Vanda Pharmaceuticals Inc

Previous wording

•Milsaperidone (VHX-896), the active metabolite of Fanapt® (iloperidone), for the acute treatment of manic or mixed episodes associated with bipolar I disorder and for the treatment of schizophrenia;

Current wording

•Milsaperidone (VHX-896), the active metabolite of Fanapt® (iloperidone), for the acute treatment of manic or mixed episodes associated with bipolar I disorder and for the treatment of schizophrenia and major depressive disorder;

Previous wording

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

Current wording

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

Previous wording

•Fanapt®: We initiated the commercial launch of Fanapt® for the treatment of bipolar I disorder in adults in the third quarter of 2024, including the expansion of its existing sales force and the introduction of prescriber awareness and comprehensive marketing programs.

Current wording

•Fanapt®: We initiated the commercial launch of Fanapt® for the acute treatment of bipolar I disorder in adults in the third quarter of 2024, which included the expansion of our existing sales force and the introduction of prescriber awareness and comprehensive marketing programs. Several lead indicators suggest a strong initial market response including new patient starts as reflected by new to brand prescriptions (NBRx), increasing by over 90% in the third quarter of 2024 as compared to the third quarter of 2023.

Previous wording

•Milsaperidone: We expect to submit a New Drug Application (NDA) for milsaperidone (also known as VHX-896 and P-88), the active metabolite of Fanapt®, for the treatment of schizophrenia and acute bipolar I disorder to the FDA in early 2025.

Current wording

•Milsaperidone: We expect to submit a New Drug Application (NDA) for milsaperidone (also known as VHX-896 and P-88), the active metabolite of Fanapt®, for the treatments of schizophrenia and acute bipolar I disorder to the FDA in early 2025. We expect to initiate a Phase III program for milsaperidone for major depressive disorder (MDD) by the end of 2024.

Previous wording

•Iloperidone LAI: We expect to initiate a Phase III program for the LAI formulation of Fanapt® by the end of 2024.

Current wording

•Iloperidone LAI: We expect to initiate a Phase III program for the LAI formulation of Fanapt® in the fourth quarter of 2024.

Previous wording

•We continue to pursue FDA approval for HETLIOZ® for the treatment of jet lag disorder and insomnia. We are challenging the FDA’s rejection of our supplemental New Drug Application (sNDA) for the treatment of jet lag disorder in the U.S. Court of Appeals for the D.C. Circuit. We have accepted the opportunity for a hearing with the FDA on the approvability of the insomnia sNDA.

Current wording

•We continue to pursue FDA approval for HETLIOZ® for the treatments of jet lag disorder and insomnia. We are challenging the FDA’s rejection of our supplemental New Drug Application (sNDA) for the treatment of jet lag disorder in the U.S. Court of Appeals for the D.C. Circuit. We have accepted the opportunity for a hearing with the FDA on the approvability of the insomnia sNDA.

Previous wording

•We announced in May 2024 that ownership of the United States (U.S.) NDA and Investigational New Drug (IND) applications for PONVORY® had been transferred to us from a Johnson & Johnson Company. We initiated the commercial launch of PONVORY® for the treatment of relapsing forms of multiple sclerosis in the third quarter of 2024 including the deployment of a specialty sales force.

Current wording

•We initiated the commercial launch of PONVORY® for the treatment of relapsing forms of multiple sclerosis in the third quarter of 2024, which included the deployment of a specialty sales force.

Previous wording

•We expect to file IND applications with the FDA for PONVORY® in the treatment of psoriasis and ulcerative colitis, in 2024.

Current wording

•We expect IND applications for PONVORY® in the treatments of psoriasis and ulcerative colitis to be completed in the fourth quarter of 2024.

Previous wording

•In May 2024, we announced positive results from the second Phase III study of tradipitant for the treatment of motion sickness. We expect to submit an NDA for the treatment of motion sickness to the FDA in the fourth quarter of 2024. An eventual NDA approval of tradipitant for the treatment of motion sickness would significantly expand the addressable patient population, with approximately 30% of the U.S. population reported to suffer from motion sickness under ordinary travel conditions that include travel by sea, air and land.

Current wording

•Motion Sickness NDA: We expect to submit an NDA for tradipitant for the treatment of motion sickness to the FDA in the fourth quarter of 2024. The NDA for the treatment of motion sickness is expected to include the positive results of three placebo controlled clinical studies where tradipitant was effective in preventing vomiting associated with motion.

Previous wording

•VPO-227, a CFTR inhibitor for the treatment of cholera, has received approval to proceed in a Phase I study in Bangladesh, a country where treatment of cholera remains a significant and unmet need. We plan to initiate this study by the end of 2024.

Current wording

•VPO-227, a CFTR inhibitor for the treatment of cholera, has received approval to proceed in a Phase I study in Bangladesh, a country where the treatment of cholera remains a significant and unmet need. We plan to initiate this study by the end of 2024.

Previous wording

•The Phase I clinical study for VCA-894A for the treatment of a patient with Charcot-Marie-Tooth disease, axonal, type 2S (CMT2S), an inherited peripheral neuropathy for which there is no available treatment, expects to enroll the patient in mid-2024.

Current wording

•The Phase I clinical study for VCA-894A for the treatment of a patient with Charcot-Marie-Tooth disease, axonal, type 2S (CMT2S), an inherited peripheral neuropathy for which there is no available treatment, expects to enroll the patient by the end of 2024.

Previous wording

•The Phase I clinical study of VTR-297 for the treatment of onychomycosis, a fungal infection of the nail, was initiated in April 2024. The study is over 75% enrolled and is expected to be completed in the third quarter of 2024.

Current wording

•The Phase I clinical study for VTR-297 for the treatment of onychomycosis, a fungal infection of the nail, was initiated in April 2024. The study is fully enrolled, and results are expected by the end of 2024.

Previous wording

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 specialty distributors. We invoice and record revenue when 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 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.

Current wording

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 specialty distributors and specialty pharmacies. We invoice and record revenue when 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 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.

Previous wording

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 six months ended June 30, 2024 and 2023, 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, and other reserves related to transactions that resulted in elevated levels of inventory at specialty pharmacy customers.

Current wording

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 nine months ended September 30, 2024 and 2023, 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, and other reserves related to transactions that resulted in elevated levels of inventory at specialty pharmacy customers.

Previous wording

Medicare Part D coverage gap: The Medicare Part D prescription drug benefit requires manufacturers to fund approximately 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients for applicable drugs. We account for the Medicare Part D coverage gap using a point of sale model. Estimates for expected Medicare Part D coverage gap are based in part on historical activity and, where available, actual and pending prescriptions when we have validated the insurance benefits. Beginning January 1, 2025, the Medicare Part D coverage gap discount program will be replaced with a new discounting program under the Inflation Reduction Act of 2022.

Current wording

Medicare Part D coverage gap: The Medicare Part D prescription drug benefit requires manufacturers to fund approximately 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients for applicable drugs. We account for the Medicare Part D coverage gap using a point of sale model. Estimates for expected Medicare Part D coverage gap are based in part on historical activity and, where available, actual and pending prescriptions when we have validated the insurance benefits. Beginning January 1, 2025, the Medicare Part D coverage gap discount program will be replaced with a new discounting program under the Inflation Reduction Act of 2022. The implementation of the new discounting program is expected to result in higher discounts for our Medicare payor segment relative to the current Medicare Part D prescription drug benefit program.

Previous wording

The following table summarizes sales discounts and allowance activity as of and for the six months ended June 30, 2024:

Current wording

The following table summarizes sales discounts and allowance activity as of and for the nine months ended September 30, 2024:

Previous wording

The provision of $41.5 million for rebates and chargebacks for the six months ended June 30, 2024 and its ending balance at June 30, 2024 primarily represents Medicaid rebates applicable to sales of Fanapt® and, to a lesser extent, HETLIOZ®. The provision of $14.8 million for discounts, returns and other for the six months ended June 30, 2024 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 both Fanapt® and HETLIOZ®.

Current wording

The provision of $57.5 million for rebates and chargebacks for the nine months ended September 30, 2024 and its ending balance at September 30, 2024 primarily represents Medicaid rebates applicable to sales of Fanapt® and, to a lesser extent, HETLIOZ®. The provision of $22.2 million for discounts, returns and other for the nine months ended September 30, 2024 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 across our commercial products.

Previous wording

Income taxes. We assess the need for a valuation allowance against our deferred tax asset each quarter through the review of all available positive and negative evidence. Deferred tax assets are reduced by a tax valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. The analysis is highly dependent upon historical and projected taxable income. Projected taxable income includes significant assumptions related to revenue, commercial expenses and research and development activities, which could be affected by the HETLIOZ® generic competition and our ability to obtain regulatory approval from the FDA for products or new indications in development, among other factors. 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.

Current wording

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 taxable income. Since 2018, we have generated annual pretax income in the U.S. Projected taxable income includes significant assumptions related to revenue, commercial expenses and research and development activities, which could be affected by the HETLIOZ® generic competition, the commercial launches of Fanapt® in bipolar disorder and PONVORY® in relapsing forms of MS, 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.

Previous wording

Revenues. Total revenues increased by $4.4 million, or 10%, to $50.5 million for the three months ended June 30, 2024 compared to $46.1 million for the three months ended June 30, 2023. Revenues were as follows:

Current wording

Revenues. Total revenues increased by $8.8 million, or 23%, to $47.7 million for the three months ended September 30, 2024 compared to $38.8 million for the three months ended September 30, 2023. Revenues were as follows:

Previous wording

Fanapt® net product sales decreased by $3.2 million, or 7%, to $43.7 million for the six months ended June 30, 2024 compared to $47.0 million for the six months ended June 30, 2023. The decrease to net product sales was attributable to a decrease in volume. We initiated the commercial launch of Fanapt® for bipolar I disorder in adults in the third quarter of 2024.

Current wording

Fanapt® net product sales increased by $2.6 million, or 12%, to $23.9 million for the three months ended September 30, 2024 compared to $21.3 million for the three months ended September 30, 2023. The increase to net product sales was attributable to an increase in price net of deductions and volume. We initiated the commercial launch of Fanapt® for bipolar I disorder in adults in the third quarter of 2024.

Previous wording

HETLIOZ® net product sales decreased by $3.3 million, or 15%, to $18.7 million for the three months ended June 30, 2024 compared to $22.0 million for the three months ended June 30, 2023. The decrease to net product sales was attributable to a decrease in price net of deductions, including the impact of changes in constrained revenue. 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 at March 31, 2024 and June 30, 2024. Going forward, HETLIOZ® net product sales may reflect lower unit sales as a result of reduction of the elevated inventory levels at specialty pharmacy customers or may be variable depending upon when specialty pharmacy customers need to purchase again. Further, HETLIOZ® net product sales will likely decline in future periods, potentially significantly, related to continued generic competition in the U.S. We constrained HETLIOZ® net product sales for the three months ended June 30, 2024 and 2023 to an amount not probable of significant revenue reversal. The amount of revenue recognized during the three months ended June 30, 2024 related to changes in estimates on revenue constrained during the first quarter of 2024 and 2023 was $0.7 million and $4.8 million, respectively. 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.

Current wording

HETLIOZ® net product sales increased by $0.4 million, or 2%, to $17.9 million for the three months ended September 30, 2024 compared to $17.5 million for the three months ended September 30, 2023. The increase to net product sales was attributable to an increase in volume, partially offset by a decrease in price net of deductions, including the impact of changes in constrained revenue. 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 at March 31, 2024, June 30, 2024 and September 30, 2024. Going forward, HETLIOZ® net product sales may reflect lower unit sales as a result of reduction of the elevated inventory levels at specialty pharmacy customers or may be variable depending upon when specialty pharmacy customers need to purchase again. Further, HETLIOZ® net product sales will likely decline in future periods, potentially significantly, related to continued generic competition in the U.S. We constrained HETLIOZ® net product sales for the three months ended September 30, 2024 and 2023 to an amount not probable of significant revenue reversal. The amount of revenue recognized during the three months ended September 30, 2024 and 2023 related to changes in estimates on revenue constrained during the second quarter of 2024 and 2023 was $0.8 million and $0.3 million, respectively. 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.

Previous wording

In December 2023, we completed the acquisition of the U.S. and Canadian rights to PONVORY® from Actelion Pharmaceuticals Ltd. (Janssen), a Johnson & Johnson Company. PONVORY® net product sales increased by $1.8 million, or 26%, to $8.6 million for the three months ended June 30, 2024 compared to $6.8 million for the three months ended March 31, 2024. The increase in net product sales was attributable to an increase in price net of deductions, partially offset by a decrease in volume. We initiated the commercial launch of PONVORY® in relapsing forms of MS in the third quarter of 2024.

Current wording

In December 2023, we completed the acquisition of the U.S. and Canadian rights to PONVORY® from Actelion Pharmaceuticals Ltd. (Janssen), a Johnson & Johnson Company. PONVORY® net product sales decreased by $2.8 million, or 32%, to $5.9 million for the three months ended September 30, 2024 compared to $8.6 million for the three months ended June 30, 2024. The decrease in net product sales was attributable to a decrease in volume and price net of deductions. We initiated the commercial launch of PONVORY® in relapsing forms of MS in the third quarter of 2024.

Previous wording

Cost of goods sold. Cost of goods sold decreased by $0.8 million, or 22%, to $2.7 million for the three months ended June 30, 2024 compared to $3.5 million for the three months ended June 30, 2023. 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. 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 included $2.2 million and $3.0 million of Fanapt® product as of June 30, 2024 and December 31, 2023, respectively, and $7.2 million of HETLIOZ® product as of June 30, 2024 and December 31, 2023.

Current wording

Cost of goods sold. Cost of goods sold decreased by $0.5 million, or 17%, to $2.6 million for the three months ended September 30, 2024 compared to $3.1 million for the three months ended September 30, 2023. 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. 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 included $2.1 million and $3.0 million of Fanapt® product and $7.3 million and $7.2 million of HETLIOZ® product as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

Research and development expenses. Research and development expenses were $16.7 million for the three months ended June 30, 2024 compared to $16.6 million for the three months ended June 30, 2023.

Current wording

Research and development expenses. Research and development expenses increased by $0.2 million, or 1.1%, to $16.8 million for the three months ended September 30, 2024 compared to $16.6 million for the three months ended September 30, 2023. The increase was primarily due to an increase in expenses associated with our milsaperidone development program partially offset by expenses associated with our tradipitant development program.

Previous wording

Selling, general and administrative expenses. Selling, general and administrative expenses increased by $11.1 million, or 39%, to $39.5 million for the three months ended June 30, 2024 compared to $28.4 million for the three months ended June 30, 2023. 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 relapsing forms of MS, as well as legal and other corporate activities. During the first half of 2024, we commenced a host of commercial activities, including an expansion of our sales force, primarily in the second quarter of 2024, as well as the development of prescriber awareness and comprehensive marketing programs in preparation for the launches of Fanapt® in bipolar disorder and PONVORY® in relapsing forms of MS which were initiated in the third quarter of 2024. Selling, general and administrative expenses may increase in future periods as a result of the ongoing commercial launches of Fanapt in bipolar disorder and PONVORY® in relapsing forms of MS.

Current wording

Selling, general and administrative expenses. Selling, general and administrative expenses increased by $12.8 million, or 52%, to $37.6 million for the three months ended September 30, 2024 compared to $24.8 million for the three months ended September 30, 2023. 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 relapsing forms of MS, as well as legal and other corporate activities. During the first nine months of 2024, we commenced a host of commercial activities as part of our commercial launches of Fanapt® in bipolar disorder and PONVORY® in multiple sclerosis, 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 of Fanapt® in bipolar disorder and PONVORY® in relapsing forms of MS, which were initiated in the third quarter of 2024.

Previous wording

Other income. Other income was $4.6 million for the three months ended June 30, 2024 compared to $5.5 million for the three months ended June 30, 2023. Other income primarily consists of investment income on our marketable securities.

Current wording

Other income. Other income was $4.8 million for the three months ended September 30, 2024 compared to $5.9 million for the three months ended September 30, 2023. Other income primarily consists of investment income on our marketable securities.

Previous wording

Provision for income taxes. An income tax benefit of $1.0 million and a provision for income taxes of $1.1 million was recorded for the three months ended June 30, 2024 and 2023, respectively. The income tax expense (benefit) for each of the three months ended June 30, 2024 and 2023 was primarily driven by the estimated effective tax rate for the year as well as discrete income tax expense of $0.2 million and $0.8 million, respectively.

Current wording

Provision for income taxes. An income tax benefit of $0.9 million and $0.3 million was recorded for the three months ended September 30, 2024 and 2023, respectively. The income tax benefit for each of the three months ended September 30, 2024 and 2023 was primarily driven by the estimated effective tax rate for the year as well as discrete income tax expense of $0.2 million.

Previous wording

Revenues. Total revenues decreased by $10.6 million, or 10%, to $97.9 million for the six months ended June 30, 2024 compared to $108.6 million for the six months ended June 30, 2023. Revenues were as follows:

Current wording

Revenues. Total revenues decreased by $1.8 million, or 1%, to $145.6 million for the nine months ended September 30, 2024 compared to $147.4 million for the nine months ended September 30, 2023. Revenues were as follows:

Previous wording

HETLIOZ® net product sales decreased by $22.8 million, or 37%, to $38.8 million for the six months ended June 30, 2024 compared to $61.6 million for the six months ended June 30, 2023. The decrease to net product sales was attributable to a decrease in volume, partially offset by an increase in price net of deductions. 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 at March 31, 2024 and June 30, 2024. Going forward, HETLIOZ® net product sales may reflect lower unit sales as a result of reduction of the elevated inventory levels at specialty pharmacy customers or may be variable depending on when specialty pharmacy customers need to purchase again. Further, HETLIOZ® net product sales will likely decline in future periods, potentially significantly, related to continued generic competition in the U.S. We constrained HETLIOZ® net product sales for the six months ended June 30, 2024 and 2023 to an amount not probable of significant revenue reversal. The amount of revenue recognized during the six months ended June 30, 2024 related to changes in estimates on revenue constrained during 2023 was $1.6 million. HETLIOZ® net product sales could experience variability in future periods as the remaining uncertainties associated with variable consideration related to inventory stocking by specialty pharmacy customers are resolved.

Current wording

HETLIOZ® net product sales decreased by $22.5 million, or 28%, to $56.6 million for the nine months ended September 30, 2024 compared to $79.1 million for the nine months ended September 30, 2023. The decrease to net product sales was attributable to a decrease in volume, partially offset by an increase in price net of deductions. 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 at March 31, 2024, June 30, 2024 and September 30, 2024. Going forward, HETLIOZ® net product sales may reflect lower unit sales as a result of reduction of the elevated inventory levels at specialty pharmacy customers or may be variable depending on when specialty pharmacy customers need to purchase again. Further, HETLIOZ® net product sales will likely decline in future periods, potentially significantly, related to continued generic competition in the U.S. We constrained HETLIOZ® net product sales for the nine months ended September 30, 2024 and 2023 to an amount not probable of significant revenue reversal. The amount of revenue recognized during the nine months ended September 30, 2024 related to changes in estimates on revenue constrained during 2023 was $1.4 million. HETLIOZ® net product sales could experience variability in future periods as the remaining uncertainties associated with variable consideration related to inventory stocking by specialty pharmacy customers are resolved.

Previous wording

In December 2023, we completed the acquisition of the U.S. and Canadian rights to PONVORY®from Janssen. PONVORY® net product sales were $15.4 million for the six months ended June 30, 2024. We initiated the commercial launch of PONVORY® in relapsing forms of MS in the third quarter of 2024.

Current wording

In December 2023, we completed the acquisition of the U.S. and Canadian rights to PONVORY®from Janssen. PONVORY® net product sales were $21.3 million for the nine months ended September 30, 2024. We initiated the commercial launch of PONVORY® in relapsing forms of MS in the third quarter of 2024.

Previous wording

Cost of goods sold. Cost of goods sold decreased by $2.1 million, or 25%, to $6.2 million for the six months ended June 30, 2024 compared to $8.3 million for the six months ended June 30, 2023. 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. 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 included $2.2 million and $3.0 million of Fanapt® product as of June 30, 2024 and December 31, 2023, respectively, and $7.2 million of HETLIOZ® product as of June 30, 2024 and December 31, 2023.

Current wording

Cost of goods sold. Cost of goods sold decreased by $2.6 million, or 23%, to $8.7 million for the nine months ended September 30, 2024 compared to $11.3 million for the nine months ended September 30, 2023. 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. 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 included $2.1 million and $3.0 million of Fanapt® product and $7.3 million and $7.2 million of HETLIOZ® product as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

Research and development expenses. Research and development expenses increased by $1.9 million, or 5%, to $37.8 million for the six months ended June 30, 2024 compared to $35.9 million for the six months ended June 30, 2023. The increase in research and development expenses was associated an increase in expenses associated with our PONVORY® and CFTR development programs, partially offset by a decrease in expenses associated with our other development programs, which include expenses incurred on product discovery such as ASO.

Current wording

Research and development expenses. Research and development expenses increased by $2.1 million, or 4%, to $54.6 million for the nine months ended September 30, 2024 compared to $52.5 million for the nine months ended September 30, 2023. The increase in research and development expenses was associated an increase in expenses associated with our PONVORY® and CFTR development programs, partially offset by a decrease in expenses associated with our Fanapt®, tradipitant and other development programs, which include expenses incurred on product discovery such as ASO.

Previous wording

The following table summarizes the costs of our product development initiatives for the six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes the costs of our product development initiatives for the nine months ended September 30, 2024 and 2023:

Previous wording

Selling, general and administrative expenses. Selling, general and administrative expenses increased by $5.1 million, or 8%, to $69.6 million for the six months ended June 30, 2024 compared to $64.5 million for the six months ended June 30, 2023. 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 relapsing forms of MS, as well as legal and other corporate activities. During the first half of 2024, we commenced a host of commercial activities, including an expansion of our sales force, primarily in the second quarter of 2024, as well as the development of prescriber awareness and comprehensive marketing programs in preparation for the launches of Fanapt® in bipolar disorder and PONVORY® in relapsing forms of MS which were initiated in the third quarter of 2024. Selling, general and administrative expenses may increase in future periods as a result of the ongoing commercial launches of Fanapt in bipolar disorder and PONVORY® in relapsing forms of MS.

Current wording

Selling, general and administrative expenses. Selling, general and administrative expenses increased by $17.9 million, or 20%, to $107.1 million for the nine months ended September 30, 2024 compared to $89.3 million for the nine months ended September 30, 2023. 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 relapsing forms of MS, as well as legal and other corporate activities. During the first nine months of 2024, we commenced a host of commercial activities as part of our commercial launches of Fanapt® in bipolar disorder and PONVORY® in multiple sclerosis, 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 of Fanapt® in bipolar disorder and PONVORY® in relapsing forms of MS, which were initiated in the third quarter of 2024.

Previous wording

Intangible asset amortization. Intangible asset amortization was $3.8 million and $0.8 million for the six months ended June 30, 2024 and 2023, respectively. Amortization expense increased in 2024 due to amortization on the intangible asset from the rights to PONVORY® in the U.S. and Canada which were acquired in December 2023.

Current wording

Intangible asset amortization. Intangible asset amortization was $5.5 million and $1.1 million for the nine months ended September 30, 2024 and 2023, respectively. Amortization expense increased in 2024 due to amortization on the intangible asset from the rights to PONVORY® in the U.S. and Canada which were acquired in December 2023.

Previous wording

Other income. Other income was $9.2 million for the six months ended June 30, 2024 compared to $9.0 million for the six months ended June 30, 2023. Other income primarily consists of investment income on our marketable securities.

Current wording

Other income. Other income was $14.0 million for the nine months ended September 30, 2024 compared to $14.9 million for the nine months ended September 30, 2023. Other income primarily consists of investment income on our marketable securities.

Previous wording

Provision for income taxes. We recorded an income tax benefit of $1.5 million and provision for income taxes of $3.3 million for the six months ended June 30, 2024 and 2023, respectively. The income tax expense (benefit) for the six months ended June 30, 2024 and 2023 was primarily driven by the estimated effective tax rate for the year, as well as discrete income tax expense of $0.8 million and $1.8 million, respectively.

Current wording

Provision for income taxes. We recorded an income tax benefit of $2.4 million and provision for income taxes of $3.1 million for the nine months ended September 30, 2024 and 2023, respectively. The income tax expense (benefit) for the nine months ended September 30, 2024 and 2023 was primarily driven by the estimated effective tax rate for the year, as well as discrete income tax expense of $1.0 million and $2.1 million, respectively.

Previous wording

As of June 30, 2024, our total cash and cash equivalents and marketable securities were $387.7 million compared to $388.3 million at December 31, 2023. 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.

Current wording

As of September 30, 2024, our total cash and cash equivalents and marketable securities were $376.3 million compared to $388.3 million at December 31, 2023. 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.

Previous wording

We also have long-term contractual obligations related to our operating 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 9, Commitments and Contingencies, to the condensed consolidated financial statements included in Part I of this Quarterly Report.

Current wording

We also have long-term contractual obligations related to our operating leases and license agreements. Other than the lease agreement discussed in Note 9, Commitments and Contingencies, to the condensed consolidated financial statements in Part I of this Quarterly Report, 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 9, Commitments and Contingencies, to the condensed consolidated financial statements included in Part I of this Quarterly Report.

Previous wording

The following table summarizes our net cash flows from operating and investing activities for the six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes our net cash flows from operating and investing activities for the nine months ended September 30, 2024 and 2023: