Vanda Pharmaceuticals Inc.
02/12/2026 | Press release | Distributed by Public on 02/12/2026 06:04
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
| MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing in this annual report on Form 10-K (Annual Report). This discussion and analysis generally addresses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Annual Report can be found in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report include historical information and other information with respect to our plans and strategy for our business and contain forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under Part I, Item 1A, Risk Factors, and elsewhere in this Annual Report.
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 four products: Fanapt®for the acute treatment of manic or mixed episodes associated with bipolar I disorder and the treatment of schizophrenia, HETLIOZ®for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) and for the treatment of nighttime sleep disturbances in Smith-Magenis syndrome (SMS), PONVORY®for the treatment of relapsing forms of multiple sclerosis (RMS) including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease and NEREUSTMfor the prevention of vomiting induced by motion (collectively, our commercial products). HETLIOZ®is the first product approved by the United States Food and Drug Administration (FDA) for patients with Non-24 and for patients with SMS. In addition, we have a number of drugs and/or additional indications for current products in development, including:
•Fanapt®(iloperidone) long acting injectable (LAI) formulation for the treatment of schizophrenia and hypertension;
•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;
•NEREUSTM(tradipitant) for the prevention of vomiting induced by GLP-1 receptor agonists, the treatment of gastroparesis and the treatment of atopic dermatitis;
•Imsidolimab, an IL-36R antagonist, for the treatment of generalized pustular psoriasis (GPP);
•VTR-297, a small molecule histone deacetylase (HDAC) inhibitor for the treatment of hematologic malignancies and onychomycosis and with potential use as a treatment for several oncology indications;
•Portfolio of Cystic Fibrosis Transmembrane Conductance Regulator (CFTR) activators and inhibitors, including VSJ-110 for the treatment of dry eye and ocular inflammation and VPO-227 for the treatment of secretory diarrhea disorders, including cholera;
•VQW-765, a small molecule alpha-7 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.
Operational Highlights
Key Operational Highlights - Commercial
•Fanapt®experienced significant growth, with total prescriptions (TRx) increasing by 36% and Fanapt®net product sales increasing by 25% in the fourth quarter of 2025 as compared to the fourth quarter of 2024. Fanapt®total prescriptions increased by 28% and Fanapt®net product sales increased by 24% for the full year 2025 as compared to the full year 2024. New to brand prescriptions (NBRx) increased by 108% in the fourth quarter of 2025 as compared to the fourth quarter of 2024 and increased by 149% for the full year 2025 as compared to the full year 2024.
•During 2025, our direct-to-consumer campaign, launched in the first quarter, continued to drive meaningful gains in brand awareness for us and our products, Fanapt®and PONVORY®. We maintained strategic investments in our commercial infrastructure, including increased brand visibility through targeted sponsorships, with the goal of supporting long-term market leadership and future commercial launches. Fanapt®performance remains the focus of our commercial initiatives and encourages us to continue to invest in this differentiated medicine, and, if approved, the franchise-extending launch of BysantiTM.
Key Operational Highlights - Regulatory & Clinical Development
•The FDA has approved NEREUSTMfor the prevention of vomiting induced by motion.
•BysantiTMNew Drug Application (NDA) for bipolar I disorder and schizophrenia is under review by the FDA, with a Prescription Drug User Fee Act (PDUFA) target action date of February 21, 2026.
•A BysantiTMPhase III clinical study for use as a once-daily adjunctive treatment for major depressive disorder (MDD) is enrolling patients and results are expected in 2026.
•We announced positive results of a clinical study of NEREUSTMin the prevention of vomiting induced by a GLP-1 analog, Wegovy®(semaglutide). A Phase III clinical program is anticipated to be initiated in the first half of 2026.
•Imsidolimab Biologics License Application (BLA) in generalized pustular psoriasis (GPP) was submitted to the FDA in the fourth quarter of 2025.
•A Phase III study of VQW-765 in the treatment of adults with social anxiety disorder has been initiated and study results are expected by the end of 2026.
•The Phase III study of the LAI formulation of iloperidone in the treatment of schizophrenia in relapse-prevention is enrolling patients.
•A clinical study of the LAI formulation of iloperidone in people with treatment-resistant hypertension is ongoing and we are enrolling patients.
•On January 8, 2026, we announced that we had received a decision letter from the FDA Center for Drug Evaluation and Research (CDER) concluding that the supplemental New Drug Application (sNDA) for HETLIOZ®for the treatment of jet lag disorder cannot be approved in the current form. This letter followed CDER's re-review of the jet lag sNDA under our collaborative framework agreement with the FDA. We have requested that the FDA Commissioner resume hearing proceedings.
Since we began operations, we have devoted substantially all of our resources to the in-licensing, clinical development and commercialization of our products. Our ability to generate meaningful product sales and achieve profitability largely depends on our level of success in commercializing Fanapt®in the United States (U.S.), HETLIOZ®in the U.S. and Europe, PONVORY®in the U.S. and NEREUSTMin the U.S., on our ability, alone or with others, to complete the development of our products and to obtain the regulatory approvals for and manufacture, market and sell our products. The results of our operations will vary significantly from year-to-year and quarter-to-quarter and depend on a number of factors, including risks related to our business, risks related to our industry, and other risks that are detailed in Part I, Item 1A, Risk Factors, of this Annual Report.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported revenues and expenses during the reported periods. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
A summary of our significant accounting policies appears in the notes to our audited consolidated financial statements for the year ended December 31, 2025 included in this 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 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 taxes, 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 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 paid by the wholesalers, specialty pharmacies and specialty distributors, net of estimated prompt-pay discounts and allowance for credit losses. Payment terms differ by customer, but are based on customary commercial terms and typically range between thirty and sixty days. Allowance for credit losses is measured using historical loss rates based on the aging of receivables and incorporating current conditions and forward-looking estimates.
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.
Reserves for variable consideration are classified as product revenue allowances on the Consolidated Balance Sheets, with the exception of prompt-pay discounts, which are classified as reductions of accounts receivable. The reserve for product returns for which the product may not be returned for a period of greater than one year from the balance sheet date is included as a component of other non-current liabilities in the Consolidated Balance Sheets. Uncertainties related to variable consideration are generally resolved in the quarter subsequent to period end, with the exception of Medicaid rebates, which are dependent upon the timing of when states submit reimbursement claims, Medicare inflationary rebates, which are billed on an annual basis beginning in 2025, and product returns that are resolved during the product expiry period specified in the customer contract. Furthermore, inventory stocking of HETLIOZ®at specialty pharmacy customers since the entrance of generic competition in early 2023 has resulted in longer periods to resolve these uncertainties related to variable consideration. We currently record sales allowances for the following:
•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. 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 accounted for the Medicare Part D coverage gap using a point of sale model. Beginning January 1, 2025, the Medicare Part D coverage gap discount program was replaced with a new discounting program under the Inflation Reduction Act of 2022. The Medicare Part D benefit redesign has resulted in overall higher discounts for our Medicare payor segment relative to the previous Medicare Part D prescription drug coverage gap discount program. Under the redesigned Medicare Part D program, applicable drugs dispensed to applicable beneficiaries are subject to manufacturer discounts of 10% during the initial coverage phase and 20% during the catastrophic coverage phase. Under the Medicare Part D benefit redesign, we are a specified manufacturer whose applicable drugs for applicable beneficiaries who are Low Income Subsidy eligible under section 1860D-14(a) of the Social Security Act are subject to lower applicable discounts during the phase-in period. Estimates for expected Medicare Part D rebates are based, in part, on historical activity and, where available, actual and pending prescriptions when we have validated the insurance benefits.
•Service fees: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 December 31, 2025 or 2024.
The following table summarizes sales discounts and allowance activity as of and for the years ended December 31, 2025, 2024 and 2023:
| (in thousands) |
Rebates & Chargebacks |
Discounts, Returns and Other |
Total | ||||||||||||||
| Balances at December 31, 2022 | 37,459 | 10,024 | 47,483 | ||||||||||||||
| Provision related to current period sales | 85,916 | 28,488 | 114,404 | ||||||||||||||
| Adjustments for prior period sales | (267) | 276 | 9 | ||||||||||||||
| Credits/payments made | (82,957) | (28,361) | (111,318) | ||||||||||||||
| Balances at December 31, 2023 | 40,151 | 10,427 | 50,578 | ||||||||||||||
| Provision related to current period sales | 82,233 | 33,449 | 115,682 | ||||||||||||||
| Adjustments for prior period sales | (3,246) | 3 | (3,243) | ||||||||||||||
| Credits/payments made | (69,199) | (31,488) | (100,687) | ||||||||||||||
| Balances at December 31, 2024 | 49,939 | 12,391 | 62,330 | ||||||||||||||
| Provision related to current period sales | 104,711 | 42,480 | 147,191 | ||||||||||||||
| Adjustments for prior period sales | (4,881) | (619) | (5,500) | ||||||||||||||
| Credits/payments made | (86,413) | (39,543) | (125,956) | ||||||||||||||
| Balances at December 31, 2025 | $ | 63,356 | $ | 14,709 | $ | 78,065 | |||||||||||
The provision of $104.7 million and $82.2 million for rebates and chargebacks for the years ended December 31, 2025 and 2024, respectively, and their ending balances at December 31, 2025 and 2024, primarily represent Medicaid rebates. The provision of $42.5 million and $33.4 million for discounts, returns and other for the years ended December 31, 2025 and 2024, and their ending balances at December 31, 2025 and 2024, primarily represent service fees, estimated product returns, co-pay assistance costs and prompt pay discounts.
Stock-based compensation.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 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 generally expense research and development costs as they are incurred for products in the development stage, including manufacturing costs and milestone payments made under license agreements prior to FDA approval. Upon and subsequent to FDA approval, manufacturing and milestone payments made under license agreements are capitalized. 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.
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 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. Projected pretax income includes significant assumptions related to revenue, which could be affected by the success of the commercial launches of Fanapt®in bipolar I disorder, PONVORY®in RMS and NEREUSTMin the prevention of vomiting induced by motion, which was approved on December 30, 2025, and HETLIOZ®generic competition, as well as commercial and research and development activities, including spend on our commercial launches and late-stage clinical activities, and our ability to obtain regulatory approval from the FDA for products or new indications in development, among other factors. In the fourth quarter of 2025, after considering all available positive and negative evidence, including but not limited to historical, current and future projected results and significant risks and uncertainties related to forecasts, we concluded that it is not more likely than not that substantially all of our deferred tax assets in the U.S. are realizable in future periods and recorded a valuation allowance against all net deferred tax assets in the U.S., resulting in a non-cash income tax expense of $113.7 million for the year ended December 31, 2025. If we have cumulative pretax income in future periods and if our projections indicate pretax income in future periods or if there are meaningful changes to our business operations, the conclusion about the appropriateness of the valuation allowance could change in a future period. A future reduction of the valuation allowance, in whole or in part, would result in a non-cash income tax benefit during the period of reduction. The potential timing and amount of any future valuation allowance release has yet to be determined and requires an analysis that is highly dependent upon historical and future projected earnings, among other factors. Any such adjustment could have a material impact on our financial position and results of operations.
Tax benefits are recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement.
Recent Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies,to the consolidated financial statements included in Part II, Item 8 of this Annual Report for information on recent accounting pronouncements.
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, PONVORY®for the treatment of RMS and NEREUSTMfor the prevention of vomiting induced by motion, which was approved in December 2025, the impact of regulatory changes to the pharmaceutical industry such as the Medicare Part D provisions of the Inflation Reduction Act of 2022, any possible payments made or received pursuant to license agreements, progress of our research and development efforts, the timing and outcome of clinical trials and related possible regulatory approvals and the status of existing and future potential litigation involving our products and intellectual property. See Note 18, Legal Matters, to the consolidated financial statements included in Part IV of this Annual Report for information on material legal matters.
Year ended December 31, 2025 compared to year ended December 31, 2024
Revenues. Total revenues increased by $17.3 million, or 9%, to $216.1 million for the year ended December 31, 2025 compared to $198.8 million for the year ended December 31, 2024. 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:
| Year Ended December 31, | |||||||||||||||||||||||
| (in thousands) | 2025 | 2024 |
Net Change |
Percent | |||||||||||||||||||
|
Fanapt®net product sales
|
$ | 117,302 | $ | 94,297 | $ | 23,005 | 24 | % | |||||||||||||||
|
HETLIOZ®net product sales
|
71,431 | 76,675 | (5,244) | (7) | % | ||||||||||||||||||
|
PONVORY®net product sales
|
27,372 | 27,800 | (428) | (2) | % | ||||||||||||||||||
| Total net product sales | $ | 216,105 | $ | 198,772 | $ | 17,333 | 9 | % | |||||||||||||||
Fanapt®net product sales increased by $23.0 million, or 24%, to $117.3 million for the year ended December 31, 2025 compared to $94.3 million for the year ended December 31, 2024. The increase to net product sales was primarily attributable to an increase in volume. We initiated the commercial launch of Fanapt®for bipolar I disorder in adults in the third quarter of 2024. An amount of variable consideration related to Fanapt®net product sales is subject to dispute, of which approximately $3.0 million was recognized for the three months ended December 31, 2025.
HETLIOZ®net product sales decreased by $5.2 million, or 7%, to $71.4 million for the year ended December 31, 2025 compared to $76.7 million for the year ended December 31, 2024. The decrease to net product sales was attributable to a decrease in volume and price, net of deductions. Since the entrance of generic competition in the first quarter of 2023, inventory levels at our specialty pharmacy customers have been elevated relative to inventory levels prior to the entrance of generic competition. The elevated levels of inventory have resulted in longer periods to resolve uncertainties related to variable consideration. HETLIOZ®net product sales have been and may continue to be variable depending on when specialty pharmacy customers purchase again. Further, HETLIOZ®net product sales may decline in future periods, potentially significantly, related to continued generic competition in the U.S.
PONVORY®net product sales decreased by $0.4 million, or 2%, to $27.4 million for the year ended December 31, 2025 compared to $27.8 million for the year ended December 31, 2024. We initiated the commercial launch of PONVORY®in RMS in the third quarter of 2024. An amount of variable consideration related to PONVORY®net product sales is subject to dispute, of which approximately $3.0 million was recognized for the three months ended December 31, 2024.
Cost of goods sold.Cost of goods sold increased by $1.7 million, or 15%, to $13.0 million for the year ended December 31, 2025 compared to $11.3 million for the year ended December 31, 2024. Cost of goods sold includes third-party manufacturing costs of product sold, third-party royalty costs and distribution and other costs. 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. Third-party royalty costs on HETLIOZ®net product sales in Germany will end in October 2026 and third-party royalty costs on Fanapt®net product sales in the U.S. will end in November 2026. There are no third-party royalty costs on net sales of PONVORY®. Third-party royalty costs on NEREUSTMnet product sales in the U.S. are tiered, up to the low double digits, and will begin once we initiate the commercial launch of NEREUSTM. We evaluate the risk of excess inventory and product expiry by evaluating current and future product demand relative to product shelf life and build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance, patient usage, and generic competition. Our inventory balance consisted of $2.1 million of Fanapt®product, $7.8 million of HETLIOZ®product and $0.3 million of PONVORY®product as of December 31, 2025. Our inventory balance consisted of $2.0 million of Fanapt®product, $7.3 million of HETLIOZ®and $0.2 million of PONVORY®product as of December 31, 2024.
Research and development expenses.Research and development expenses increased by $34.8 million, or 47%, to $109.3 million for the year ended December 31, 2025 compared to $74.4 million for the year ended December 31, 2024. The increase was primarily due to an upfront payment to AnaptysBio, Inc. for the exclusive, global license to develop, manufacture, and commercialize imsidolimab and drug supply as well as an increase in expenses for our Fanapt®and BysantiTMdevelopment programs, partially offset by a decrease in expenses for our NEREUSTMdevelopment program.
The following table summarizes the costs of our product development initiatives for the years ended December 31, 2025 and 2024.
| Year Ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Direct project costs (1) | |||||||||||
|
Fanapt®
|
$ | 17,352 | $ | 9,401 | |||||||
|
BysantiTM
|
12,275 | 6,872 | |||||||||
|
HETLIOZ®
|
12,560 | 10,528 | |||||||||
|
PONVORY®
|
8,348 | 5,300 | |||||||||
|
NEREUSTM
|
16,429 | 23,608 | |||||||||
|
Imsidolimab
|
16,287 | - | |||||||||
| VTR-297 | 3,554 | 2,642 | |||||||||
| CFTR | 9,290 | 6,344 | |||||||||
| VQW-765 | 3,565 | 743 | |||||||||
| Other | 1,938 | 1,272 | |||||||||
| Total direct project costs | 101,598 | 66,710 | |||||||||
| Indirect project costs (1) | |||||||||||
| Stock-based compensation | 2,367 | 2,960 | |||||||||
| Other indirect overhead | 5,306 | 4,761 | |||||||||
| Total indirect project costs | 7,673 | 7,721 | |||||||||
| Total research and development expense | $ | 109,271 | $ | 74,431 | |||||||
(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 and continue our efforts to expand our product pipeline.
Selling, general and administrative expenses.Selling, general and administrative expenses increased by $91.5 million, or 63%, to $238.0 million for the year ended December 31, 2025 compared to $146.4 million for the year ended December 31, 2024. The increase in selling, general and administrative expenses was primarily the result of an increase in spending on commercial activities related to our commercial launches of Fanapt®in bipolar disorder and PONVORY®in RMS. 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. We initiated a direct-to-consumer campaign that started in the first quarter of 2025, elevating brand awareness of the company and the key products Fanapt®and PONVORY®. Selling, general and administrative expenses may increase in future periods as a result of the ongoing commercial launches as well as the other future commercial launches.
Intangible asset amortization. Intangible asset amortization was $7.0 million for the year ended December 31, 2025 compared to $7.3 million for the year ended December 31, 2024. Intangible asset amortization will increase in 2026 due to the amortization of the NEREUSTMintangible asset, which was capitalized in December 2025.
Other income, net. Other income, net was $12.5 million for the year ended December 31, 2025 compared to $17.7 million for the year ended December 31, 2024. Other income primarily consists of investment income on our marketable securities.
Provision (benefit) for income taxes.We recorded an income tax provision of $81.8 million and a benefit for income taxes of $4.0 million for the years ended December 31, 2025 and 2024, respectively. The income tax expense as of December 31, 2025 was primarily due to the recording of a valuation allowance against all of our deferred tax assets. The income tax expense or benefit is determined by applying the statutory tax rates in jurisdictions where we operate to each period's income before income taxes. Adjustments are made for permanent differences in taxability or deductibility of pretax items as well as for
other items, such as tax credits that are generated from our research and development activities. See Note 15, Income Taxes,to the consolidated financial statements in Part II, Item 8 of this Annual Report for additional information.
Liquidity and Capital Resources
As of December 31, 2025, our total cash and cash equivalents and marketable securities were $263.8 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 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 December 31, 2025 and 2024 are summarized as follows:
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Cash and cash equivalents | $ | 84,851 | $ | 102,316 | |||||||
| Marketable securities: | |||||||||||
| U.S. Treasury and government agencies | 153,735 | 227,830 | |||||||||
| Corporate debt | 25,261 | 44,497 | |||||||||
| Total marketable securities | 178,996 | 272,327 | |||||||||
| Total cash, cash equivalents and marketable securities | $ | 263,847 | $ | 374,643 | |||||||
As of December 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 and certain commitments for marketing activities. Our non-cancellable purchase commitments for agreements with a remaining non-cancellable term longer than one year from December 31, 2025 primarily relate to commitments for marketing activities and data services. Various other long-term agreements entered into for services with other third-party vendors, such as inventory purchase commitments, are cancellable in nature or contain variable commitment terms within the agreement that are within our control. We also have long-term contractual obligations related to our leases and license agreements. See Note 8, Leases, and Note 11, Commitments and Contingencies, respectively, to the consolidated financial statements in Part II, Item 8 of this Annual Report for more information about these commitments.
We do not have any off-balance sheet arrangements.
Based on our current operating plans, which include costs and expenses in connection with our U.S. commercial activities, including the commercial launch of NEREUSTMfor the prevention of vomiting induced by motion, continued clinical development of NEREUSTM, BysantiTMand our other products, pursuit of regulatory approval of BysantiTMand imsidolimab, pursuit of further regulatory approvals for our currently approved products and payments due upon achievement of milestones under our license agreements, we believe that our cash, cash equivalents and marketable securities and cash received from product sales will be sufficient for at least the next 12 months. Our future cash requirements and the adequacy of our available funds will depend on many factors, primarily including a regulatory approval of BysantiTMand imsidolimab, our ability to generate revenue, the scope and costs of our commercial, manufacturing and process development activities, including the commercial launch of NEREUSTM, 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.
Cash Flow
The following table summarizes our net cash flows from operating, investing and financing activities for the years ended December 31, 2025 and 2024:
| Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | Net Change | ||||||||||||||
| Net cash provided by (used in): | |||||||||||||||||
| Operating activities: | |||||||||||||||||
|
Net loss
|
$ | (220,474) | $ | (18,900) | $ | (201,574) | |||||||||||
| Non-cash charges | 102,724 | 9,701 | 93,023 | ||||||||||||||
| Net change in operating assets and liabilities | 8,308 | (6,558) | 14,866 | ||||||||||||||
| Operating activities | (109,442) | (15,757) | (93,685) | ||||||||||||||
| Investing activities: | |||||||||||||||||
|
Asset acquisition
|
- | (4,229) | 4,229 | ||||||||||||||
| Purchases of property and equipment | (998) | (490) | (508) | ||||||||||||||
| Net purchases, sales and maturities of marketable securities | 95,858 | (12,711) | 108,569 | ||||||||||||||
| Investing activities | 94,860 | (17,430) | 112,290 | ||||||||||||||
| Financing activities: | |||||||||||||||||
|
Principal payments on finance leases
|
(1,991) | (155) | (1,836) | ||||||||||||||
|
Tax obligations paid in connection with settlement of restricted stock units
|
(915) | - | (915) | ||||||||||||||
| Financing activities | (2,906) | (155) | (2,751) | ||||||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 23 | (163) | 186 | ||||||||||||||
| Net change in cash, cash equivalents and restricted cash | $ | (17,465) | $ | (33,505) | $ | 16,040 | |||||||||||
Operating Activities. Cash flows used in operating activities during the year ended December 31, 2025 were $109.4 million, a decrease of $93.7 million compared to $15.8 million during the year ended December 31, 2024. The decrease reflects an increase of $201.6 million in net loss, an increase of $93.0 million in non-cash charges primarily due to the recording of a valuation allowance against all of our deferred tax assets and an increase of $14.9 million from the net change in operating assets and liabilities. Our net loss for the year ended December 31, 2025 includes expenses associated with the $15.0 million payment related to the exclusive, global license agreement with Anaptys Bio, Inc. for the development and commercialization of imsidolimab. The increase from net change in operating assets and liabilities due to timing for our accounts payable and accrued liabilities. We generally pay approved invoices when due, with vendor terms typically ranging from 30 to 45 days.
Investing Activities. Cash flows provided by investing activities during the year ended December 31, 2025 were $94.9 million, an increase of $112.3 million compared to cash flows used in investing activities of $17.4 million during the year ended December 31, 2024. The change in investing activities primarily reflects the net use of cash and cash equivalents and maturities of the investments in our portfolio of marketable securities. The $4.2 million asset acquisition cash flow during year ended December 31, 2024 relates to the payment of the remaining consideration for the PONVORY®acquisition that was accrued as of December 31, 2023. The $10.0 million milestone payment owed to Eli Lilly and Company for the FDA's approval of NEREUSTMfor the prevention of vomiting induced by motion was accrued as of December 31, 2025.
Financing Activities. Cash flows used in financing activities during the year ended December 31, 2025 were $2.9 million, a decrease of $2.8 million compared to $0.2 million during the year ended December 31, 2024. Financing activities include principal payments for our finance lease liabilities and tax obligations paid in connection with settlement of restricted stock units.
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