Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2024

Summary of Significant Accounting Policies

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

Use of Estimates

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

Cash, Cash Equivalents and Restricted Cash

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

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total end of period cash, cash equivalents and restricted cash reported within the Condensed Consolidated Statements of Cash Flows:


(in thousands)	March 31, 2024		March 31, 2023
Cash and cash equivalents	$	125,158	$	354,171


Restricted cash included in non-current inventory and other	469		469
Total cash, cash equivalents and restricted cash	$	125,627	$	354,640

Revenue from Net Product Sales

The Company’s net product sales consist of sales of Fanapt®, HETLIOZ® and PONVORY®. Net sales by product for the three months ended March 31, 2024 and 2023 were as follows:


	Three Months Ended
(in thousands)	March 31, 2024		March 31, 2023
Fanapt® net product sales	$	20,579	$	22,882
HETLIOZ® net product sales	20,053		39,616
PONVORY® net product sales	6,830		—
Total net product sales	$	47,462	$	62,498

The Company’s HETLIOZ® net product sales as reported for the three months ended March 31, 2023 reflected higher unit sales as compared to recent prior periods. The higher unit sales during the three months ended March 31, 2023 resulted in a significant increase of inventory stocking at specialty pharmacy customers at March 31, 2023. During the remainder of 2023, HETLIOZ® net product sales reflected lower unit sales as a result of the continued reduction of the elevated inventory levels at specialty pharmacy customers. During the three months ended March 31, 2024, net product sales for HETLIOZ® reflected higher unit sales as compared to the most recent three quarters of 2023. The higher unit sales during the three months ended March 31, 2024 again resulted in an increase of inventory stocking at specialty pharmacy customers at March 31, 2024. During 2023 and the three months ended March 31, 2024, inventory levels at specialty pharmacy customers have remained elevated relative to inventory levels prior to the entrance of generic competition. Going forward, HETLIOZ® net product sales may reflect lower unit sales as a result of reduction of the elevated inventory levels at specialty pharmacy customers. Further, HETLIOZ® net product sales will likely decline in future periods, potentially significantly, related to continued generic competition in the U.S. The Company constrained HETLIOZ® net product sales for the three months ended March 31, 2024 and 2023 to an amount not probable of significant revenue reversal. The amount of revenue recognized during the three months ended March 31, 2024 related to changes in estimates on revenue constrained during the year ended December 31, 2023 was not material. HETLIOZ® net product sales could experience variability in future periods as the remaining uncertainties associated with variable consideration related to inventory stocking by specialty pharmacy customers are resolved.

Major Customers

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 United States (U.S.) for distribution through a limited number of specialty pharmacies and is not available in retail pharmacies. PONVORY® is available in the U.S. for distribution primarily through specialty distributors. The

Company invoices and records revenue when its customers, wholesalers, specialty pharmacies and specialty distributors, receive product from the third-party logistics warehouse, which is the point at which control is transferred to the customer. Outside the U.S., the Company has a distribution agreement for the commercialization of Fanapt® in Israel and sells HETLIOZ® in Germany. There were five major customers that each accounted for more than 10% of total revenues and, as a group, represented 72% of total revenues for the three months ended March 31, 2024. There were five major customers that each accounted for more than 10% of accounts receivable and, as a group, represented 71% of total accounts receivable at March 31, 2024. Receivables are carried at transaction price net of allowance for credit losses. Allowance for credit losses is measured using historical loss rates based on the aging of receivables and incorporating current conditions and forward-looking estimates.

Recent Accounting Pronouncements