Vanda Pharmaceuticals Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Business Organization and Presentation

Business Organization

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

The Company’s commercial portfolio is currently comprised offive 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, the Company’s commercial products). In addition, the Company has a number of drugs and/or additional indications for current products in development, including:

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

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

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

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

•Imsidolimab, an IL-36R antagonist, for the treatment of generalized pustular psoriasis (GPP);

•NEREUSTM(tradipitant) for the prevention of vomiting induced by GLP-1 receptor agonists and the treatment of gastroparesis;

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

•Portfolio of Cystic Fibrosis Transmembrane Conductance Regulator (CFTR) activators and inhibitors, including VSJ-110 for the treatment of dry eye and ocular inflammation and VPO-227 for the treatment of secretory diarrhea disorders, including cholera;

•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

•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.

Based on the Company’s current operating plans, which include continued investment in support of its 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 its commercial and other products, pursuit of regulatory approval of imsidolimab, pursuit of further regulatory approvals for its currently approved products and payments due upon achievement of milestones under its license agreements, the Company believes that its 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. The Company’s activities will necessitate significant working capital through 2026 and beyond, and future cash requirements and the adequacy of its available funds will depend on many factors, primarily including the Company’s ability to generate revenue, the scope and costs of its commercial, manufacturing and process development activities, including the commercial launches of NEREUSTM and BYSANTITM, a regulatory approval of imsidolimab, the magnitude of its discovery, preclinical and clinical development programs and potential costs to acquire or license the rights to additional products. The Company may need or desire to obtain additional capital to finance its operations through debt, equity or alternative financing arrangements. The Company may also seek capital through collaborations or partnerships with other companies. If the Company is unable to obtain additional financing, it may be required to reduce the scope of its future activities.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Vanda Pharmaceuticals Inc. and its wholly-owned subsidiaries and have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K (Annual Report) for the fiscal year ended December 31, 2025. The financial information as of March 31, 2026 and for the three months ended March 31, 2026 and 2025 is unaudited, but in the opinion of management, all adjustments considered necessary for a fair statement of the results for these interim periods have been included. All intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated balance sheet data as of December 31, 2025 was derived from audited financial statements but does not include all disclosures required by GAAP. The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or any future year or period.

2. Summary of Significant Accounting Policies

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

Use of Estimates

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

Cash, Cash Equivalents and Restricted Cash

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

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total end of period cash, cash equivalents and restricted cash reported within the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025:

Revenue from Net Product Sales

Net sales by product for the three months ended March 31, 2026 and 2025 were as follows:

Since the entrance of generic competition in the first quarter of 2023, HETLIOZ® dispenses have decreased. Additionally, inventory levels at the Company’s specialty pharmacy customers have been elevated relative to inventory levels prior to the entrance of generic competition. HETLIOZ® net product sales have been and may continue to fluctuate from quarter to quarter depending on when specialty pharmacy customers purchase again. HETLIOZ® net product sales may decline in future periods, potentially significantly, related to continued generic competition in the U.S.

The Company recognized a decrease to net product sales of $1.5 million during the three months ended March 31, 2026 and an increase to net product sales of $3.8 million during the three months ended March 31, 2025 for changes in estimates on variable consideration for performance obligations satisfied in previous periods across the Company’s commercial products. The elevated levels of HETLIOZ® inventory have resulted in longer periods to resolve uncertainties related to variable consideration. Furthermore, 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. An amount of variable consideration related to PONVORY® net product sales is also subject to dispute, of which approximately $3.0 million was recognized for the three months ended December 31, 2024.

Major Customers

Fanapt® is available in the United States (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. The Company invoices and records revenue when its customers, wholesalers, specialty pharmacies and specialty distributors, receive product from the third-party logistics warehouse, which is the point at which control is transferred to the customer. Revenues and accounts receivable are concentrated with these customers. Outside the U.S., the Company has a distribution agreement for the commercialization of Fanapt® in Israel and sells HETLIOZ® in Germany. There were four major customers that each accounted for more than 10% of total revenues and, as a group, represented 75% of total revenues for the three months ended March 31, 2026. There were four major customers that each accounted for more than 10% of accounts receivable and, as a group, represented 82% of total accounts receivable at March 31, 2026. 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.

Recent Accounting Pronouncements

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

3. Marketable Securities

The following is a summary of the Company’s available-for-sale marketable securities as of March 31, 2026, which all have contractual maturities of less than two years:

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

4. Fair Value Measurements

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

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

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

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

The Company’s assets classified in Level 1 and Level 2 as of March 31, 2026 and December 31, 2025 consist of cash equivalents and available-for-sale marketable securities. The valuation of Level 1 instruments is determined using a market approach and is based upon unadjusted quoted prices for identical assets in active markets. The valuation of Level 2 instruments is also determined using a market approach based upon quoted prices for similar assets in active markets, or other inputs that are observable for substantially the full term of the financial instrument. Level 2 securities include certificates of deposit, commercial paper and corporate notes that use as their basis readily observable market parameters.

The Company held certain assets that are required to be measured at fair value on a recurring basis as of March 31, 2026, as follows:

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

Total assets measured at fair value as of March 31, 2026 and December 31, 2025 includeno cash equivalents.

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

5. Inventory

Inventory consisted of the following as of March 31, 2026 and December 31, 2025:

Inventory, which is recorded at the lower of cost or net realizable value, includes the cost of third-party manufacturing and other direct and indirect costs and is valued using the first-in, first-out method. The Company evaluates the risk of excess inventory and product expiry by evaluating current and future product demand relative to product shelf life, taking into account all possible alternative uses for the inventory available in the ordinary course of business. The Company builds demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance, patient usage and generic competition. The Company’s inventory balance consisted of $7.5 million of HETLIOZ® product and $3.0 million of other products as of March 31, 2026. The Company’s inventory balance consisted of $7.8 million of HETLIOZ® product and $3.2 million of other products as of December 31, 2025.

6. Intangible Assets

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

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

NEREUSTM. In December 2025, the FDA approved the NDA for NEREUSTM. As a result of this approval, the Company met a milestone under its license agreement with Eli Lilly and Company (Lilly) that required the Company to make a license payment of $10.0 million to Lilly, which was accrued in the Company’s Consolidated Balance Sheets as of December 31, 2025 and represented a non-cash investing activity for the year ended December 31, 2025, and was paid in the first quarter of 2026. This milestone obligation was determined to be additional consideration for the acquisition of NEREUSTM and capitalized as an intangible asset and is being amortized on a straight-line basis over the estimated economic useful life of the related product patents.

The following is a summary of the Company’s amortizing intangible assets as of March 31, 2026:

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

As of March 31, 2026 and December 31, 2025, the Company also had $27.9 million of fully amortized intangible assets related to Fanapt®.

Intangible assets are amortized over their estimated useful economic life using the straight-line method. Amortization expense was $2.0 million and $1.8 million for the three months ended March 31, 2026 and 2025, respectively.

The following is a summary of the future intangible asset amortization schedule as of March 31, 2026:

7. Accounts Payable and Accrued Liabilities

The following is a summary of the Company’s accounts payable and accrued liabilities as of March 31, 2026 and December 31, 2025:

8. Commitments and Contingencies

Guarantees and Indemnifications

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

License Agreements

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

Fanapt®. Pursuant to the terms of a settlement agreement with Novartis Pharma AG (Novartis), Novartis transferred all U.S. and Canadian rights in the Fanapt® franchise to the Company on December 31, 2014. The Company paid directly to Sanofi S.A. (Sanofi) a fixed royalty of 3% of net sales through December 2019 related to manufacturing know-how. The Company is also obligated to pay Sanofi a fixed royalty on Fanapt® net sales equal to 6% on Sanofi know-how not related to manufacturing under certain conditions for a period of up to 10 years in markets where the new chemical entity patent has expired or was not issued. The Company is obligated to pay this 6% royalty on net sales in the U.S. through November 2026.

HETLIOZ®. In February 2004, the Company entered into a license agreement with BMS under which it received an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize HETLIOZ®. As of March 31, 2026, the Company has paid BMS $37.5 million in upfront fees and milestone obligations, including $33.0 million of regulatory approval and commercial milestones capitalized as intangible assets (see Note 6, Intangible Assets). The Company hasno remaining milestone obligations to BMS. Additionally, the Company is obligated to make royalty payments on HETLIOZ® net sales to BMS in each territory where the Company commercializes HETLIOZ® for a period of 10 years following the first commercial sale in the territory. The royalty is 5% on net sales in territories outside the U.S. The Company’s obligation to pay royalties in the U.S. ended in April 2024. The Company is also obligated under the license agreement to pay BMS a percentage of any sublicense fees, upfront payments and milestone and other payments (excluding royalties) that it receives from a third party in connection with any sublicensing arrangement, at a rate which is in themid-twenties. The Company is obligated to use its commercially reasonable efforts to develop and commercialize HETLIOZ®.

NEREUSTM. In April 2012, the Company entered into a license agreement with Lilly pursuant to which the Company acquired an exclusive worldwide license under certain patents and patent applications, and other licenses to intellectual property, to develop and commercialize NEREUSTM for all human indications. Lilly is eligible to receive future payments based upon achievement of specified development, regulatory approval and commercialization milestones as well as tiered royalties on net sales at percentage rates up to thelow double digits. As of March 31, 2026, the Company has paid Lilly $15.0 million in upfront fees and development milestones, including a $10.0 million milestone paid to Lilly during the first quarter of 2026 for the FDA’s approval of the Company’s NDA for the prevention of vomiting induced by motion in the fourth quarter of 2025, which was accrued as a current liability on the Consolidated Balance Sheets as of December 31, 2025. As of March 31, 2026, remaining milestone obligations include a $5.0 million milestone for the first approval of an application for marketing authorization for NEREUSTM in the E.U. and up to $80.0 million for sales milestones. The Company is obligated to use its commercially reasonable efforts to develop and commercialize NEREUSTM.

Imsidolimab. In January 2025, the Company entered into an exclusive global license agreement with AnaptysBio, Inc. (Anaptys) under which it acquired the worldwide rights to develop, manufacture and commercialize imsidolimab. Under the terms of the agreement, which was accounted for as an asset acquisition, the Company made an upfront payment of $10.0 million to Anaptys and an additional $5.0 million payment for drug supply, $14.4 million of which was included in research and development expense on the Consolidated Statements of Operations for the year ended December 31, 2025. Anaptys is eligible to receive future payments based upon achievement of specified regulatory approval and commercialization milestones as well as a 10% royalty on global net sales. As of March 31, 2026, remaining milestone obligations include up to $35.0 million for future regulatory approval and sales milestones, including $5.0 million each for the first approval of an application for marketing authorization for imsidolimab in the U.S. and E.U. and $25.0 million for a sales milestone. The Company is obligated to use its commercially reasonable efforts to develop and commercialize imsidolimab.

Portfolio of CFTR activators and inhibitors. In March 2017, the Company entered into a license agreement with the University of California San Francisco (UCSF), under which the Company acquired an exclusive worldwide license to develop and commercialize a portfolio of CFTR activators and inhibitors. Pursuant to the license agreement, the Company will develop and commercialize the CFTR activators and inhibitors and is responsible for all development costs, including current pre-investigational new drug development work. UCSF is eligible to receive future payments based upon achievement of specified development and commercialization milestones as well assingle-digit royalties on net sales. As of March 31, 2026, the Company has paid UCSF $1.8 million in upfront fees and development milestones. As of March 31, 2026, remaining milestone obligations include $11.9 million for development milestones and $33.0 million for future regulatory approval and sales milestones. Included in the $11.9 million of development milestones are $1.1 million of milestone obligations due upon the conclusion of clinical studies for each licensed product, not to exceed $3.2 million in total for the CFTR portfolio.

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

Other Agreements

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

Clinical Trial Agreement. In December 2024, the Company entered into an agreement with a third party to jointly design and complete a pediatric study for PONVORY® required by the FDA and the European Medicines Agency. Pursuant to the agreement, the Company will bear the primary responsibility for completing the clinical trial, and the third party will bear primary responsibility for manufacturing the clinical study product. All costs associated with the pediatric study will be shared equally by the Company and the third party. As the Company and the third party are both active participants in the research activities and both parties are exposed to significant risks and rewards, the agreement is being accounted for under Accounting Standards Codification (ASC) 808. Furthermore, no parts of the agreement are within the scope of ASC 606, because the Company determined that performing research and development activities on behalf of other parties is not part of the ordinary activities of its business. Therefore, reimbursements from the third party for research and development costs are recorded as reductions to research and development expense as incurred. Expenses recognized by the Company related to activities under the collaborative arrangement, which commenced during the first quarter of 2025, were $0.7 million for the three months ended March 31, 2026, which were reduced by amounts reimbursable from the third party of $0.3 million. Expenses recognized by the Company related to activities under the collaborative arrangement were not material for the three months ended March 31, 2025.

Lease Agreements. In May 2026, the Company entered into an amendment to the lease for its headquarters at 2200 Pennsylvania Avenue, N.W. in Washington, D.C. The amendment extends the term of the lease from July 2028 to July 2038 for additional fixed payments, net of contractual rent abatements, totaling $26.9 million, among other terms.

In August 2024, the Company entered into a master lease agreement for vehicles to be utilized by the Company’s sales force. The individual car leases commence upon delivery of the vehicles. Delivery of these vehicles began in the fourth quarter of 2024, and they were determined to be finance leases upon lease commencement. The contractual period of each lease isthree years. The Company continued to lease additional cars under the master lease agreement during 2025 and 2026. The Company capitalized $0.7 million for car leases that commenced during the three months ended March 31, 2026, all of which were determined to be finance leases. Total fixed payments for the vehicle leases that had not yet commenced as of March 31, 2026 are estimated to be $0.6 million, payable over initial terms ofthree years, and subject to change upon finalization of each vehicle lease contract.

For further information regarding the Company’s lease agreements, see Note 8, Leases, to the consolidated financial statements included in the Company’s Annual Report for the fiscal year ended December 31, 2025.

Purchase Commitments

In the normal course of its business, the Company regularly enters into agreements with third-party vendors under fee service arrangements, which generally may be terminated on 90 days’ notice without incurring additional charges, other than charges for work completed or materials procured but not paid for through the effective date of termination and other costs incurred by the Company’s contractors in closing out work in progress as of the effective date of termination. The Company’s unrecognized 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, of which $7.7 million, $12.0 million, $7.2 million and $2.6 million are expected to be paid in 2026, 2027, 2028 and 2029, respectively. 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 the Company’s control.

9. Accumulated Other Comprehensive Income

The accumulated balances related to each component of other comprehensive income, net of taxes, were as follows as of March 31, 2026 and December 31, 2025:

10. Stock-Based Compensation

As of March 31, 2026, there were 8,836,571 shares subject to outstanding options, restricted stock units (RSUs) and performance restricted stock units (PSUs) under the Amended and Restated 2016 Equity Incentive Plan (2016 Plan). No awards remain in effect under the 2006 Equity Incentive Plan (2006 Plan, and together with the 2016 Plan, Plans), which expired by its terms in April 2016. In June 2016, the Company’s stockholders approved the 2016 Plan. The 2016 Plan has been amended a number of times since to increase the number of shares reserved for issuance, among other administrative changes, including, but not limited to, an amendment to eliminate its term. Each of the amendments to the 2016 Plan was approved by the Company’s stockholders. There is a total of 18,190,000 shares of common stock authorized for issuance under the 2016 Plan,3,230,604 shares of which remained available for future grant as of March 31, 2026.

Stock Options

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

As of March 31, 2026, $0.6 million of unrecognized compensation costs related to unvested service option awards are expected to be recognized over a weighted average period of 0.5 years. No option awards are classified as a liability as of March 31, 2026.

A summary of option activity under the Plans for the three months ended March 31, 2026 follows:

There wereno options granted during the three months ended March 31, 2026 and 2025. There wereno options exercised for the three months ended March 31, 2026 and 2025.

Restricted Stock Units

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

As of March 31, 2026, $20.3 million of unrecognized compensation costs related to unvested service RSUs are expected to be recognized over a weighted average period of 2.1 years. No RSUs are classified as a liability as of March 31, 2026.

A summary of RSU activity for the 2016 Plan for the three months ended March 31, 2026 is as follows:

The total fair value of the 1,033,432 RSUs that vested during the three months ended March 31, 2026 was $6.0 million.

Performance Restricted Stock Units

In the first quarter of 2026, the compensation committee of the board of directors granted PSUs under the 2016 Plan to the Company’s executive officers. The PSUs entitle each employee to earn a number of shares of the Company’s common stock ranging from 0% to 150% of the target number of PSUs granted, based on the Company’s Total Shareholder Return (TSR) relative to the TSR of the companies comprising the Nasdaq Biotechnology Index (Relative TSR), over thethree-year performance period beginning on December 31, 2025 and ending on December 31, 2028 (the Performance Period), subject to the executive’s continued employment through the compensation committee of the board of director’s certification of performance following the end of the Performance Period. Following the end of the Performance Period, the compensation committee of the board of directors will determine the extent to which the applicable performance goals have been achieved and will determine the number of PSUs, if any, that have been earned, and any such earned PSUs will vest on March 1, 2029. The PSUs provide for accelerated vesting in certain scenarios including in the event that the executive is subject to an involuntary termination within 24 months after a change in control.

As of March 31, 2026, $3.2 million of unrecognized compensation costs related to unvested PSUs are expected to be recognized over a weighted average period of 2.9 years. No PSUs are classified as a liability as of March 31, 2026.

A summary of PSU activity for the 2016 Plan for the three months ended March 31, 2026, based on award at target, is as follows:

No PSUs vested during the three months ended March 31, 2026.

Stock-Based Compensation Expense

Stock-based compensation expense recognized for the three months ended March 31, 2026 and 2025 was comprised of the following:

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model. Expected volatility rates are based on the historical volatility of the Company’s publicly traded common stock and other factors. The expected terms are determined based on a combination of historical exercise data and hypothetical exercise data for unexercised stock options. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has never paid cash dividends to its stockholders and does not plan to pay dividends in the foreseeable future. There wereno options granted during the three months ended March 31, 2026 and 2025.

The fair value of each PSU is estimated on the date of grant using a Monte Carlo model because the performance target is based on a market condition. Expense related to these PSUs is recognized ratably over thethree-year measurement period. The expected volatility rate is based on the historical volatility of the Company’s publicly traded common stock and other factors. The expected term is determined based on the remaining performance period of the award. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has never paid cash dividends to its stockholders and does not plan to pay dividends in the foreseeable future. Assumptions used in the Monte Carlo model for PSUs granted during the three months ended March 31, 2026 were as follows:

11. Income Taxes

The Company assesses the need for a valuation allowance against its 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 or all of the deferred tax assets will not be realized. After considering all available positive and negative evidence, including but not limited to historical, current and future projected results and significant risks and uncertainties related to forecasts, the Company has concluded that it is not more likely than not that substantially all of its 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.

As a result of the valuation allowance against the Company’s deferred tax assets, the Company recognized an income tax provision of $0.1 million for the three months ended March 31, 2026 related to discrete income tax expense. The income tax benefit of $7.9 million 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.

12. Earnings per Share

Basic earnings per share (EPS) is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding. Diluted EPS is computed by dividing the net loss by the weighted average number of shares of common stock outstanding, plus potential outstanding common stock for the period. Potential outstanding common stock includes stock options and shares underlying RSUs and PSUs, but only to the extent that their inclusion is dilutive, as calculated using the treasury stock method.

The following table presents the calculation of basic and diluted net loss per share of common stock for the three months ended March 31, 2026 and 2025:

The Company incurred a net loss for the three months ended March 31, 2026 and 2025 causing inclusion of any potentially dilutive securities to have an anti-dilutive effect, resulting in dilutive loss per share and basic loss per share attributable to common stockholders being equivalent.

13. Segments

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

The following table presents the segment revenue and significant expense categories included within the product segment’s measure of profit or loss for the three months ended March 31, 2026 and 2025:

14. Legal Matters

HETLIOZ®. In December 2022, the Company filed patent infringement lawsuits, including Hatch-Waxman Act claims, against each of Teva Pharmaceuticals USA, Inc. (Teva) and Apotex Inc. and Apotex Corp. (Apotex) in the U.S. District Court for the District of New Jersey (NJ District Court) asserting that U.S. Patent No. 11,285,129 (‘129 Patent), will be infringed by Teva’s and Apotex’ generic versions of HETLIOZ®, each of which was approved by the FDA. The Company asked the NJ District Court to, among other things, order that the effective date of the FDA’s approval of Teva’s and Apotex’ generic versions of HETLIOZ® be a date that is no earlier than the expiration of the ‘129 Patent, or such later date that the NJ District Court may determine, and enjoin each of Teva and Apotex from the commercial manufacture, use, import, offer for sale and/or sale of their generic versions of HETLIOZ® until the expiration of the ‘129 Patent, or such later date that the NJ District Court may determine. In February 2023, the case was transferred to the U.S. District Court for the District of Delaware (Delaware District Court). In April 2023, Teva and Apotex moved for judgment on the pleadings. In June 2024, the Delaware District Court denied those motions, allowing the Company’s lawsuit to proceed. In March 2025, the Delaware District Court held a claim construction hearing, which resolved two claim term disputes in the Company’s favor and deferred ruling on a third dispute between the parties. In May 2025, the Delaware District Court consolidated this action with the Company’s action relating to the ‘556 Patent (as defined below). In March 2026, the Delaware District Court held a hearing on the Company’s and Teva’s and Apotex’s summary judgment and Daubert motion. The Company’s lawsuit remains pending, and a trial that was scheduled to begin on August 3, 2026 has been rescheduled to begin on October 29, 2026.

In January 2023, the Company filed a lawsuit in the NJ District Court against Teva challenging Teva’s advertising and marketing practices related to its at risk launch of its generic version of HETLIOZ® for the single indication of Non-24. The Company believes that Teva’s advertising and marketing practices related to its generic version of HETLIOZ® promote its product for uses beyond the limited labeling that Teva sought, and the FDA approved. The Company seeks to, among other things, enjoin Teva from engaging in false and misleading advertising and recover monetary damages. In December 2023, the case was transferred to the Delaware District Court following Teva’s motion to transfer and dismiss the case earlier that year. In February 2025, the Delaware District Court denied Teva’s motion to dismiss, allowing the Company’s lawsuit to proceed. In March 2025, Teva filed its answer and asserted counterclaims against the Company for alleged violations of the Lanham Act, antitrust and state trade laws. In the same month, the Delaware District Court declined to consolidate this action with the Company’s cases alleging infringement of the ‘129 Patent and the ‘556 Patent (as defined below). In January 2026, the parties filed a stipulation to dismiss the case.

In January 2023, the Company filed a lawsuit in the U.S. District Court for the District of Columbia (DC District Court) against the FDA challenging the FDA’s approval of Teva’s Abbreviated New Drug Application (ANDA) for its generic version of HETLIOZ® capsules under the Administrative Procedure Act (APA), the Food, Drug, and Cosmetic Act (FDCA), and FDA regulations. Under the FDCA, every ANDA must contain information to show that the labeling proposed for the generic drug is the same as the labeling approved for the listed drug. The labeling and packaging for HETLIOZ® includes Braille, but Teva’s generic version does not. On this basis, the Company believes that Teva’s approved labeling does not comply with applicable requirements. The Company has asked the DC District Court to, among other things, vacate the FDA’s approval of Teva’s ANDA, declare that the approval of the ANDA was unlawful, arbitrary, and capricious and compel the FDA to order Teva to recall its generic HETLIOZ® product. In February 2023, Teva intervened in the lawsuit as a defendant. In September 2023, the Company amended its lawsuit to request that the DC District Court set aside the FDA’s July 2023 denial of the Company’s citizen petition, originally filed with the FDA in January 2023. In April 2024, the Company filed a motion for summary judgment. In February 2025, the DC District Court denied the Company’s motion and granted the FDA and Teva’s cross motions for summary judgment. In February 2025, the Company appealed to the U.S. Court of Appeals for the District of Columbia Circuit (DC Circuit). In October 2025, the DC Circuit granted the FDA’s motion for a stay of the briefing schedule that it filed in October 2025 due to the government shutdown, and the stay was lifted in November 2025. An oral argument was held on March 12, 2026.

In September 2023, the Company filed a lawsuit in the DC District Court against the FDA challenging the FDA’s approval of an ANDA filed by MSN Pharmaceuticals Inc. and MSN Laboratories Private Limited (MSN) for its generic version of HETLIOZ® capsules under the APA, the FDCA, FDA regulations and the Appointments Clause of the U.S. Constitution. The Company believes that MSN’s underlying approval data, particularly its bioequivalence studies, are faulty. On this basis, the Company asked the DC District Court to, among other things, vacate the FDA’s approval of MSN’s ANDA, declare that the approval of the ANDA was unlawful, arbitrary, and capricious, is unconstitutional under the Appointments Clause, and compel the FDA to order MSN to recall its generic HETLIOZ®product. In December 2023, the Company filed a motion for summary judgment. In January 2024, the FDA opposed the Company’s motion and moved to waive the administrative record, following which the court held an oral argument on the cross-motions. The DC District Court issued an order compelling the FDA to serve the administrative record and set deadlines for further proceedings. In April 2024, the Company filed a motion for summary judgment. In July 2024, the DC District Court held an oral argument on the motion to dismiss that the FDA filed in January 2024, which the Company opposed in February 2024. In September 2024, the DC District Court granted in part the FDA’s motion to dismiss as to the Company’s APA claims and denied the FDA’s motion to dismiss as to the Company’s claims under the Appointments Clause. In August 2025, the Company filed a motion for summary judgment based on its Appointments Clause claims, to which the FDA filed an opposition and cross-motion for summary judgment in September 2025. In January 2026, the DC District Court denied the cross-motions for summary judgment without prejudice and stayed the case pending resolution of an agency appeal. The Company’s lawsuit remains pending.

In April 2024, the Company filed a lawsuit in the Delaware District Court against MSN and its commercial partner Amneal Pharmaceuticals, Inc. (Amneal), and Impax Laboratories LLC (Impax) alleging claims for false advertising in violation of the Lanham Act and unfair competition under several state laws as well as claims for breach of express representation and fraudulent inducement of a license agreement. In July 2024, the defendants filed a motion to dismiss and in September 2024, the Company opposed the motion, to which the defendants replied in October 2024. In July 2025, the Delaware District Court issued its report and recommendation to deny the defendants’ motion to dismiss as to standing but granted their motion to dismiss the Lanham Act claims, to which the Company objected in August 2025. In September 2025, the Delaware District Court overruled the Company’s objections. In October 2025, the Company appealed the Delaware District Court’s decision. The Company’s lawsuit remains pending.

In December 2024, the Company filed a lawsuit in the Delaware District Court against each of Teva and Apotex asserting U.S. Patent No. 11,918,556 (‘556 Patent), a method of administration patent that was not litigated in the prior Delaware District Court cases, will be infringed by Teva’s and Apotex’s generic versions of HETLIOZ®, each of which was approved by the FDA. The Company has asked the Delaware District Court to, among other things, order that the effective date of the FDA’s approval of Teva’s and Apotex’ generic versions of HETLIOZ® be a date that is no earlier than the expiration of the ‘556 Patent, or such later date that the Delaware District Court may determine, and enjoin each of Teva and Apotex from the commercial manufacture, use, import, offer for sale and/or sale of their generic versions of HETLIOZ® until the expiration of the ‘556 Patent, or such later date that the Delaware District Court may determine. In March 2025, Teva filed its answer and asserted counterclaims against the Company, including, among other things, for alleged violation of the antitrust laws and inequitable conduct, which the Company opposed in May 2025. The Delaware District Court declined to consolidate this action with the Company’s case alleging Lanham Act violations against Teva but consolidated this action with the Company’s action relating to the ‘129 Patent. In March 2026, the Delaware District Court held a hearing on the Company’s and Teva’s and Apotex’s summary judgment and Daubert motion. The Company’s lawsuit remains pending, and a trial that was scheduled to begin on August 3, 2026 has been rescheduled to begin on October 29, 2026.

HETLIOZ LQ®. In July 2024, the Company filed a Hatch-Waxman lawsuit against MSN in the Delaware District Court asserting that U.S. Patent Nos. 10,179,119, 11,266,622, 11,285,129, 11,850,229, 10,610,510, 10,980,770, and 11,759,446 will be infringed by MSN’s generic version of HETLIOZ LQ®for which MSN is seeking FDA approval. In June 2025, the Company filed an amended complaint against MSN, further alleging that U.S. Patent Nos. 10,071,977, 11,566,011 and 11,918,556 (all asserted HETLIOZ LQ® patents together, the Asserted Patents) will also be infringed by MSN’s generic version of HETLIOZ LQ®. The Company has asked the Delaware District Court to, among other things, enter judgment that MSN has infringed at least one claim of each of the Asserted Patents by submitting or causing to be submitted its ANDA to obtain FDA approval for the commercial manufacture, use, import, offer for sale and/or sale in the U.S. of its generic version of HETLIOZ LQ® before the expiration of each of the Asserted Patents, enter judgment that the use of MSN’s generic version of HETLIOZ LQ® in the U.S. before the expiration of each of the Asserted Patents will directly infringe at least one claim of each of the Asserted Patents, order that the effective date of any approval by the FDA of MSN’s generic version of HETLIOZ LQ® be a date that is no earlier than the expiration of the last expiring Asserted Patent(s), or such later date as the Court may determine, enjoin MSN from the commercial manufacture, use, import, offer for sale and/or sale of its generic version of HETLIOZ LQ® until the expiration of each of the Asserted Patents or such later date as the Court may determine, and award monetary damages, to the extent applicable. The Company’s lawsuit remains pending, and a trial that was scheduled to begin on September 14, 2026 has been rescheduled to begin on June 1, 2027.

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

In September 2022, the Company filed a lawsuit in the DC District Court against the FDA to compel the FDA to comply with two separate non-discretionary obligations under the FDCA and its implementing regulations: an obligation to publish a notice of an opportunity for a hearing on the Company’s sNDA for HETLIOZ® in the treatment of jet lag disorder in the Federal Register within 180 days of the filing of the sNDA, and a separate obligation to publish the same notice within 60 days of the request for a hearing. The FDA published the notice of an opportunity for a hearing on October 11, 2022. The Company has asked the DC District Court to, among other things, compel the FDA to comply with its obligations and declare that its lack of compliance violates the FDCA and the FDA regulations. In January 2024, the DC District Court held an oral argument on dispositive cross-motions, following which the DC District Court granted in part the Company’s motion for summary judgment. The DC District Court ruled that the FDA violated the statute and ordered the FDA to either finally resolve the Company’s application or commence a hearing on or before March 5, 2024. In March 2024, the Company and the FDA filed a consent motion for entry of final judgment in the Company’s favor on its APA claim for the FDA’s unreasonable delay in resolving the hearing request, following which the FDA refused to hold a hearing or approve the Company’s sNDA for HETLIOZ® in the treatment of jet lag disorder. The Company subsequently filed a petition for review in the DC Circuit. Under the FDCA, the FDA has an obligation to either approve an sNDA or to hold a hearing on the application’s approvability. The Company’s petition asks the DC Circuit to set aside the FDA’s order refusing to hold a hearing and refusing approval. In January 2025, the DC Circuit held an oral argument. In August 2025, the DC Circuit issued a decision in favor of the Company against the FDA, setting aside the FDA’s refusal to hold a hearing on the Company’s sNDA for HETLIOZ® in the treatment of jet lag disorder and remanding the case back to the FDA. In October 2025, the Company announced that it had entered into a collaborative framework with the FDA for the resolution of certain of its disputes regarding HETLIOZ® and NEREUSTM (the FDA Agreement), pursuant to which, the FDA agreed to conduct an expedited re-review of the sNDA and the Company sought a temporary abeyance in these proceedings. In January 2026, the FDA notified the Company that, following its re-review of the sNDA, it has determined that the sNDA cannot be approved in its current form. In January 2026, the Company requested that the FDA Commissioner resume hearing proceedings. In March 2026, the Office of the Commissioner granted the Company’s hearing request. The proceedings remain pending.

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

In February 2024, the Company filed a lawsuit in the DC District Court against the FDA to compel the FDA to comply with its statutory obligations under the FDCA and its implementing regulations, and to challenge the FDA’s complete response letter and 60-day filing regulations, which the Company believes do not absolve the FDA of its statutory responsibilities. Under the FDCA, the FDA has an obligation to either approve the Company’s sNDA for HETLIOZ® in the treatment of insomnia characterized by difficulties with sleep initiation within 180 days of the filing of the sNDA or give the Company a notice of an opportunity for a hearing. The Company submitted the sNDA on May 4, 2023. The Company has asked the DC District Court to, among other things, compel the FDA to comply with its obligations, declare that its lack of compliance violates the FDCA and the FDA regulations and declare the FDA’s complete response letter and 60-day filing regulations unlawful. In June 2024, the Company filed a motion for summary judgment and the FDA published a notice of opportunity for a hearing. In July 2024, the FDA opposed the Company’s motion for summary judgment. In September 2024, the DC District Court held an oral argument on the dispositive cross motions. In March and April 2025, the parties provided supplemental briefing. In May 2025, the DC District Court held a further hearing on the supplemental briefings. In September 2025, the Company filed a motion to stay proceedings in the case until January 2026 pursuant to the FDA Agreement. In January 2026, the Company and the FDA asked the DC District Court to lift the abeyance. The Company’s lawsuit remains pending.

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

In February 2025, the Company filed a lawsuit in the DC District Court against the FDA to compel the FDA to comply with its statutory obligations under the FDCA and its implementing regulations and to challenge the FDA’s reliance on PDUFA deadlines and its complete response letter and 60-day filing regulations, which the Company believes do not absolve the FDA of its statutory responsibilities. Under the FDCA, the FDA has an obligation to either approve the Company’s NDA for NEREUSTM to prevent vomiting induced by motion within 180 days of the filing of the NDA or give the Company a notice of an opportunity for a hearing. The Company submitted the NDA on December 30, 2024. The Company has asked the DC District Court to, among other things, compel the FDA to comply with its obligations, declare that its lack of compliance violates the FDCA and the FDA regulations and declare the FDA’s complete response letter and 60-day filing regulations and adherence to PDUFA deadlines unlawful. Separately, under the FDCA, the FDA has an obligation to commence a hearing on the Company’s NDA for NEREUSTM in gastroparesis within 120 days of a timely accepted notice of opportunity for a hearing, which the FDA issued on January 7, 2025. In April 2025, the Company filed a motion for summary judgment regarding its motion sickness NDA and requested to file summary judgment regarding its gastroparesis NDA. In May 2025, the DC District Court held a hearing on the motion regarding the motion sickness NDA, and the FDA approved the motion sickness NDA in December 2025. The Center for Drug Evaluation and Research issued a proposed order denying a hearing on the gastroparesis NDA in July 2025. In September 2025, the Company filed a motion to stay proceedings in the DC District Court regarding the gastroparesis NDA until January 2026 pursuant to the FDA Agreement. In January 2026, the Company and the FDA asked the DC District Court to lift the abeyance. The Company’s lawsuit remains pending.

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

In March 2026, the Company filed a petition for review in the U.S. Court of Appeals for the DC Circuit seeking review of the FDA’s final order refusing to hold a hearing or to approve the Company’s NDA for NEREUSTM in gastroparesis. Under the FDCA, the FDA has an obligation to either approve an sNDA or to hold a hearing on the application’s approvability. The Company’s petition asks the DC Circuit to set aside the FDA’s order refusing to hold a hearing and refusing approval. The Company’s petition for review remains pending.