SEC Filing | Harmony Biosciences

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39450

HARMONY BIOSCIENCES HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware	82-2279923
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)


630 W. Germantown Pike, Suite 215, Plymouth Meeting, PA	19462
(Address of principal executive offices)	(Zip Code)

(484) 539-9800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, par value $0.00001 value per share

HRMY

The Nasdaq Stock Market LLC
(Nasdaq Global Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 28, 2023, there were 60,000,145 shares of the registrant’s common stock, par value $0.00001 value per share, outstanding.

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TABLE OF CONTENTS


	Page
Part I. Financial Information	3
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets (Unaudited)	3
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)	4
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	5
Condensed Consolidated Statements of Cash Flows (Unaudited)	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	33
Item 4. Controls and Procedures	34
Part II. Other Information	35
Item 1. Legal Proceedings	35
Item 1A. Risk Factors	35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3. Defaults upon Senior Securities	35
Item 4. Mine Safety Disclosures	35
Item 5. Other Information	35
Item 6. Exhibits	36
Signatures	37

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	June 30,		December 31,
	2023		2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	317,415	$	243,784
Investments, short-term		53,568		79,331
Trade receivables, net		63,812		54,740
Inventory, net		4,854		4,297
Prepaid expenses		9,442		9,347
Other current assets		6,550		8,786
Total current assets		455,641		400,285
NONCURRENT ASSETS:
Property and equipment, net		572		573
Restricted cash		250		750
Investments, long-term		58,651		22,568
Intangible assets, net		149,031		160,953
Deferred tax asset		93,578		85,943
Other noncurrent assets		2,460		2,798
Total noncurrent assets		304,542		273,585
TOTAL ASSETS	$	760,183	$	673,870
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables	$	6,563	$	3,786
Accrued compensation		7,972		11,532
Accrued expenses		63,563		59,942
Current portion of long-term debt		11,000		2,000
Other current liabilities		3,947		1,624
Total current liabilities		93,045		78,884
NONCURRENT LIABILITIES:
Long-term debt, net		180,487		189,647
Other noncurrent liabilities		1,479		2,501
Total noncurrent liabilities		181,966		192,148
TOTAL LIABILITIES		275,011		271,032
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS’ EQUITY:
Common stock—$0.00001 par value; 500,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively; 59,999,658 shares and 59,615,731 issued and outstanding at June 30, 2023 and December 31, 2022, respectively		1		1
Additional paid in capital		694,038		675,118
Accumulated other comprehensive (loss) income		(522)		(151)
Accumulated deficit		(208,345)		(272,130)
TOTAL STOCKHOLDERS’ EQUITY		485,172		402,838
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	760,183	$	673,870

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

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HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net product revenues	$	134,216	$	107,028	$	253,342	$	192,341
Cost of product sold		25,008		18,921		45,788		33,637
Gross profit		109,208		88,107		207,554		158,704
Operating expenses:
Research and development		14,969		12,668		28,258		20,246
Sales and marketing		24,528		20,160		47,100		37,743
General and administrative		22,809		22,163		44,871		40,043
Total operating expenses		62,306		54,991		120,229		98,032
Operating income		46,902		33,116		87,325		60,672
Other (expense) income, net		(31)		42		(29)		40
Interest expense, net		(2,776)		(3,927)		(5,421)		(8,096)
Income before income taxes		44,095		29,231		81,875		52,616
Income tax expense		(9,795)		(5,700)		(18,090)		(7,600)
Net income	$	34,300	$	23,531	$	63,785	$	45,016
Unrealized loss on investments		(491)		(29)		(371)		(29)
Comprehensive income	$	33,809	$	23,502	$	63,414	$	44,987
EARNINGS PER SHARE:
Basic	$	0.57	$	0.40	$	1.07	$	0.76
Diluted	$	0.56	$	0.39	$	1.05	$	0.74
Weighted average number of shares of common stock - basic		59,974,123		59,063,358		59,853,808		58,986,370
Weighted average number of shares of common stock - diluted		60,743,953		60,922,672		60,997,410		60,759,026

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

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HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share data)


						Accumulated
				Additional		other				Total
	Common Stock			paid-in		comprehensive		Accumulated		stockholders’
	Shares	Amount		capital		(loss) income		deficit		equity
Balance as of December 31, 2022	59,615,731	$	1	$	675,118	$	(151)	$	(272,130)	$	402,838
Net income	—		—		—		—		63,785		63,785
Unrealized loss on investments	—		—		—		(371)		—		(371)
Exercise of options and restricted stock units	383,927		—		4,069		—		—		4,069
Stock-based compensation	—		—		14,851		—		—		14,851
Balance as of June 30, 2023	59,999,658	$	1	$	694,038	$	(522)	$	(208,345)	$	485,172


						Accumulated
				Additional		other				Total
	Common Stock			paid-in		comprehensive		Accumulated		stockholders’
	Shares	Amount		capital		(loss) income		deficit		equity
Balance as of March 31, 2023	59,954,618	$	1	$	685,716	$	(31)	$	(242,645)	$	443,041
Net income	—		—		—		—		34,300		34,300
Unrealized loss on investments	—		—		—		(491)		—		(491)
Issuance of common stock	—		—		—		—		—		—
Exercise of options	45,040		—		674		—		—		674
Stock-based compensation	—		—		7,648		—		—		7,648
Balance as of June 30, 2023	59,999,658	$	1	$	694,038	$	(522)	$	(208,345)	$	485,172


						Accumulated
				Additional		other				Total
	Common Stock			paid-in		comprehensive		Accumulated		stockholders’
	Shares	Amount		capital		(loss) income		deficit		equity
Balance as of December 31, 2021	58,825,769	$	1	$	640,104	$	—	$	(453,598)	$	186,507
Net income	—		—		—		—		45,016		45,016
Unrealized loss on investments	—		—		—		(29)		—		(29)
Exercise of stock options	291,980		—		3,133		—		—		3,133
Stock-based compensation	—		—		11,906		—		—		11,906
Balance as of June 30, 2022	59,117,749	$	1	$	655,143	$	(29)	$	(408,582)	$	246,533


						Accumulated
				Additional		other				Total
	Common Stock			paid-in		comprehensive		Accumulated		stockholders’
	Shares	Amount		capital		(loss) income		deficit		equity
Balance as of March 31, 2022	59,030,148	$	1	$	646,615	$	—	$	(432,113)	$	214,503
Net income	—		—		—		—		23,531		23,531
Unrealized loss on investments	—		—		—		(29)		—		(29)
Exercise of options	87,601		—		1,250		—		—		1,250
Stock-based compensation	—		—		7,278		—		—		7,278
Balance as of June 30, 2022	59,117,749	$	1	$	655,143	$	(29)	$	(408,582)	$	246,533

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

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HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except share and per share data)


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	63,785	$	45,016
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation		206		211
Intangible amortization		11,922		11,043
Stock-based and employee stock purchase compensation expense		14,851		11,906
Stock appreciation rights market adjustment		(497)		361
Debt issuance costs amortization		840		823
Deferred taxes		(7,635)		—
Amortization of premiums and accretion of discounts on Investment securities		(1,312)		—
Other non-cash expenses		799		770
Change in operating assets and liabilities:
Trade receivables		(9,072)		(14,979)
Inventory		(557)		224
Prepaid expenses and other assets		2,227		(3,707)
Trade payables		2,777		5,660
Accrued expenses and other current liabilities		1,289		5,407
Other non-current liabilities		(1)		(152)
Net cash provided by operating activities		79,622		62,583
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities		(72,847)		(22,406)
Proceeds from maturities and sales of investment securities		63,491		—
Purchase of property and equipment		(205)		(86)
Milestone payments		—		(40,000)
Net cash used in investing activities		(9,561)		(62,492)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayment of long term debt		(1,000)		(1,000)
Payments of employee withholding taxes related to stock-based awards		(514)		—
Proceeds from exercised options		4,584		3,133
Net cash provided by financing activities		3,070		2,133
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		73,131		2,224
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period		244,534		235,059
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period	$	317,665	$	237,283
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest	$	10,691	$	7,524
Cash paid during the year for taxes		19,890		290

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

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HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

The Company

Harmony Biosciences Holdings, Inc., and its consolidated subsidiary (the “Company”) was founded in July 2017 as Harmony Biosciences II, LLC, a Delaware limited liability company. The Company converted to a Delaware corporation named Harmony Biosciences II, Inc. in September 2017 and, in February 2020, the Company changed its name to Harmony Biosciences Holdings, Inc. The Company’s operations are conducted in its wholly owned subsidiary, Harmony Biosciences, LLC (“Harmony”), which was formed in May 2017. The Company is a commercial-stage pharmaceutical company focused on developing and commercializing innovative therapies for patients living with rare neurological diseases as well as patients living with other neurological diseases who have unmet medical needs. The Company is headquartered in Plymouth Meeting, Pennsylvania.

2. LIQUIDITY AND CAPITAL RESOURCES

The unaudited condensed consolidated financial statements have been prepared as though the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $208,345 and $272,130, as of June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023, the Company had cash, cash equivalents and investments of $429,884.

The Company believes that its existing cash, cash equivalents and investments on hand as of June 30, 2023, as well as additional cash generated from operating and financing activities will meet its operational liquidity needs and fund its planned investing activities for the next twelve months from the date of issuance of these unaudited condensed consolidated financial statements.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented. All intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated balance sheet as of June 30, 2023, the unaudited condensed consolidated statements of cash flows for the three and six months ended June 30, 2023, and 2022, and the unaudited condensed consolidated statements of operations and comprehensive income and the unaudited condensed consolidated statements of shareholders’ equity for the three and six months ended June 30, 2023 and 2022, are unaudited. The balance sheet as of December 31, 2022, was derived from audited financial statements as of and for the year ended December 31, 2022. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements as of and for the year ended December 31, 2022, and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2023, and the results of its operations and its cash flows for the three and six months ended June 30, 2023 and 2022. The unaudited condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted under the SEC’s rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial

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statements and accompanying notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the unaudited condensed consolidated financial statements, including the notes thereto, and elsewhere in this report. Actual results may differ significantly from estimates, which include rebates due pursuant to commercial and government contracts, accrued research and development expenses, stock-based compensation expense and income taxes.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents and restricted cash consist of cash and, if applicable, highly liquid investments with an original maturity of three months or less when purchased, including investments in Money Market Funds and debt securities that approximate fair value. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheet that equal the amount reflected in the statements of cash flows.


	As of
	June 30,		December 31,
	2023		2022
Cash and cash equivalents	$	317,415	$	243,784
Restricted cash		250		750
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows	$	317,665	$	244,534

Restricted cash includes amounts required to be held as a security deposit in the form of letters of credit for the Company’s credit card program and the fleet program.

Investments

The Company’s investments consist of debt securities that are classified as available-for-sale. Short-term and long-term investments are carried at fair value and unrealized gains and losses are recorded as a component of accumulated comprehensive income in stockholders’ equity. The amortization of premiums and accretion of discounts adjust the carrying value of investments and are recorded in interest expense, net, on the unaudited condensed consolidated statements of operations and comprehensive income. Interest income and realized gains and losses, if any, are also recorded in interest expense, net, on the unaudited condensed consolidated statement of operations and comprehensive income. Realized gains and losses that result from the sale of investments are determined on a specific identification basis.

At each reporting period, the Company reviews any unrealized losses position to determine if the decline in the fair value of the underlying investments is a result of credit losses or other factors. If the assessment indicates that a credit loss exists, any impairment is recognized as an allowance for credit losses in our consolidated statement of operations.

Interest income generated from our investments and cash equivalents, which is included in interest expense, net, was $2,731 and $5,153 for the three and six months ended June 30, 2023, respectively, compared to $250 and $317 for the three and six months ended June 30, 2022, respectively.

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Concentrations of Risk

Substantially all of the Company’s cash and money market funds are held in two financial institutions. Due to their size, the Company believes these financial institutions represent minimal credit risk. Deposits may exceed the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation for U.S. institutions. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company believes that it is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

The Company is also subject to credit risk from its trade receivables related to its product sales. The Company extends credit to specialty pharmaceutical distribution companies within the United States. Customer creditworthiness is monitored and collateral is not required. Historically, the Company has not experienced credit losses on its accounts receivable. The Company monitors its exposure within accounts receivable and would record a reserve against uncollectible accounts receivable if necessary. As of June 30, 2023, three customers accounted for 100% of gross accounts receivable; Caremark LLC (“CVS Caremark”), which accounted for 38% of gross accounts receivable; Accredo Health Group, Inc. (“Accredo”), which accounted for 36% of gross accounts receivable; and PANTHERx Specialty Pharmacy LLC (“Pantherx”), which accounted for 26% of gross accounts receivable. As of December 31, 2022, three customers accounted for 100% of gross accounts receivable; CVS Caremark, which accounted for 41% of gross accounts receivable, Accredo, which accounted for 35% of gross accounts receivable; and Pantherx, which accounted for 24% of gross accounts receivable.

For the six months ended June 30, 2023, three customers accounted for 100% of gross product revenues; CVS Caremark accounted for 35% of gross product revenues; Pantherx accounted for 33% of gross product revenues; and Accredo accounted for 32% of gross product revenues. For the six months ended June 30, 2022, three customers accounted for 100% of gross product revenues; CVS Caremark accounted for 39% of gross product revenues; Pantherx accounted for 32% of gross product revenues; and Accredo accounted for 29% of gross product revenues.

The Company depends on a single source supplier for each of its product and active pharmaceutical ingredient.

Recently Issued Accounting Pronouncements

ASU 2020-04, Reference Rate Reform (Topic 848). In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), which provides guidance related to reference rate reform. The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and could initially be applied to applicable contract modifications through December 31, 2022, which was extended to December 31, 2024 upon the FASB issuing ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The Company is currently evaluating the impact of the transition from LIBOR to alternative reference rates but does not expect a significant impact to its condensed consolidated financial statements.

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4. INVESTMENTS

The carrying value and amortized cost of the Company’s available-for-sale debt securities, summarized by type of security, consisted of the following:


	June 30, 2023
		Amortized	Unrealized	Unrealized		Fair
		Cost	Gains	Losses		Value
Short-term:
Commercial paper	$	30,058	—	(28)	$	30,030
Corporate debt securities		21,673	3	(29)		21,647
U.S. government securities		1,891	1	(1)		1,891
Total short-term investments	$	53,622	4	(58)	$	53,568

Long-term:
Commercial paper	$	1,601	—	(4)	$	1,597
Corporate debt securities		30,502	23	(149)		30,376
U.S. government securities		27,016	—	(338)		26,678
Total long-term investments	$	59,119	23	(491)	$	58,651

	December 31, 2022
		Amortized	Unrealized	Unrealized		Fair
		Cost	Gains	Losses		Value
Short-term:
Commercial paper	$	26,553	15	(34)	$	26,534
Corporate debt securities		49,213	9	(73)		49,149
U.S. government securities		3,658	—	(10)		3,648
Total short-term investments	$	79,424	24	(117)	$	79,331

Long-term:
Commercial paper	$	853	1	—	$	854
Corporate debt securities		21,516	11	(68)		21,459
U.S. government securities		257	—	(2)		255
Total long-term investments	$	22,626	12	(70)	$	22,568

The Company classifies investments with an original maturity of less than one year as current and investments with an original maturity date of greater than one year as noncurrent on its unaudited condensed consolidated balance sheet. The investments classified as noncurrent have original maturity dates ranging from 1-2 years. The Company did not have any available-for-sale debt security investments in a continuous unrealized loss position of greater than 12 months as of June 30, 2023 and December 31, 2022, respectively.

5. FAIR VALUE MEASUREMENTS

The Company’s unaudited condensed consolidated financial statements include cash, cash equivalents, restricted cash, accounts payable, and accrued liabilities, all of which are short term in nature and, accordingly, approximate fair value.

It is the Company’s policy to measure non-financial assets and liabilities at fair value on a nonrecurring basis. These non-financial assets and liabilities are not measured at fair value on an ongoing basis but are

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subject to fair value adjustments in certain circumstances (such as evidence of impairment), which, if material, are disclosed in the accompanying footnotes.

The Company measures certain assets and liabilities at fair value based on the fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels based on the source of inputs as follows:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities.

Level 3—Valuations based on unobservable inputs and models that are supported by little or no market activity.

Money market funds are classified as Level 1 fair value instruments. Investments in available-for-sale debt securities are classified as Level 2 and carried at fair value, which we estimate utilizing a third-party pricing service. The pricing service utilizes industry standard valuation models whereby all significant inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, bids, offers, or other market-related data, are observable. We validate valuations obtained from third-party services by obtaining market values from other pricing sources. The Company did not classify any assets or liabilities as Level 3 as of June 30, 2023 or December 31, 2022.

The Company’s assets measured at fair value consisted of the following:


	June 30, 2023				December 31, 2022
		Total	Level 1	Level 2		Total	Level 1	Level 2
Assets
Cash equivalents	$	235,465	234,267	1,198	$	184,977	184,977	—
Commercial paper		31,627	—	31,627		27,388	—	27,388
Corporate debt securities		52,023	—	52,023		70,608	—	70,608
U.S. government securities		28,569	—	28,569		3,903	—	3,903
Total	$	347,684	234,267	113,417	$	286,876	184,977	101,899

6. INVENTORY

Inventory, net consisted of the following:


	As of
	June 30,		December 31,
	2023		2022
Raw materials	$	982	$	838
Work in process		1,679		1,513
Finished goods		2,481		2,565
Inventory, gross		5,142		4,916
Reserve for excess inventory		(288)		(619)
Total inventory, net	$	4,854	$	4,297

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7. INTANGIBLE ASSETS

In August 2019, the Company received FDA approval of WAKIX® (pitolisant) for the treatment of excessive daytime sleepiness (“EDS”) in adult patients with narcolepsy. This event triggered a milestone payment of $75,000 under the provisions of the 2017 LCA (defined below) which the Company capitalized as an intangible asset. The Company determined a useful life of 10 years for such intangible asset, and, as of June 30, 2023, the remaining useful life was 6.3 years.

In October 2020, the Company received FDA approval for the New Drug Application (“NDA”) for WAKIX for the treatment of cataplexy in adult patients with narcolepsy. This event triggered a milestone payment of $100,000 under the provisions of the 2017 LCA which the Company capitalized as an intangible asset and paid in January of 2021. The Company determined a useful life of 9 years for such intangible asset, and, as of June 30, 2023, the remaining useful life was 6.3 years.

In February 2022, the Company attained $500,000 in life-to-date aggregate net sales of WAKIX in the United States. This event triggered a final $40,000 payment under the provisions of the 2017 LCA which the Company capitalized as an intangible asset and paid in March of 2022. The Company determined a useful life of 7.6 years for such intangible asset, and, as of June 30, 2023, the remaining useful life was 6.3 years.

Amortization expense was $5,961 for each of the three months ended June 30, 2023 and 2022, respectively, and $11,922 and $11,043 for the six months ended June 30, 2023 and 2022, respectively, and is recorded in general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive income.

The Company expects the future annual amortization expense for the unamortized intangible assets to be as follows:


Years ending December 31,
2023 (Excluding the six months ended June 30, 2023)	$	11,923
2024		23,845
2025		23,845
2026		23,845
2027		23,845
Thereafter		41,728
Total	$	149,031

The gross carrying amount and net book value of the intangible asset is as follows:


	As of
	June 30,		December 31,
	2023		2022
Gross Carrying Amount	$	215,000	$	215,000
Accumulated Amortization		(65,969)		(54,047)
Net Book Value	$	149,031	$	160,953

8. LICENSE AGREEMENTS AND ASSET PURCHASE AGREEMENTS

License Agreements

In July 2017, Harmony entered into a License Agreement (the “2017 LCA”) with Bioprojet Société Civile de Recherche (“Bioprojet”) whereby Harmony acquired the exclusive right to commercialize the pharmaceutical compound pitolisant for the treatment, and/or prevention, of narcolepsy, obstructive sleep apnea, idiopathic hypersomnia, and Parkinson’s disease as well as any other indications unanimously agreed by the parties in the United States and its territories. A milestone payment of $50,000 was due upon acceptance by the FDA of

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pitolisant’s NDA, which was achieved in February 2019 and was expensed within research and development for the year ended December 31, 2019. A milestone payment of $77,000, which included a $2,000 fee that is described below, was due upon FDA approval of WAKIX (pitolisant) for treatment of EDS in adult patients with narcolepsy, which was achieved in August 2019. The $2,000 payment and $75,000 milestone payment were paid in August and November 2019, respectively. In addition, a milestone payment of $102,000, which included a $2,000 fee was due upon the FDA approval of the NDA for WAKIX for the treatment of cataplexy in adult patients with narcolepsy. The $2,000 payment was paid in October 2020 and a $100,000 milestone payment was paid in January 2021. A final $40,000 milestone payment was paid to Bioprojet in March 2022 upon WAKIX attaining $500,000 in aggregate net sales in the United States. The 2017 LCA also requires a fixed trademark royalty and a tiered royalty based on net sales, which is payable to Bioprojet on a quarterly basis. The Company incurred $22,542 and $17,125 for the three months ended June 30, 2023 and 2022, respectively, and $41,602 and $30,797 for the six months ended June 30, 2023 and 2022, respectively, for sales-based, trademark and tiered royalties recognized as cost of product sold. As of June 30, 2023 and December 31, 2022, the Company had accrued $22,542 and $25,367, respectively, for sales-based, trademark and tiered royalties.

On July 31, 2022, Harmony entered into a License and Commercialization Agreement (the “2022 LCA”) with Bioprojet whereby Harmony obtained exclusive rights to manufacture, use and commercialize one or more new products based on pitolisant in the United States and Latin America, with the potential to add additional indications and formulations upon agreement of both parties. Harmony paid an initial, non-refundable $30,000 licensing fee in October 2022 and additional payments of up to $155,000 are potentially due under the 2022 LCA upon the achievement of certain future development and sales-based milestones. In addition, there are other payments due upon achievement of development milestones for new indications and formulations as agreed upon by both parties. The 2022 LCA also requires a fixed trademark royalty and a tiered royalty based on net sales upon commercialization, which will be payable to Bioprojet on a quarterly basis.

Agreement Related to Intellectual Property

In August 2021, the Company entered into an asset purchase agreement with ConSynance Therapeutics, Inc. (the “APA”) to acquire HBS-102 (formerly referred to as “CSTI-100”), a potential first-in-class molecule with a novel mechanism of action. Under the terms of the APA, the Company acquired full development and commercialization rights globally, with the exception of Greater China, for $3,500. The Company accounted for the transaction as an asset acquisition as substantially all of the fair value of the assets acquired was concentrated in a single identified asset. In March 2023, the Company achieved a preclinical milestone, which triggered a $750 payment under the provisions of the APA, which the Company recognized as an IPR&D charge recorded in research and development within the unaudited condensed consolidated statement of operations and comprehensive income for the six months ended June 30, 2023. There are additional payments due under the APA upon the achievement of certain milestones including $1,000 for preclinical milestones, $19,000 for development milestones, $44,000 for regulatory milestones and $110,000 for sales milestones.

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9. ACCRUED EXPENSES

Accrued expenses consist of the following:


	As of
	June 30,		December 31,
	2023		2022
Royalties due to third parties	$	22,542	$	25,367
Rebates and other sales deductions		30,441		27,860
Interest		4,199		3,286
Selling and marketing		2,499		1,135
Research and development		1,969		358
Professional fees, consulting, and other services		750		1,163
Other expenses		1,163		773
	$	63,563	$	59,942

10. DEBT

Blackstone Credit Agreement

In August 2021, the Company entered into the Blackstone Credit Agreement that provides for (i) a senior secured term loan facility in an aggregate original principal amount of $200,000 (the “Initial Term Loan”) and (ii) a senior secured delayed draw term loan facility in an aggregate principal amount up to $100,000 (the “DDTL” and, together with the Initial Term Loan, the “Loans”). The DDTL was initially available to draw down through August 9, 2022. In August 2022, the Company entered into an agreement to extend the expiration date of the DDTL to August 9, 2023, for which the Company will pay a ticking fee at a rate of 1% per annum on the undrawn portion of the DDTL, which commenced on August 10, 2022.

The repayment schedule for the Initial Term Loan consists of quarterly $500 principal payments, which commenced on December 31, 2021, and increasing to quarterly $5,000 principal payments beginning on March 31, 2024, with a $145,500 payment due on the maturity date of August 9, 2026 (“Maturity Date”). Interest is payable quarterly, which commenced on November 9, 2021, and continues through the Maturity Date. The Initial Term Loan bears interest at a per annum rate equal to LIBOR, subject to a 1.00% floor, plus 6.50%.

Net cash received from the Initial Term Loan was $191,849, net of debt issuance costs of $8,151. The debt issuance costs related to the Initial Term Loan are being amortized as additional interest expense over the five-year loan term of the Blackstone Credit Agreement. In addition, the Company paid $1,000 in debt issuance costs relating to the DDTL, which are recorded in other current assets within the unaudited condensed consolidated balance sheet. The fair value of the Initial Term Loan as of June 30, 2023 was $171,622.

Long-term debt, net consists of the following:


	June 30,		December 31,
	2023		2022
Liability component - principal	$	196,500	$	197,500
Unamortized debt discount associated with debt financing costs		(5,013)		(5,853)
Liability component - net carrying value		191,487		191,647
Less current portion		(11,000)		(2,000)
Long-term debt, net	$	180,487	$	189,647

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Future minimum payments relating to long-term debt, net as of June 30, 2023, for the periods indicated below consists of the following:


Years ending December 31,
2023 (Excluding the six months ended June 30, 2023)	$	1,000
2024		20,000
2025		20,000
2026		155,500
2027		—
Thereafter		—
Total	$	196,500

Interest expense related to the Company’s long-term debt, net, is included in interest expense, net in the unaudited condensed consolidated statements of operations and comprehensive income and consists of the following:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Interest on principal balance	$	5,794	$	3,773	$	11,109	$	7,597
Amortization of deferred financing costs		424		411		840		823
Total term loan interest expense	$	6,218	$	4,184	$	11,949	$	8,420

11. LEASES

In June 2018, the Company entered into an operating lease for approximately fifteen thousand square feet of office space in Plymouth Meeting, PA, which expires in May 2024. The Company subsequently entered two separate operating leases for additional office space in Plymouth Meeting, PA, which include approximately thirteen thousand square feet and seven thousand square feet of additional office space, respectively, and expire in May 2024. The terms of the lease payments provide for rental payments on a monthly basis and on a graduated scale. The Company also leases a fleet of automobiles that are used by its sales representatives and are classified as operating leases.

Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future lease payments using our incremental borrowing rate. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Our leases have remaining lease terms of less than 1 year to 3 years, some of which may include the option to extend or terminate the leases.

The Company recorded operating lease costs of $444 and $392 for the three months ended June 30, 2023 and 2022, respectively, and $822 and $777 for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, the weighted-average remaining lease term for operating leases was 1.4 years and the weighted-average discount rate for operating leases was 4.7%.

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