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 included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and in other parts of this Annual Report on Form 10-K. A discussion of the year ended December 31, 2024, compared to the year ended December 31, 2023, has been reported previously under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 25, 2025.

Company Overview

At Harmony, we are cultivating a differentiated neuroscience company, rooted in innovation and driven by a commitment to addressing the unmet needs of patients living with neurological diseases. To date, we have focused on rare neurological diseases with a growing portfolio now spanning sleep/wake, neurobehavioral, and rare epilepsy, and we are harnessing scientific insights and pioneering approaches to advance meaningful treatments that help patients thrive. Our operations are conducted by our wholly owned subsidiaries, Harmony Biosciences, LLC and Harmony Biosciences Management, Inc.

Sleep/Wake Franchise

Pitolisant was developed by Bioprojet and approved by the EMA in 2016 for the treatment of narcolepsy in adult patients with or without cataplexy and in 2021 for the treatment of EDS in adult patients with obstructive sleep apnea. We acquired an exclusive license to develop, manufacture and commercialize pitolisant in the United States pursuant to our license agreement with Bioprojet (as amended, the "2017 LCA") in July 2017. Pitolisant was granted Orphan Drug designation for the treatment of narcolepsy by the FDA in 2010. It received Breakthrough Therapy designation for the treatment of cataplexy in patients with narcolepsy and Fast Track designation for the treatment of EDS and cataplexy in patients with narcolepsy in April 2018. In August 2019, WAKIX was approved by the U.S. Food and Drug Administration (the "FDA") for the treatment of EDS in adult patients with narcolepsy, and its U.S. commercial launch was initiated in November 2019. In October 2020, WAKIX was approved by the FDA for the treatment of cataplexy in adult patients with narcolepsy.

We believe that pitolisant's ability to regulate histamine mediated through histamine-3 receptor antagonist and inverse agonist activity gives it the potential to provide therapeutic benefit in other rare neurological diseases.

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We are focusing our development efforts on other rare neurological disorders in which EDS is a prominent symptom, including Prader-Willi Syndrome ("PWS") and myotonic dystrophy type 1, otherwise known as dystrophia myotonica ("DM1"). Based on the positive signals from the data from our Phase 2 proof-of-concept signal detection clinical trial to evaluate pitolisant for the treatment of EDS and other key behavioral symptoms in patients with PWS, an End-of-Phase 2 meeting with the FDA was held in June 2023. We aligned with the FDA on the proposed Phase 3 registration study design to support further investigation of pitolisant as a potential treatment to address the unmet medical need for children, adolescents and adults with PWS experiencing EDS, for which there is currently no approved treatment. In October 2023, we received FDA alignment regarding the study design for the Phase 3 TEMPO study in patients with PWS, which has the potential to serve as the registrational trial and support our efforts to seek pediatric exclusivity for pitolisant. In February 2024, the FDA granted Orphan Drug designation to pitolisant for the treatment of PWS. The Phase 3 registrational trial, the TEMPO study, was initiated in the first quarter of 2024. In June 2021, we initiated a Phase 2 proof-of-concept signal detection clinical trial to evaluate pitolisant for the treatment of EDS, fatigue and cognitive dysfunction in adult patients with DM1 and announced topline results from this trial in the fourth quarter of 2023, in which clinically meaningful improvements were demonstrated in EDS and fatigue, the two most prominent non-muscular symptoms in patients with DM1. The safety and tolerability profile of pitolisant in adult patients with DM1 was consistent with the established safety profile of pitolisant with no new safety signals detected and no serious adverse events reported.

Our partner, Bioprojet completed a Phase 3 trial in pediatric patients with narcolepsy and submitted the trial data to the European Medicines Agency (the "EMA") seeking approval for a pediatric narcolepsy indication. In January 2023,

Bioprojet received a positive opinion from the EMA's Committee for Medicinal Products for Human Use ("CHMP") and in March 2023, the EMA granted approval for the marketing authorization of WAKIX for the treatment of narcolepsy with or without cataplexy in children six and older. Based on the data from the positive Phase 3 trial conducted by Bioprojet, we submitted an sNDA for pediatric narcolepsy in December 2023. In June 2024, we announced that the FDA approved our sNDA for WAKIX for the treatment of EDS in pediatric patients six years of age and older with narcolepsy. In addition, in June 2024, the FDA did not approve our sNDA seeking to expand the WAKIX label for the treatment of pediatric patients with cataplexy. In October 2024, we held a Type A meeting with the FDA to discuss the pediatric cataplexy indication and reached alignment on a path to sNDA resubmission, which was submitted in the third quarter of 2025. In February 2026, the FDA approved WAKIX for the treatment of cataplexy in pediatric patients six years and older with narcolepsy.

We remain committed to obtaining pediatric exclusivity for WAKIX. We believe the initiation of the PWS Phase 3 registrational trial, the TEMPO study, and our current data in pediatric narcolepsy, which resulted in the FDA's approval of WAKIX in its current pediatric indication, are supportive of our efforts in obtaining pediatric exclusivity for WAKIX.

We have expanded our pipeline through the acquisition of additional assets that focus on addressing the unmet needs of patients living with rare neurological diseases as well as patients living with other neurological diseases who have unmet medical needs. We are targeting assets that will allow us to further leverage the expertise and infrastructure that we have successfully built at Harmony so we can optimize the benefit of internal synergies. Consistent with this objective, in July 2022, we entered into a License and Commercialization Agreement (the "2022 LCA") with Bioprojet whereby we obtained exclusive rights to manufacture, develop and commercialize one or more new products based on pitolisant in the United States and Latin America, with the potential to add additional indications and formulations upon the agreement of both parties. We have made progress in the development of two new formulations of pitolisant: pitolisant GR and pitolisant HD. Both formulations entered clinical studies in the fourth quarter of 2023. We received data from the pitolisant GR pilot bioequivalence study, which supports further development of Pitolisant GR. In addition, we completed a dosing optimization study that supports initiating Pitolisant GR at the therapeutic dose of 17.8mg without titration. We initiated the pivotal bioequivalence study in the first quarter of 2025 and announced positive topline data readout in the fourth quarter of 2025. We anticipate a PDUFA date for Pitolisant GR in the first quarter of 2027. We received data from the pitolisant HD pilot pharmacokinetics study in June 2024, which also supports advancing this development program toward pivotal trials. We submitted an IND application for pitolisant HD with the FDA to initiate Phase 3 registrational trials in narcolepsy and IH in the fourth quarter of 2025. After receiving "Study May Proceed" letters from the FDA, the Phase 3 registrational study in narcolepsy, ONSTRIDE1, and the Phase 3 registrational study in IH, ONSTRIDE2, were initiated. We anticipate topline data from both studies in 2027 and a potential PDUFA date in 2028. Utility patents have been filed for both of these formulations, with the potential for patent protection to the mid-2040's.

In April 2024, we entered into a sublicense agreement with Bioprojet for an orexin-2 receptor agonist (OX2R) ("BP1.15205") to be evaluated for the treatment of narcolepsy and other potential indications (the "Sublicense"). Under the Sublicense, we have obtained the exclusive right to develop, manufacture and commercialize BP1.15205 in the United States and Latin American territories, which are rights that Bioprojet originally licensed from Teijin Pharma, the innovator of BP1.15205. In June 2025, we announced positive pre-clinical data demonstrating significant wake-promoting and cataplexy-suppressing effects in a standard transgenic mouse model of narcolepsy type 1and presented safety data from the three-month GLP toxicity studies in two different species. We filed an investigational medicinal product dossier ("IMPD") with the EMA and began first-in-human studies in the fourth quarter of 2025 with topline data anticipated in 2026.

In June 2025, we entered into a research collaboration, option and license agreement (the "CiRC Agreement") with a related party, CiRC Biosciences, Inc. ("CiRC"). Under this agreement, Harmony and CiRC will collaborate on the research and development of two discovery-stage candidates, CBS105 for treatment-resistant narcolepsy and CBS104 for refractory epilepsy (together the "Candidates"), using cell replacement therapy for the treatment of refractory epilepsies and treatment-resistant narcolepsy.

In August 2021, we acquired HBS-102, a Melanin-concentrating hormone receptor type 1 (MCHR1) antagonist previously developed as CSTI-100/ALB-127258(a)/ALB-127258 (the "Compound"), along with intellectual property and other assets related to the development, manufacture, and commercialization of the Compound from ConSynance Therapeutics, Inc. We acquired full development and commercialization rights for HBS-102 globally, but we have provided an indication-limited grant-back license to ConSynance for the development and commercialization of the Compound in Greater China. We conducted a preclinical PoC study to assess the effect of HBS-102 on hyperphagia, weight gain and other metabolic parameters in a mouse model of PWS. The final report was received during the third quarter of 2024 and

the results are consistent with the expected results. In addition, a 13-week toxicology study has been completed, and we believe the preliminary results are encouraging.

We are exploring an opportunity to evaluate a new formulation of pitolisant for the treatment of fatigue in larger CNS indications. The histaminergic mechanism of action is uniquely positioned to address all three different dimensions of fatigue - physical, emotional and cognition. We have generated clinical data to support the utility of pitolisant to treat fatigue in the phase 2 proof-of-concept study in DM1 and in a phase 3 study for the treatment of residual sleepiness in patients with obstructive sleep apnea. We plan to evaluate this new formulation for fatigue in broader indications, with fatigue in MS as the lead indication, and to explore other potential opportunities such as fatigue in stroke and Parkinson's disease. Our current efforts are focused on formulation optimization with new modes of delivery and towards a Phase 1 PK study.

Rare Epilepsy Franchise

In April 2024, we acquired all of the outstanding capital stock of Epygenix Therapeutics, Inc. ("Epygenix"), pursuant to the terms of a stock purchase agreement (the "Epygenix Agreement"). As a result, we now have an exclusive license relating to the use of clemizole ("EPX-100") for the treatment of Dravet Syndrome ("DS"), Lennox-Gastaut Syndrome ("LGS") and other developmental and epileptic encephalopathies ("DEEs"). Patients with both conditions often encounter severe refractory epilepsy and extreme co-morbidities or mortality without effective treatments, even with polypharmacy. As such, there is a recognized need for improved treatment options for both conditions. We believe the total addressable market for EPX-100 among patients with DS is approximately 5,000 people based on an estimated current DS prevalence of approximately 8,600 cases and approximately 7,000 diagnosed DS cases. We believe the total addressable market for EPX-100 among patients with LGS is approximately 35,000 people based on an estimated current LGS prevalence of approximately 48,000 cases and 44,000 diagnosed LGS cases. EPX-100 has been granted orphan drug designation and rare pediatric disease designation by the FDA for treatment of both DS and LGS. EPX-100 is currently in two Phase 3 registrational clinical trials, one for each of DS (the ARGUS Study) and LGS (the LIGHTHOUSE Study). In December 2025, we announced initial open-label extension data from the ARGUS Study, which showed clinically meaningful reductions in seizure activity in participants with DS and a favorable benefit-risk profile.

Additionally, we are currently developing EPX-200, a selective 5HT-2C agonist for DEEs ("EPX-200"), another asset acquired pursuant to the terms of the Epygenix Agreement. EPX-200 is currently in the pre-IND phase.

Neurobehavioral Franchise

In October 2023, we acquired Zynerba Pharmaceuticals, Inc. ("Zynerba"), adding global rights to develop, manufacture and commercialize ZYN002, which is a pharmaceutically manufactured 100% synthetic, patent protected permeation enhanced cannabidiol gel for transdermal delivery. In September 2025, we completed a Phase 3 registrational trial of ZYN002, the RECONNECT study, for the treatment of Fragile X Syndrome ("FXS"), which was designed to confirm the positive findings from the prespecified analysis of the primary outcome in the subgroup of patients with complete methylation from the Phase 2/3 CONNECT study conducted by Zynerba. The RECONNECT study did not meet the primary endpoint of improvement in social avoidance primarily due to a higher-than-expected placebo response rate. Additionally, an open-label phase 2 proof-of-concept study conducted by Zynerba showed positive signals for ZYN002 in the treatment of behavioral symptoms associated with 22q deletion syndrome, a disorder caused by a small missing piece on the long arm of the 22nd chromosome .After an in-depth review of the data from the RECONNECT study, the ZYN002 program in FXS is being phased out and we are no longer pursuing an indication for 22q deletion syndrome.

Commercial Performance Metrics

As of December 31, 2025, we continued to see growth in the number of unique healthcare professional ("HCP") prescribers of WAKIX since it became available in November 2019. There are approximately 9,000 HCPs who treat patients living with narcolepsy, with approximately 4,000 enrolled in oxybate risk-evaluation and mitigation strategies. The average number of patients on WAKIX for the year ended December 31, 2025, was approximately 8,500. Additionally, as of December 31, 2025, we have secured formulary access for more than 80% of all insured lives (Commercial, Medicare and Medicaid) in the United States.

Financial Operations Overview

Net Product Revenue

Net product revenue includes gross product shipments less provisions for sales discounts and allowances, which includes trade allowances, rebates to government and commercial entities, and other discounts. Although we expect net sales to increase over time, provisions for sales discounts and allowances may fluctuate based on the mix of sales to different customer segments and/or changes in our estimates. For further discussion of the components of Revenue, see "-Critical Accounting Policies and Significant Judgments and Estimates."

Cost of Product Sold

Cost of product sold includes manufacturing and distribution costs, the cost of API, FDA program fees, royalties due to third parties on net product sales, freight, shipping, handling, storage costs and salaries of employees involved with oversight of production. We expect the cost of product sales to increase as we continue to ramp up production in order to meet future demand for WAKIX and diversify our supply chain for WAKIX.

The shelf life of WAKIX is four years from the date of manufacture, with the earliest expiration of current inventory expected to be January 2027. We regularly review our inventory levels and expect write-offs from time to time. We will continue to assess inventory levels in future periods as demand for WAKIX and the rate of inventory turnover evolves. We currently have adequate supply of WAKIX to cover demand into the third quarter of 2027, with additional API on-hand inventory to support at least 24 months beyond this time frame.

Research and Development Expenses

Research and development expenses primarily include development programs for potential new indications for pitolisant in patients with IH, PWS, and DM1 and the development of our product candidates ZYN002, EPX-100, EPX-200 Pitolisant GR, Pitolisant HD, BP1.15205 and HBS-102. We also incur research and development expenses related to our team of Medical Science Liaisons ("MSLs") who interact with key opinion leaders, with a focus on the science, the role of histamine in sleep-wake state stability and the novel mechanism of action of pitolisant. In addition, our MSLs support our market access team with the presentation of clinical data to payors upon request and our clinical development team to identify potential clinical trial sites. Research and development costs are expensed as incurred. We have significantly increased our research and development efforts as we advance our clinical programs and add product candidates to expand our pipeline. Research and development expenses also include:

A significant portion of our research and development costs are external costs, such as fees paid to CROs and CDMOs, central laboratories, contractors, and consultants in connection with our clinical development programs. Internal expenses primarily relate to personnel who are deployed across multiple programs.

Product candidates in later stages of clinical development generally have higher development costs in the current period than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials, milestone payments, and the cost of submitting an NDA to the FDA (and/or other regulatory authorities). We expect our research and development expenses to be significant as we advance our current clinical development programs and prepare to seek regulatory approval for additional indications for pitolisant and Pitolisant GR, complete the Phase 3 clinical trials for EPX-100 and Pitolisant HD, and advance the development of BP1.15205, CBS105 and HBS-102 toward new indications.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of any additional indications for pitolisant or other product candidates that we move forward for regulatory approval. There are numerous risks and uncertainties associated with developing product candidates, including uncertainty related to:

A change in the outcome of any of these variables with respect to the development of any of our programs or any product candidate we develop would significantly change the costs, timing and viability associated with the development and/or regulatory approval of such programs or product candidates.

Sales and Marketing Expenses

Our sales and marketing expenses primarily relate to the market development and commercialization activities of WAKIX for the treatment of EDS and cataplexy in adult patients with narcolepsy and for EDS in children six years and older with narcolepsy. Market development and commercial activities account for a significant portion of our operating expenses and are expensed as incurred. We expect our sales and marketing expenses to increase in the near- and mid-term to support WAKIX's indications for the treatment of EDS or cataplexy in adult patients with narcolepsy, the treatment of EDS

in pediatric patients 6 years of age and older with narcolepsy and to expand our portfolio with the anticipated growth from potential additional indications.

Sales and marketing expenses include:

In addition, sales and marketing expenses include external costs such as website development, media placement fees, agency fees for patient, medical education and promotional expenses, market research, analysis of secondary data, conference fees, and consulting fees.

General and Administrative Expenses

General and administrative expenses consist primarily of employee-related expenses, such as salaries, share-based compensation, benefits and travel expenses for our personnel in executive, legal, finance and accounting, human resources, investor relations, and other administrative departments. General and administrative expenses also consist of office leases, legal fees, including ANDA litigation expenses, conference attendance, and professional fees, including legal, tax and accounting and consulting fees.

We anticipate that our general and administrative expenses will increase in the future to support our continued commercialization efforts, ongoing and future potential research and development activities, and increased costs of operating as a public company. These increases will likely be driven by costs associated with the hiring of additional personnel and fees paid to outside consultants, lawyers and accountants, among other expenses. Additionally, we anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with the requirements of Nasdaq and the SEC, insurance and investor relations costs. If any of our current or future indication expansion programs or new product candidates obtain U.S. regulatory approval, we expect that we would incur significantly increased expenses associated with building a sales and marketing team.

Paragon Agreement

We are party to a right-of-use agreement with Paragon whereby we have access to and the right to use certain office space leased by Paragon in Chicago, Illinois. For the year ended December 31, 2025, we paid fees of $0.5 million related to rent and consulting services.

Interest Expense

Interest expense consists primarily of interest expense on debt facilities, amortization of debt issuance costs and amortization of premiums on our debt securities.

Interest Income

Interest income consists primarily of cash interest earned on our cash and investment balances and accretion of the discount on our investments in debt securities.

Results of Operations

The following table sets forth selected items in our consolidated statements of operations for the periods presented:

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Net Product Revenue

Net product revenue increased by $153.7 million, or 21.5% for the year ended December 31, 2025, compared to the same period in 2024. The increase was primarily due to an 18.3% increase in units shipped, and the impact of a 7.0% price increase partially offset by higher rebates of approximately 3.6%. The price increase occurred in January 2025.

Cost of Product Sales

Cost of product sales increased by $41.5 million, or 26.5%, for the year ended December 31, 2025, compared to the same period in 2024. Cost of product sales as a percentage of net product revenue was 22.8% for the year ended December 31, 2025, compared to 21.9% for the year ended December 31, 2024. The increase in cost of product sales and cost of sales as a percentage of net revenue was due to triggering a higher royalty tier under the 2017 LCA earlier in 2025 compared to 2024.

Research and Development Expenses

The following table is a summary of our research and development expenses:

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Research and development expenses increased by $43.8 million, or 30.0%, for the year ended December 31, 2025, compared to the same period in 2024. The increase was primarily driven by a combined $47.2 million increase in research and development expenses for EPX-100, ZYN002 and Pitolisant GR and HD as we progressed clinical trials and manufacturing, an $8.0 million increase in personnel costs associated with higher headcount, a $2.3 million increase in stock compensation associated with new equity awards and a $3.4 million increase in other research and development expenses primarily associated with the development of BP1.15205 offset by a $7.7 million decrease in clinical development associated with pitolisant, driven by a decrease in clinical trial expenses for IH, and a $9.3 million decrease in IPR&D charges. The change in IPR&D consisted of clinical milestones achieved for ZYN002 ($15.0 million) and BP1.15205 ($4.3 million) and an upfront fee related to the CiRC Agreement ($15.0 million) that occurred during the year ended December 31, 2025 offset by the acquisition of Epygenix ($17.1 million), a preclinical milestone achieved for HBS-102 ($1.0 million) and the Sublicense ($25.5 million) that occurred during the year ended December 31, 2024.

Sales and Marketing Expenses

Sales and marketing expenses increased by $8.6 million, or 7.8%, for the year ended December 31, 2025, compared to the same period in 2024. The increase was primarily due to a $5.6 million increase in patient engagement and marketing activities and a $3.0 million increase in personnel costs. The increase in patient engagement and marketing activities for both comparable periods was driven by our continued growth of WAKIX and the increase in personnel costs was driven primarily by higher headcount.

General and Administrative Expenses

General and administrative expenses increased by $42.2 million, or 38.2%, for the year ended December 31, 2025, compared to the same period in 2024. The increase was primarily due to a $39.0 million increase in legal and professional fees, primarily associated with patent lawsuits and settlements, a $1.1 million increase in personnel costs associated with a higher headcount and a $2.1 million increase associated with travel and conference attendance.

Interest Expense

Interest expense decreased by $2.8 million, or 16.3%, for the year ended December 31, 2025, compared to the same period in 2024. The decrease was primarily due to lower average outstanding debt balances compared to the prior year.

Interest Income

Interest income increased by $3.4 million, or 18.2%, for the year ended December 31, 2025, compared to the same period in 2024. The increase was primarily a result of having higher invested balances compared to the prior year.

Income Taxes

Income tax expense was $56.4 million, representing a 26.2% effective tax rate, for the year ended December 31, 2025, compared to income tax expense of $46.3 million for the year ended December 31, 2024, representing a 24.1% effective tax rate. The increase in our effective tax rate for the year ended December 31, 2025, was primarily driven by the remeasurement of state deferred tax assets that was incurred during the year ended December 31, 2025. The effective tax rate of 26.2% for the year ended December 31, 2025, included 3.5% from the remeasurement of state deferred tax assets, 2.8% in state income taxes, and 1.5% in non-deductible IPR&D, offset by a 4.0% benefit from credits.

Liquidity, Sources of Funding and Capital Resources

Overview

As of December 31, 2025, we had cash, cash equivalents, and investments of $882.5 million and retained earnings of $160.9 million. As of December 31, 2025, we had outstanding debt of $165.0 million.

The consolidated financial statements have been prepared as though we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

We believe that our existing cash, cash equivalents and investments on hand as of December 31, 2025, will enable us to meet our operational liquidity needs and fund our potential investing activities for at least the next 12 months. We have based our liquidity and cash flow projections on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we expect.

Term Loan A Credit Agreement

In July 2023, we entered into a Credit Agreement (the "TLA Credit Agreement") with JPMorgan Chase Bank, N.A., as "Administrative Agent", and certain lenders, which was subsequently amended in September 2023. The TLA Credit Agreement, as amended, provides for a five-year senior secured term loan (the "TLA Term Loan") in an aggregate principal amount of $200.0 million.

The repayment schedule for the TLA Term Loan consists of $3.8 million quarterly principal payments, which commenced on December 31, 2023, increasing to $5.0 million quarterly principal payments beginning on December 31, 2025, with a $115.0 million payment due on the maturity date of July 26, 2028. The TLA Term Loan bears interest at a per annum rate equal to, at our option, (i) a base rate plus a specified margin ranging from 2.50% to 3.00%, based on our senior secured net leverage ratio (as defined in the TLA Credit Agreement) or (ii) Term SOFR plus a credit spread adjustment of 0.10% plus a specified margin ranging from 3.50% to 4.00%, based on our senior secured net leverage ratio.

The TLA Credit Agreement contains customary affirmative and negative covenants, financial covenants, representations and warranties, events of default and other provisions. We were in compliance with all covenants as of December 31, 2025.

Share Repurchases

In August 2023, our Board of Directors approved a program (the "August 2023 Repurchase Program") providing for the repurchase of shares of common stock in an aggregate amount of up to $125.0 million, excluding commissions and transaction fees. The repurchase program may be suspended, terminated or modified at any time for any reason. During the year ended December 31, 2023, we repurchased and retired 1,439,792 shares of common stock at an aggregate cost of approximately $50.0 million, excluding commissions and transaction fees, under the August 2023 Repurchase Program.

In October 2023, our Board of Directors terminated the August 2023 Repurchase Program and approved a share repurchase program (the "October 2023 Repurchase Program") providing for the repurchase of shares of common stock in an aggregate amount of up to $200.0 million, excluding commissions and transaction fees. The October 2023 Repurchase Program may be suspended, terminated, or modified at any time for any reason. During the year ended December 31, 2025, we did not repurchase any shares of common stock pursuant to the October 2023 Repurchase Program. As of December 31, 2025, the remaining amount of common stock authorized for repurchases was $150.0 million.

Epygenix Acquisition

In April 2024, we acquired Epygenix, pursuant to the terms of a stock purchase agreement. In connection with the closing of the transaction, we paid the former stockholders of Epygenix up front consideration of $35.0 million less a working capital adjustment. In addition, we will also be obligated to pay up to $130.0 million upon the achievement of development and regulatory milestones and up to $515.0 million upon the achievement of certain sales-based milestones, in each case to Epygenix's former stockholders. As a result, we now have an exclusive license relating to the use of clemizole, initially for the treatment of DS and LGS.

ConSynance Agreement

In August 2021, we entered into an asset purchase agreement with ConSynance Therapeutics, Inc. (the "APA") to acquire HBS-102, a potential first-in-class molecule with a novel mechanism of action. Under the terms of the APA, we acquired full development and commercialization rights globally, with the exception of Greater China, for $3.5 million. In March 2023, we achieved a preclinical milestone, which triggered a $0.8 million payment under the provisions of the APA, which we recognized as an IPR&D charge recorded in research and development within the consolidated statement of operations and comprehensive income for the year ended December 31, 2023. In September 2024, we achieved a milestone for preclinical proof-of concept, which triggered a $1.0 million payment under the provisions of the APA, which we recognized as an IPR&D charge recorded in research and development within the consolidated statement of operations and comprehensive income for the year ended December 31, 2024. There are additional payments due upon the achievement of certain milestones, including $19.0 million for development milestones, $44.0 million for regulatory milestones and $110.0 million for sales milestones.

Bioprojet Agreements

In April 2024, we entered into the Sublicense agreement with Bioprojet for an orexin-2 receptor agonist (OX2R), BP1.15205, to be evaluated for the treatment of narcolepsy and other potential indications (the "Sublicense"). Under the Sublicense, we obtained the exclusive right to develop, manufacture and commercialize BP1.15205 in the United States and Latin American territories (the "Licensed Territories"), which are rights that Bioprojet originally licensed from Teijin Pharma, the innovator of BP1.15205. BP1.15205 is currently in a Phase 1 clinical trial to assess the safety, tolerability, pharmacokinetics and pharmacodynamics after single and multiple ascending doses in healthy volunteers and sleep-deprived healthy subjects. Under the Sublicense, we paid Bioprojet an upfront license fee of $25.5 million. In November 2025, we achieved a clinical milestone for BP1.15205 that triggered a $4.3 million payment to Bioprojet under the Sublicense. We will also be obligated to pay up to $123.3 million upon achievement of other development and regulatory milestones and up to $240.0 million upon achievement of certain sales-based milestones, as well as royalty rates in the mid-teens on potential sales in the Licensed Territories.

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In July 2022, we entered into the 2022 LCA with Bioprojet whereby we obtained exclusive rights to manufacture, develop and commercialize one or more new products based on pitolisant in the United States and Latin America, with the potential to add additional indications and formulations upon the agreement of both parties. We paid an initial, non-refundable $30.0 million licensing fee in October 2022 and additional payments of up to $155.0 million are potentially due under the 2022 LCA upon the achievement of certain future development and sales-based milestones. In addition, certain payments will become due upon the achievement of development milestones for new indications and formulations as agreed upon by both parties. The 2022 LCA also includes a fixed trademark royalty and a tiered royalty based on net sales of any new products commercialized, which will be payable to Bioprojet on a quarterly basis.

CiRC Agreement

In June 2025, we entered the CiRC Agreement with CiRC, a related party. Under this agreement, we will collaborate on the research and development of the Candidates using cell replacement therapy for the treatment of refractory epilepsies and treatment-resistant narcolepsy. As part of the CiRC Agreement, we paid CiRC an upfront fee of $15.0 million and we will also be obligated to pay $2.0 million upon the achievement of certain research milestones for each of the Candidates. In addition, we have an option to obtain an exclusive license for each of the Candidates that would grant us global rights to develop, manufacture and commercialize that Candidate. We would be obligated to pay an option exercise fee of $8.0 million, or $16.0 million in the aggregate if the options related to both Candidates were exercised, and we would be obligated upon achievement to pay future development, regulatory and sales-based milestones, as well as royalties on sales of any product derived from the Candidates.

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Recent Milestone Payments

In November 2025, we achieved a clinical milestone for BP1.15205 that triggered a $4.3 million payment to Bioprojet under the Sublicense, which was paid in December 2025.

In September 2025, we achieved a clinical milestone for ZYN002 that triggered a $15.0 million payment to contingent value rights holders per the terms of our acquisition of Zynerba, which was paid in November 2025.

In September 2024, we achieved a preclinical milestone that triggered a $1.0 million payment under the provisions of the APA, which was paid in October 2024.

Cash Flows

The following table sets forth a summary of our cash flows for the years ended December 31, 2025, and 2024:

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Operating Activities

Net cash provided by operating activities for the year ended December 31, 2025, consisted of net income of $158.7 million adjusted for non-cash items of $45.0 million related to stock-based compensation expense, $34.3 million related to acquired IPR&D, $25.3 million related to intangible amortization and depreciation, offset by $7.3 million related to deferred tax assets. Net working capital excluding cash decreased by $91.8 million, primarily driven by increases in accounts receivable due to higher net product revenue in the current period, offset by an increase in accounts payable due to the timing of payments and an increase in accrued expenses primarily from higher accrued rebates and patent-related legal fees, including settlements related to the ANDA settlements.

Net cash provided by operating activities for the year ended December 31, 2024, primarily consisted of net income of $143.8 million adjusted for non-cash items of $43.6 million related to acquired IPR&D, $42.7 million related to stock-based compensation expense, and $24.1 million related to intangible amortization and depreciation, offset by $29.3 million related to deferred tax assets. Net working capital excluding cash increased by $7.3 million, primarily driven by increases in accounts receivable due to higher net product revenue in the current period and decreases in accounts payable due to the timing of payments.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2025, was $39.6 million, which was primarily attributable to $86.2 million in purchases of debt securities, a $15.0 million upfront fee paid to CiRC, a $15.0 million payment associated with the achievement of a clinical milestone for ZYN002, $4.3 million associated with the achievement of a clinical milestone for BP1.15205 and $0.3 million in purchases of property and equipment, partially offset by $81.1 million from maturities of investments.

Net cash used in investing activities for the year ended December 31, 2024, was $67.5 million, which was primarily attributable to $105.3 million in purchases of debt securities, a $25.5 million license fee paid to Bioprojet, a $1.0 million milestone payment related to HBS-102, $33.1 million net cash consideration paid for the acquisition of Epygenix and $1.2 million in purchases of property and equipment, partially offset by $98.5 million from maturities of investments.

Financing Activities

Net cash used in financing activities for the year ended December 31, 2025, was $9.0 million, which primarily consisted of $16.3 million in principal payments associated with the TLA Credit Agreement and $3.0 million of employee withholding tax payments related to stock-based awards, partially offset by $10.2 million in proceeds from the exercise of stock options.

Net cash used in financing activities for the year ended December 31, 2024, was $11.0 million, which primarily consisted of $15.0 million in principal payments associated with the TLA Credit Agreement, partially offset by $6.5 million in proceeds from the exercise of stock options, and $2.5 million of employee withholding tax payments related to stock-based awards.

Critical Accounting Estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with GAAP, we evaluate our estimates and judgments on an ongoing basis.

Significant estimates include assumptions used in the determination of the amount of revenue recognized on sales of WAKIX, costs incurred under services type agreements related to the performance of research and development activities, the measurement of compensation expense pursuant to stock-based awards, the calculation of our income tax provision, and the determination of accounting treatment for our business combinations. We base our estimates on contractual terms, historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Items Deducted from Gross Product Revenue

Product revenue is recorded at the product's list price and is reduced from the product's list price at the time of recognition for variable consideration that is offered within contracts between us and our customers, payors, and other indirect customers relating to the sale of WAKIX. Components of variable consideration include government (as detailed below) and commercial contracts, commercial co-payment assistance program, and distribution service fees. These deductions are based on the amounts earned, or to be claimed on the related sales, and are classified as a current liability or reduction of receivables in our consolidated balance sheet

The following table provides a summary of activity and ending balances of our sales allowances and accruals for the year ended December 31, 2025 (in thousands):

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Included in these amounts are immaterial adjustments related to prior-year sales due to changes in estimates.

We define our critical accounting policies as those under GAAP that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. During the year covered by this report, there were no material changes to the accounting policies and assumptions previously disclosed, except as disclosed in Note 3 to the consolidated financial statements contained herein.

Recent Accounting Pronouncements

See Note 3 to our consolidated financial statements included herein under "Part II-Item 8. Financial Statements and Supplementary Data." for more information.

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