Vanda Pharmaceuticals Inc.

Previous wording

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

Current wording

Our commercial portfolio is currently comprised of five products: Fanapt® and BYSANTITM 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 NEREUSTM for the prevention of vomiting induced by motion (collectively, our commercial products). In addition, we have a number of drugs and/or additional indications for current products in development, including:

Previous wording

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

Current wording

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

Previous wording

•Bysanti TM (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);

Current wording

•BYSANTITM (milsaperidone) for major depressive disorder (MDD);

Previous wording

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

Current wording

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

Previous wording

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

Current wording

•VQW-765, a small molecule alpha-7 nicotinic acetylcholine receptor partial agonist, for the treatment of social/performance anxiety and psychiatric disorders;

Previous wording

•VTR-297, a small molecule histone deacetylase (HDAC) inhibitor for the treatment of onychomycosis and hematologic malignancies and with potential use as a treatment for several oncology indications;

Current wording

•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; and

Previous wording

•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.

Current wording

•Antisense oligonucleotide (ASO) molecules, including VGA-157A for Parkinson’s disease, 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.

Previous wording

•A Bysanti™ Phase III clinical study for use as a once-daily adjunctive treatment for MDD is enrolling patients and results are expected in 2026.

Current wording

◦The Phase III study of BYSANTITM as a once-daily adjunctive treatment for major depressive disorder (MDD), with results expected in Q1 2027.

Previous wording

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 and PONVORY® in the U.S. and Canada, on our ability, alone or with others, to complete the development of our products, and to obtain the regulatory approvals for and to manufacture, market and sell our products. The results of our operations will vary significantly from year-to-year and quarter-to-quarter and depend on a number of factors, including risks related to our business, risks related to our industry, and other risks that are detailed in Part I, Item 1A, Risk Factors, of our annual report on Form 10-K (Annual Report) for the year ended December 31, 2024 and Item 1A, Risk Factors, of any Quarterly Report filed subsequent to our Annual Report.

Current wording

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 our commercial products, 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 our annual report on Form 10-K (Annual Report) for the year ended December 31, 2025 and Item 1A, Risk Factors, of any Quarterly Report filed subsequent to our Annual Report.

Previous wording

Revenue from net product sales. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We recognize revenue when control of the product is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for those product sales, which is typically once the product physically arrives at the customer. Sales tax, value-added taxes and usage-based taxes are excluded from revenues.

Current wording

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.

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 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, 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 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.

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 nine months ended September 30, 2025 and 2024, we constrained the variable consideration for HETLIOZ® net product sales. The constrained revenue relates to the uncertainties of payor utilization, patient demand and chargeback and rebate amounts, including Medicaid, related to the elevated levels of inventory on hand at the specialty pharmacies.

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.

Previous wording

Reserves for variable consideration are classified as product revenue allowances on the Condensed Consolidated Balance Sheets, with the exception of prompt-pay discounts, which are classified as reductions of accounts receivable. The reserve for product returns for which the product may not be returned for a period of greater than one year from the balance sheet date is included as a component of other non-current liabilities in the Condensed Consolidated Balance Sheets. Uncertainties related to variable consideration are generally resolved in the quarter subsequent to period end, with the exception of Medicaid rebates, which are dependent upon the timing of when states submit reimbursement claims, Medicare inflationary rebates, which are billed on an annual basis beginning in 2025, and product returns that are resolved during the product expiry period specified in the customer contract. Due to increased inventory stocking of HETLIOZ® at specialty pharmacy customers in 2025 and 2024, the time it takes to resolve these uncertainties could be longer than we have experienced prior to the entrance of generic competition. We currently record sales allowances for the following:

Current wording

Reserves for variable consideration are classified as product revenue allowances on the Condensed Consolidated Balance Sheets, with the exception of prompt-pay discounts, which are classified as reductions of accounts receivable. The reserve for product returns for which the product may not be returned for a period of greater than one year from the balance sheet date is included as a component of other non-current liabilities in the Condensed Consolidated Balance Sheets. Uncertainties related to variable consideration are generally resolved in the quarter subsequent to period end, with the exception of Medicaid rebates, which are dependent upon the timing of when states submit reimbursement claims, Medicare inflationary rebates, which are billed on an annual basis beginning in 2025, and product returns that are resolved during the product expiry period specified in the customer contract. 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:

Previous wording

•Rebates: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program as well as contracted rebate programs with other payors, including the Medicare Part D inflationary rebate effective October 1, 2022. Rebate amounts owed after the final dispensing of the product to a benefit plan participant are based upon contractual agreements or legal requirements with public sector benefit providers, such as Medicaid and Medicare. The allowances for rebates are based on statutory or contracted discount rates and estimated patient utilization.

Current wording

•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.

Previous wording

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

Current wording

•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.

Previous wording

•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 September 30, 2025 or December 31, 2024.

Current wording

•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 passed, prescription trends and other relevant factors. We do not expect returned products to be resalable. There was no right of return asset as of March 31, 2026 or December 31, 2025.

Previous wording

The following table summarizes sales discounts and allowance activity as of and for the nine months ended September 30, 2025:

Current wording

The following table summarizes sales discounts and allowance activity as of and for the three months ended March 31, 2026:

Previous wording

The provision of $75.4 million for rebates and chargebacks for the nine months ended September 30, 2025 and its ending balance at September 30, 2025 primarily represents Medicaid rebates applicable to sales of Fanapt® and, to a lesser extent, HETLIOZ®. The provision of $32.8 million for discounts, returns and other for the nine months ended September 30, 2025 primarily represents wholesaler distribution fees applicable to sales of Fanapt® and estimated product returns of Fanapt®, and co-pay assistance costs and prompt-pay discounts applicable to the sales of all of our commercial products.

Current wording

The provision of $28.5 million for rebates and chargebacks for the three months ended March 31, 2026 and its ending balance at March 31, 2026 primarily represent Medicaid rebates. The provision of $11.3 million for discounts, returns and other for the three months ended March 31, 2026 and its ending balance at March 31, 2026 primarily represents service fees, estimated product returns, co-pay assistance costs and prompt-pay discounts.

Previous wording

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

Current wording

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. We use the Monte Carlo model to determine the fair value of performance restricted share units (PSUs). The determination of the fair value of stock options and PSUs on the date of grant using a valuation 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 (stock options) or remaining performance period (PSUs) of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. Expected volatility rates are based on the historical volatility of our publicly traded common stock and other factors. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. We have never paid cash dividends to our stockholders and do not plan to pay dividends in the foreseeable future. As stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Previous wording

Research and development expenses. Research and development expenses consist primarily of fees for services provided by third parties in connection with the clinical trials, costs of contract manufacturing services for clinical trial use, milestone payments made under licensing agreements prior to regulatory approval, costs of materials used in clinical trials and research and development, costs for regulatory consultants and filings, depreciation of capital resources used to develop products, related facilities costs, and salaries, other employee-related costs and stock-based compensation for research and development personnel. We expense research and development costs as they are incurred for products in the development stage, including manufacturing costs and milestone payments made under license agreements prior to FDA approval. Upon and subsequent to FDA approval, manufacturing and milestone payments made under license agreements are capitalized. Milestone payments are accrued when it is deemed probable that the milestone event will be achieved. Costs related to the acquisition of intellectual property are expensed as incurred if the underlying technology is developed in connection with our research and development efforts and has no alternative future use.

Current wording

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.

Previous 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 pretax income. In 2024, we generated our first full year pretax loss since 2017, largely due to expenditures on the commercial launches of Fanapt® in bipolar I disorder and PONVORY® in RMS. Projected taxable income includes significant assumptions related to revenue, which could be affected by the success of the commercial launches of Fanapt® in bipolar I disorder and PONVORY® in RMS and HETLIOZ® generic competition, commercial and research and development activities, and our ability to obtain regulatory approval from the FDA for products or new indications in development, among other factors. As of September 30, 2025, after considering all available positive and negative evidence, we concluded, consistent with prior periods, that it was more likely than not that substantially all of our deferred tax assets in the U.S. are realizable in future periods. We maintain a valuation allowance against certain state net deferred tax assets. If our results are not in line with our projections or if our projections change, 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. An increase in the valuation allowance would result in a non-cash income tax expense during the period of change. Any such adjustment could have a material impact on our results of operations.

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 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, NEREUSTM in the prevention of vomiting induced by motion and BYSANTITM for the acute treatment of manic or mixed episodes associated with bipolar I disorder and for the treatment of schizophrenia, which was approved on February 20, 2026, 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. 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 have concluded that it is not more likely than not that substantially all of our deferred tax assets are realizable in future periods and maintained a valuation allowance against all net deferred tax assets as of March 31, 2026 and December 31, 2025. The valuation allowance was recorded in the fourth quarter of 2025, 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.

Previous wording

Inflation Reduction Act of 2022, any possible payments made or received pursuant to license agreements, progress of our research and development efforts, the timing and outcome of clinical trials and related possible regulatory approvals and the status of existing and future potential litigation involving our products and intellectual property. See Note 14, Legal Matters, to the condensed consolidated financial statements included in Part I of this Quarterly Report for information on material legal matters.

Current wording

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 the ongoing commercial launch of NEREUSTM for the prevention of vomiting induced by motion, which was approved in December 2025 and became commercially available in the U.S. on May 1, 2026, and the upcoming launch of BYSANTITM for the acute treatment of manic or mixed episodes associated with bipolar I disorder and for the treatment of schizophrenia, which was approved on February 20, 2026, 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 14, Legal Matters, to the condensed consolidated financial statements included in Part I of this Quarterly Report for information on material legal matters.

Previous wording

Revenues. Total revenues increased by $8.6 million, or 18%, to $56.3 million for the three months ended September 30, 2025 compared to $47.7 million for the three months ended September 30, 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:

Current wording

Revenues. Total revenues increased by $1.7 million, or 3%, to $51.7 million for the three months ended March 31, 2026 compared to $50.0 million for the three months ended March 31, 2025. Revenue from net product sales was as follows:

Previous wording

PONVORY® net product sales decreased by $1.5 million, or 7%, to $19.8 million for the nine months ended September 30, 2025 compared to $21.3 million for the nine months ended September 30, 2024. The decrease in net product sales was attributable to a decrease in price net of deductions. 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.

Current wording

Fanapt® net product sales increased by $6.0 million, or 26%, to $29.6 million for the three months ended March 31, 2026 compared to $23.5 million for the three months ended March 31, 2025. The increase to net product sales was primarily attributable to an increase in volume, partially offset by a decrease in price, net of deductions. 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.

Previous wording

Cost of goods sold. Cost of goods sold increased by $0.4 million, or 16%, to $3.0 million for the three months ended September 30, 2025 compared to $2.6 million for the three months ended September 30, 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. There are no third-party royalty costs on net sales of PONVORY®. We evaluate the risk of excess inventory and product expiry by evaluating current and future product demand relative to product shelf life and build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance, patient usage, and generic competition. Our inventory balance consisted of $1.7 million of Fanapt® product, $8.0 million of HETLIOZ® product and $0.3 million of PONVORY® product as of September 30, 2025.

Current wording

Cost of goods sold. Cost of goods sold decreased by $0.4 million, or 10%, to $3.2 million for the three months ended March 31, 2026 compared to $3.5 million for the three months ended March 31, 2025. 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 NEREUSTM net product sales in the U.S. are tiered, up to the low double digits, and began with the U.S. commercial launch of NEREUSTM on May 1, 2026. 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 $7.5 million of HETLIOZ® product and $3.0 million of other products as of March 31, 2026. Our inventory balance consisted of $7.8 million of HETLIOZ® product and $3.2 million of other products as of December 31, 2025.

Previous wording

Research and development expenses. Research and development expenses increased by $25.7 million, or 47%, to $80.3 million for the nine months ended September 30, 2025 compared to $54.6 million for the nine months ended September 30, 2024. The increase in research and development expenses 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 Bysanti TM development programs, partially offset by a decrease in expenses for our tradipitant development program.

Current wording

Research and development expenses. Research and development expenses decreased by $7.3 million, or 20%, to $28.4 million for the three months ended March 31, 2026 compared to $35.7 million for the three months ended March 31, 2025. The decrease was primarily due to lower expenses on our imsidolimab program, partially offset by an increase in expenses for our VQW-765 andvarious of our other development programs. The three months ended March 31, 2025 included an upfront payment to AnaptysBio, Inc. for the exclusive, global license to develop, manufacture, and commercialize imsidolimab and drug supply.

Previous wording

Selling, general and administrative expenses. Selling, general and administrative expenses increased by $22.7 million, or 60%, to $60.3 million for the three months ended September 30, 2025 compared to $37.6 million for the three months ended September 30, 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. A direct-to-consumer campaign that started in the first quarter of 2025 continued in the second and third quarters 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.

Current wording

Selling, general and administrative expenses. Selling, general and administrative expenses increased by $18.3 million, or 36%, to $68.4 million for the three months ended March 31, 2026 compared to $50.1 million for the three months ended March 31, 2025. The increase in selling, general and administrative expenses was primarily the result of an increase in spending on our continued commercialization efforts for Fanapt® in bipolar disorder and PONVORY® in RMS, including the expansion of our sales force during 2025. Selling, general and administrative expenses may increase in future periods as a result of the ongoing commercial launches, including the U.S. commercial launch of NEREUSTM initiated on May 1, 2026, as well as the other future commercial launches.

Previous wording

Intangible asset amortization. Intangible asset amortization was $1.8 million each for the three months ended September 30, 2025 and 2024.

Current wording

Intangible asset amortization. Intangible asset amortization was $2.0 million for the three months ended March 31, 2026 compared to $1.8 million for the three months ended March 31, 2025. Intangible asset amortization increased in 2026 due to the amortization of the NEREUSTM intangible asset, which was capitalized in December 2025.

Previous wording

Other income. Other income was $2.9 million for the three months ended September 30, 2025 compared to $4.8 million for the three months ended September 30, 2024. Other income primarily consists of investment income on our marketable securities.

Current wording

Other income, net. Other income, net was $1.8 million for the three months ended March 31, 2026 compared to $3.7 million for the three months ended March 31, 2025. Other income primarily consists of investment income on our marketable securities.

Previous wording

Benefit for income taxes. An income tax benefit of $5.8 million and $0.9 million was recorded for the three months ended September 30, 2025 and 2024, respectively. The income tax benefit for each of the three months ended September 30, 2025 and 2024 was primarily driven by the estimated effective tax rate for the year as well as discrete income tax expense of $0.1 million and $0.2 million, respectively.

Current wording

Provision (benefit) for income taxes. We recorded an income tax provision of $0.1 million and a benefit for income taxes of $7.9 million for the three months ended March 31, 2026 and 2025, respectively. The income tax provision for the three months ended March 31, 2026 was driven by discrete income tax expense of $0.1 million. The income tax benefit for the three months ended March 31, 2025 was primarily driven by the estimated effective tax rate for the year as well as discrete income tax expense of $0.5 million.

Previous wording

As of September 30, 2025, our total cash and cash equivalents and marketable securities were $293.8 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.

Current wording

As of March 31, 2026, our total cash and cash equivalents and marketable securities were $202.3 million compared to $263.8 million at December 31, 2025. 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

In the normal course of our business, we regularly enter into agreements with third-party vendors under fee service arrangements which generally may be terminated on 90 days’ notice without incurring additional charges, other than charges for work completed or materials procured but not paid for through the effective date of termination and other costs incurred by our contractors in closing out work in progress as of the effective date of termination. Our non-cancellable purchase commitments for agreements with a remaining non-cancellable term longer than one year from September 30, 2025 primarily relate to commitments for data services and marketing activities. 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.

Current wording

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 March 31, 2026 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, Commitments and Contingencies, to the condensed consolidated financial statements included in Part I of this Quarterly Report for more information about these commitments.

Previous wording

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

Current wording

Based on our current operating plans, which include continued investment in support of our commercial products, including the ongoing commercial launch of NEREUSTM for the prevention of vomiting induced by motion, which became commercially available in the U.S. on May 1, 2026, and the upcoming commercial launch of BYSANTITM for the acute treatment of manic or mixed episodes associated with bipolar I disorder and for the treatment of schizophrenia, continued clinical development of our commercial and other products, pursuit of regulatory approval of 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 as of the date the financial statements were issued. Our activities will necessitate significant working capital through 2026 and beyond, and future cash requirements and the adequacy of our available funds will depend on many factors, primarily including our ability to generate revenue, the scope and costs of our commercial, manufacturing and process development activities, including the commercial launches of NEREUSTM and BYSANTITM, a regulatory approval of imsidolimab, the magnitude of our discovery, preclinical and clinical development programs and potential costs to acquire or license the rights to additional products.

Previous wording

The following table summarizes our net cash flows from operating, investing and financing activities for the nine months ended September 30, 2025 and 2024:

Current wording

The following table summarizes our net cash flows from operating, investing and financing activities for the three months ended March 31, 2026 and 2025:

Previous wording

Investing Activities: Cash flows provided by investing activities during the nine months ended September 30, 2025 were $50.0 million, an increase of $71.4 million compared to $21.4 million cash used in investing activities during the nine months ended September 30, 2024. The change in investing activities primarily reflects the timing of reinvestment of available cash and cash equivalents and maturities of the investments in our portfolio of marketable securities. Additionally, the $4.2 million asset acquisition cash flow during the nine months ended September 30, 2024 relates to the payment of the remaining consideration for the PONVORY® acquisition that was accrued as of December 31, 2023.

Current wording

Investing Activities. Cash flows provided by investing activities during the three months ended March 31, 2026 were $20.2 million, a decrease of $23.7 million compared to $43.9 million during the three months ended March 31, 2025. 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 $10.0 million milestone payment owed to Eli Lilly and Company for the FDA’s approval of NEREUSTM for the prevention of vomiting induced by motion was accrued as of December 31, 2025 and paid in 2026.

Previous wording

Financing Activities: Financing activities include principal payments for our finance lease liabilities and tax obligations paid in connection with settlement of restricted stock units. Cash flows used in financing activities during the nine months ended September 30, 2025 were $2.3 million. There were no financing cash flows for the nine months ended September 30, 2024.

Current wording

Financing Activities. Cash flows used in financing activities during the three months ended March 31, 2026 were $0.8 million, a decrease of $0.5 million compared to $1.3 million during the three months ended March 31, 2025. Financing activities include principal payments for our finance lease liabilities and tax obligations paid in connection with settlement of restricted stock units.