We do not currently hedge our foreign currency exchange rate risk. Foreign currency has not had, nor do we believe that a decrease or increase in any foreign currency exchange rates would have, a material impact on our results of operations.


ITEM 4			Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) as of March 31, 2025. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of March 31, 2025, the end of the period covered by this quarterly report on Form 10-Q, to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION


ITEM 1			Legal Proceedings

Information with respect to this item may be found in Note 14, Legal Matters, to the condensed consolidated financial statements in Part I of this quarterly report on Form 10-Q, which is incorporated herein by reference.


ITEM 1A			Risk Factors

We previously disclosed in Part I, Item 1A of our annual report on Form 10-K (Annual Report) for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 14, 2025, important factors which could affect our business, financial condition, results of operations and future operations under the heading Risk Factors. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described as risk factors, any one or more of which could, directly or indirectly, cause our actual operating results and financial condition to vary materially from past, or anticipated future, operating results and financial condition. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and the price of our common stock. Other than as set forth below, there have been no material changes in our risk factors subsequent to the filing of our Annual Report for the fiscal year ended December 31, 2024.

The Company’s business may be materially adversely affected by the imposition of duties and tariffs and other trade barriers and retaliatory countermeasures implemented by the U.S. and other governments.

Recently there have been significant changes to United States (U.S.) trade policies, sanctions, legislation, treaties and tariffs, including, but not limited to, trade policies and tariffs affecting products from outside of the U.S. For example, in early 2025, the U.S. presidential administration announced significant new tariffs on foreign imports into the U.S., with a baseline tariff of

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10% on imports from most countries, and additional tariffs of varying amounts from specified counties. The additional tariffs were paused for 90 days on April 9, 2025. The extent and duration of increased tariffs and the resulting impact on general economic conditions and on our business are uncertain and depend on various factors, such as negotiations between the U.S. and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted and availability and cost of alternative sources of supply. Any new or additional tariffs on goods imported to the U.S. could also increase the cost of some of our products and reduce our margins. The imposition of additional tariffs or other trade barriers could increase our costs in certain markets. Additionally, it is possible that U.S. policy changes and uncertainty about such changes could increase market volatility and currency exchange rate fluctuations. As a result of these dynamics, we cannot predict the impact to our business of any future changes to the U.S.’s or other countries’ trading relationships or the impact of new laws or regulations adopted by the U.S. or other countries.


ITEM 2			Unregistered Sales of Equity Securities and Use of Proceeds

None.


ITEM 3			Defaults Upon Senior Securities

None.


ITEM 4			Mine Safety Disclosures

Not applicable.


ITEM 5			Other Information

During the fiscal quarter ended March 31, 2025, none of our directors or officers informed us of the adoption, modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408. Furthermore, during the fiscal quarter ended March 31, 2025, we did not adopt or terminate a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.

On April 24, 2025, our board of directors approved, subject to stockholder approval, an amendment to our Amended and Restated 2016 Equity Incentive Plan, as amended (the 2016 Plan). The amendment to the 2016 Plan, if approved by the stockholders, will increase the aggregate number of shares of common stock that may be issued by us pursuant to awards under the 2016 Plan by 2,500,000 shares.


ITEM 6			Exhibits


Exhibit Number						Description

3.1						Form of Amended and Restated Certificate of Incorporation of the registrant (filed as Exhibit 3.8 to Amendment No. 2 to the registrant’s registration statement on Form S-1 (File No. 333-130759) on March 17, 2006 and incorporated herein by reference).

3.2						Amended and Restated Bylaws of the registrant, as amended and restated on October 2, 2024 (filed as Exhibit 3.1 to the registrant’s current report on Form 8-K (File No. 001-34186) on October 3, 2024 and incorporated herein by reference).

3.3						Amended and Restated Certificate of Designation of Rights, Preferences and Privileges of Series A Junior Participating Preferred Stock of Vanda Pharmaceuticals Inc. (filed as Exhibit 3.1 to the registrant’s current report on Form 8-K (File No. 001-34186) on April 17, 2024 and incorporated herein by reference).

4.1						Rights Agreement, dated as of April 17, 2024, by and between Vanda Pharmaceuticals Inc. and Equiniti Trust Company, LLC as rights agent (filed as Exhibit 4.1 to the registrant’s current report on Form 8-K (File No. 001-34186) on April 17, 2024 and incorporated herein by reference).

4.2						Amendment No. 1 to the Rights Agreement, dated as of May 3, 2024, by and between Vanda Pharmaceuticals Inc. and Equiniti Trust Company, LLC as rights agent (filed as Exhibit 4.1 to the registrant’s current report on Form 8-K (File No. 001-34186) on May 3, 2024 and incorporated herein by reference).

4.3						Amendment No. 2 to the Rights Agreement, dated as of August 7, 2024, by and between Vanda Pharmaceuticals Inc. and Equiniti Trust Company, LLC as rights agent (filed as Exhibit 4.1 to the registrant’s current report on Form 8-K (File No. 001-34186) on August 8, 2024 and incorporated herein by reference).

10.1†						Form of Restricted Stock Unit Award Agreement for Senior Management under the Amended and Restated 2016 Equity Incentive Plan

31.1*						Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*						Certification of the Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**						Certification of the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), as required by Section 906 of the Sarbanes-Oxley Act of 2002.

101						The following financial information from this quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2025 formatted in Inline Extensible Business Reporting Language (iXBRL) and filed electronically herewith: (i) Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024; (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024; (iii) Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2025 and 2024; (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2025 and 2024; (v) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024; and (vi) Notes to Condensed Consolidated Financial Statements.

104						Cover Page Interactive Data File (embedded within the Inline XBRL document).

†						Indicates management contract or compensatory plan or arrangement.

*						Filed herewith.

**						Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



						Vanda Pharmaceuticals Inc.

May 8, 2025						/s/ Mihael H. Polymeropoulos, M.D.
						Mihael H. Polymeropoulos, M.D.
						President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

May 8, 2025						/s/ Kevin Moran
						Kevin Moran
						Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

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Date	Price Target	Rating	Analyst
10/31/2024	$18.00	Buy	H.C. Wainwright
7/11/2024	$11.00	Overweight	Cantor Fitzgerald
2/25/2022	$24.00 → $12.00	Buy → Hold	Jefferies

SEC Form 10-Q filed by Vanda Pharmaceuticals Inc.

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