VNDA 10-K & 10-Q changes, risk factors and insider trading

We are dependent on the commercial success of Fanapt®,our HETLIOZ®commercial and PONVORY®.products. In the U.S., HETLIOZ® competes with generic versions of HETLIOZ® and we could experience increased generic competition in the near term.

We are substantially dependent upon the commercial success of Fanapt® oral tablets for the acute treatment of mixed or manic episodes associated with bipolar I disorder and the treatment of schizophrenia, HETLIOZ® capsules for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24), HETLIOZ® capsules and oral suspension (HETLIOZ LQ®) for the treatment of nighttime sleep disturbances in Smith-Magenis syndrome (SMS) and, PONVORY® oral tablets for the treatment of relapsing forms of multiple sclerosis (RMS) in adults.adults and NEREUSTM capsules for the prevention of vomiting induced by motion.

In December 2022, the U.S. District Court for the District of Delaware (Delaware District Court) ruled in favor of certain generic drug companies in our patent litigation alleging that the companies’ generic versions of HETLIOZ® capsules, for which they were seeking FDA approval, infringed our patents covering HETLIOZ®., Wewhich appealedwas theaffirmed decision toby the U.S. Court of Appeals for the Federal Circuit (Federal Circuit). Inin May 2023, a three-judge panel of the Federal Circuit affirmed the Delaware District Court’s ruling. In August 2023, the Federal Circuit denied our request for a rehearing. In January 2024, we filed a petition for a writ of certiorari with the U.S Supreme Court to review the Federal Circuit’s decision. In April 2024, the U.S. Supreme Court denied our petition.2023. The FDA has approved Abbreviated New Drug Applications (ANDA) for generic versions of HETLIOZ® for Teva Pharmaceuticals USA, Inc. (Teva), Apotex Inc. (Apotex) and MSN Pharmaceuticals Inc. and MSN Laboratories Private Limited (MSN). Teva and Apotex have launched their generic versions of HETLIOZ® at risk in the U.S., and MSN has launched its generic version as well. HETLIOZ® could face even more competition from other generic companies in the U.S. in the near term in light of the patent litigation rulings against us. Sales of generic versions of HETLIOZ® have resulted in and could continue to result in a reduction in the demand for HETLIOZ® and/or the price at which we can sell it and/or create volatility in net product sales in future periods, which would have a material and adverse impact on our revenues and results of operations. Our expansion and development of HETLIOZ® outside the U.S. is generally not subject to the adverse patent ruling in the U.S.

PONVORY® tablets were approved in the U.S. for the treatment of RMS in adults in March 2021 and commercially launched in the U.S. by Actelion Pharmaceuticals Ltd. (Janssen), a Johnson & Johnson Company in April 2021. PONVORY® tablets were approved in Canada for the treatment of relapsing forms of multiple sclerosis (RMS) in adults in April 2021 and commercially launched in Canada by Janssen in November 2021. In December 2023, we acquired the U.S. and Canadian rights to PONVORY® from Janssen. Janssen was responsible for the continued marketing and sale of PONVORY® during a transition period. We initiated our commercial launch of PONVORY® in RMS in the U.S. in the third quarter of 2024. We have no Canadian operations and no history of commercializing products in Canada.

Our ability to generate significant product revenue from sales of Fanapt®,our HETLIOZ®commercial and PONVORY®products both in the U.S. and abroad, in the near term will depend on, among other things, our ability to:

•obtain regulatory approval for Fanapt®, HETLIOZ® or Fanapt®NEREUSTM in additional countries;

We expect to continue to incur significant expenses and to utilize a substantial portion of our cash resources as we continue to commercialize our commercial products, evaluate foreign market opportunities for Fanapt®, HETLIOZ® and HETLIOZ®NEREUSTM and continue to grow our operational capabilities, both domestically and abroad. This activity represents a significant investment in the commercial success of Fanapt®,our HETLIOZ®commercial and PONVORY®,products, which is uncertain.

The cost of growing and maintaining a sales, marketing and distribution organization may exceed its cost effectiveness. If we fail to continue to develop sales, marketing and distribution capabilities, if sales efforts are not effective or if costs of developing sales, marketing and distribution capabilities exceed their cost effectiveness, our business, financial condition and results of operations and financial condition could be materially adversely affected.

As a result of the decision in favor of generic drug companies in connection with our HETLIOZ® patent litigation, we have faced generic competition in the near term and our revenues and results of operations could be further affected by the launch of additional generic versions of HETLIOZ® in the U.S.

InWe Decemberfiled 2022,several followingHatch-Waxman conclusionlawsuits of the trial,in the Delaware District Court issuedagainst itsTeva, rulingApotex, inand favorMSN asserting infringement of patents covering HETLIOZ® 20 mg capsules. In January 2022, we entered into a license agreement with MSN and Impax Laboratories LLC (Impax) resolving the lawsuits against MSN. The consolidated lawsuits against Teva and Apotex,Apotex findingwere tried in March 2022. In December 2022, the Delaware District Court ruled that theirTeva useand of a generic HETLIOZ®, for which they were seeking FDA approval,Apotex did not infringe oneU.S. ofPatent ourNo. HETLIOZ® patentsRE46,604, and that the asserted claims of certainU.S. ofPatent ourNos. otherRE46,604; HETLIOZ®9,730,910; patents10,149,829; and 10,376,487 were invalid.invalid, Wewhich appealedwas theaffirmed decision toby the Federal Circuit and in May 2023, a three-judge panel of the Federal Circuit affirmed the Delaware District Court’s ruling. In August 2023, the Federal Circuit denied our request for a rehearing. In January 2024, we filed a petition for a writ of certiorari with the U.S. Supreme Court to review the Federal Circuit’s decision. In April 2024, the U.S. Supreme Court denied our petition.2023. Teva and Apotex have since launched their generic versions at risk and MSN has launched its generic version as well. The commercial launch of the generic versions, and potential increased competition from additional generic entrants in the near term,entrants, have resulted in and could continue to have a material and adverse impact on our revenues and results of operations.

Further, although we are pursuing additional remedies in other courts,remedies, including seeking injunctions against Apotex and Teva, we may not be successful in any such efforts, which will be costly and time-consuming to pursue. Specifically, in December 2022 we have filed Hatch-Waxman lawsuitslawsuits, which are currently pending in the U.S.Delaware District Court for the District of New JerseyCourt, against each of Teva and Apotex, and in the U.S. District Court for the Southern District of Florida against Apotex, asserting infringement of U.S. Patent No. 11,285,129, which is a method of administration patent that was not litigated in the prior litigation. The New Jersey cases have been transferred to the Delaware District Court, where they remain pending, and the Florida case was voluntarily dismissed. We have also filed patent infringement lawsuits against each of Teva and Apotex in the U.S.Delaware District Court for the District of Delaware,Court, in each case, asserting infringement of U.S. Patent No. 11,918,556, another method of administration patent that was not litigated in the prior litigation. A trial is scheduled to begin in these cases on August 3, 2026. These lawsuits do not affect the sale of HETLIOZ® in the E.U. and there is no generic litigation pending outside of the U.S. with respect to HETLIOZ®. These lawsuits do not relate to the HETLIOZ LQ® oral suspension formulation. These efforts will also require considerable attention of management and could, even if ultimately successful, negatively impact our results of operations. See Note 18, Legal Matters, to the consolidated financial statements in Part II, Item 8 of this Annual Report and the risk factor entitled “We are, have been, and may continue to be, involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful, and third parties may challenge the validity or enforceability of our patents and they may be successful,” each of which is incorporated herein by reference, for additional information.

Future performance of Fanapt®,our HETLIOZ®commercial and PONVORY®products may be impacted by a number of factors including competing products or unanticipated safety issues. If Fanapt®,our HETLIOZ®commercial orproducts PONVORY® isare not successful in gaining broad commercial acceptance, our business would be harmed.

Future performance of Fanapt®,our HETLIOZ®commercial and PONVORY®products sales will be dependent on several factors, including our ability to educate physicians and to increase physician awareness of the benefits of our products relative to competing products. The degree of further market acceptance of any of our products, including with respect to new indications, or market acceptance of approved product candidates among physicians, patients, health care payors and the medical community, will depend on a number of factors, including but not limited to:

Our ability to commercialize our products successfully depends in part on the coverage and reimbursement levels with governmental authorities, private health insurers and other third-party payors. In determining whether to reimburse our products and at what level, third-party payors consider factors that include the efficacy, cost effectiveness and safety of our products, as well as the availability of other treatments including generic prescription drugs and over-the-counter alternatives. We expect to continue to face pressure to make unfavorable pricing modifications, such as discounts or rebates. Negotiating favorable reimbursement can be a time consumingtime-consuming and expensive process, and there is no guarantee that we will be able to reach pricing terms with third-party payors at levels that are profitable to us. Certain third-party payors also have reimbursement or coverage processes that we believe are difficult to navigate and require prior authorization for, or even refuse to provide, reimbursement for our products, and others may do so in the future. Our business may be materially adversely affected if our patients are not able to receive approval for reimbursement of our products from third-party payors on a broad, timely or satisfactory basis; if reimbursement is subject to difficult reimbursement or coverage processes or prior authorization requirements; or if reimbursement is not maintained at satisfactory levels. In addition, our business could be adversely affected if third-party payors limit or reduce the indications for, or conditions under which, or the patient populations for whom, our products may be reimbursed. Moreover, as discussed further below and above in Part I, Item 1 under the heading Pharmaceutical Coverage, Pricing and Reimbursement and Healthcare Reform, changes in insurance coverage or reimbursement levels by third-party payors, or in the type of such coverage held by patients, may materially harm our business and commercialization efforts.

Most significantly, in August 2022, President Biden signed the Inflation Reduction Act of 2022 (IRA) into law. This statute marks the most significant action by Congress with respect to the pharmaceutical industry since adoption of the ACA in 2010. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare, with prices that can be negotiated subject to a cap, with the first drug price negotiations effective January 1, 2026; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation beginning October 1, 2022; and replaces the Medicare Part D coverage gap discount program with a new discounting program beginning January 1, 2025. The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years. On March 15, 2023 and June 30, 2023, HHS issuedhas continued to issue guidance regardingas implementationthese ofprograms theare Medicare drug price negotiation program in initial price applicability year 2026. More recently, in October 2024, HHS released guidance related to implementation for initial price applicability year 2027.implemented. In August 2024, CMS announced prices for the first ten drugs under the drug price negotiation program, with the newnegotiated prices going into effect in 2026, andand, isin expectedMarch to2025, announceannounced the next fifteen drugs to be selected for the second round of negotiationsnegotiations, bywith Februarynegotiated 1,prices 2025.going into effect in 2027. Several manufacturers and industry groups have challenged the drug price negotiation program for Medicare Parts B and D in federal court. These lawsuits are ongoing, and additional lawsuits may be filed in the future related to provisions of the IRA. It is unknown whether such litigation or other litigation, if brought, will be successful, or whether there will be future changes to the IRA. Moreover, the recent change in presidential administrationsadministration in the2025 U.S.and mayassociated introduceexecutive branch policy priorities have introduced additional unpredictability regarding the future implementation of the IRA. For these and other reasons, it is currently unclear how the IRA will be effectuated, and while the impact of the IRA on the pharmaceutical industry cannot yet be fully determined, it is likely to be significant.

Healthcare reform efforts or any future legislation or regulatory actions aimed at controlling and reducing healthcare costs, including through measures designed to limit reimbursement, restrict access or impose unfavorable pricing modifications on pharmaceutical products, such as the executive order recently issued by the Trump administration calling for most favored drug pricing in the U.S., which would tie the price of drugs in the U.S. to the lowest price in a group of other countries, could impact our ability to obtain or maintain reimbursementreimbursement, or price, for our products at satisfactory levels, or at all, which could materially harm our business and financial results.

If the FDA does not approve our NDA filing for the use of tradipitantNEREUSTM for patients with gastroparesis; or if the FDA determines that our clinical trial results for tradipitant for the treatment of gastroparesis do not demonstrate adequate safety and substantial evidence of efficacy, continued development of tradipitant may be significantly delayed or terminated,gastroparesis, our business willmay be significantly harmed, and the market price of our stock could decline.

In February 2022, we announced results from oura Phase III clinical study,study VP-VLY-686-3301,(3301) evaluating the efficacy and safety of tradipitantNEREUSTM in treating the symptoms of gastroparesis. The study did not meet its prespecified primary endpoint, which was the difference between drug and placebo on the change of the severity of nausea from baseline at week 12 of treatment. Both treatment arms showed significant improvements from baseline on nausea as well as the other core symptoms of gastroparesis. When restricting the analysis in the group of patients that used no rescue medications at baseline and adjusting for poor compliance, we identified strong evidence of a drug effect across a number of symptoms and across the duration of the study, including a significant and meaningful effect at the prespecified primary endpoint of nausea change at week 12. TheOn September 18, 2024, the FDA mayinformed us that it did not view this data as constituting substantial evidence of efficacy for tradipitantNEREUSTM in any indication for the treatment of gastroparesis or its symptoms, for any length of treatment. Any adverse developments or results or perceived adverse developments or results with respect to our regulatory submission or the tradipitantNEREUSTM clinical program in gastroparesis will significantly harm our business and could cause the market price of our stock to decline. Examples of such potential adverse developments include, but are not limited to:

•the FDA determining that it believes additional clinical studies are required with respect to tradipitantNEREUSTM for the treatment of gastroparesis;

•the FDA determining that the tradipitantNEREUSTM clinical trial program for gastroparesis does not demonstrate adequate safety and substantial evidence of efficacy.

We believe that tradipitantNEREUSTM has a well-established safety profile, as demonstrated by the results of extensive testing in animals and humans. Despite these results, however, the FDA informed us in December 2018 that in order to treat patients beyond 12 weeks, we would have to conduct a nine-month non-rodent chronic toxicity study. This currently limits our ability to collect safety data in humans for more than 12 weeks. The non-rodent study required by the FDA necessitates the sacrifice of dozens of animals and we have disputed the necessity of a nine-month non-rodent chronic toxicity study. In February 2019, we filed a lawsuit in the U.S. District Court for the District of Columbia (DC District Court) challenging the FDA’s position, but we ultimately did not prevail. Despite our disagreement with the FDA, the preclinical package has allowed us to continue to conduct all of the efficacy studies necessary for NDA filing. Moreover, in July 2020, the FDA authorized tradipitantNEREUSTM through an expanded access program (EAP) for a single patient. An EAP allows a patient to request the use of tradipitant,NEREUSTM, prior to NDA approval, for up to six months with an option to request renewal. Since then, certain patients who experienced a benefit in tradipitantNEREUSTM studies have requested and received expanded access, while others have been denied treatment under the EAP. The EAP is ongoing and a number of patients have initiated treatment. Although this EAP is not intended for data collection, we collect safety data from this cohort of expanded access patients and included this data in the NDA that we submitted for tradipitantNEREUSTM for patients with gastroparesis. In December 2023, the FDA accepted our NDA for tradipitant in gastroparesis for filing and set a PDUFA target action date of September 18, 2024. On September 18, 2024, we received a CRL from the FDA. In January 2025, we received a Notice of Opportunity for a Hearing, and we have accepted the opportunity for a hearing. Tradipitant is the first novel drug to be accepted for review by the FDA for gastroparesis in over 30 years and, if approved, will be the first novel drug to be approved by the FDA for the treatment of gastroparesis in over 40 years. The lack of long-term (i.e., more than 12 weeks in humans) safety data would likely impact the FDA’s willingness to approve tradipitantNEREUSTM for a chronic indication. However, because long-term safety data is not normally a requirement for short-term indications, and with a preclinical profile that has not precluded clinical development, we believe the package was complete for any NDA filing to treat patients for 12 weeks or less. For example, the FDA has communicated to us that it is considering an indication for the short-term relief of nausea in gastroparesis. While this short-term indication is not preferred, we would consider accepting this limited indication while continuing to pursue a chronic indication. However, the FDA may not deem the safety information sufficient even for a short-term indication. Moreover, FDA authorization of an EAP is not a guarantee of or a step towards obtaining full FDA approval of an NDA. In December 2023, the FDA accepted our NDA for NEREUSTM in gastroparesis for filing and set a PDUFA target action date of September 18, 2024. On September 18, 2024, we received a Complete Response Letter (CRL) from the FDA. In January 2025, we received a Notice of Opportunity for a Hearing, and we have accepted the opportunity for a hearing. NEREUSTM is the first novel drug to be accepted for review by the FDA for gastroparesis in over 30 years and, if approved, will be the first novel drug to be approved by the FDA for the treatment of gastroparesis in over 40 years. We plan to continue to pursue the marketing authorization for tradipitantNEREUSTM but our business will be materially adversely impacted if we are not able to agree with the FDA on a regulatory path to approval for tradipitantNEREUSTM or the FDA delays or denies approval of our NDA filing.

If the FDA does not acceptapprove our NDA filingsNDAs for the use of tradipitant for patients with motion sickness; or if the FDA determines that our clinical trial results for tradipitantHETLIOZ® for the treatment of motionjet sicknesslag dodisorder notor demonstrate adequate safety and substantial evidence of efficacy,insomnia, continued development of tradipitantHETLIOZ® willfor the treatment of jet lag disorder and insomnia may be significantly delayed or terminated, our business will be significantly harmed,harmed and the market price of our stock could decline.

InAny May 2023, we announced positive results from the first Phase III study of tradipitant in motion sickness, confirming the previously reported results demonstrating that tradipitant is effective in the prevention of vomiting associated with motion sickness. In May 2024 we announced positive results from the second Phase III study of tradipitant in motion sickness, confirming the previously reported results of two efficacy studies demonstrating tradipitant is effective in prevention of vomiting associated with motion sickness. Anyadditional adverse developments or results or perceived adverse developments or results with respect to our regulatory submissionsubmissions for jet lag disorder or the tradipitant clinical program in motion sicknessinsomnia will significantly harm our business and could cause the market price of our stock to decline. Examples of such potential adverse developments include, but are not limited to:

•the FDA determining that it believes additional clinical studies are required with respect to tradipitant for the treatmentjet oflag motiondisorder sicknessor insomnia programs;

•safety, efficacy or other concerns arising from clinical or non-clinical studies in thisthe programjet lag disorder or insomnia programs, or the manufacturing processes or facilities used for the jet lag disorder or insomnia programs; or

•the FDA determining that the tradipitantjet clinicallag trialdisorder programor forinsomnia motionprograms sicknessraise doessafety concerns or do not demonstrate adequate safety and substantial evidence of efficacy.

Financial instability or a general decline in economic conditions in the U.S. and other countries caused by political instability and conflict and economic challenges caused by general health crises have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused record inflation globally and could adversely affect our operations. Increased inflation may result in increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital on acceptable terms, if at all. Existing free trade laws and regulations, such as the United States-Mexico-Canada Agreement, provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements. Changes in laws or policies governing the terms of trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products, such as Canada, China and Mexico, could have a material adverse effect on our business and financial results. For example, in February 2025, the U.S. government imposed or threatened to impose new tariffs on imported products from Mexico, Canada and China. The impact of these tariffs is subject to a number of factors, including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any retaliatory responses to such actions that the target countries may take and any mitigating actions that may become available. Despite recent trade negotiations between the U.S. and the Mexican, Canadian and Chinese governments, given the uncertainty regarding the scope and duration of any new tariffs, as well as the potential for additional tariffs or trade barriers by the U.S., Mexico, Canada, China or other countries, we can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful. In addition, the U.S. Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which, coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks. Economic conditions, and uncertainty as to the general direction of the macroeconomic environment, are beyond our control and may make any necessary debt or equity financing more difficult, costly and dilutive. While we believe we have adequate capital resources to meet current working capital and capital expenditure requirements, an economic downturn or significant increase in our expenses could require additional financing on less than attractive rates or on terms that are excessively dilutive to existing stockholders. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our stock price and could require us to delay or abandon clinical development plans.

Our business strategy includes entering into collaborations with third parties for the commercialization of our products. While we are not currently party to any material commercial collaborative arrangements, areas in which we may potentially enter into third-party collaboration arrangements include joint sales and marketing arrangements for sales and marketing in certain E.U. countries and elsewhere outside of the U.S., and future product development arrangements. If we are unable to identify or enter into an agreement with any material third-party collaborator, our business, financial condition or results of operations or financial condition could be adversely affected. The launch of generic versions of HETLIOZ® and further generic competition may make it more difficult for us to identify or attract third-party collaborators and obtain favorable commercial terms in any such agreement or arrangement. Any arrangements we do enter into may not be scientifically or commercially successful. The termination of any of these arrangements might adversely affect our ability to develop, commercialize and market our products.

Our commercial portfolio is currently comprised of threefour 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.disease and NEREUSTM for the prevention of vomiting induced by motion (collectively, our commercial products). HETLIOZ® is the first product approved by the United States Food and Drug Administration (FDA) for patients with Non-24 and for patients with SMS. In addition, we have a number of drugs and/or additional indications for current products in development, including:

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

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

•TradipitantNEREUSTM (VLY-686tradipitant), afor smallthe moleculeprevention neurokinin-1of (NK-1)vomiting induced by GLP-1 receptor antagonist, foragonists, the treatment of gastroparesis, motion sicknessgastroparesis and the treatment of atopic dermatitis;

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

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

•WeA initiated aBysantiTM Phase III clinical study for Bysanti™use as a once-daily adjunctive treatment for major depressive disorder (MDD) inis theenrolling fourthpatients quarterand of 2024. Resultsresults are expected in 2026.

•We initiatedannounced positive results of a clinical trial to study tradipitantof NEREUSTM in the prevention of vomiting induced by a GLP-1 analog, Wegovy® (semaglutide),. A Phase III clinical program is anticipated to be initiated in the fourthfirst quarterhalf of 2024.2026.

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® andin the United States (U.S.), HETLIOZ® in the U.S. and Europe andEurope, PONVORY® in the U.SU.S. and Canada,NEREUSTM in the U.S., on our ability, alone or with others, to complete the development of our products and to obtain the regulatory approvals for and 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 this Annual Report.

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,taxes, value-added taxes and usage-based taxes are excluded from revenues.

Fanapt® is available in the U.S. for distribution through a limited number of wholesalers and is available in retail pharmacies. HETLIOZ® is available in the U.S. for distribution through a limited number of specialty pharmacies and is not available in retail pharmacies. PONVORY® is available in the U.S. for distribution primarily through a limited number of specialty distributors and specialty pharmacies. We invoice and record revenue when our customers, wholesalers, specialty pharmacies and specialty distributors, receive product from the third-party logistics warehouse, which is the point at which control is transferred to the customer. Revenues and accounts receivable are concentrated with these customers. Outside the U.S., we have a distribution agreement for the commercialization of Fanapt® in Israel and sell HETLIOZ® in Germany. Receivables are carried at transaction price,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.

Reserves for variable consideration are classified as product revenue allowances on the Consolidated Balance Sheets, with the exception of prompt-pay discounts, which are classified as reductions of accounts receivable. The reserve for product returns for which the product may not be returned for a period of greater than one year from the balance sheet date is included as a component of other non-current liabilities in the Consolidated Balance Sheets. Uncertainties related to variable consideration are generally resolved in the quarter subsequent to period end, with the exception of Medicaid rebates, which are dependent upon the timing of when states submit reimbursement claims, Medicare inflationary rebates, which are expected to be 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 increasedFurthermore, inventory stocking of HETLIOZ® at specialty pharmacy customers since the entrance of HETLIOZ®generic competition in 2024early and2023 2023,has theresulted timein itlonger takesperiods to resolve these uncertainties couldrelated beto longervariable than we have historically experienced.consideration. We currently record sales allowances for the following:

•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. 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.

•Medicare Part D rebates: ThePrior to January 1, 2025, the Medicare Part D prescription drug benefit requiresrequired manufacturers to fund approximately 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients for applicable drugs. We accountaccounted 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 ishas expected to resultresulted in overall higher discounts for our Medicare payor segment relative to the currentprevious Medicare Part D prescription drug coverage gap discount program. Under the redesigned Medicare Part D program, applicable drugs dispensed to applicable beneficiaries will beare subject to manufacturer discounts of 10% during the initial coverage phase and 20% during the catastrophic coverage phase. Manufacturers may be eligible for phase-in of discounts, such as for applicable beneficiaries who are Low Income Subsidy (LIS) eligible under section 1860D-14(a) ofUnder the SocialMedicare SecurityPart Act.D Webenefit redesign, we are a specified manufacturer whose applicable drugs for applicable beneficiaries who are LISLow Income Subsidy eligible willunder besection 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.

The provision of $104.7 million and $82.2 million for rebates and chargebacks of $82.2 million and $85.9 million for the years ended December 31, 20242025 and 2023,2024, respectively, and their ending balances at December 31, 20242025 and 2023,2024, primarily represent Medicaid rebates. The provision of $42.5 million and $33.4 million for discounts, returns and other of $33.4 million and $28.5 million for the years ended December 31, 20242025 and 2023,2024, and their ending balances at December 31, 2025 and 2024, primarily representsrepresent wholesalerservice distribution fees applicable to sales of Fanapt® andfees, estimated product returns of Fanapt®, andreturns, co-pay assistance costs and prompt pay discounts applicable to the sales of all of our commercial products. The ending balances of discounts, returns and other as of December 31, 2024 and 2023 primarily represent estimated product returns of Fanapt® and wholesaler distribution fees applicable to sales of Fanapt®.discounts.

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.

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 firstProjected 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 anddisorder, PONVORY® in RMS and NEREUSTM in the prevention of vomiting induced by motion, which was approved on December 30, 2025, and HETLIOZ® generic competition, as well as commercial and research and development activities, including spend on our commercial launches and late-stage clinical activities, and our ability to obtain regulatory approval from the FDA for products or new indications in development, among other factors. Tax benefits are recognized from an uncertain tax position only if it is more likely than not thatIn the taxfourth position will be sustained on examination by the taxing authorities based on the technical meritsquarter of the position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement. As of December 31, 2024,2025, after considering all available positive and negative evidence, including but not limited to historical, current and future projected results and significant risks and uncertainties related to forecasts, we concluded, consistent with prior periods,concluded that it wasis not more likely than not that substantially all of our deferred tax assets in the U.S. are realizable in future periods.periods Weand maintainrecorded a valuation allowance against certain stateall net deferred tax assets.assets in the U.S., resulting in a non-cash income tax expense of $113.7 million for the year ended December 31, 2025. If ourwe resultshave arecumulative notpretax income in linefuture withperiods our projections orand if our projections change,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. AnA increasefuture inreduction of the valuation allowanceallowance, in whole or in part, would result in a non-cash income tax expensebenefit during the period of change.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.

We anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, including our and our partners’ ability to continue to successfully commercialize our products, including activities related to Fanapt® for the acute treatment of manic or mixed episodes associated with bipolar I disorder in adultsadults, PONVORY® for the treatment of RMS and NEREUSTM for the prevention of vomiting induced by motion, which was approved in April 2024 and acquired rights to PONVORY® in the U.S. and Canada in December 2023,2025, the impact of regulatory changes to the pharmaceutical industry such as the Medicare Part D benefitprovisions redesign effective January 1, 2025 underof the Inflation Reduction Act of 2022, any possible payments made or received pursuant to license agreements, progress of our research and development efforts, the timing and outcome of clinical trials and related possible regulatory approvals and the status of existing and future potential litigation involving our products and intellectual property. See Note 18, Legal Matters, to the consolidated financial statements included in Part IV of this Annual Report for information on material legal matters.

Revenues. Total revenues increased by $6.1$17.3 million, or 3%,9%, to $216.1 million for the year ended December 31, 2025 compared to $198.8 million for the year ended December 31, 2024 compared to $192.6 million for the year ended December 31, 2023. The impact of the Medicare Part D benefit redesign under the Inflation Reduction Act of 2022, which begins January 1, 2025, is uncertain and will affect all of our products.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 werewas as follows:

Fanapt® net product sales increased by $3.4$23.0 million, or 4%,24%, to $117.3 million for the year ended December 31, 2025 compared to $94.3 million for the year ended December 31, 2024 compared to $90.9 million for the year ended December 31, 2023.2024. The increase to net product sales was primarily attributable to an increase in price net of deductions and volume. We initiated the commercial launch of Fanapt® for bipolar I disorder in adults in the third quarter of 2024. 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.

Cost of goods sold. Cost of goods sold decreasedincreased by $3.5$1.7 million, or 24%,15%, to $13.0 million for the year ended December 31, 2025 compared to $11.3 million for the year ended December 31, 2024 compared to $14.8 million for the year ended December 31, 2023.2024. Cost of goods sold includes third-party manufacturing costs of product sold, third-party royalty costs and distribution and other costs. Third-party royalty costs were 6% of Fanapt® net product sales and 5% of HETLIOZ® net product sales in Germany. Third-party royalty costs on HETLIOZ® net product sales in the U.S. decreased from 10% to 5% in December 2022 and ended in April 2024. Third-party royalty costs on HETLIOZ® net product sales in Germany will end in October 2026 and third-party royalty costs on Fanapt® net product sales in the U.S. will end in November 2026. There wereare no-thirdno partythird-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 will begin once we initiate the commercial launch of NEREUSTM. We evaluate the risk of excess inventory and product expiry by evaluating current and future product demand relative to product shelf life and build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance, patient usage, and generic competition. Our inventory balance consisted of $2.1 million of Fanapt® product, $7.8 million of HETLIOZ® product and $0.3 million of PONVORY® product as of December 31, 2025. Our inventory balance consisted of $2.0 million of Fanapt® product, $7.3 million of HETLIOZ® product and $0.2 million of PONVORY® product as of December 31, 2024. Our inventory balance consisted of $3.0 million of Fanapt® product and $7.2 million of HETLIOZ® product as of December 31, 2023.

We previously disclosed in Part I, Item 1A of our annual report on Form 10-K (Annual Report) for the year ended December 31, 2025, filed with the Securities and Exchange Commission on February 12, 2026, important factors which could affect our business, financial condition, results of operations and future operations under the heading Risk Factors. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described as risk factors, any one or more of which could, directly or indirectly, cause our actual operating results and financial condition to vary materially from past, or anticipated future, operating results and financial condition. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and the price of our common stock. ThereOther than as set forth below, there have been no material changes to the risk factors disclosed in (i) our Annual Report for the fiscal year ended December 31, 2025.

Our commercial portfolio is currently comprised of five products: Fanapt® (iloperidone) and BYSANTITM (milsaperidone) for the acute treatment of manic or mixed episodes associated with bipolar I disorder and the treatment of schizophrenia, HETLIOZ® (tasimelteon) 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® (ponesimod) for the treatment of relapsing forms of multiple sclerosis (RMS) including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease and NEREUSTM (tradipitant) 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:

•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,QuimilzaTM (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;

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

•Fanapt® saw continued strong momentum in Q2 2026, with total prescriptions (TRx) up 32%31% and new-to-brand prescriptions (NBRx) up 76%32% versus Q1Q2 2025. InSince Aprilcommercial 2026,expansion weeklyfollowing TRxthe forapproval of bipolar disorder, Fanapt® reachedhas anseen 11-yearsignificant highgrowth, ofwith overTRx 2,600up prescriptions62% forand theNBRx weekup ending300% Aprilversus 24,Q2 2026.2024.

◦The Phase III study of VQW-765 in the treatment of adults with social anxiety disorder, with results expected by the end ofin 2026.

•The FDA accepted the Biologics License Application (BLA) for imsidolimabQuimilzaTM in GeneralizedGPP Pustularis Psoriasisunder (GPP)review by the FDA with a Prescription Drug User Fee Act (PDUFA) target action date of December 12, 2026. The results of the pivotal clinical study were published in the April 28, 2026 issue of the New England Journal of Medicine (NEJM) Evidence.

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 toof, 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,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.

There have been no significant changes in our critical accounting policiespolicies, including estimates, assumptions and judgmentsjudgments, from those described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Annual Report. A summary of our significant accounting policies appears in the notes to our audited consolidated financial statements included in the Annual Report. However, we believe that the following accounting policies are important to understanding and evaluating our reported financial results as they involve the most significant judgments and estimates used in the preparation of our condensed consolidated financial statements, and we have accordingly included them in this discussion.

Fanapt® isand NEREUSTM are available in the U.S. for distribution through a limited number of wholesalers and isare also available in retail pharmacies. In addition, NEREUSTM is available by prescription directly through the nereus.us website. HETLIOZ® is available in the U.S. for distribution through a limited number of specialty pharmacies and is not available in retail pharmacies. PONVORY® is available in the U.S. for distribution primarily through a limited number of specialty distributors and specialty pharmacies. We invoice and record revenue when our customers, wholesalers, specialty pharmacies and specialty distributors, receive product from the third-party logistics warehouse, which is the point at which control is transferred to the customer. Revenues and accounts receivable are concentrated with these customers. Outside the U.S., we have a distribution agreement for the commercialization of Fanapt® in Israel and sell HETLIOZ® in Germany. Receivables are carried at transaction price paid by the wholesalers, specialty pharmacies and specialty distributors, net of estimated prompt-pay discounts and allowance for credit losses. Payment terms differ by customer, but are based on customary commercial terms and typically range between thirty and sixty days. Allowance for credit losses is measured using historical loss rates based on the aging of receivables and incorporating current conditions and forward-looking estimates.

The transaction price is determined based upon the consideration to which we will be entitled in exchange for transferring product to the customer. Our product sales are recorded net of applicable product revenue allowances for which reserves are established and include discounts, rebates, chargebacks, service fees, co-pay assistance and product returns that are applicable for various government and commercial payors. Where appropriate, our estimates of variable consideration included in the transaction price consider a range of possible outcomes. Allowances for rebates, chargebacks and co-pay assistance are based upon the insurance benefits of the end customer, if any, which are estimated using historical activity and, where available, actual and pending prescriptions for which we have validated the insurance benefits. Variable consideration may be constrained and is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the respective underlying contracts. If actual results in the future vary from our estimates, we adjust our estimate in the period identified, which would affect net product sales in the period such variances become known. During the six months ended June 30, 2026, we constrained NEREUSTM net product sales. The constrained revenue relates to the uncertainties of patient demand and product returns related to the elevated levels of inventory on hand at wholesalers.

•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 MarchJune 31,30, 2026 or December 31, 2025.

The following table summarizes sales discounts and allowance activity as of and for the threesix months ended MarchJune 31,30, 2026:

The provision of $28.5$64.1 million for rebates and chargebacks for the threesix months ended MarchJune 31,30, 2026 and its ending balance at MarchJune 31,30, 2026 primarily represent Medicaid rebates. The provision of $11.3$36.1 million for discounts, returns and other for the threesix months ended MarchJune 31,30, 2026 and its ending balance at MarchJune 31,30, 2026 primarily represents service fees, estimated product returns, co-pay assistance costs and prompt-pay discounts. NEREUSTM became commercially available in the U.S. in May 2026. The increase in the balance of discounts, returns and other as of June 30, 2026 relative to December 31, 2025 was primarily due to provisions for constrained revenue for the initial stocking of NEREUSTM by wholesalers.

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,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.

Intangible assets and impairment of long-lived assets. Our intangible assets consist of capitalized license costs for products approved by the FDA or costs to acquire already commercialized products. We amortize our intangible assets on a straight-line basis over the estimated useful economic life of the related product patents. We assess the impairment of intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important that could trigger an impairment review include significant underperformance relative to expectedexpected, historical or projected future operating results, a significant adverse change in legal or regulatory factors that could affect the value or patent life, including our ability to defend and enforce patent claims and other intellectual property rights, and significant negative industry or economic trends. When we determine that the carrying value of our intangible assets may not be recoverable based upon the existence of one or more of the indicators of impairment, we measure any impairment based on the amount that carrying value exceeds fair value.

Income taxes. We assess the need for a valuation allowance against our deferred tax assets each quarter through the review of all available positive and negative evidence. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. The analysis is highly dependent upon historical and projected pretax income. Projected pretax income includes significant assumptions related to revenue, which could be affected by the success of the commercial launches of Fanapt® in bipolar I disorder, PONVORY® in RMS, NEREUSTM in the prevention of vomiting induced by motionmotion, which became commercially available in the U.S. in May 2026, 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 onin 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 MarchJune 31,30, 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.

Tax benefits are recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained onupon examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement.

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 theour ongoingnewest commercial launch ofproducts, NEREUSTM for the prevention of vomiting induced by motion, which was approved in December 2025 and became commercially available in the U.S. onin 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 onin 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.

Three months ended MarchJune 31,30, 2026 compared to three months ended MarchJune 31,30, 2025

Revenues. Total revenues increaseddecreased by $1.7$2.1 million, or 3%,4%, to $51.7$50.5 million for the three months ended MarchJune 31,30, 2026 compared to $50.0$52.6 million for the three months ended MarchJune 31,30, 2025. Revenue from net product sales was as follows:

Fanapt® net product sales increased by $6.0$6.7 million, or 26%,23%, to $29.6$36.0 million for the three months ended MarchJune 31,30, 2026 compared to $23.5$29.3 million for the three months ended MarchJune 31,30, 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.volume. An amount of variable consideration related to Fanapt® net product sales is subject to dispute, of which approximately $3.0 million was recognized for the three months ended December 31, 2025.

HETLIOZ® net product sales decreased by $4.9$10.6 million, or 24%,66%, to $15.9$5.6 million for the three months ended MarchJune 31,30, 2026 compared to $20.9$16.2 million for the three months ended MarchJune 31,30, 2025. The decrease to net product sales was attributable to a decrease in volume. Since the entrance of generic competition in the first quarter of 2023, HETLIOZ® dispenses have decreased. Additionally, inventory levels at our specialty pharmacy customers have been elevated relative to inventory levels prior to the entrance of generic competition. The elevated levels of inventory have resulted in longer periods to resolve uncertainties related to variable consideration. HETLIOZ® net product sales have been and may continue to fluctuate from quarter to quarter depending on when specialty pharmacy customers purchase again. During the second quarter of 2026, there was destocking of inventory by certain of our specialty pharmacy customers, as well as orders, totaling approximately $7.0 million in revenue, that were shipped on June 29, 2026 and arrived on July 1, 2026, both resulting in a decline in volume. These orders that did not arrive by quarter end will be recognized as revenue in the third quarter of 2026. HETLIOZ® net product sales may decline in future periods, potentially significantly, related to continued generic competition in the U.S.

PONVORY® net product sales increased by $0.6$0.8 million, or 10%,12%, to $6.2$7.9 million for the three months ended MarchJune 31,30, 2026 compared to $5.6$7.1 million for the three months ended MarchJune 31,30, 2025. An amount of variable consideration related to PONVORY® net product sales is subject to dispute, of which approximately $3.0 million was recognized for the three months ended December 31, 2024.

Cost of goods sold. Cost of goods sold 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 onin 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.

Research and development expenses. Research and development expenses decreasedincreased by $7.3$15.0 million, or 20%,68%, to $28.4$37.0 million for the three months ended MarchJune 31,30, 2026 compared to $35.7$22.0 million for the three months ended MarchJune 31,30, 2025. The decreaseincrease was primarily due to lowerhigher expenses on our imsidolimab program, partially offset by an increase in expenses for our VQW-765 and various 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.

The following table summarizes the costs of our product development initiatives for the three months ended MarchJune 31,30, 2026 and 2025:

Selling, general and administrative expenses. Selling, general and administrative expenses increased by $18.3$7.2 million, or 36%,11%, to $68.4$71.8 million for the three months ended MarchJune 31,30, 2026 compared to $50.1$64.6 million for the three months ended MarchJune 31,30, 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,products, including the U.S. commercial launch of NEREUSTM initiated onin May 1,2026 2026, as well asand the otherexpansion futureof commercialour launches.sales force during 2025.

Intangible asset amortization. Intangible asset amortization was $2.0 million for the three months ended MarchJune 31,30, 2026 compared to $1.8 million for the three months ended MarchJune 31,30, 2025. Intangible asset amortization increased in 2026 due to the amortization of the NEREUSTM intangible asset, which was capitalized in December 2025.

Other income, net. Other income, net was $1.8$1.4 million for the three months ended MarchJune 31,30, 2026 compared to $3.7$3.6 million for the three months ended MarchJune 31,30, 2025. Other income primarily consists of investment income on our marketable securities.

Provision (benefit) for income taxes. We recorded an income tax provision of $0.1 million and a benefit for income taxes of $7.9$7.7 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The income tax provision for the three months ended MarchJune 31,30, 2026 was driven by discrete income tax expense of $0.1 million. The income tax benefit for the three months ended MarchJune 31,30, 2025 was primarily driven by the estimated effective tax rate for the year as well as discrete income tax expense of $0.5$0.4 million.