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.

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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

This Quarterly Report on Form 10-Q contains forward‑looking statements relating to future events and our future performance within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Stockholders are cautioned that such statements involve risks and uncertainties, including: We may not be able to successfully market Inbrija, Ampyra, ~~Inbrija~~ or any other products under development; the COVID-19 pandemic, including related restrictions on in-person interactions and travel, and the potential for illness, quarantines, and vaccine mandates affecting our management, employees, or consultants or those that work for other companies we rely upon, could have a material adverse effect on our business operations or product sales; our ability to attract and retain key management and other personnel, or maintain access to expert advisors; our ability to raise additional funds to finance our operations, repay outstanding indebtedness or satisfy other obligations, and our ability to control our costs or reduce planned ~~expenditures;~~expenditures and take other actions which are necessary for us to continue as a going concern; risks associated with the trading of our common stock and our credit agreements; including the potential delisting of our common stock from the Nasdaq Global Select Market which could result in a default under the indenture dated as of December 23, 2019 for Acorda’s 6.00% convertible senior secured notes, and could prevent the implementation of our business plan, and the success of actions that we may take, such as a reverse stock split, in order to attempt to maintain such ~~listing;~~listing and avoid a default; risks related to the successful implementation of our business plan, including the accuracy of its key assumptions; risks related to our corporate restructurings, including our ability to outsource certain operations, realize expected cost savings and maintain the workforce needed for continued operations; risks associated with complex, regulated manufacturing processes for pharmaceuticals, which could affect whether we have sufficient commercial supply of Inbrija to meet market demand; our reliance on third-party manufacturers for the production of commercial supplies of ~~Ampyra~~Inbrija and ~~Inbrija;~~Ampyra; third-party payers (including governmental agencies) may not reimburse for the use of Inbrija at acceptable rates or at all and may impose restrictive prior authorization requirements that limit or block prescriptions; reliance on collaborators and distributors to commercialize Inbrija and Ampyra outside the U.S.; our ability to satisfy our obligations to distributors and collaboration partners outside the U.S. relating to commercialization and supply of INBRIJA and AMPYRA; competition for Inbrija and Ampyra, including increasing competition and accompanying loss of revenues in the U.S. from generic versions of Ampyra following our loss of patent exclusivity; the ability to realize the benefits anticipated from acquisitions because, among other reasons, acquired development programs are generally subject to all the risks inherent in the drug development process and our knowledge of the risks specifically relevant to acquired programs generally improves over time; the risk of unfavorable results from future studies of Inbrija or from other research and development programs, or any other acquired or in-licensed programs; the occurrence of adverse safety events with our products; the outcome (by judgment or settlement) and costs of legal, administrative, or regulatory proceedings, investigations or inspections, including, without limitation, collective, representative or class-action litigation; failure to protect our intellectual property, to defend against the intellectual property claims of others or to obtain third-party intellectual property licenses needed for the commercialization of our products; and failure to comply with regulatory requirements could result in adverse action by regulatory agencies. These forward-looking statements are based on current expectations, estimates, forecasts and

projections about the industry and markets in which we operate and management’s beliefs and assumptions. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make, and investors should not place undue reliance on these statements. In addition to the risks and uncertainties described above, we have included important factors in the cautionary statements included in this report and in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, particularly in the “Risk Factors” section (as updated by the disclosures in our subsequent quarterly reports, including this report), that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments that we may make. Forward-looking statements in this report are made only as of the date hereof, and we disclaim any intent or obligation to update any forward-looking statements as a result of developments occurring after the date of this report except as may be required by law.

We and our subsidiaries own several registered trademarks in the U.S. and in other countries. These registered trademarks include, in the U.S., the marks “Acorda Therapeutics,” our stylized Acorda Therapeutics logo, ~~“Biotie Therapies,~~“Inbrija,” “Ampyra,~~” “Inbrija,~~” and “ARCUS.” Also, our marks “Fampyra” and “Inbrija” are registered marks in the European Community Trademark Office and we have registrations or pending applications for these marks in other jurisdictions. Our trademark portfolio also includes several registered trademarks and pending trademark applications in the U.S. and worldwide for potential product names or for disease awareness activities. Third party trademarks, trade names, and service marks used in this report are the property of their respective owners.


	June 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	23,127		$	45,634		$	30,255		$	37,536
Restricted cash		13,113			13,400			6,989			6,884
Trade accounts receivable, net of allowances of $820 and $1,012, as of June 30, 2022 and December 31, 2021, respectively		14,270			17,002
Trade accounts receivable, net of allowances of $768 and $842, as of March 31, 2023 and December 31, 2022, respectively								9,190			13,866
Prepaid expenses		5,840			6,574			4,125			4,312
Inventory, net		15,321			18,548			13,465			12,752
Other current assets		4,851			999			4,070			6,765
Total current assets		76,522			102,157			68,094			82,115
Property and equipment, net of accumulated depreciation		3,023			4,382			2,383			2,603
Intangible assets, net of accumulated amortization		320,472			335,980			297,393			305,087
Right of use asset, net of accumulated amortization		5,792			6,751			5,029			5,287
Restricted cash		255			6,189			510			255
Other assets		248			11
Other non-current assets								1,497			248
Total assets	$	406,312		$	455,470		$	374,906		$	395,595
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	7,958		$	10,845		$	2,854		$	9,809
Accrued expenses and other current liabilities		29,690			28,605			27,017			23,680
Current portion of liability related to sale of future royalties		—			4,460
Current portion of lease liabilities		1,347			8,186			1,556			1,545
Current portion of acquired contingent consideration		2,125			1,929			3,312			2,532
Deferred Revenue								—			384
Total current liabilities		41,120			54,025			34,739			37,950
Convertible senior notes		158,674			151,025			171,496			167,031
Derivative liability		—			37			—			—
Non-current portion of acquired contingent consideration		40,775			47,671			36,488			38,668
Non-current portion of lease liabilities		4,895			4,086			4,055			4,341
Non-current portion of loans payable		26,302			27,645
Deferred tax liability		40,813			13,930			41,805			44,202
Other non-current liabilities		5,826			5,914			9,363			9,781
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value per share. Authorized 1,000,000 shares at June 30, 2022 and December 31, 2021; 0 shares issued as of June 30, 2022 and December 31, 2021, respectively		—			—
Common stock, $0.001 par value per share. Authorized 61,666,666 shares at June 30, 2022 and December 31, 2021; issued 24,277,417 and 13,249,802 shares, including those held in treasury, as of June 30, 2022 and December 31, 2021, respectively		24			13
Treasury stock at cost (5,543 shares at June 30, 2022 and December 31, 2021)		(638	)		(638	)
Preferred stock, $0.001 par value per share. Authorized 1,000,000 shares at March 31, 2023 and December 31, 2022; no shares issued as of March 31, 2023 and December 31, 2022, respectively								—			—
Common stock, $0.001 par value per share. Authorized 61,666,666 shares at March 31, 2023 and December 31, 2022; issued 24,343,329 shares, including those held in treasury, as of March 31, 2023 and December 31, 2022, respectively								24			24
Treasury stock at cost (5,543 shares at March 31, 2023 and December 31, 2022)								(638	)		(638	)
Additional paid-in capital		1,029,344			1,023,136			1,029,952			1,029,881
Accumulated deficit		(941,561	)		(870,357	)		(953,097	)		(936,273	)
Accumulated other comprehensive loss		738			(1,017	)		719			628
Total stockholders’ equity		87,907			151,137			76,960			93,622
Total liabilities and stockholders’ equity	$	406,312		$	455,470		$	374,906		$	395,595


(In thousands, except per share data)	Three-month period ended June 30, 2022			Three-month period ended June 30, 2021			Six-month period ended June 30, 2022			Six-month period ended June 30, 2021			Three-month period ended March 31, 2023			Three-month period ended March 31, 2022
Revenues:
Net product revenues	$	27,484		$	28,199		$	46,059		$	53,446		$	18,719		$	18,575
Royalty revenues		3,567			3,586			7,526			7,201			3,528			3,959
License revenues														11			—
Total net revenues		31,051			31,785			53,585			60,647			22,258			22,534
Costs and expenses:
Cost of sales		8,800			11,324			14,768			23,285			3,234			5,967
Research and development		1,525			2,374			3,219			7,123			1,386			1,694
Selling, general and administrative		30,067			32,368			57,005			66,336			22,514			26,938
Amortization of intangible assets		7,691			7,691			15,382			15,382			7,691			7,691
Change in fair value of derivative liability		(7	)		(805	)		(37	)		(580	)		—			(30	)
Changes in fair value of acquired contingent consideration		(3,110	)		(5,478	)		(6,133	)		(6,429	)		(1,091	)		(3,023	)
Total operating expenses		44,966			47,474			84,204			105,117			33,734			39,237
Operating loss		(13,915	)		(15,689	)		(30,619	)		(44,470	)		(11,476	)		(16,703	)
Other income (expense), net:		��
Interest and amortization of debt discount expense		(7,474	)		(7,705	)		(15,036	)		(15,530	)		(7,571	)		(7,562	)
Interest income		20			1			21			4			93			1
Other income (expense)		1,250			—			1,250			1
Realized loss on foreign currency transactions		—			(2	)		—			(3	)
Other income														92			—
Total other expense, net		(6,204	)		(7,706	)		(13,765	)		(15,528	)		(7,386	)		(7,561	)
Loss before taxes		(20,119	)		(23,395	)		(44,384	)		(59,998	)		(18,862	)		(24,264	)
(Provision for) benefit from income taxes		(26,563	)		531			(26,821	)		3,683			2,038			(258	)
Net loss	$	(46,682	)	$	(22,864	)	$	(71,205	)	$	(56,315	)	$	(16,824	)	$	(24,522	)

Net loss per share—basic	$	(2.78	)	$	(2.29	)	$	(4.74	)	$	(5.79	)	$	(0.69	)	$	(1.85	)
Net loss per share—diluted	$	(2.78	)	$	(2.29	)	$	(4.74	)	$	(5.79	)	$	(0.69	)	$	(1.85	)
Weighted average common shares outstanding used in computing net loss per share—basic		16,783			9,992			15,026			9,733			24,338			13,251
Weighted average common shares outstanding used in computing net loss per share—diluted		16,783			9,992			15,026			9,733			24,338			13,251

Common stock

(In thousands)

Number
of
shares

Par
value

Treasury stock

Additional
paid-in
capital

Accumulated
deficit

Accumulated
other
comprehensive (loss)
income

Total
stockholders
equity

Balance at December 31, 2021

13,250

$
13

$
(638
)

$
1,023,136

$
(870,357
)

$
(1,017
)

$
151,137

Compensation expense for
   issuance of stock options
   to employees

—

—

—

181

—

—

181

Compensation expense for
   issuance of restricted
   stock to employees

35

—

—

304

—

—

304

Other comprehensive income,
   net of tax

—

—

—

—

—

449

449

Net loss

—

—

—

—

(24,522
)

—

(24,522
)
Balance at March 31, 2022

13,285

$
13

$
(638
)

$
1,023,621

(894,879
)

$
(568
)

$
127,549

Compensation expense for
   issuance of stock options
   to employees

—

—

—

471

—

—

471

Interest payment for convertible notes

10,992

11

—

5,252

—

—

5,263

Other comprehensive income,
   net of tax

—

—

—

—

—

1,306

1,306

Net loss

—

—

—

—

(46,682
)

—

(46,682
)
Balance at June 30, 2022

24,277

$
24

$
(638
)

$
1,029,344

$
(941,561
)

$
738

$
87,907

Consolidated Statements of ~~Changes in Stockholders’ Equity (Continued)~~Cash Flows

Common stock

(In thousands)

Number
of
shares

Par
value

Treasury stock

Additional
paid-in
capital

Accumulated
deficit

Accumulated
other
comprehensive (loss)
income

Total
stockholders
equity

Balance at December 31, 2020

9,476

$
9

$
(638
)

$
1,007,790

$
(766,403
)

$
(2,803
)

$
237,955

Compensation expense for
   issuance of stock options
   to employees

—

—

—

483

—

—

483

Compensation expense for
   issuance of restricted
   stock to employees

—

—

—

224

—

—

224

Other comprehensive income, net of tax

—

—

—

—

—

1,069

1,069

Net loss

—

—

—

—

(33,451
)

—

(33,451
)
Balance at March 31, 2021

9,476

$
9

$
(638
)

$
1,008,497

$
(799,854
)

$
(1,734
)

$
206,279

Compensation expense for
   issuance of stock options
   to employees

—

—

—

498

—

—

498

Compensation expense for
   issuance of restricted
   stock to employees

—

—

—

456

—

—

456

Interest payment for convertible notes

1,636

2

—

6,208

—

—

6,210

Other comprehensive loss, net of tax

—

—

—

—

—

(99
)

(99
)
Net loss

—

—

—

—

(22,864
)

—

(22,864
)
Balance at June 30, 2021

11,112

11

(638
)

1,015,659

(822,718
)

(1,833
)

190,481

(In thousands)

Six-month period ended June 30, 2022

Six-month period ended June 30, 2021

Cash flows from operating activities:

Net loss

$
(71,205
)

$
(56,315
)
Adjustments to reconcile net loss to net cash (used in) provided by
   operating activities:

Share-based compensation expense

956

1,661

Amortization of debt discount and debt issuance costs

8,278

8,575

Depreciation and amortization expense

16,976

17,161

Change in acquired contingent consideration obligation

(6,133
)

(6,429
)
Non-cash royalty revenue

(4,762
)

(5,972
)
Deferred tax provision (benefit)

26,884

(3,683
)
Change in derivative liability

(37
)

(580
)
Changes in assets and liabilities:

Decrease in accounts receivable

2,732

6,183

(Increase) decrease in prepaid expenses and other current assets

(1,214
)

1,206

Decrease in inventory

3,227

1,054

Increase in other assets

(237
)

—

(Decrease) increase in accounts payable, accrued expenses and other current
   liabilities

(3,211
)

1,979

Decrease in other non-current liabilities

(405
)

(416
)
Net cash used in operating activities

(28,151
)

(35,576
)
Cash flows from investing activities:

   Proceeds from sale of Chelsea facility, net

—

73,969

Purchases of property and equipment

(109
)

(164
)
Purchases of intangible assets

—

(26
)
Net cash (used in) provided by investing activities

(109
)

73,779

Cash flows from financing activities:

   Repayment of Convertible Senior Notes Due 2021

—

(69,000
)
Repayment of loans payable

—

(655
)
Net cash used in financing activities

—

(69,655
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash

(468
)

(447
)
Net decrease in cash, cash equivalents and restricted cash

(28,728
)

(31,898
)
Cash, cash equivalents and restricted cash at beginning of period

65,223

102,895

Cash, cash equivalents and restricted cash at end of period

$
36,495

$
70,996

Supplemental disclosure:

Cash paid for interest

$
947

$
6

Cash paid for taxes

133

23

Acorda Therapeutics, Inc. (“Acorda” or the “Company”) is a biopharmaceutical company focused on developing therapies that restore function and improve the lives of people with neurological disorders. The Company markets Inbrija (levodopa inhalation powder), which is approved in the U.S. for intermittent treatment of OFF episodes, also known as OFF periods, in people with Parkinson’s disease treated with carbidopa/levodopa. Inbrija is for as needed use and utilizes the Company’s ARCUS pulmonary delivery system, a technology platform designed to deliver medication through inhalation that the Company believes has potential to be used in the development of a variety of inhaled medicines. The Company has entered into agreements to commercialize Inbrija in Spain, Germany, Latin America, and China, and is in discussions with potential partners for commercialization of Inbrija in other jurisdictions outside of the U.S.

The Company also markets branded Ampyra (dalfampridine) Extended Release Tablets, 10 mg to improve walking in adults with multiple sclerosis. Ampyra is marketed as Fampyra outside the U.S. by Biogen International GmbH, or Biogen, under a license and collaboration agreement that the Company entered into in June 2009. Fampyra has been approved in a number of countries across Europe, Asia, and the Americas.

(2) Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the ~~United States (GAAP)~~U.S. (“GAAP”) for interim financial information, Accounting Standards Codification ~~(ASC)~~(“ASC”) Topic 270-10, and with the instructions to Form 10-Q. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments considered necessary for a fair presentation have been included in the interim periods presented and all adjustments are of a normal recurring nature. The Company has evaluated subsequent events through the date of this filing. Operating results for the ~~three- and six-month periods~~three-month period ended ~~June 30, 2022~~March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023. When used in these notes, the terms “Acorda” or “the Company” mean Acorda Therapeutics, Inc. The December 31, ~~2021~~2022 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. You should read these unaudited interim condensed consolidated financial statements in conjunction with the consolidated financial statements and footnotes included in the ~~Company's~~Company’s Annual Report on Form 10-K, for the year ended December 31, ~~2021.~~2022.

~~(2) Summary of Significant Accounting Policies~~

The Company’s significant accounting policies are detailed in its Annual Report on Form 10-K for the year ended December 31, ~~2021. Effective January 1, 2021, the Company adopted ASU 2019-12, “Simplifying the Accounting for Income Taxes” (Topic 740).~~2022. Effective January 1, 2022, the Company adopted ASU 2021-04, “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options”. The Company’s significant accounting policies have not changed materially from December 31, ~~2021.~~2022.

~~Basis of Presentation~~

The Company reclassified the net proceeds from the sale of the Chelsea facility of $74.0 million for the six-month period ended June 30, 2021 from financing activities to investing activities in the accompanying Consolidated Statement of Cash Flows.

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same amounts shown in the statement of cash flows:

Six-month period ended June 30, 2022

Six-month period ended June 30, 2021

(In thousands)
Beginning of period

End of period

Beginning of period

End of period

Cash and cash equivalents
$
45,634

$
23,127

$
71,369

$
45,714

Restricted cash

13,400

13,113

12,917

12,883

Restricted cash non-current

6,189

255

18,609

12,399

Total Cash, cash equivalents and restricted cash per statement of cash flows
$
65,223

$
36,495

$
102,895

$
70,996

Restricted cash represents an escrow account with funds to maintain the interest payments for ~~an amount equal to all~~the remaining scheduled interest payments on the outstanding convertible senior secured notes due 2024 through the interest payment date of June 1, ~~2023;~~2023 and a ~~bank~~an account with funds to cover the Company’s self-funded employee health insurance. At ~~June 30, 2022,~~March 31, 2023, the Company also held ~~$0.3~~$0.5 million of restricted cash related to cash collateralized standby letters of credit in connection with obligations under facility leases. See Note 10 to the Company’s Consolidated Financial Statements included in this report for a discussion of interest payments on the Company's outstanding6.00% convertible senior secured notes due December 2024 (“2024 Notes”).

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to ~~2024.~~the total of the same amounts shown in the statement of cash flows:


	Three-month period ended March 31, 2023				Three-month period ended March 31, 2022
(In thousands)	Beginning of period		End of period		Beginning of period		End of period
Cash and cash equivalents	$	37,536	$	30,255	$	45,634	$	31,873
Restricted cash		6,884		6,989		13,400		13,393
Restricted cash non-current		255		510		6,189		6,189
Total Cash, cash equivalents, and restricted cash per statement of cash flows	$	44,675	$	37,754	$	65,223	$	51,455

Investments

~~Inventory~~Short-term investments consist primarily of high-grade commercial paper and corporate bonds. The Company classifies marketable securities available to fund current operations as short-term investments in current assets on its consolidated balance sheets. Marketable securities are classified as long-term investments in long-term assets on the consolidated balance sheets if the Company has the ability and intent to hold them and such holding period is longer than one year. The Company classifies all its investments as available-for-sale. Available-for-sale securities are recorded at the fair value of the investments based on quoted market prices.

Unrealized holding gains and losses on available-for-sale securities, which are determined to be temporary, are excluded from earnings and are reported as a separate component of accumulated other comprehensive loss.

Premiums and discounts on investments are amortized over the life of the related available-for-sale security as an adjustment to yield using the effective‑interest method. Dividend and interest income are recognized when earned. Amortized premiums and discounts, dividend and interest income are included in interest income. Realized gains and losses are included in other income.

There were no investments classified as short-term or long-term at March 31, 2023 or December 31, 2022.

Inventory

The following table provides the major classes of inventory:


(In thousands)	June 30, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Raw materials	$	3,410	$	3,338	$	11,061	$	6,212
Work-in-progress		—		—
Finished goods		11,911		15,210		2,404		6,540
Total	$	15,321	$	18,548	$	13,465	$	12,752

The Company reviews inventory, including inventory purchase commitments, for slow moving or obsolete amounts based on expected product sales volume and provides reserves against the carrying amount of inventory as appropriate.On February 10, 2021, the Company completed the sale of its Chelsea, Massachusetts manufacturing operations to Catalent Pharma Solutions. In connection with the sale of the manufacturing operations, the Company transferred approximately $2.3 million of raw materials to Catalent. See Note 12 to the Company’s Consolidated Financial Statements included in this report for a discussion of assets transferred upon the sale. Additionally, in reviewing the inventory for slow moving or obsolete amounts the Company recorded a charge of $1.3 million for the remaining work-in-progress inventory that was scrapped or discarded during the six-month period ended June 30, 2021.

Foreign Currency Translation

The functional currency of operations outside the ~~United States of America~~U.S. is deemed to be the currency of the local country, unless otherwise determined that the ~~United States~~U.S. dollar would serve as a more appropriate functional currency given the economic operations of the entity. Accordingly, the assets and liabilities of the Company’s foreign subsidiary, Biotie, are translated into ~~United States~~U.S. dollars using the period-end exchange rate; and income and expense items are translated using the average exchange rate during the period; and equity transactions are translated at historical rates. Cumulative translation adjustments are reflected as a separate component of equity. Foreign currency transaction gains and losses are charged to operations and reported in other income (expense) in consolidated statements of operations.

Segment and Geographic Information

The Company is managed and operated as 1one business which is focused on developing therapies that restore function and improve the lives of people with neurological disorders. The entire business is managed by a single management team that reports to the Chief Executive Officer. The Company does not operate separate lines of business with respect to any of its products or product candidates and the Company does not prepare discrete financial information to allocate resources to separate products or product candidates or by location. Accordingly, the Company views its business as 1one reportable operating segment. Net product revenues reported are substantially derived from the sales of ~~Ampyra~~Inbrija and ~~Inbrija~~Ampyra in the U.S. ~~for the three- and six-month periods ended June 30, 2022 and 2021.~~

Impairment of Long-Lived Assets

The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful lives of its long-lived assets, including identifiable intangible assets subject to amortization and property plant and equipment, may warrant revision or that the carrying value of the assets may be impaired. The Company evaluates the realizability of its long-lived assets based on profitability and cash flow expectations for the related assets. Factors the Company considers important that could trigger an impairment review include significant changes in the use of any assets, changes in historical trends in operating performance, changes in projected operating performance, stock price, loss of a

major customer, and significant negative economic trends. The decline in the trading price of the ~~Company's~~Company’s common stock during the ~~six-month~~three-month period ended ~~June 30, 2022,~~March 31, 2023, and related decrease in the ~~Company's~~Company’s market capitalization, was determined to be a triggering event in connection with the ~~Company's~~Company’s review of the recoverability of its long-lived assets for the ~~six-month~~three-month period ended ~~June 30, 2022.~~March 31, 2023. The Company performed a recoverability test as of ~~June 30, 2022~~March 31, 2023 using the undiscounted cash flows, which are the sum of the future undiscounted cash flows expected to be derived from the direct use of the long-lived assets compared to the carrying value of the long-lived assets. Estimates of future cash flows were based on the Company’s own assumptions about its own use of the long-lived assets. The cash flow estimation period was based on the long-lived assets’ estimated remaining useful life to the Company. After performing the recoverability test, the Company determined that the undiscounted cash flows exceeded the carrying value and the long-lived assets were not impaired. Changes in these assumptions and resulting valuations could result in future long-lived asset impairment charges. During the ~~six-month~~three-month period ended ~~June 30, 2022,~~March 31, 2023, no other impairment indicators were noted by the Company. Management will continue to monitor any changes in circumstances for indicators of impairment. Any write‑downs are treated as permanent reductions in the carrying amount of the assets.

Liquidity

The Company’s ability to meet its future operating requirements, repay its liabilities, ~~and~~ meet its other obligations, and continue as a going concern are dependent upon a number of factors, including its ability to generate cash from product sales, reduce ~~planned~~ expenditures, and obtain additional financing. If the Company is unable to generate sufficient cash flow from the sale of its products, the Company will be required to adopt one or more alternatives, subject to the restrictions contained in the indenture governing ~~its convertible senior secured notes due~~the 2024 Notes, such as further reducing expenses, selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous and which are likely to be highly dilutive. Also, the Company’s ability to raise additional capital and repay or restructure its indebtedness will depend on the capital markets and its financial condition at such time, among other factors. In addition, financing may not be available when needed, at all, on terms acceptable to the Company or in accordance with the restrictions described above. As a result of these factors, the Company may not be able to engage in any of the alternative activities, or engage in such activities on desirable terms, which could harm the Company’s business, financial condition and results of operations, as well as result in a default on the Company’s debt obligations. If the Company is unable to take these actions, it may be forced to significantly alter its business strategy, substantially curtail its current operations, or cease operations altogether.

At ~~June 30, 2022,~~March 31, 2023, the Company had ~~$23.1~~$30.3 million of cash and cash equivalents, compared to ~~$45.6~~$37.5 million at December 31, ~~2021.~~2022. The Company’s ~~June 30, 2022~~March 31, 2023 cash and cash equivalents balance does not include ~~$12.4~~$7.5 million of restricted cash, ~~that~~of which $6.2 million is currently held in escrow ~~under~~for payment of the ~~terms~~June 1, 2023 interest payment on the 2024 Notes, $0.8 million is related to self-funded employee health insurance, and $0.5 million is related to collateralized standby letters of its convertible senior secured notes due 2024, which may potentially be released from escrow if the Company pays interest on those notes using shares of its common stock (the amount released would correspond to the amount of interest paid using shares).credit. The Company incurred a net loss of ~~$71.2~~$16.8 million for the ~~six-month~~three-month period ended March 31, 2023.

The Company assesses and determines its ability to continue as a going concern in accordance with the provisions of ASC Topic 205-40, “Presentation of Financials Statements—Going Concern” (“ASC Topic 205-40”), which requires the Company to evaluate whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date that its annual and interim consolidated financial statements are issued. Certain

additional financial statement disclosures are required if such conditions or events are identified. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting. Determining the extent, if any, to which conditions or events raise substantial doubt about the Company’s ability to continue as a going concern, or the extent to which mitigating plans sufficiently alleviate any such substantial doubt, as well as whether or not liquidation is imminent, requires significant judgment by management. The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements contained in this report are issued.

In June 2022, the Company received a deficiency letter from Nasdaq Stock Market, LLC (“Nasdaq”) notifying the Company that, for 30 ~~2022.~~consecutive business days, the bid price for the Company’s common stock had closed below $1.00 per share, which is the minimum closing price required to maintain continued listing on the Nasdaq Global Select Market (the “Minimum Bid Requirement”). The Company had 180 calendar days to regain compliance with the Minimum Bid Requirement.

On November 11, 2022, the Company held a special meeting of stockholders in order to authorize the Board of Directors to approve the amendment and restatement of the Company’s Certificate of Incorporation to effect a reverse stock split at a ratio of any whole number in the range of 1-for-2 to 1-for-20 within one year following the conclusion of the special meeting, which proposal was approved by stockholders.

After a hearing with the Nasdaq Hearings Panel in February 2023, the Company was granted an extension until June 20, 2023 to regain compliance with the Minimum Bid Requirement. In the event the Company does not achieve compliance with the Minimum Bid Requirement by June 20, 2023, the Company has committed to effecting the reverse stock split authorized by the Company’s stockholders in November 2022.

The Company believes that its existing cash and cash equivalents will be sufficient to cover its cash flow requirements for at least the next twelve months from the issuance date of these financial statements. However, the Company’s future requirements may change and will depend on numerous ~~factors.~~factors, some of which may be beyond the Company’s control.

Subsequent Events

Subsequent events are defined as those events or transactions that occur after the balance sheet date, but before the financial statements are filed with the Securities and Exchange Commission. The Company completed an evaluation of the impact of any subsequent events through the date these financial statements were issued, and determined there ~~was a~~were subsequent events that required disclosure ~~or adjustment~~ in these financial statements. See Note 1514 to the Company’s Consolidated Financial Statements included in this report for a discussion of subsequent events.

~~Accounting Pronouncements Adopted~~

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC 740 and removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years with early adoption permitted. The Company adopted this guidance

~~effective January 1, 2021. The adoption of this guidance did not have a significant impact on the consolidated financial statements.~~

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The FASB is issuing this update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company adopted this guidance effective January 1, 2022. The adoption of this guidance did not have a significant impact on the consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments”: The amendments in this update are to clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2020-03 are not expected to have a significant effect on current accounting practices. The ASU improves various financial instrument topics in the Codification to increase stakeholder awareness of the amendments and to expedite the improvement process by making the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. The ASU is effective for smaller reporting companies for fiscal years beginning after December 15, 2022 with early application permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

In August 2020, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This update simplifies the accounting for convertible instruments by eliminating the cash conversion and beneficial conversion feature models which require separate accounting for embedded conversion features. This update also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions and requires the application of the if-converted method for calculating diluted earnings per share. ASU 2020-06 is effective for smaller reporting companies for fiscal periods beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

During the three‑month periods ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company recognized share-based compensation expense of ~~$0.5~~$0.1 million and ~~$1.0 million, respectively. During the six-month periods ended June 30, 2022 and 2021, the Company recognized share-based compensation expense of $1.0 and $1.7~~$0.5 million, respectively. Activity in options and restricted stock during the ~~six-month~~three-month period ended ~~June 30, 2022~~March 31, 2023 and related balances outstanding as of that date are reflected below. The weighted average fair value per share of options granted to employees for the three-month periods ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ were approximately ~~$0.58~~$0.49 and ~~$2.56,~~$1.60, respectively. ~~The weighted average fair value per share of options granted to employees for the six-month periods ended June 30, 2022 and 2021 were approximately $0.85 and $2.58, respectively.~~

A summary of share-based compensation activity for the ~~six-month~~three-month period ended ~~June 30, 2022~~March 31, 2023 is presented below:

Number of
Shares
(In thousands)

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Intrinsic
Value
(In thousands)

Balance at January 1, 2022

1,186

$
94.38

Granted

95

1.21

Cancelled

(175
)

134.93

Exercised

—

—

Balance at June 30, 2022

1,106

$
79.94

6.2

$
4

Vested and expected to vest at
June 30, 2022

1,087

$
81.24

6.1

$
4

Vested and exercisable at
June 30, 2022

743

$
116.80

4.6

$
—


	Number of Shares (In thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Intrinsic Value (In thousands)
Balance at January 1, 2023		1,026		$	78.00		—		—
Granted		1,065			0.61		—		—
Cancelled		(73	)		182.59		—		—
Exercised		—			—		—		—
Balance at March 31, 2023		2,018		$	33.37		8.1	$	10,176
Vested and expected to vest at March 31, 2023		1,973		$	34.10		8.0	$	10,083
Vested and exercisable at March 31, 2023		715		$	92.13		5.1	$	6,510

Unrecognized compensation cost for unvested stock options, restricted stock awards, and restricted stock units as of ~~June 30, 2022~~March 31, 2023 totaled ~~$1.2~~$1.0 million and is expected to be recognized over a weighted average period of approximately ~~2.4~~1.9 years.

During the ~~six‑~~three‑month ~~periods~~period ended ~~June 30, 2022,~~March 31, 2023, the Company did ~~not~~not make any repurchases of shares.

(5) Loss Per Share

The following table sets forth the computation of basic and diluted loss per share for the ~~three- and six-month~~three-month periods ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


(In thousands, except per share data)	Three-month period ended June 30, 2022			Three-month period ended June 30, 2021			Six-month period ended June 30, 2022			Six-month period ended June 30, 2021			Three-month period ended March 31, 2023			Three-month period ended March 31, 2022
Basic and diluted
Net loss—basic	$	(46,682	)	$	(22,864	)	$	(71,205	)	$	(56,315	)	$	(16,824	)	$	(24,522	)
Net income (loss)—diluted	$	(46,682	)	$	(22,864	)	$	(71,205	)	$	(56,315	)

Weighted average common shares outstanding used in computing net loss per share—basic		16,783			9,992			15,026			9,733			24,338			13,251
Plus: net effect of dilutive stock options and restricted common shares		—			—			—			—			—			—
Weighted average common shares outstanding used in computing net loss per share—diluted		16,783			9,992			15,026			9,733			24,338			13,251
Net loss per share—basic	$	(2.78	)	$	(2.29	)	$	(4.74	)	$	(5.79	)	$	(0.69	)	$	(1.85	)
Net loss per share—diluted	$	(2.78	)	$	(2.29	)	$	(4.74	)	$	(5.79	)	$	(0.69	)	$	(1.85	)

Securities that could potentially be dilutive are excluded from the computation of diluted loss per share when a loss from continuing operations exists or when the exercise price exceeds the average closing price of the Company’s common stock during the period, because their inclusion would result in an anti-dilutive effect on per share amounts.

The following amounts were not included in the calculation of net loss per diluted share because their effects were anti-dilutive:


(In thousands)	Three-month period ended June 30, 2022		Three-month period ended June 30, 2021		Six-month period ended June 30, 2022		Six-month period ended June 30, 2021		Three-month period ended March 31, 2023		Three-month period ended March 31, 2022
Denominator
Stock options and restricted common shares		1,177		1,451		1,176		1,446		1,087		1,299

Performance share units are excluded from the calculation of net loss per diluted share as the performance criteria has not been met for the ~~three- and six-month~~three-month periods ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. Additionally, the impact of the ~~convertible senior notes~~2024 Notes was determined to be anti-dilutive and excluded from the calculation of net loss per diluted share for the ~~three- and six-month~~three-month periods ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.

(6) Income Taxes

The Company’s effective income tax rate differs from the U.S. statutory rate primarily due to an increase in the valuation allowance and expense recorded on the equity forfeiture.

For the three-month periods ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company recorded a ~~provision~~benefit of ~~$(26.6)~~$2.0 million and a ~~benefit~~provision of ~~$0.5~~($0.3) million for income taxes, respectively. The effective income tax rates for the Company for the three-month periods ended ~~June 30,~~March 31, 2023 and 2022 were 10.8% and ~~2021 were (132.0%~~(1.1%) ~~and 2.3%~~, respectively. The variances in the effective tax rates for the three-month period ended ~~June 30, 2022,~~March 31, 2023, as compared to the three-month period ended ~~June 30, 2021,~~March 31, 2022, was primarily due to an increase in the existing valuation allowance recorded on the Company’s deferred tax assets for which no tax benefit can be recognized, ~~which increase includes~~and the ~~valuation allowance due to a deemed ownership change described below.~~

For the six-month periods ended June 30, 2022 and 2021, the Company recorded a provision from income taxes of $(26.8) million and a benefit of $3.7 million, respectively. The effective income tax rates for the six-month periods ended June 30, 2022 and 2021 were (60.4%) and 6.2%, respectively. The variance in the effective tax rates for the six-month period ended June 30, 2022 as compared to the six-month period ended June 30, 2021 was due primarily to forfeitures of equity of which no tax deduction is recorded and an increase in the existing valuation allowance recorded on the Company’s deferred tax assets for which no tax benefit can be recognized, which increase includes the valuation allowance due to a deemed ownership change described below.recorded.

The increase in the valuation allowance recorded on the Company’s deferred tax assets during the quarter ended June 30, 2022, is substantially the result of the application of Section 382 of the Internal Revenue Code. The Internal Revenue Code of 1986 contains certain provisions that can limit a taxpayer's ability to utilize net operating loss and tax credit carryforwards in any given year resulting from cumulative changes in ownership interests in excess of 50 percent over a ~~three-year~~ period (“ownership change”). In the event of such a deemed ownership change, Section 382 imposes an annual limitation on pre-ownership change tax attributes. In the quarter ended June 30, 2022, the Company experienced an ownership change under Section 382 due to cumulative changes in the Company’s ownership over three years. Accordingly, the Company's ability to utilize NOL’s and tax credit carryforwards attributable to periods prior to the deemed ownership change is subject to the annual limitation. As a result of the impact of this limitation, the Company recorded a tax provision of approximately $27.4 million, which is reflected in the increase to the valuation allowance on deferred tax assets in the quarter ended June 30, 2022, resulting in a reduction of the Company’s deferred tax assets with no impact to cash.

The Company continues to evaluate the realizability of its deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits, and the regulatory approval of products ~~currently~~ under development. Any changes to the valuation allowance or deferred tax assets and liabilities in the future would impact the ~~Company's~~Company’s income taxes.

The Company has ongoing state examinations in Massachusetts ~~and New Jersey~~ which cover multiple years. There have been no proposed adjustments at this stage of the examination. The ~~Minnesota~~New Jersey examination was finalized during the ~~second~~first quarter of ~~2022~~2023 for tax years 2015 through 2018 ~~and 2019~~ with no adjustments.

(7) Fair Value Measurements

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The Company bases fair value on the assumptions market participants would use when pricing the asset or liability.

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates, exchange rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability. The Company’s Level 1 assets consist of investments in a Treasury money market fund and U.S. government securities. The Company’s Level 3 liabilities represent acquired contingent consideration related to the acquisition of Civitas Therapeutics, Inc. (“Civitas”) which are valued using a probability weighted discounted cash flow valuation approach and derivative liabilities related to conversion options for the ~~convertible senior notes due December~~ 2024 Notes which are valued using a binomial model. For assets and liabilities not accounted for at fair value, the carrying values of these accounts approximates their fair values at ~~June 30, 2022,~~March 31, 2023, except for the fair value of the Company’s ~~convertible senior notes due December~~ 2024

Notes, which was approximately ~~$157.3~~$157.3 million as of ~~June 30, 2022.~~March 31, 2023. The Company estimates the fair value of its notes utilizing market quotations for the debt (Level 2).


(In thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
June 30, 2022
March 31, 2023
Assets Carried at Fair Value:
Money market funds	$	4,201	$	—	$	—	$	—	$	—	$	—
Liabilities Carried at Fair Value:
Acquired contingent consideration		—		—		42,900		—		—		39,800
Derivative liability - conversion option		—		—		—		—		—		—
December 31, 2021
December 31, 2022
Assets Carried at Fair Value:
Money market funds	$	12,192	$	—	$	—	$	15,322	$	—	$	—
Liabilities Carried at Fair Value:
Acquired contingent consideration		—		—		49,600		—		—		41,200
Derivative liability - conversion option		—		—		37		—		—		—

The following table presents additional information about liabilities measured at fair value on a recurring basis and for which the Company utilizes Level 3 inputs to determine fair value.

Acquired contingent consideration


(In thousands)	Three-month period ended June 30, 2022			Three-month period ended June 30, 2021			Six-month period ended June 30, 2022			Six-month period ended June 30, 2021			Three-month period ended March 31, 2023			Three-month period ended March 31, 2022
Acquired contingent consideration:
Balance, beginning of period	$	46,400		$	47,000		$	49,600		$	48,200		$	41,200		$	49,600
Fair value change to contingent consideration included in the statement of operations		(3,110	)		(5,478	)		(6,133	)		(6,429	)		(1,091	)		(3,023	)
Royalty payments		(390	)		(322	)		(567	)		(571	)		(309	)		(177	)
Balance, end of period	$	42,900		$	41,200		$	42,900		$	41,200		$	39,800		$	46,400

The Company estimates the fair value of its acquired contingent consideration using a probability weighted discounted cash flow valuation approach based on estimated future sales expected from Inbrija~~(levodopa~~ (levodopa inhalation powder), ~~an FDA~~a U.S. Food and Drug Administration (“FDA”) approved drug for the treatment of OFF periods in Parkinson’s disease. Using this approach, expected future cash flows are calculated over the expected life of the agreement and discounted to estimate the current value of the liability at the period end date. Some of the more significant assumptions made in the valuation include (i) the estimated revenue forecast for Inbrija,, and (ii) discount period and rate. The milestone payments ranged from $0$0 million to ~~$20.7~~$15.5 million for Inbrija. The discount rate used in the valuation was ~~22%~~22% for the ~~three- and six-month~~three-month period ended ~~June 30,~~March 31, 2023, as compared to 21.5% for the three-month period ended March 31, 2022. The valuation is performed quarterly and changes in the fair value of the contingent consideration are included in the statement of operations. For the ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ changes in the fair value of the acquired contingent consideration were primarily due to change in projected revenue and the recalculation of cash flows for the passage of time.

The acquired contingent consideration is classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for the various inputs to the valuation approach, including but not limited to, assumptions involving sales estimates for Inbrija and estimated discount rates, the estimated fair value could be significantly higher or lower than the fair value determined.

The following table represents a reconciliation of the derivative liability recorded in connection with the issuance of the ~~convertible senior secured notes due 2024:~~2024 Notes:

(In thousands)
Three-month period ended June 30, 2022

Three-month period ended June 30, 2021

Six-month period ended June 30, 2022

Six-month period ended June 30, 2021

Derivative Liability-Conversion Option

Balance, beginning of period
$
7

$
1,418

$
37

$
1,193

Fair value adjustment

(7
)

(805
)

(37
)

(580
)
Balance, end of period
$
—

$
613

$
—

$
613


(In thousands)	Three-month period ended March 31, 2023		Three-month period ended March 31, 2022
Derivative Liability-Conversion Option:
Balance, beginning of period	$	—	$	37
Fair value adjustment		—		(30	)
Balance, end of period	$	—	$	7

During 2019, a derivative liability was initially recorded as a result of the issuance of the ~~6.00% Convertible Senior Secured~~2024 Notes ~~due 2024~~ (See Note 10 to the Consolidated Financial Statements included in this report for more information on the ~~Convertible Senior Notes due 2024)~~2024 Notes). The fair value measurement of the derivative liability is classified as Level 3 under the fair value hierarchy as it has been valued using certain unobservable inputs. These inputs include: (1) share price as of the valuation date, (2) assumed timing of conversion of the 2024 Notes, (3) historical volatility of the share price, and (4) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement. The fair value of the derivative liability was determined using a binomial model that calculates the fair value of the 2024 Notes with the conversion feature as compared to the fair value of the 2024 Notes without the conversion feature, with the difference representing the value of the conversion feature, or the derivative liability. There are several embedded features within the 2024 Notes which, upon issuance, did not meet the conditions for equity classification. As a result, these features were aggregated together and recorded as a derivative liability conversion option. The derivative liability conversion feature is measured at fair value on a quarterly basis and changes in the fair value will be recorded in the consolidated statement of operations.

The Company received stockholder approval on August 28, 2020 to increase the number of authorized shares of the Company’s common stock from 13,333,333 shares to 61,666,666 shares. As a result of the share approval, the Company determined that multiple embedded conversion options met the conditions for equity classification. The Company performed a valuation of these conversion options as of September 17, 2020, which was the date the Company completed certain securities registration obligations. The resulting fair value of these conversion options was calculated to be ~~$18.3~~$18.3 million which was reclassified to equity and presented in the statement of stockholder’s equity as of September 30, 2020 net of the ~~$4.4~~$4.4 million tax impact. The equity component is not re-measured as long as it continues to meet the conditions for equity classification. The Company performed a valuation of the derivative liability related to certain embedded conversion features that are precluded from equity classification. The fair value of these conversion features was calculated to be negligible as of ~~June 30, 2022.~~March 31, 2023. Key inputs used in the calculation of the fair value include stock price, volatility, risky (bond) rate, and the last observed bond price during the ~~six-month~~three-month period ended ~~June 30, 2022.~~March 31, 2023.

Short-term investments with maturities of three months or less from date of purchase have been classified as cash equivalents, and amounted to approximately $4.2 million and $12.2 million as of June 30, 2022 and December 31, 2021, respectively. There were 0 short-term investments will original maturities of greater than 3 months but less than 1 year as of June 30, 2022 and December 31, 2021, respectively. Additionally, there were no short-term investments in an unrealized loss position as of June 30, 2022 and December 31, 2021, respectively. Long-term investments have original maturities of greater than 1 year. There were 0 investments classified as long-term at June 30, 2022 or December 31, 2021. The Company has determined that there were no other-than-temporary declines in the fair values of its investments as of June 30, 2022 as the Company does not have any short or long-term investments as of June 30, 2022.

(9) Liability Related to Sale of Future Royalties

~~As of~~In October 1, 2017, the Company completed a royalty purchase agreement with HealthCare Royalty Partners,, or HCRP (the “Royalty Agreement”). In exchange for the payment of ~~$40~~$40 million to the Company, HCRP obtained the right to receive Fampyra royalties payable by Biogen under the ~~Biogen Collaboration Agreement~~collaboration and licensing agreement with the Company up to an agreed upon threshold of royalties. This threshold was met during the second quarter of 2022 and ~~our~~the Company’s obligations to HCRP ~~will expire~~expired upon Biogen’s payment of royalties for that quarter. ~~The Royalty Agreement does not include potential future milestones to be paid by Biogen.~~

~~Since the Company maintained rights under the Biogen Collaboration Agreement, therefore, the~~The Royalty Agreement has been accounted for as a liability that will be amortized using the effective interest method over the life of the arrangement, in accordance with the relevant accounting guidance. The Company recorded the receipt of the ~~$40~~$40 million payment from HCRP and established a corresponding liability in the amount of ~~$40~~$40 million, net of transaction costs of approximately ~~$2.2~~$2.2 million. The net liability is classified between the current and non-current portion of liability related to the sale of future royalties in the consolidated balance sheets based on the recognition of the interest and principal payments to be received by HCRP in the 12 months following the financial statement reporting date. The total net royalties to be paid, less the net proceeds received, is recorded to interest expense using the effective interest method over the life of the Royalty Agreement.

The Company estimates the payments to be made to HCRP over the term of the Royalty Agreement based on forecasted royalties and calculates the interest rate required to discount such payments back to the liability balance. Over the course of the Royalty Agreement, the actual interest rate will be affected by the amount and timing of net royalty revenue recognized and changes in forecasted revenue. On a quarterly basis, the Company reassess the effective interest rate and adjust the rate prospectively as necessary.

~~The Company has~~had a liability related to the sale of future royalties of $0$0 and ~~$10.1~~$1.7 million for the periods ending ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. As of June 30, 2022, the Company has reflected the final payment due to HCRP of $1.9 million within accrued expenses and other current liabilities, which will be settled in the normal course of business.

The following table shows the activity within the liability account for the ~~six-month~~three-month period ended ~~June 30~~,March 31, 2023 and 2022, ~~and 2021,~~ respectively:


(In thousands)	June 30, 2022			June 30, 2021			March 31, 2023		March 31, 2022
Liability related to sale of future royalties - beginning balance	$	4,460		$	15,257		$	—	$	4,460
Deferred transaction costs amortized		33			138			—		24
Non-cash royalty revenue payable to HCRP		(4,739	)		(5,972	)		—		(2,852	)
Non-cash interest expense recognized		246			641			—		108
Liability related to sale of future royalties - ending balance	$	—		$	10,064		$	—	$	1,740

On December 24, 2019, the Company completed the private exchange of ~~$276.0~~$276.0 million aggregate principal amount of its then outstanding ~~1.75%~~1.75% Convertible Senior Notes due 2021 ~~(the “2021 Notes”)~~ for a combination of newly issued 6.00% Convertible Senior Secured Notes due 2024 (the “2024 Notes”) and cash. For each $1,000 principal amount of exchanged 2021 Notes, the Company issued $750 principal amount of the 2024 Notes and ~~made a cash payment of $200 (the “Exchange”). In the aggregate, the~~cash. The Company issued approximately ~~$207.0~~$207.0 million aggregate principal amount of the 2024 Notes and paid approximate ~~$55.2~~$55.2 million in cash to participating holders. The Exchange was conducted with a limited number of institutional holders of the 2021 Notes pursuant to Exchange Agreements dated as of December 20, 2019. The 2021 Notes received by the Company in the Exchange were cancelled in accordance with their terms. Accordingly, upon completion of the Exchange, $69.0 million of the 2021 Notes remained outstanding. On June 15, 2021, the Company repaid the outstanding balance of the 2021 Notes at their maturity date using cash on hand.

The 2024 Notes were issued pursuant to an Indenture, dated as of December 23, 2019, among the Company, its wholly owned subsidiary, Civitas ~~Therapeutics, Inc.~~ (along with any domestic subsidiaries acquired or formed after the date of issuance, the “Guarantors”), and Wilmington Trust, National Association, as trustee and collateral agent (the “2024 Indenture”). The 2024 Notes are senior obligations of the Company and the Guarantors, secured by a first priority security interest in substantially all of the assets of the Company and the Guarantors, subject to certain ~~exceptions described in the Security Agreement, dated as of December 23, 2019, between the grantors party thereto and Wilmington Trust, National Association, as collateral agent.~~exceptions.

The 2024 Notes will mature on December 1, 2024 unless earlier converted in accordance with their ~~terms prior to such date.~~terms. Interest on the 2024 Notes is payable semi-annually in arrears at a rate of ~~6.00%~~6.00% per annum on each June 1 and December ~~1, beginning on June 1, 2020.~~1. Under the 2024 Indenture, the Company may elect to pay interest in cash or shares of the Company’s common ~~stock, subject to~~stock. In May 2023, the Company announced that it will make a cash interest payment of approximately $6.2 million in satisfaction of ~~certain conditions. If~~the interest payment due on June 1, 2023 which will be made out of restricted cash. Following the June 1, 2023 interest payment, the Company ~~elects~~will no longer have the option to pay interest in shares of common stock, such common stock will have a per share value equal to 95% of the daily volume-weighted average price for the 10 trading days ending on and including the trading day immediately preceding the relevant interest payment date. Based on the current market price of the Company’s common stock and the Company’s remaining authorized shares of common stock that are not reserved for other purposes, the Company believes that for the foreseeable future interest payments on the 2024 ~~notes will have to be made~~Notes in ~~cash.~~common stock.

The 2024 Notes are convertible at the option of the holder into shares of common stock of the Company at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. The adjusted conversion rate for the 2024 Notes is 47.6190 shares of the Company’s common stock per ~~$1,000~~$1,000 principal amount of 2024 Notes, representing an adjusted conversion price of approximately ~~$21.00~~$21.00 per share of common stock. The conversion rate was adjusted to reflect the 1-for-6 reverse stock split effected on December 31, ~~2020 and is subject to additional adjustments in certain circumstances as described in the 2024 Indenture.~~2020.

The Company may elect to settle conversions of the 2024 Notes in cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock. Holders who convert their 2024 Notes prior to June 1, 2023 (other than in connection with a make-whole fundamental change) will also be entitled to an interest make-whole payment equal to the sum of all regularly scheduled stated interest payments, if any, due on such 2024 Notes on each interest payment date occurring after the conversion date for such conversion and on or before June 1, 2023. In addition, the Company will have the right to cause all 2024 Notes then outstanding to be converted automatically if the volume-weighted average price per share of the Company’s common stock equals or exceeds ~~130%~~130% of the adjusted conversion price for a specified period of time and certain other conditions are satisfied.

Holders of the 2024 Notes will have the right, at their option, to require the Company to purchase their 2024 Notes if a fundamental change (as defined in the 2024 Indenture) occurs, such as a delisting of the Company’s common stock from the Nasdaq Global Select Market, in each case, at a repurchase price equal to ~~100%~~100% of the principal amount of the 2024 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date. If a make-whole fundamental change occurs, as described in the 2024 Indenture, and a holder elects to convert its 2024 Notes in connection with such make-whole fundamental change, such holder may be entitled to an increase in the adjusted conversion rate as described in the 2024 Indenture.

Subject to a number of exceptions and qualifications, the 2024 Indenture restricts the ability of the Company and certain of its subsidiaries to, among other things, (i) pay dividends or make other payments or distributions on their capital

stock, or purchase, redeem, defease or otherwise acquire or retire for value any capital stock, (ii) make certain investments, (iii) incur indebtedness or issue preferred stock, other than certain forms of permitted debt, ~~which includes, among other items, indebtedness incurred to refinance the 2021 Notes,~~ (iv) create liens on their assets, (v) sell their assets, (vi) enter into certain transactions with affiliates or (vii) merge, consolidate, or sell of all or substantially all of their assets. The 2024 Indenture also requires the Company to make an offer to repurchase the 2024 Notes upon the occurrence of certain asset sales.

The 2024 Indenture provides that a number of events will constitute an event of default, including, among other things, (i) a failure to pay interest for 30 days, (ii) failure to pay the 2024 Notes when due at maturity, upon any required repurchase, upon declaration of acceleration or otherwise, (iii) failure to convert the 2024 Notes in accordance with the 2024 Indenture and the failure continues for five business days, (iv) not issuing certain notices required by the 2024 Indenture within a timely manner, (v) failure to comply with the other covenants or agreements in the 2024 Indenture for 60 days following the receipt

of a notice of non-compliance, (vi) a default or other failure by the Company to make required payments under other indebtedness of the Company or certain subsidiaries having an outstanding principal amount of ~~$30.0~~$30.0 million or more, (vii) failure by the Company or certain subsidiaries to pay final judgments aggregating in excess of ~~$30.0~~$30.0 million, (viii) certain events of bankruptcy or insolvency and (ix) the commercial launch in the ~~United States~~U.S. of a product determined by the ~~U.S.~~ FDA to be bioequivalent to Inbrija. In the case of an event of default arising from certain events of bankruptcy or insolvency with respect to the Company, all outstanding 2024 Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, the trustee or the holders of at least ~~25%~~25% in aggregate principal amount of the then outstanding 2024 Notes may declare all the notes to be due and payable immediately.

The Company determined that the exchange of the 2021 Notes for 2024 Notes qualified for a debt extinguishment and recognized a gain on extinguishment of $55.1 million for the year ended December 31, 2019, representing the difference between the fair value of the liability component immediately before the exchange and the carrying value of the debt. The Company recorded an adjustment of $38.4 million to additional paid-in capital to adjust the equity component of 2021 Notes in connection with the extinguishment.

The Company assessed all terms and features of the 2024 Notes in order to identify any potential embedded features that would require bifurcation. As part of this analysis, the Company assessed the economic characteristics and risks of the 2024 Notes, including the conversion, put and call features. The Company concluded the conversion features required bifurcation as a derivative. The fair value of the conversion features derivative was determined based on the difference between the fair value of the 2024 Notes with the conversion options and the fair value of the 2024 Notes without the conversion options using a binomial model. The Company determined that the fair value of the derivative upon issuance of the 2024 Notes was ~~$59.4~~$59.4 million and recorded this amount as a derivative liability with an offsetting amount as a debt discount as a reduction to the carrying value of the 2024 Notes on the closing date, or December 24, 2019. There are several embedded features within the 2024 Notes which, upon issuance, did not meet the conditions for equity classification. As a result, these features were aggregated together and recorded as the derivative liability conversion option. The conversion feature is measured at fair value on a quarterly basis and the changes in the fair value of the conversion feature for the period will be recognized in the consolidated statements of operations.

The Company received stockholder approval on August 28, 2020 to increase the number of authorized shares of the Company’s common stock from 13,333,333 shares to 61,666,666 shares. As a result of the share approval, the Company determined that multiple embedded conversion options met the conditions for equity classification. The Company performed a valuation of these conversion options as of September 17, 2020, which was the date the Company completed certain securities registration obligations for the shares underlying the 2024 Notes. The resulting fair value of these conversion options was ~~$18.3~~$18.3 million, which was reclassified to equity and presented in the statement of stockholder’s equity as of September 30, 2020, net of the ~~$4.4~~$4.4 million tax impact. The equity component is not re-measured as long as it continues to meet the conditions for equity classification. The Company performed a valuation of the derivative liability related to certain embedded conversion features that are precluded from equity classification. The fair value of these conversion features was calculated to be negligible as of ~~June 30, 2022.~~March 31, 2023.

The Company determined that the expected life of the 2024 Notes was equal to the period through December 1, 2024 as this represents the point at which the 2024 Notes will mature unless earlier converted in accordance with their terms prior to such date. Accordingly, the total debt discount of ~~$75.1~~$75.1 million, inclusive of the fair value of the embedded conversion feature derivative at issuance, is being amortized using the effective interest method through December 1, 2024. For the ~~three- and six-month periods~~three-month period ended ~~June 30, 2022~~,March 31, 2023, the Company recognized ~~$7.0~~$7.6 million ~~and $13.9 million, respectively,~~ of interest expense related to the 2024 Notes at the effective interest rate of ~~18.13%~~18.13%. The fair value of the Company’s 2024 Notes was approximately ~~$157.3~~$157.3 million as of ~~June 30~~March 31, 2023.~~, 2022.~~

In connection with the issuance of the 2024 Notes, the Company incurred approximately ~~$5.7~~$5.7 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees, and allocated these costs to the liability component and recorded as a reduction in the carrying amount of the debt liability on the balance sheet. The portion allocated to the 2024 Notes is amortized to interest expense over the expected life of the 2024 Notes using the effective interest method.

The Company’s Biotie Therapies Ltd. subsidiary received several non-convertible capital loans from Business Finland for ~~the issuance~~research and development of ~~the 2021 Notes, the Company separated the 2021 Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the~~specific drug candidates, with an aggregate adjusted acquisition-date fair value of ~~a similar liability that does not have~~$20.5 million. The loans were to be repaid only when the consolidated retained earnings of Biotie Therapies Ltd. from the development of specific product candidates was sufficient to fully repay the loans. The Company filed an ~~associated convertible feature. The carrying amount~~application with Business Finland for waiver of the ~~equity component representing~~loans and accrued interest. In July 2022, Business Finland granted the ~~conversion option was determined by deducting the fair value of the liability component from the par value of the 2021 Notes as~~waiver request, which became effective in December 2022. The Company recorded a ~~whole. The equity component is not re-measured as long as it continues to meet the conditions for equity classification.~~

~~In connection with the issuance of the 2021 Notes, the Company incurred approximately $7.5 million~~gain on extinguishment of debt ~~issuance costs, which primarily consisted~~ of ~~underwriting, legal and other professional fees, and allocated these costs to the liability and equity components based on the allocation of the proceeds. Of the total $7.5~~$27.1 million of debt issuance costs, $1.3 million were allocated to the equity component and recorded as a reduction to additional paid-in capital and $6.2 million were allocated to the liability component and recorded as a reduction infor the carrying amount of the ~~debt liability on the balance~~loans including accrued interest in December 2022.

sheet. The portion allocated to the liability component is amortized to interest expense over the expected life of the 2021 Notes using the effective interest method. The Company wrote off $1.2 million of issuance cost associated with the exchange of the 2021 Notes.(11) Leases

~~The following table sets forth total interest expense recognized related to the 2021 Notes for the three- and six-month periods ended~~ ~~June 30, 2022 and 2021:~~

(In thousands)

Three-month period ended June 30, 2022

Three-month period ended June 30, 2021

Six-month period ended June 30, 2022

Six-month period ended June 30, 2021

Contractual interest expense

$
—

$
126

$
—

$
428

Amortization of debt issuance costs

—

44

—

95

Amortization of debt discount

—

427

—

934

Total interest expense

$
—

$
597

$
—

$
1,457

~~(11) Leases~~

In February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842, which amends the guidance in former ASC Topic 840, Leases. The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases longer than 12 months. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. For lessees, leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The Company adopted the new lease guidance effective January 1, 2019 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The Company elected the package of practical expedients which permits the Company to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. The Company did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change the Company’s previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity.

The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In calculating the present value of the lease payments, the Company elected to utilize its incremental borrowing rate based on the remaining lease terms as of the January 1, 2019 adoption date.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred, if any. The Company’s leases have remaining lease terms of ~~4.5~~ 3.8 years to 65.3 years. ~~The Company has exercised the option to terminate the Ardsley lease with a termination date of June 22, 2022.~~

Operating Leases

The Company leases certain office space, manufacturing, and warehouse space under arrangements classified as leases under ASC 842. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Ardsley, New York

The Company ~~was~~ previously ~~headquartered at~~leased a ~~leased~~ facility in Ardsley, New York with approximately 160,000 square feet of ~~space.~~ ~~In September 2021, the~~space for its corporate headquarters. The Company ~~sent the landlord notice of exercise of~~exercised its early termination option under the lease, which was effective on June 22, ~~2022.~~2022. In connection with the lease termination, the Company paid an early termination fee of approximately ~~$4.7~~$4.7 million. Concurrent with the Ardsley lease termination, in June 2022, the Company relocated its corporate headquarters to a substantially smaller subleased office in Pearl River, New York, described below.

Pearl River, New York

In June 2022, the Company entered into a ~~6-year~~6-year sublease for an aggregate of approximately 21,000 square feet of space in Pearl River, New ~~York.~~York for its corporate headquarters. The Company has no options to extend the term of the sublease. The Pearl River sublease provides for monthly payments of rent during the lease term. The base rent ~~is currently $0 through December 31, 2022, with payments~~ commencing on January 1, 2023 ~~with a base rent of $0.3~~is $0.3 million per year, subject to an annual ~~2.0%~~2.0% escalation factor in each subsequent year thereafter.

~~Chelsea, Massachusetts~~

~~The Company’s Civitas subsidiary leased a manufacturing facility in Chelsea, Massachusetts which it used to manufactureInbrija through February 10, 2021.~~ ~~On February 10, 2021, the Company completed the sale of its Chelsea manufacturing operations to Catalent Pharma Solutions and assigned the lease of the Chelsea facility to a Catalent affiliate.~~

In 2018, the Company initiated a renovation and expansion of a building within the Chelsea manufacturing facility that increased the size of the facility to approximately 95,000 square feet. The project added a new size 7 spray dryer manufacturing production line for Inbrija and other ARCUS products that has greater capacity than the existing size 4 spray dryer manufacturing production line, and created additional warehousing space for manufactured product. All costs to renovate and expand the facility through the date of assignment to Catalent were borne by the Company. Since the February 10, 2021 sale of the manufacturing operations, Catalent has been responsible for finalizing the expansion, including obtaining needed regulatory approvals. However, given the potential importance of the expansion to the Company’s business, in December 2021 the Company agreed to fund $1.5 million of Catalent’s costs to complete the size 7 spray dryer expansion, which will be payable by the Company in four quarterly installments after the later of January 1, 2024 or FDA qualification and approval for use of the size 7 spray dryer.Waltham, Massachusetts

~~Additional Facilities~~

In October 2016, the Company entered into a ~~10-year~~10-year lease agreement with a term commencing January 1, 2017, for approximately 26,000 square feet of lab and office space in Waltham, ~~MA.~~Massachusetts. The lease provides for monthly rental payments over the lease term.The base rent under the lease is currently ~~$1.2~~$1.2 million per year.

The Company’s leases have remaining lease terms of ~~4.5~~3.8 years to 65.3 years, which reflects the exercise of the early termination of the Company’s Ardsley, NYNew York lease as described above. The weighted-average remaining lease term for the Company’s operating leases was ~~4.8~~4.1 years at ~~June 30, 2022.~~March 31, 2023. The weighted-average discount rate was ~~7.86%~~7.9% at ~~June 30, 2022.~~March 31, 2023.

ROU assets and lease liabilities related to the Company’s operating leases are as follows:


(In thousands)	Balance Sheet Classification	June 30, 2022		December 31, 2021		Balance Sheet Classification	March 31, 2023		December 31, 2022
Right-of-use assets	Right of use assets	$	5,792	$	6,751	Right of use assets	$	5,029	$	5,287
Current lease liabilities	Current portion of lease liabilities		1,347		8,186	Current portion of lease liabilities		1,556		1,545
Non-current lease liabilities	Non-current portion of lease liabilities		4,895		4,086	Non-current portion of lease liabilities		4,055		4,341

The Company has lease agreements that contain both lease and non-lease components. The Company accounts for lease components together with non-lease components (e.g., common-area maintenance). The components of lease costs were as follows:


(In thousands)	Three-month period ended March 31, 2023		Three-month period ended March 31, 2022
Operating lease cost	$	450	$	1,478
Variable lease cost		100		860
Short-term lease cost		—		1
Total lease cost	$	550	$	2,339

(In thousands)

Three-month period ended June 30, 2022

Three-month period ended June 30, 2021

Six-month period ended June 30, 2022

Six-month period ended June 30, 2021

Operating lease cost

$
1,482

$
1,408

$
2,959

$
2,994

Variable lease cost

968

979

1,827

2,335

Short-term lease cost

5

185

6

490

Total lease cost

$
2,455

$
2,572

$
4,792

$
5,819

Future minimum commitments under all non-cancelable operating leases are as follows:


(In thousands)
2023 (excluding the three months ended March 31, 2023)	$	1,159
2024		1,588
2025		1,633
2026		1,678
2027		357
Later years		182
Total lease payments		6,597
Less: Imputed interest		(986	)
Present value of lease liabilities	$	5,611

Supplemental cash flow information related to the Company’s operating leases are as follows:

On January 12, 2021 the Company and Catalent entered into an asset purchase agreement, pursuant to which the Company agreed to sell to Catalent certain assets related to the Company’s manufacturing activities located at the facilities situated in Chelsea, Massachusetts (the “Chelsea Facility”) and Waltham, Massachusetts (the “Waltham Facility”), for a purchase price of $80 million, plus an additional $2.3 million for raw materials transferred, and the assumption by Catalent of certain liabilities relating to such manufacturing activities. The Company closed the transaction on February 10, 2021. The Company determined that the criterion to classify the Chelsea manufacturing operations as assets held for sale within the Company’s consolidated balance sheet effective December 31, 2020 were met. Accordingly, the assets were classified as current assets held for sale at December 31, 2020 as the Company, at that time, expected to divest the Chelsea manufacturing operations within the next twelve months.

The classification to assets held for sale impacted the net book value of the assets expected to be transferred upon sale. The estimated fair value of the Chelsea manufacturing operations was determined using the purchase price in the purchase agreement along with estimated broker, accounting, legal, and other selling expenses, which resulted in a fair value less costs to sell of approximately $71.8 million. The carrying value of the assets classified as held for sale was approximately $129.7 million, which included property and equipment of $129.6 million and prepaid expenses of $0.1 million. As a result, the Company recorded a loss on assets held for sale of $57.9 million against the Chelsea manufacturing operations. Upon completion of the divestiture, final net proceeds were $74.0 million. Additionally, the expected divestiture of the Chelsea manufacturing operations was not deemed to represent a fundamental strategic shift that would have a major effect on the Company’s operations, and accordingly, the operating results of the Chelsea manufacturing operations were not reported as discontinued operations in the Company’s consolidated statement of income as of December 31, 2020.

The Company closed the transaction on February 10, 2021. In addition to the property and equipment, prepaid expenses, and raw materials, the Company also assigned the lease of the Chelsea Facility to a Catalent affiliate, which had a net carrying value of $(0.5) million as of the close date. During the three-month period ended March 31, 2021, the Company recorded a gain on disposal of approximately $0.5 million based on the net assets transferred and final net proceeds received at the close.

In January 2021 and September 2021, the Company announced corporate restructurings to reduce costs, more closely align operating expenses with expected revenue, and focus its resources on Inbrija. As part of the January 2021 restructuring, the Company reduced headcount by approximately 16% through a reduction in force (excluding the employees that transferred to Catalent at the closing of the sale of the Company’s Chelsea manufacturing operations). All of the reduction in personnel in connection with the January 2021 restructuring took place during the three-month period ended March 31, 2021. As part of the September 2021 restructuring, the Company further reduced its employee headcount by approximately ~~15%~~15% through a reduction in ~~force. Most~~workforce. A significant portion of ~~this reduction~~the reductions in ~~force~~workforce took place in September 2021, and was materially completed as of March 31, ~~2022, with negligible expenses incurred in the second quarter of~~ 2022.

During the ~~six-month~~three-month period ended ~~June 30, 2022,~~March 31, 2023, the Company incurred ~~$0.3 million~~$0 of restructuring charges, substantially all of which were cash expenditures for severance and other employee separation-related costs. Of the restructuring charges, $0.3 million were recorded in selling, general and administrative expenses for the six-month period ended June 30, 2022.charges.

~~A summary of the restructuring charges for the six-month period ended June 30, 2022 is as follows:~~

(In thousands)

Restructuring Costs

Restructuring Liability as of December 31, 2021

$
1,851

Q1 Restructuring Costs

226

Q1 Restructuring Payments

(1,700
)
Restructuring Liability as of March 31, 2022

$
377

Q2 Restructuring Costs

25

Q2 Restructuring Payments

(145
)
Restructuring Liability as of June 30, 2022

$
257

~~(14)~~(13) Commitments and Contingencies

On November 9, 2020, Drug Royalty III, L.P., and LSRC III S.ar.l. (collectively, “DRI”) filed an arbitration claim against the Company with the American Arbitration Association under a September 26, 2003 License Agreement that it originally entered into with Rush-Presbyterian St. Luke’s Medical Center (“Rush”). DRI previously purchased license royalty rights under the license agreement from Rush. DRI alleged a dispute over the last-to-expire patent covering sales of the drug Ampyra under the license agreement, and claimed damages based on unpaid license royalties of $6 million plus interest. On June 28, 2022, the Company settled DRI’s claim in exchange for a payment by the Company to DRI of $750,000 expressly without any admission of wrongdoing. Although the Company believed it had valid defenses to this claim, it also believed that the settlement was in the best interests of the Company and its stockholders to avoid the future expense and distraction associated with continuing the arbitration~~. The Company recorded a liability of~~ $2 million for the year ended December 31, 2020 in accrued expense and other current liabilities related to the dispute. As a result of the settlement, during the quarter ended June 30, 2022, this accrual was reduced to the $750,000 settlement amount and a corresponding gain of $1.3 million was recorded in the consolidated statement of operations as other income.

In addition to the arbitration described above, from time to time the Company is involved in litigation or other legal proceedings relating to claims arising out of operations in the normal course of business. The Company has assessed all litigation and legal proceedings and does not believe that it is probable that a liability has been incurred or that the amount of any potential liability or range of losses can be reasonably estimated. As a result, the Company did not record any loss contingencies for these other matters. Litigation expenses are expensed as incurred.

On February ~~10,~~ 2021, the Company sold its Chelsea manufacturing operations to Catalent Pharma ~~Solutions.~~Solutions (“Catalent”). In connection with the sale, the Company entered into a long-term, global manufacturing services (supply) agreement (the “2021 MSA”) with a Catalent ~~affiliate pursuant to which they have agreed to manufacture Inbrija~~ for the ~~Company at the Chelsea facility.~~manufacture of Inbrija. The ~~manufacturing services agreement provides~~2021 MSA provided that ~~Catalent will manufacture Inbrija, to the Company’s specifications, and~~ the Company ~~will~~would purchase Inbrija exclusively from Catalent during the term of the manufacturing services agreement; provided that such exclusivity requirement will not apply to Inbrija intended for sale in China. Under the Company’s agreement with Catalent, it isand was obligated to make minimum ~~inventory~~ purchase commitments for Inbrija of $18 million annually through the expiration of the agreement on December 31, 2030.

Under the manufacturing services agreement, the Company agreed to purchase from Catalent at least $16 million of Inbrija in 2021 (pro-rated for a partial year) and $18 million of Inbrija each year from 2022 through 2030, subject to reduction in certain cases. In December 2021, the Company and ~~Catalent amended~~entered into an amendment of the ~~manufacturing services agreement to adjust~~ 2021 MSA that adjusted the structure of the minimum payment terms for the period from July 1, 2021 through June 30, 2022 (the “Adjustment Period”). Under the amendment, the minimum payment obligation for the Adjustment Period was replaced with payments to Catalent for actual product delivered during the Adjustment Period subject to a cap for the Adjustment Period that ~~corresponded~~corresponds to ~~the Company’s~~its original minimum ~~inventory~~ purchase obligation for that period (i.e., ~~$17~~$17 million), and with certain payments being made in the first half of 2022 instead of during the second half of ~~2021~~.

~~Additionally, pursuant to~~2021. As a result of the amendment, payments to Catalent for product delivered during the Adjustment Period were approximately $8.4 million less than the $17 million minimum inventory purchase obligation for that period.

On December 31, 2022, the Company ~~agreed that it would reimburse~~and Catalent entered into a ~~portion~~termination letter, which was subsequently amended and restated in March 2023 (the “Termination Letter”), to terminate the 2021 MSA. In connection with the termination of ~~Catalent’s costs in completing~~ the ~~installation and qualification of a larger size 7 spray dryer at the Chelsea manufacturing facility, which~~2021 MSA, the Company ~~believes~~is obligated to pay a $4 million termination fee to Catalent, payable in April 2024. The parties also entered into a Settlement and Release Agreement with respect to certain batches of Inbrija that were not delivered in 2022 as scheduled, and that were delivered in the first quarter of 2023.

Effective January 1, 2023, the Company entered into a new manufacturing services agreement with Catalent, which was subsequently amended in March 2023 (as amended in March 2023, the “New MSA”). Under the New MSA, Catalent will continue to manufacture Inbrija through 2030, with reduced minimum annual commitments through 2024 and significantly lower pricing thereafter. The New MSA provides for the scale-up of new spray drying equipment (“PSD-7”), which will provide expanded capacity for the long-term world-wide manufacturing requirements of Inbrija. The Company will be ~~beneficial~~subject to ~~its future production needs,~~purchase commitments in 2023 and 2024 of 15 and 24 batches of Inbrija, respectively, at a total cost of

$10.5 million and $15.5 million, respectively. Thereafter, in 2025, the Company will pay Catalent a fixed per capsule fee based on the amount of ~~$1.5 million. This amount~~Inbrija that is delivered for sale in the U.S. and other markets.

It is anticipated that by 2026, the PSD-7 equipment will be ~~paid quarterly over~~fully operational, which will significantly reduce the per capsule fees for all markets. The Company agreed to a ~~one-year period commencing no sooner than January 1, 2024.~~

~~The manufacturing services agreement contains customary representations, warranties~~minimum purchase requirement of at least three batches per year on the PSD-7 equipment, and ~~covenants, including~~will provide up to $1 million in each of 2023 and 2024 for capital expenditures to assist in the capacity expansion efforts. In addition, the Company will be obligated to pay Catalent $2 million in 2023 in connection with ~~respect~~certain activities relating to the ~~ownership~~operational readiness of ~~any intellectual property created pursuant~~the PSD-7.

The New MSA, unless earlier terminated, will continue until December 31, 2030, and will be automatically extended for successive two-year periods unless either party provides the other with at least 18-months’ prior written notice of non-renewal. Either party may terminate the New MSA by written notice under certain circumstances, including material breach (subject to specified cure periods) or insolvency. The Company may also terminate the ~~manufacturing services agreement, as well as~~

~~provisions relating to ordering, payment~~New MSA upon certain specified regulatory events and ~~shipping terms, regulatory matters, reporting obligations, indemnity, confidentiality and other matters.~~for convenience upon 180 days’ prior written notice.

During the quarter ended ~~June 30, 2022,~~March 31, 2023, the Company incurred approximately ~~$3.4~~$2.9 million of purchase commitments with Catalent ~~pursuant to the terms~~which was previously reflected as other current assets as of ~~the~~ December ~~2021 amendment described above, of which $3.2 million are~~31, 2022 and now recognized as inventory within ~~the Company’s~~its balance ~~sheet and $0.2 million are recognized as~~sheet. The Company did not recognize any purchase commitments in cost of sales within ~~the Company’s~~its consolidated statement of operations for the period. As

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.

We are a biopharmaceutical company focused on developing therapies that restore function and improve the lives of people with neurological disorders. We market Inbrija (levodopa inhalation powder), which is approved in the U.S. for intermittent treatment of OFF episodes, also known as OFF periods, in people with Parkinson’s disease treated with carbidopa/levodopa. Inbrija is for as needed use and utilizes our ARCUS pulmonary delivery system, a technology platform designed to deliver medication through inhalation that we believe has potential to be used in the development of a variety of inhaled medicines. We also market branded Ampyra (dalfampridine) Extended Release Tablets, 10 ~~mg.~~mg in the U.S. as treatment to improve walking in patients with multiple sclerosis, or MS.

Inbrija is the first and only inhaled levodopa, or L-dopa, for intermittent treatment of OFF episodes, also known as OFF periods, in people with Parkinson’s disease treated with carbidopa/levodopa regimen. Approximately one million people in the U.S. and 1.2 million ~~Europeans~~people in Europe are diagnosed with Parkinson’s; it is estimated that approximately 40% of people with Parkinson’s in the U.S. experience OFF periods. The U.S. Food and Drug Administration ~~(FDA)~~(“FDA”) approval of Inbrija is for a single dose of 84 mg (administered as two capsules), which may be taken up to five times per day. ~~Currently, Inbrija is available in the U.S. without the need for a medical exception for approximately 92% of commercially insured lives and approximately 18% of Medicare plan lives.~~ U.S. net revenue for Inbrija was ~~$7.4~~$5.6 million for the quarter ended ~~June 30, 2022~~March 31, 2023 and ~~$6.4~~$3.7 million for the quarter ended ~~June 30, 2021. Net revenues for ex-U.S. Inbrija sales in Germany were $1.9 million for the quarter ended June 30,~~March 31, 2022.

Inbrija is also approved for use in the European Union ~~(EU)~~(“EU”). The European ~~Commission (EC)-approved~~Medicines Agency approved Inbrija dose is 66 mg (administered as two capsules) up to five times per day (per EU convention, this reflects emitted dose and is equivalent to the 84 mg labelled dose in the U.S.). Under the EU approval, Inbrija is indicated for the intermittent treatment of episodic motor fluctuations (OFF episodes) in adult patients with Parkinson’s disease treated with a levodopa/dopa-decarboxylase inhibitor.

We have entered into agreements to commercialize Inbrija in Spain, Germany, ~~and~~ Latin America, and China, and we are in discussions with potential partners for commercialization of Inbrija in other jurisdictions outside of the U.S. ~~In 2021, we entered into exclusive distribution and supply agreements with Esteve Pharmaceuticals to commercialize~~Net revenues for ex-U.S. Inbrija ~~in Spain and Germany. Under~~sales were $0.5 million for the terms of the Germany distribution agreement, in 2021 we received a €5 million (approximately $5.9 million) upfront payment, and we are entitled to receive sales-based milestones. Under the terms of both the Spain and Germany supply agreements, we are entitled to receive a significant double-digit percentage of the Inbrija selling price in exchange for supply of the product. Esteve Pharmaceuticals launched Inbrija in Germany in June 2022 and expects to launch Inbrija in Spain in earlyquarter ended March 31, 2023. Also, in May 2022, we announced that we entered into exclusive distribution and supply agreements with Pharma Consulting Group, S.A. (known as Biopas Laboratories) to commercialize Inbrija in nine countries within Latin America, including Brazil and Mexico. Under the terms of the Biopas agreements, we are entitled to receive a significant double-digit, tiered percentage of the Inbrija selling price in exchange for supply of the product, and we are entitled to sales-based milestones.

Inbrija utilizes our ARCUS platform for inhaled therapeutics. Because of our limited financial resources, we previously suspended work on ARCUS and other proprietary research and development programs. However, we are discussing potential collaborations with other companies that have expressed interest in formulating their novel molecules for pulmonary delivery using ARCUS, and we have ~~already been performing~~performed feasibility studies for a number of these opportunities.

Ampyra is an extended-release tablet formulation of dalfampridine approved by the FDA as a treatment to improve walking in patients with multiple sclerosis, or MS. Ampyra became subject to competition from generic versions of Ampyra starting in late 2018 as a result of an adverse ~~U.S. federal district~~ court ruling that invalidated certain Ampyra Orange Book-listed patents. We have experienced a significant decline in Ampyra sales due to competition from several generic versions of Ampyra. Additional manufacturers may market generic versions of Ampyra, and we expect our Ampyra sales will continue to decline over time. U.S. netnet revenue for Ampyra was ~~$18.2~~$12.6 million for the quarter ended ~~June 30, 2022~~March 31, 2023 and ~~$21.8~~$14.9 million for the quarter ended ~~June 30, 2021.~~ March 31, 2022.

Ampyra is marketed as Fampyra outside the U.S. by Biogen International GmbH, or Biogen, under a license and collaboration agreement that we entered into in June 2009. Fampyra has been approved in a number of countries across Europe, Asia, and the Americas. Our Fampyra patents have been challenged in Germany and could be similarly challenged in other countries where Fampyra is marketed by Biogen, and these challenges could lead to generic competition with Fampyra. For example, we understand that a generic drug manufacturer that has sought to invalidate Fampyra patents in Germany through nullity proceedings has ~~taken steps to initiate~~commenced a generic launch in Germany.~~Refer to~~ ~~Legal Proceedings~~ ~~in Part II, Item 1 of this report for more information.~~

In February 2021, inwe sold our Chelsea manufacturing operations to Catalent Pharma Solutions (“Catalent”). In connection with the sale, ~~of our former Chelsea, Massachusetts manufacturing operations,~~ we entered into a long-term, global manufacturing services (supply) agreement (the “2021 MSA”) with Catalent for the ~~supply~~manufacture of Inbrija. The ~~Catalent manufacturing services agreement provides~~2021 MSA provided that ~~Catalent will manufacture Inbrija, to our specifications, and~~ we ~~will~~would purchase Inbrija exclusively from Catalent, ~~during~~and were obligated to make minimum purchase commitments for Inbrija of $18 million annually through the ~~term~~expiration of the ~~manufacturing services agreement; provided that such exclusivity requirement will not apply to Inbrija intended for sale in China.~~agreement on December 31, 2030.

Under the manufacturing services agreement, we agreed to purchase from Catalent at least $16 million of Inbrija in 2021 (pro-rated for a partial year) and $18 million of Inbrija each year from 2022 through 2030, subject to reduction in certain cases. In December 2021, we ~~and Catalent amended~~entered into an amendment of the ~~manufacturing services agreement to adjust~~ 2021 MSA that adjusted the structure of the minimum payment terms for the period from July 1, 2021 through June 30, 2022 (the “Adjustment Period”). Under the amendment, the minimum payment obligation for the Adjustment Period was replaced with payments toCatalent for actual product delivered during the Adjustment Period subject to a cap for the Adjustment Period that ~~corresponded~~corresponds to ~~our~~its original minimum ~~inventory~~ purchase obligation for that period (i.e., $17 million), and with certain payments being made in the first half of 2022 instead of during the second half of ~~2021~~.2021. As a result of the amendment, ~~our~~ payments to Catalent for product delivered during the Adjustment Period were approximately ~~$4.6~~$8.4 million less than the $17 million minimum inventory purchase obligation for that period.

Additionally, pursuant to the amendment, we agreed that we would reimburse a portion of Catalent’s costs in completing the installation and qualification of a larger size 7 spray dryer at the Chelsea manufacturing facility, which we believe will be beneficial to our future production needs, in the amount of $1.5 million. This amount will be paid quarterly over a one-year period commencing no sooner than January 1, 2024.

In January 2021 and September 2021, we announced corporate restructurings to reduce costs, more closely align operating expenses with expected revenue, and focus our resources on Inbrija. The headcount reductions and other budget cuts we implemented, including those resulting from the sale of the Chelsea manufacturing operations described above, are expected to result in a $60 million annualized reduction in operating expenses inOn December 31, 2022, ~~as compared to 2020.~~

~~In January 2021,~~ we entered into an At The Market (ATM) Offering Agreement with H.C. Wainwright & Co., LLC as sales agent. Pursuant to the ATM agreement, we may offer and sell shares of our common stock having an aggregate value of up to $15.25 million in an at-the-market offering, subject to a ~~3% sales commission payable to H.C. Wainwright.~~

~~We were previously headquartered at a leased facility in Ardsley, New York with approximately 160,000 square feet of space.~~ ~~In September 2021, we sent the landlord notice of exercise of our early~~ termination ~~option under the lease,~~letter, which was ~~effective on June 22, 2022.~~subsequently amended and restated in March 2023 (the “Termination Letter”), to terminate the 2021 MSA. In connection with the ~~lease~~ termination of the 2021 MSA, we ~~paid an early~~are obligated to pay a $4 million termination fee to Catalent, payable in April 2024. The parties also entered into a Settlement and Release Agreement with respect to certain batches of ~~approximately $4.7 million. We terminated~~Inbrija that were not delivered in 2022 as scheduled, and that were delivered in the ~~Ardsley lease because~~first quarter of 2023.

Effective January 1, 2023, we ~~believe~~entered into a new manufacturing services agreement with Catalent, which was subsequently amended in March 2023 (as amended in March 2023, the ~~Ardsley facility was substantially larger than our needs~~“New MSA”). Under the New MSA, Catalent will continue to manufacture Inbrija through 2030, with reduced minimum annual commitments through 2024 and significantly lower pricing thereafter. The New MSA provides for the ~~foreseeable future. Concurrent~~scale-up of new spray drying equipment (“PSD-7”), which will provide expanded capacity for the long-term world-wide manufacturing requirements of Inbrija. We will be subject to purchase commitments in 2023 and 2024 of 15 and 24 batches of Inbrija, respectively, at a total cost of $10.5 million and $15.5 million, respectively. Thereafter, in 2025, we will pay Catalent a fixed per capsule fee based on the amount of Inbrija that is delivered for sale in the U.S. and other markets.

It is anticipated that by 2026, the PSD-7 equipment will be fully operational, which will significantly reduce the per capsule fees for all markets. We agreed to a minimum purchase requirement of at least three batches per year on the PSD-7 equipment, and will provide up to $1 million in each of 2023 and 2024 for capital expenditures to assist in the capacity expansion efforts. In addition, we are obligated to pay Catalent $2 million in 2023 in connection with certain activities relating to the ~~Ardsley lease termination,~~operational readiness of the PSD-7.

The New MSA, unless earlier terminated, will continue until December 31, 2030, and will be automatically extended for successive two-year periods unless either party provides the other with at least 18-months’ prior written notice of non-renewal. Either party may terminate the New MSA by written notice under certain circumstances, including material breach (subject to specified cure periods) or insolvency. We may also terminate the New MSA upon certain specified regulatory events and for convenience upon 180 days’ prior written notice.

In October 2022, an arbitration panel issued a decision in ~~June~~our dispute with Alkermes Plc (“Alkermes”) and ruled that the existing license and supply agreements with Alkermes were unenforceable. As a result of the panel’s ruling, we are no longer required to pay Alkermes any royalties on net sales for license and supply of Ampyra, and we are free to use alternative sources for supply of Ampyra, which we have already secured for U.S. supply.

We had previously designated Patheon, Inc. (“Patheon”) as a second manufacturing source of Ampyra. In connection with that designation, we entered into a manufacturing agreement with Patheon, and Alkermes assisted us in transferring manufacturing technology to Patheon. Patheon now supplies us with our Ampyra needs. Under the manufacturing services agreement, we agreed to purchase from Patheon, on a non-exclusive basis, a portion of our requirements for Ampyra in the U.S. We pay Patheon a fixed per bottle fee (60 tablets per bottle) based on the annual quantity of Ampyra bottles that are delivered for sale. As a result of the arbitration ruling in October 2022, we ~~relocated~~were free to obtain supply of Ampyra from alternative sources and Patheon became our ~~corporate~~sole manufacturer and packager of Ampyra for sales in the U.S.

~~headquarters~~The manufacturing services agreement is automatically renewed for successive one-year periods on December 31 of each year, unless either party provides the other party with at least 12-months’ prior written notice of non-renewal. Either party may terminate manufacturing services agreement by written notice under certain circumstances, including material breach (subject to specified cure periods) or insolvency. We may also terminate the manufacturing services agreement upon certain regulatory actions or objections. Patheon may terminate the manufacturing services agreement if we assign the agreement to a ~~substantially smaller subleased office~~third party under certain circumstances.

The manufacturing services agreement contains customary representations, warranties and covenants, including with respect to the ownership of any intellectual property created pursuant to the manufacturing services agreement, as well as provisions relating to ordering, payment and shipping terms, regulatory matters, reporting obligations, indemnity, confidentiality and other matters.

We rely on a single third-party manufacturer to supply dalfampridine, the active pharmaceutical ingredient, or API, in ~~Pearl River, New York with approximately 21,000 square feet~~Ampyra, and also on a single supplier for a critical excipient used in the manufacture of ~~space.~~Ampyra. If these companies experience any disruption in their operations, our supply of Ampyra could be delayed or interrupted until the problem is solved or we locate another source of supply or another packager, which may not be available. We may not be able to enter into alternative supply or packaging arrangements on terms that are commercially reasonable, if at all. Any new supplier or packager would also be required to qualify under applicable regulatory requirements. Because of these and other factors, we could experience substantial delays before we are able to obtain qualified replacement products or services from any new supplier or packager.

As of ~~June 30, 2022,~~March 31, 2023, we had cash, cash equivalents, and restricted cash of approximately ~~$36.5~~$37.8 million. Restricted cash includes ~~$12.4~~$7.5 million, of which $6.2 million is currently held in escrow ~~related to~~under the ~~6% semi-annual interest portion~~terms of our 6.00% convertible senior secured notes due to December 2024 ~~which~~(“2024 Notes”), $0.8 million is related to self-funded employee health insurance, and $0.5 million is related to collateralized standby letters of credit. In May 2023, we announced that we will make a cash interest ~~is payable~~payment of approximately $6.2 million in ~~cash or stock. If we elect to pay interest due in stock, a corresponding amount~~satisfaction of the ~~restricted cash~~interest payment due on June 1, 2023 which will be ~~released from escrow. In connection with~~made out of restricted cash. Following the June 1, ~~2022~~2023 interest payment, ~~date on~~we will no longer have the 2024 notes, we issued an aggregate of 10,992,206 shares of common stock to holders of the notes and, to certain holders who delivered beneficial ownership limitation notices under the indenture governing the 2024 notes, cash interest payments of $0.9 million. In connection with the interest payment, $6.2 million was released from escrow and is available to us for other purposes. The issuance of sharesoption to pay interest on the 2024 ~~notes is based on a formula set forth~~Notes in ~~the 2024 notes indenture. Based on the current market price of our~~ common stock and our remaining authorized shares of common stock that are not reserved for other purposes, we believe that for the foreseeable future interest payments on the 2024 notes will have to be made in cash.stock.

Our business and financial condition have been impacted by, and are subject to risks resulting from, the COVID-19 global pandemic. The COVID-19 global pandemic has caused significant disruptions in the healthcare industry ~~including disruptions to the~~and delivery of ~~patient healthcare;~~healthcare to patients; for example, the pandemic has made it more difficult for some patients to visit with their physician and obtain pharmaceutical prescriptions. We also believe that ~~the governmental and other restrictions and requirements related to~~ the pandemic may have caused certain patients to lessen their mobility and therefore their need for certain therapeutics. We believe these factors contributed to volatility in new Inbrija prescriptions since the start of the pandemic in 2020 and ~~have~~ continued to impact prescriptions in 2022.

COVID-related policies, restrictions, and concerns may disrupt our operations and those of our customers and suppliers. Also, our operations could be interrupted if we or our customers or suppliers lose the services of key employees or consultants who become ill from COVID-19. These types of disruptions could potentially affect any of our critical business functions, and thus harm our business, including for example our sales and marketing operations, as well as compliance and certain general and administrative functions. The ultimate impact of the COVID-19 global pandemic, or any other health epidemic, is highly uncertain and subject to ~~change.These factors could~~change, and can have a material adverse effect on our business, operating results, and financial condition.

Inbrija is the first and only inhaled levodopa, or L-dopa, for intermittent treatment of OFF episodes, also known as OFF periods, in people with Parkinson’s disease treated with carbidopa/levodopa regimen. ~~Our New Drug Application, or NDA, for~~The FDA approved Inbrija ~~was approved by the U.S. Food and Drug Administration, or FDA, in December 2018. The approval is~~ for a single dose of 84 mg (administered as two capsules), which may be taken up to five times per day. Inbrija became commercially available in the U.S. in February 2019. Currently, Inbrija is available in the U.S. without the need for a medical exception for approximately 92% of commercially insured lives and approximately 18% of Medicare plan lives. U.S. net revenue for Inbrija was ~~$7.4~~$5.6 million for the quarter ended ~~June 30, 2022~~March 31, 2023 and ~~$6.4~~$3.7 million for the quarter ended ~~June 30, 2021. Net revenues~~March 31, 2022. Inbrija utilizes our ARCUS platform for ~~ex-U.S.~~ inhaled therapeutics. ARCUS is a dry-powder pulmonary drug delivery technology that we believe has potential to be used in the development of a variety of inhaled medicines. The ARCUS platform allows systemic delivery of medication through inhalation, by transforming molecules into a light, porous dry powder. This allows delivery of substantially higher doses of medication than can be delivered via conventional dry powder technologies.

Inbrija ~~sales~~is also approved for use in ~~Germany were $1.9 million~~the 27 member states of the EU, as well as Iceland, Norway, and Liechtenstein, for ~~the quarter ended June 30, 2022.~~

~~In September 2019, the European Commission, or EC, approved our Marketing Authorization Application, or MAA, for Inbrija. The approved~~a single dose isof 66 mg (administered as two capsules) up to five times per day (per ~~European Union, or~~ EU convention, this reflects emitted dose and is equivalent to the 84 mg labelled dose in the U.S.). Under the MAA, Inbrija is indicated in the EU for the intermittent treatment of episodic motor fluctuations (OFF episodes) in adult patients with Parkinson’s disease treated with a levodopa/dopa-decarboxylase inhibitor. The MAA approved Inbrija for use in what were then the 27 countries of the EU, as well as Iceland, Norway and Liechtenstein. Following the UK’s exit ~~of the UK~~ from the EU, we were granted a grandfathered Marketing Authorization ~~(MA)~~ by the Medicines and Healthcare Products Regulatory Agency (MHRA) in the UK ~~that was approved~~ in ~~November~~January 2021.

Esteve Germany supply agreements, we are entitled to receive a significant double-digit percentage of the Inbrija selling price in exchange for supply of the product. Esteve ~~Pharmaceuticals~~Germany and Esteve Spain launched Inbrija in Germany in June 2022 and ~~expects to launch Inbrija~~ in Spain in ~~early~~February 2023, respectively. Net revenues for ex-U.S. Inbrija sales were $0.5 million for the quarter ended March 31, 2023. ~~Also, in~~

In May 2022, we announced that we entered into exclusive distribution and supply agreements with Pharma Consulting Group, S.A. (known as Biopas Laboratories) to commercialize Inbrija in nine countries within Latin America, including Brazil and Mexico. Under the terms of the Biopas agreements, we are entitled to receive a significant double-digit, tiered percentage of the Inbrija selling price in exchange for supply of the product, and we are entitled to sales-based milestones.

We ~~market~~expect Biopas to commence sales of Inbrija in ~~the U.S. using field-based teams supported by our corporate marketing personnel. Our own neuro-specialty sales representatives work~~at least one country in ~~combination~~2024.

In May 2023, we entered into a distribution agreement and a commercial supply agreement with sales representatives provided by contract commercial organizations, and collectively they are currently focused on a priority list of physicians who are high volume prescribers of carbidopa/levodopa and other products indicated to treat OFF episodes. Our field-based teams also include reimbursement and market access specialists, who provide information to physicians and payers on our marketed products, as well as market development specialists who work collaboratively with field-sales teams and corporate personnel to assist in the execution of our strategic initiatives. Our Inbrija field-based and marketing activities are focused on physician awareness and market access as well as patient awareness, education and training. Inbrija is distributed in the U.S. primarily through: a specialty pharmacy associated with our e-prescribing program, described below; AllianceRx Walgreens Prime, or Walgreens, a specialty pharmacy that delivers the medication to patients by mail; and ASD Specialty Healthcare, Inc. (an AmeriSource Bergen affiliate)Hangzhou Chance Pharmaceuticals Co., ~~a specialty distributor. In 2022, we implemented an e-prescribing program~~Ltd (“Chance”), for the exclusive distribution of Inbrija in China. Chance is obligated to use commercially reasonable efforts to market Inbrija in China. The agreements remain in effect until the ~~U.S. through~~earlier of (a) the last commercial sale of Inbrija on a ~~specialty pharmacy that supports electronic prescriptions. We believe~~jurisdiction- by- jurisdiction basis, and (b) 12 years from the ~~convenience of electronic prescribing may be preferred by some physicians and patients.~~

We have established Prescription Support Services for Inbrija, sometimes referred to as the Inbrija hub, which helps patients navigate their insurance coverage and identify potential financial support alternatives, when appropriate. The Inbrija hub also includes a virtual nurse educator program to assist patients with proper usageeffective date of the ~~Inbrija inhaler. Insurance coverage services fall into one~~agreements, subject to customary termination for insolvency and certain other termination rights. We will receive a non-refundable upfront payment of these categories: insurance verification, to research patient insurance benefits and confirm insurance coverage; prior authorization support, to identify prior authorization requirements; and appeals support. For patients that may need assistance paying for their medication, Prescription Support Services offers several support options, including: a program that provides no cost medication to patients who meet specific program eligibility requirements; co-pay support, which may help commercially insured (non-government funded) patients lower their out-of-pocket costs;$2.5 million, and a ~~bridge program for federally insured patients who experience a delay in coverage determination.~~near term milestone payment of up to $6 million, depending on the clinical study requirements to be determined by the Chinese National Medical Products Administration (NMPA). We ~~have a no-cost sample program, available at physician offices, to enable patients and their physicians to assess the value~~will also receive $3 million upon regulatory approval of Inbrija ~~before the patient incurs out-of-pocket co-pay or co-insurance costs. In addition, we have~~in China, up to $132.5 million in sales milestones based on specified sales volumes, and a ~~first dispense zero-dollar copay program~~fixed fee for ~~commercially insured patients (which replaced our previous free trial program) to enable those patients to assess the value~~each carton of Inbrija ~~before incurring out-of-pocket co-pay or co-insurance costs.~~

Parkinson’s disease is a progressive neurodegenerative disorder resulting from the gradual loss of certain neurons in the brain. These neurons are responsible for producing dopamine and that loss causes a range of symptoms including impaired movement, muscle stiffness and tremors. The standard baseline treatment of Parkinson’s disease is oral carbidopa/levodopa, but oral medication can be associated with wide variability in the timing and amount of absorption and there are significant challenges in creating a regimen that consistently maintains therapeutic effects. As Parkinson’s progresses, people are likelysupplied to experience OFF periods, which are characterized by the return of Parkinson’s symptoms that result from low levels of dopamine between doses of oral carbidopa/levodopa. OFF periods are often highly disruptive to people with Parkinson’s. Approximately one million people in the U.S. and 1.2 million Europeans are diagnosed with Parkinson’s; it is estimated that approximately 40% of people with Parkinson’s in the U.S. experience OFF periods.Chance.

Inbrija utilizes our ARCUS platform for inhaled therapeutics. ARCUS is a dry-powder pulmonary drug delivery technology that we believe has potential to be used in the development of a variety of inhaled medicines. The ARCUS platform allows systemic delivery of medication through inhalation, by transforming molecules into a light, porous dry powder. This allows delivery of substantially higher doses of medication than can be delivered via conventional dry powder technologies. We acquired the ARCUS technology platform as part of our 2014 acquisition of Civitas Therapeutics. We have worldwide rights to our ARCUS drug delivery technology, which is protected by extensive know-how and trade secrets and various U.S. and foreign patents, including patents that protect the Inbrija dry powder capsules beyond 2030. We have several patents listed in the Orange Book for Inbrija, including patents expiring between 2022 and 2032. Inbrija was also entitled to three years of new product exclusivity in the U.S. that expired in December 2021. We have patents in Europe for Inbrija expiring between 2022 and 2033. One of our European patents, EP 3090773B, had been opposed by an unnamed party but in 2021 was maintained as granted by the European Opposition Board. Inbrija also has ten years of market exclusivity in Europe that is set to expire in September 2029.

We believe there are potential opportunities for using ARCUS with central nervous system, or CNS, as well as non-CNS, disorders. Due to several corporate restructurings since 2017 and associated cost-cutting measures, including the corporate restructurings we announced in January and September 2021, we suspended work on ARCUS and other proprietary research and development programs. However, we ~~are discussing~~continue to discuss potential collaborations with other companies that ~~have expressed~~express interest in formulating their novel molecules for pulmonary delivery using ARCUS, and we have ~~already been performing~~performed feasibility studies for a number of these opportunities.

Should we decide to proceed with any ARCUS development programs, we would be reliant on Catalent or another third-party supplier for the manufacture of product for that program. Our global supply agreement with Catalent does not provide for the terms and conditions under which Catalent would supply any product or product candidate other than Inbrija. We would be unable to advance the development of any ARCUS inhaled therapeutic candidate unless Catalent is willing to manufacture the candidate for us on commercially reasonable terms, or we could identify another third-party manufacturer that would be capable and willing to manufacture the candidate for us on commercially reasonable terms.AmpyraAlso, due to reductions in force, employee attrition and the 2021 sale of our Chelsea manufacturing operations, we may need to hire replacement personnel or engage consultants to continue with ARCUS research and development work beyond feasibility and similar early-stage studies.

Ampyra was approved by the FDA in January 2010 to improve walking in adults with multiple sclerosis. ~~To our knowledge, Ampyra is the first drug approved for this indication.~~ Efficacy was shown in people with all four major types of MS (relapsing remitting, secondary progressive, progressive relapsing and primary progressive). Ampyra became subject to competition from generic versions of Ampyra starting in late 2018 as a result of an adverse ~~U.S. federal district~~ court ruling that invalidated certain Ampyra Orange Book-listed patents. We have experienced a significant decline in Ampyra sales due to competition from several generic versions of Ampyra. Additional manufacturers may market generic versions of Ampyra, and we expect our Ampyra sales will continue to decline over time. U.S. netnet revenue for Ampyra was ~~$18.2~~$12.6 million for the quarter ended ~~June 30, 2022~~March 31, 2023 and ~~$21.8~~$14.9 million for the quarter ended ~~June 30, 2021.~~March 31, 2022.

Prior to October 2022 our primary source of supply of Ampyra was provided through a manufacturing and license agreement with Alkermes. In connection with a dispute over license and supply royalties, in the fourth quarter of 2022, an arbitration panel awarded to us an aggregate of $18.3 million including prejudgment interest. In addition, the arbitration panel ruled the agreements with Alkermes as unenforceable, and as a result we no longer have to pay Alkermes any royalties on net sales for license and supply of Ampyra, and we are now free to use alternative sources for supply of Ampyra, which we have secured. We expect the cost savings associated with this decision to greatly benefit Ampyra’s value to us.

Ampyra is marketed as Fampyra outside the U.S. by ~~Biogen International GmbH, or~~ Biogen under a license and collaboration agreement that we entered into in June 2009. Fampyra has been approved in a number of countries across Europe, Asia, and the Americas. Biogen ~~recently~~ initiated a commercial launch of Fampyra in China ~~after receiving approval from the Chinese National Medical Products Administration~~ in ~~2021.~~ 2022. Our Fampyra patents have been challenged in Germany and could be similarly challenged in other countries where Fampyra is marketed by Biogen. ~~The Germany nullity actions are further described below under~~ ~~Ampyra Patent Update~~. Fampyra currently faces generic

competition in Germany, notwithstanding that the Germany Fampyra Patents remain in effect, and challenges to the Fampyra patents could lead to additional generic competition with Fampyra in Germany and other countries.

Under our agreement with Biogen, we are entitled to receive double-digit tiered royalties on net sales of Fampyra and we are also entitled to receive additional payments based on achievement of certain regulatory and sales milestones, although we do not anticipate achievement of any of those milestones in the foreseeable future. In November 2017, we announced a $40 million Fampyra royalty monetization transaction with HealthCare Royalty Partners, or HCRP. In return for the payment to us, HCRP obtained the right to receive these Fampyra royalties up to an agreed-upon threshold. This threshold was met during the second quarter of 2022 and our obligations to HCRP will expire upon Biogen’s payment of royalties for that quarter. The HCRP transaction is accounted for as a liability, as described in Note 9 to our Consolidated Financial Statements included in this report.

There are no patents listed in the Orange Book for Ampyra. Ampyra became subject to competition from generic versions of Ampyra starting in late 2018 as a result of an adverse U.S. federal district court ruling that invalidated certain Ampyra Orange Book-listed patents.

There are two European patents, EP 1732548 and EP 2377536, with claims directed to use of a sustained release dalfampridine composition (known under the trade name Fampyra in the European Union) to increase walking speed in a patient with multiple sclerosis. Both European patents are set to expire in 2025, absent any additional exclusivity granted

based on regulatory review timelines. Fampyra had ten years of market exclusivity in the European Union that expired in 2021. Accordingly, even though the European patents were upheld by the Technical Board of Appeal of the European Patent Office, generic drug manufacturers may seek to challenge Fampyra’s European patents within individual European countries, and Fampyra could potentially face competition from those generic drug manufacturers. For example, a generic drug manufacturer that has sought to invalidate Fampyra patents in Germany through nullity proceedings, as described in the following paragraph, has initiated a generic launch in Germany even though the patents have not been invalidated.

On August 20, 2020, ratiopharm Gmbh (an affiliate of Teva Pharmaceutical Industries Ltd.) filed nullity actions against us in the German Federal Patent Court seeking to invalidate both of our German patents that derived from our European patents, EP 1732548 (the ‘548 patent) and EP 2377536 (the ‘536 patent), with claims directed to the use of a sustained dalmfapridine composition to increase walking speed in a patient with multiple sclerosis. In November 2021, the German Federal Patent Court issued preliminary opinions indicating that the claimed subject matter of the ‘548 patent lacked inventive step and the claimed subject matter of the ‘536 patent lacked novelty and inventive step. At an oral hearing in February 2022, the German court dismissed ratiopharm’s action against the ‘536 patent as inadmissible because of ongoing formality proceedings relating to the ‘536 patent in the European Patent Office. At an oral hearing in April 2022, the German court dismissed ratiopharm’s action against the ‘548 patent as inadmissible because of ongoing formality proceedings relating to the ‘548 patent in the European Patent Office.Ratiopharm has appealed the decision on the ‘536 patent but not the decision on the ‘548 patent, and could refile the nullity actions. On January 11, 2022, STADA Arzneimittel also filed a nullity action against the ‘536 patent, and on July 27, 2022, Teva GmbH also filed a nullity action against the ‘548 patent, both in the same court as the ratiopharm nullity actions. We are working with Biogen to vigorously defend these actions and enforce our patent rights. Refer to ~~Legal Proceedings~~ ~~in Part II, Item 1 of this report for more information.~~

Three-Month Period Ended ~~June 30, 2022~~March 31, 2023 Compared to ~~June 30, 2021~~March 31, 2022

We recognize product sales of Inbrija following receipt of product by companies in our distribution network, which for Inbrija primarily includes specialty pharmacies and ~~ASD Specialty Healthcare, Inc. (an AmeriSource Bergen affiliate).~~distributors. We recognized net revenues from the U.S. sales of Inbrija of ~~$7.4~~$5.6 million and ~~$6.4~~$3.7 million for the three-month periods ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, an increase of ~~$1.0~~$1.9 million, or ~~16%~~51.4%. The increase in Inbrija ~~U.S.~~ net revenues of ~~$1.0~~$1.9 million was composed of an increase in volume of ~~$0.2~~$1.6 million anand a net price increase ~~in price of $0.6 million,~~ and discount and allowance adjustments of ~~$0.2~~$0.3 million for the three-month period ended ~~June 30, 2022.~~March 31, 2023. Consistent with trends in previous years, we anticipated declines in first quarter net sales given patient overstocking in the fourth quarter, insurance resetting at the beginning of each year, and quarterly true-up discounts and allowances as discussed below. Additionally, we recognized revenues from our supply agreement with Esteve ~~Pharmaceuticals~~ for sales in ~~Germany~~ex-U.S. of ~~$1.9~~$0.5 million and $0 for the three-month periods ended ~~June 30,~~March 31, 2023 and 2022, respectively.

We recognize product sales of Ampyra following receipt of product by companies in our distribution network, which for Ampyra primarily includes specialty pharmacies, which deliver the medication to patients by mail. We recognized net revenues from the sale of Ampyra to these customers of $12.6 million and ~~2021,~~$14.9 million for the three-month periods ended March 31, 2023 and 2022, respectively, ~~which represents initial stocking~~a decrease of ~~Inbrija.~~$2.3 million, or 15.4%. The decrease in Ampyra net revenues of $2.3 million was composed of a decrease in volume of $3.7 million, partially offset by net price increase and discount and allowance adjustments of $1.4 million for the three-month period ended March 31, 2023. Consistent with trends in previous years, we anticipated declines in first quarter net sales given patient overstocking in the fourth quarter, insurance resetting at the beginning of each year, and quarterly true-up discounts and allowances as discussed below.

Discounts and allowances ~~which~~for both Inbrija and Ampyra are included as an offset in net revenues ~~consist~~consisting of allowances for customer credits, including estimated chargebacks, rebates, returns, and discounts. Discounts and allowances are recorded following shipment of our products to our customers. Adjustments are recorded for estimated chargebacks, rebates, and discounts. Discounts and allowances also consist of discounts provided to Medicare beneficiaries whose prescription drug costs cause them to be subject to the Medicare Part D coverage gap (i.e., the “donut hole”). Payment of coverage gap discounts is required under the Patient Protection and Affordable Care ~~Act, the health care reform legislation enacted in 2010.~~Act. Discounts and allowances may increase as a percentage of sales as we enter into new managed care contracts in the future.

We believe that first and fourth quarter revenues for our products is subject to certain recurring seasonal factors relating to the commencement of a new calendar year. For example, some patients refill their prescriptions earlier ahead of the new year, in the fourth quarter, in anticipation of the year-end reset of health plan deductiblesInbrija and the Medicare donut hole, or a year-end switch of their insurance plans or pharmacy benefit providers. Also, we believe that specialty pharmacies used for Inbrija distribution may increase their Inbrija inventory, within contractual limits where applicable, in anticipation of the holidays and new year. We believe these factors have had a positive impact on fourth quarter revenues and a negative impact on first quarter revenues in the past two years. Also, discounts and allowances typicallyAmpyra are ~~highest in the first quarter,~~

~~and lowest in the fourth quarter, and when this occurs fourth quarter revenues increase, and first quarter revenues decrease, on a relative basis.~~

We recognize product sales of Ampyra following receipt of product by companies in our distribution network, which for Ampyra primarily includes specialty pharmacies, which deliver the medication to patients by mail. We recognized net revenues from the sale of Ampyra to these customers of $18.2 million and $21.8 million for the three-month periods ended June 30, 2022 and 2021, respectively, a decrease of $3.6 million, or 17%. The decrease in Ampyra net revenues of $3.6 million was composed of a decrease in volume of $6.2 million, partially offset by net price increase and discount and allowance adjustments of $2.6 million for the three-month period ended June 30, 2022. Consistent with trends in previous years, we anticipated declines in first quarter net sales given patient overstocking in the fourth quarter, insurance resetting at the beginning of each year, and quarterly true-up discounts and allowances as discussed below.

Discounts and allowances which are included as an offset in net revenues consist of allowances for customer credits, including estimated chargebacks, rebates, returns and discounts. Discounts and allowances are recorded following shipment of our products to our customers. Adjustments are recorded for estimated chargebacks, rebates, and discounts. Discounts and allowances also consist of discounts provided to Medicare beneficiaries whose prescription drug costs cause them to be subject to the Medicare Part D coverage gap (i.e., the “donut hole”). Payment of coverage gap discounts is required under the Affordable Care Act. Discounts and allowances may increase as a percentage of sales as we enter into managed care contracts in the future.

~~We believe that first and fourth quarter revenues for our products is~~ subject to certain recurring seasonal factors relating to the commencement of a new calendar year. For example, some patients refill their prescriptions earlier ahead of the new year, in the fourth quarter, in anticipation of the year-end reset of health plan deductibles and the Medicare donut hole, or a year-end switch of their insurance plans or pharmacy benefit providers. Also, we believe specialty pharmacies may increase their inventory in anticipation of the holidays and new year. These factors have had a positive impact on fourth quarter revenues and a negative impact on first quarter revenues. Also, discounts and allowances typically are highest in the first quarter, and lowest in the fourth quarter, and when this occurs, fourth quarter revenues increase, and first quarter revenues decrease, on a relative basis.

We recognized ~~$3.6~~$3.5 million and $4.0 million in royalty revenues for the three-month periods ended ~~June 30,~~March 31, 2023 and 2022, respectively, a decrease of $0.5 million or 12.5%.

We recognized negligible license revenue and ~~2021.~~no license revenues for the three-month periods ended March 31, 2023 and 2022, respectively.

We recorded cost of sales of ~~$8.8~~$3.2 million for the three-month period ended ~~June 30, 2022~~March 31, 2023 as compared to ~~$11.3~~$6.0 million for the three-month period ended ~~June 30, 2021.~~March 31, 2022. Cost of sales for the three-month period ended ~~June 30, 2022~~March 31, 2023 consisted primarily of ~~$8.5~~$3.1 million in inventory costs related to recognized revenues ~~$0.2 million in royalty fees based on net product shipments,~~ and $0.1 million in other period ~~costs~~. costs. Cost of sales for the three-month period ended ~~June 30, 2021~~March 31, 2022 consisted primarily of ~~$11.0~~$5.7 million in inventory costs related to recognized revenues and $0.3 million in royalty fees based on net product shipments.

We recorded amortization of intangible asset related to Inbrija of $7.7 million for the three-month periods ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Research and development expenses for the three-month period ended ~~June 30, 2022~~March 31, 2023 were ~~$1.5~~$1.4 million as compared to ~~$2.4~~$1.7 million for the three-month period ended ~~June 30, 2021,~~March 31, 2022, a decrease of approximately ~~$0.9~~$0.3 million, or ~~38%~~17.6%. The decrease was primarily due to restructuring and related decreases in several research and development ~~programs to shift focus on the Inbrija launch.~~programs.

Sales and marketing expenses for the three-month period ended ~~June 30, 2022~~March 31, 2023 were ~~$10.7~~$9.6 million compared to ~~$14.7~~$10.1 million for the three-month period ended ~~June 30, 2021,~~March 31, 2022, a decrease of approximately ~~$4.0~~$0.5 million, or ~~27%~~5.0%. The decrease was primarily due to a decrease in marketing-related spending of ~~$2.9~~$0.6 million for Inbrija, ~~a decrease in overall salaries~~ and ~~benefits of $0.5 million,~~ a decrease in spending ~~related to marketing~~ for Ampyra ~~of $0.5 million,~~ and ~~a decrease in~~ other selling related expenses of ~~$0.1~~$0.6 million, partially offset by an increase in salaries and benefits of $0.7 million.

General and administrative expenses for the three-month period ended ~~June 30, 2022~~March 31, 2023 were ~~$19.3~~$12.8 million compared to ~~$17.7~~$16.8 million for the three-month period ended ~~June 30, 2021, an increase~~March 31, 2022, a decrease of approximately ~~$1.6~~$4.0 million, or 9%23.8%. The ~~increase~~decrease was primarily due to ~~an increase~~a decrease in ~~other departmental spending~~rent and facility costs of ~~$5.0~~$1.7 million, ~~partially offset by~~a decrease of $0.6 million in depreciation expenses as a result of the relocation of the corporate offices, a decrease in salaries and benefits of $1.1 million, and a decrease in professional fees of ~~$2.3 million, a decrease in overall salaries and benefit costs of $0.4 million, and a decrease in Civitas spending of~~ $0.7 million, ~~due to the sale~~partially offset by an increase of ~~the Chelsea facility manufacturing operations.~~$0.1 million in other departmental spending.

A derivative liability was recorded in December 2019 as a result of the issuance of the ~~6.00% Convertible Senior Secured Notes due 2024.~~2024 Notes. The derivative liability is measured at fair value on a quarterly basis and changes in the fair value are recorded in the consolidated statement of operations. We recorded ~~negligible~~no income due to the change in the fair value of the derivative liability for the three-month period ended ~~June 30, 2022.~~March 31, 2023.

contingent consideration of ~~$3.1~~$1.0 million for the three-month period ended ~~June 30, 2022~~ March 31, 2023 as compared to income of ~~$5.5~~$3.0 million for the three-month period ended ~~June 30, 2021.~~ March 31, 2022. The changes in the ~~fair-value~~fair value of the acquired contingent consideration were primarily due to ~~updates~~ the change in projected revenue and the recalculation of cash flows for the passage of time, as well as an increase in the discount rate.

Other expense, net was ~~$6.2~~$7.4 million and ~~$7.7~~$7.6 million for the three-month periods ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. Nearly all Other Expense, net was interest on the 2024 Notes.

For the three-month periods ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we recorded a ~~provision~~benefit from income taxes of ~~$(26.6)~~$2.0 million and a ~~benefit~~provision for income taxes of ~~$0.5~~($0.3) million, respectively. The effective income tax rates for the three-month periods ended ~~June 30,~~March 31, 2023 and 2022 were 10.8% and ~~2021 were (132.0%) and 2.3%~~(1.1)%, respectively.

The variance in the effective tax rates for the three-month period ended ~~June 30, 2022~~March 31, 2023 as compared to the three-month period ended ~~June 30, 2021~~March 31, 2022 was due primarily to an increase in the existing valuation allowance recorded on our deferred tax assets for which no tax benefit can be recognized ~~which increase includes the valuation allowance due to a deemed ownership change described below.~~

The increase in the valuation allowance recorded on our deferred tax assets during the quarter ended June 30, 2022, is substantially the result of the application of Section 382 of the Internal Revenue Code. The Internal Revenue Code of 1986 contains certain provisions that can limit a taxpayer's ability to utilize net operating loss and tax credit carryforwards in any given year resulting from cumulative changes in ownership interests in excess of 50 percent over a three-year period (“ownership change”). In the event of such a deemed ownership change, Section 382 imposes an annual limitation on pre-ownership change tax attributes. In the quarter ended June 30, 2022, we Company experienced an ownership change under Section 382 based on cumulative changes in our ownership over three years. Accordingly, our ability to utilize NOL’s and tax credit carryforwards attributable to periods prior to the deemed ownership change is subject to the annual limitation under

Section 382. As a result of this limitation, we recorded a tax provision of approximately $27.4 million, which is reflected in the increase in the valuation allowance on the deferred tax assets in the quarter ended June 30, 2022, resulting in a reduction of our deferred tax assets with no impact to cash.

We continue to evaluate the realizability of our deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits and the ~~regulatory approval of products currently under development. Any changes to the valuation allowance or deferred tax assets and liabilities in the future would impact our income taxes.~~

The Company has ongoing state examinations in Massachusetts and New Jersey which cover multiple years. There have been no proposed adjustments at this stage of the examination. The Minnesota examination was finalized during the second quarter of 2022 for tax years 2018 and 2019 with no adjustments.

We recognize product sales of Inbrija following receipt of product by companies in our distribution network, which primarily includes specialty pharmacies and ASD Specialty Healthcare, Inc. We recognized net revenues from the U.S. sales of Inbrija of $11.1~~million and $11.4million for the six-month periods ended June 30, 2022 and June 30, 2021, respectively, a decrease of $0.3million, or 3%. The decrease in Inbrija US net revenues of $0.3million was composed of an increase in price of $0.8~~ ~~million, partially offset by a decrease in volume of $0.1~~ ~~million and an increase in discount and allowance adjustments of $1.0~~ million, for the six-month period ended June 30, 2022. Consistent with trends in previous years, we anticipated declines in first quarter net sales given patient overstocking in the fourth quarter, insurance resetting at the beginning of each year, and quarterly true-up discounts and allowances as discussed below. Additionally, we recognized revenues from our supply agreement with Esteve Pharmaceuticals for sales in Germany of $1.9 million and $0 for the three-month periods ended June 30, 2022 and 2021, respectively, which represents initial stocking of Inbrija.

We believe that first and fourth quarter revenues for our products is subject to certain recurring seasonal factors relating to the commencement of a new calendar year. For example, some patients refill their prescriptions earlier ahead of the new year, in the fourth quarter, in anticipation of the year-end reset of health plan deductibles and the Medicare donut hole, or a year-end switch of their insurance plans or pharmacy benefit providers. Also, we believe that specialty pharmacies used for Inbrija distribution may increase their Inbrija inventory, within contractual limits where applicable, in anticipation of the holidays and new year. We believe these factors have had a positive impact on fourth quarter revenues and a negative impact on first quarter revenues in the past two years. Also, discounts and allowances typically are highest in the first quarter, and lowest in the fourth quarter, and when this occurs fourth quarter revenues increase, and first quarter revenues decrease, on a relative basis.

~~June 30, 2022 and 2021, respectively, a decrease of $8.9~~ ~~million, or 21%~~. ~~The decrease in Ampyra net revenues of $8.9 million was composed of a decrease in volume of $10.3 million, partially offset by net price increase and discount and allowance adjustments of $1.4~~million for the six-month period ended June 30, 2022. Consistent with trends in previous years, we anticipated declines in first quarter net sales given patient overstocking in the fourth quarter, insurance resetting at the beginning of each year, and quarterly true-up discounts and allowances as discussed below.

We believe that first and fourth quarter revenues for our products is subject to certain recurring seasonal factors relating to the commencement of a new calendar year. For example, some patients refill their prescriptions earlier ahead of the new year, in the fourth quarter, in anticipation of the year-end reset of health plan deductibles and the Medicare donut hole, or a year-end switch of their insurance plans or pharmacy benefit providers. Also, we believe specialty pharmacies may increase their inventory anticipation of the holidays and new year. These factors have had a positive impact on fourth quarter revenues and a negative impact on first quarter revenues. Also, discounts and allowances typically are highest in the first quarter, and lowest in the fourth quarter, and when this occurs fourth quarter revenues increase, and first quarter revenues decrease, on a relative basis.

~~We recognized $0 and negligible revenues from the sale of other products for the six-month periods ended June 30, 2022 and 2021, respectively.~~

~~We recognized $7.5 million and $7.2 million in royalty revenues for the six-month periods ended June 30, 2022 and 2021, respectively, an increase of $0.3 million, or 4.2%.~~

We recorded cost of sales of $14.8 million for the six-month period ended June 30, 2022 as compared to $23.3 million for the six-month period ended June 30, 2021. Cost of sales for the six-month period ended June 30, 2022 consisted primarily of $14.2 million in inventory costs related to recognized revenues, $0.5 million in royalty fees based on net product shipments and $0.1 million in other period costs. Cost of sales for the six-month period ended June 30, 2021 consisted primarily of $21.3 million in inventory costs related to recognized revenues and $0.6 million in royalty fees based on net product shipments, idle capacity costs of $0.1 million, and $1.3 million in period costs related to expired inventory, freight, stability testing, and packaging.

~~We recorded amortization of intangible asset related to Inbrija of $15.4 million for the six-month periods ended June 30, 2022 and June 30, 2021.~~

Research and development expenses for the six-month period ended June 30, 2022 were $3.2 million as compared to $7.1 million for the six-month period ended June 30, 2021, a decrease of approximately $3.9 million, or 55%. The decrease was primarily due to restructuring and related decreases in several research and development programs to shift focus on the Inbrija launch.

Sales and marketing expenses for the six-month period ended June 30, 2022 were $20.8 million compared to $29.9 million for the six-month period ended June 30, 2021, a decrease of approximately $9.1 million, or 30%. The decrease was primarily due to a decrease in marketing-related spending of $5.2 million for Inbrija, a decrease in overall salaries and benefits of $2.9 million, and a decrease in spending related to marketing for Ampyra of $1.8 million, partially offset by an increase in other selling related expenses of $0.8 million.

General and administrative expenses for the six-month period ended June 30, 2022 were $36.2 million compared to $36.5 million for the six-month period ended June 30, 2021, a decrease of approximately $0.3 million, or 1%. The decrease was primarily due to a decrease in professional fees of $4.3 million, a decrease of $1.5 million in restructuring costs, a decrease in overall salaries and benefit costs of $2.6 million, and a decrease in Civitas spending of $1.0 million due to the sale of the Chelsea facility manufacturing operations, partially offset by an increase in other departmental spending of $9.1 million.

A derivative liability was recorded in December 2019 as a result of the issuance of the 6.00% Convertible Senior Secured Notes due 2024. The derivative liability is measured at fair value on a quarterly basis and changes in the fair value are recorded in the consolidated statement of operations. We recorded negligible income due to the change in the fair value of the derivative liability for the six-month period ended June 30, 2022.

As a result of the original spin out of Civitas from Alkermes, part of the consideration to Alkermes was a future royalty to be paid to Alkermes on Inbrija. We acquired this contingent consideration as part of the Civitas acquisition. The fair value of that future royalty is assessed quarterly. We recorded income relating to changes in the fair value of our acquired contingent consideration of $6.1 million for the six-month period ended June 30, 2022 as compared to income of $6.4 million for the six-month period ended June 30, 2021. The changes in the fair-value of the acquired contingent consideration were primarily due to updates the change in projected revenue and the recalculation of cash flows for the passage of time, as well as an increase in the discount rate.

~~Other expense, net was $13.8 million and $15.5 million for the six-month periods ended June 30, 2022 and 2021, respectively.~~

For the six-month periods ended June 30, 2022 and 2021, we recorded a provision from income taxes of $(26.8) million and a benefit of $3.7 million, respectively. The effective income tax rates for the six-month periods ended June 30, 2022 and 2021 were (60.4%) and 6.16%, respectively. The variance in the effective tax rates for the six-month period ended June 30, 2022 as compared to the six-month period ended June 30, 2021, was due primarily to forfeitures of equity of which no tax deduction is recorded and an increase in the existing valuation allowance recorded on our deferred tax assets for which no tax benefit can be recognized, which increase includes the valuation allowance due to a deemed ownership change described below.recorded.

The increase in the valuation allowance recorded on our deferred tax assets during the quarter ended June 30, 2022, is substantially the result of the application of Section 382 of the Internal Revenue Code. The Internal Revenue Code of 1986 contains certain provisions that can limit a taxpayer's ability to utilize net operating loss and tax credit carryforwards in any given year resulting from cumulative changes in ownership interests in excess of 50 percent over a three-year period (“ownership change”). In the event of such a deemed ownership change, Section 382 imposes an annual limitation on pre-ownership change tax attributes. In the quarter ended June 30, 2022, we experienced an ownership change under Section 382 based on cumulative changes in our ownership over three years. Accordingly, our ability to utilize NOL’s and tax credit carryforwards attributable to periods prior to the deemed ownership change is subject to the annual limitation in Section 382. As a result of the impact of this limitation, we recorded a tax provision of approximately $27.4 million, which is reflected in the increase in the valuation allowance on the deferred tax assets in the quarter ended June 30, 2022, resulting in a reduction of our deferred tax assets with no impact to cash.

We continue to evaluate the realizability of our deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits, and the regulatory approval of products ~~currently~~ under development. Any changes to the valuation allowance or deferred tax assets and liabilities in the future would impact our income taxes.

~~The Company has~~We have ongoing state examinations in Massachusetts ~~and New Jersey~~ which cover multiple years. There have been no proposed adjustments at this stage of the examination. The ~~Minnesota~~New Jersey examination was finalized during the ~~second~~first quarter of ~~2022~~2023 for tax years 2015 through 2018 ~~and 2019~~ with no adjustments.

Since our inception, we have financed our operations primarily from: private placements and public offerings of our capital stock; borrowing money through loans and the issuance of debt instruments; payments received under our collaboration and licensing agreements; revenue from sales of Ampyra, Fampyra, and Inbrija, as well as our former products, Zanaflex and Qutenza; royalty ~~monetizations~~monetization and ~~our~~a revenue interest financing arrangement; and, to a lesser extent, funding from government grants. Also, in February 2021, we obtained additional capital from the sale of our Chelsea manufacturing operations.

~~At June 30, 2022,~~On March 31, 2023, we had ~~$23.1~~$30.3 million of cash and cash equivalents, compared to ~~$45.6~~$37.5 million at December 31, ~~2021.~~2022. Our ~~June 30, 2022~~March 31, 2023 cash and cash equivalents balance does not include ~~$12.4~~$7.5 million of restricted cash, ~~that~~of which $6.2 million is currently held in escrow ~~under~~for payment of the ~~terms~~June 1, 2023 interest payment on the 2024 Notes, $0.8 million is related to self-funded employee health insurance, and $0.5 million is related to collateralized standby letters of ~~our convertible senior secured notes due 2024, further described below under~~ ~~Financing Arrangements~~.credit. We incurred a net loss of ~~$71.2 million and $104.0~~$16.8 million for the ~~six-month~~three month period ended ~~June 30, 2022 and the year ended December~~March 31, ~~2021, respectively.~~2023.

Our ability to meet our future operating requirements, repay our liabilities, and meet our other obligations, and continue as a going concern are dependent upon a number of factors, including our ability to generate cash from product sales, reduce planned expenditures, and obtain additional financing. If we are unable to generate sufficient cash flow from the sale of our products, we may be required to adopt one or more alternatives, subject to the restrictions contained in the indenture governing our 2024 Notes, such as further reducing expenses, selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous and which are likely to be highly dilutive. Also, our ability to raise additional capital and repay or restructure our indebtedness will depend on the capital markets and our financial condition at such time, among other factors. In addition, financing may not be available when needed, at all, on terms acceptable to us or in accordance with the restrictions described above.

In June 2022, we received notice that we are no longer in compliance with Nasdaq’s continued listing requirements because the trading price of our common stock had fallen below $1.00 for a period of more than 30 consecutive trading days (the “Minimum Bid Requirement”). We had 180 days, or until December 19, 2022, to regain compliance with this requirement in order to avoid potential delisting of our common stock, which would have significant adverse consequences both for the liquidity of our common stock and under the indenture governing the 2024 Notes. On November 11, 2022, our stockholders authorized our Board of Directors to approve an amendment and restatement of our Certificate of Incorporation to effect a reverse stock split at a ratio of any whole number in the range of 1-for-2 to 1-for-20 within one year. In February 2023, after a hearing with the Nasdaq Hearings Panel, we were granted an extension until June 20, 2023 to regain compliance with the Minimum Bid Requirement. In the event we do not achieve compliance with the Minimum Bid Requirement by June 20, 2023, we have committed to effecting the reverse stock split authorized by our stockholders in November 2022. However, there can be no assurance that we will achieve compliance with the Minimum Bid Requirement even with effecting the reverse stock split.

We believe that our existing cash and cash equivalents will be sufficient to cover our cash flow requirements for at least the next twelve months from the issuance date of these financial statements. However, our future requirements may change and will depend on numerous factors, some of which may be beyond our control.

On December 24, 2019, we completed the private exchange of $276.0 million aggregate principal amount of our then outstanding 1.75% Convertible Senior Notes due 2021 (the “~~2021 Notes~~”“2021 Notes”) for ~~a combination of newly issued 6.00%~~

~~Convertible Senior Secured Notes due 2024 (the “2024 Notes”) and cash. For each $1,000 principal amount of exchanged~~ ~~2021 Notes, we issued $750 principal amount of~~ the 2024 Notes and ~~made a cash payment of $200 (the “Exchange”). In the aggregate, we~~cash. We issued approximately $207.0 million aggregate principal amount of the 2024 Notes and paid ~~approximate~~approximately $55.2 million in cash to participating holders. ~~The Exchange was conducted with a limited number of institutional holders of the~~ ~~2021 Notes~~ pursuant to Exchange Agreements dated as of December 20, 2019. The 2021 Notes received by us in the Exchange were cancelled in accordance with their terms. Accordingly, upon completion of the Exchange, $69.0 million of the 2021 Notes remained outstanding. On June 15, 2021, we repaid the outstanding balance of the 2021 Notes at their maturity date using cash on hand.

The 2024 Notes were issued pursuant to an Indenture, dated as of December 23, 2019, among us, ~~our~~its wholly owned subsidiary, Civitas Therapeutics, Inc. (along with any domestic subsidiaries acquired or formed after the date of issuance, the “Guarantors”), and Wilmington Trust, National Association, as trustee and collateral agent (the “2024 Indenture”). The 2024 Notes are senior obligations of us and the Guarantors, secured by a first priority security interest in substantially all of the assets of us and the Guarantors, subject to certain ~~exceptions described in the Security Agreement, dated as of December 23, 2019, between the grantors party thereto and Wilmington Trust, National Association, as collateral agent.~~exceptions.

The 2024 Notes will mature on December 1, 2024 unless earlier converted in accordance with their ~~terms prior to such date.~~terms. Interest on the 2024 Notes is payable semi-annually in arrears at a rate of 6.00% per annum on each June 1 and December ~~1, beginning on June 1, 2020.~~1. Under the 2024 Indenture, we may elect to pay interest in cash or shares of our common ~~stock, subject to the~~stock. In May 2023, we announced that we will make a cash interest payment of approximately $6.2 million in satisfaction of ~~certain conditions. If~~the interest payment due on June 1, 2023 which will be made out of restricted cash. Following the June 1, 2023 interest payment, we ~~elect~~will no longer have the option to pay interest ~~in shares of common stock, such common stock will have a per share value equal to 95% of the daily volume-weighted average price for the 10 trading days ending~~ on ~~and including the trading day immediately preceding the relevant interest payment date.~~ Based on the current market price of our common stock and our remaining authorized shares of common stock that are not reserved for other purposes, we believe that for the foreseeable future interest payments on the 2024 notes will have to be made in cash.

The 2024 Notes are convertible at the option of the holder into shares of our common stock at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. The adjusted conversion rate for the 2024 Notes is 47.6190 shares of our common stock per $1,000 principal amount of 2024 Notes, representing an adjusted conversion price of approximately $21.00 per share of common stock. The conversion rate was adjusted to reflect the 1-for-6 reverse stock split effected on December 31, 2020 and is subject to additional adjustments in certain circumstances as described in the 2024 Indenture.

~~We may elect to settle conversions of~~ the 2024 Notes in ~~cash, shares of our common stock or a combination of cash and shares of our~~ common stock. Holders who convert their 2024 Notes prior to June 1, 2023 (other than in connection with a make-whole fundamental change) will also be entitled to an interest make-whole payment equal to the sum of all regularly scheduled stated interest payments, if any, due on such 2024 Notes on each interest payment date occurring after the conversion date for such conversion and on or before June 1, 2023. In addition, we will have the right to cause all 2024 Notes then outstanding to be converted automatically if the volume-weighted average price per share of our common stock equals or exceeds 130% of the adjusted conversion price for a specified period of time and certain other conditions are satisfied.

Holders of the 2024 Notes will have the right, at their option, to require us to purchase their 2024 Notes if a fundamental change (as defined in the 2024 Indenture) occurs, in each case, at a repurchase price equal to 100% of the principal amount of the 2024 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date. If a make-whole fundamental change occurs, as described in the 2024 Indenture, and a holder elects to convert its 2024 Notes in connection with such make-whole fundamental change, such holder may be entitled to an increase in the adjusted conversion rate as described in the 2024 Indenture.

Subject to a number of exceptions and qualifications, the 2024 Indenture restricts our ability and ~~the ability of~~ certain of our subsidiaries to, among other things, (i) pay dividends or make other payments or distributions on their capital stock, or

purchase, redeem, defease or otherwise acquire or retire for value any capital stock, (ii) make certain investments, (iii) incur indebtedness or issue preferred stock, other than certain forms of permitted debt, ~~which includes, among other items, indebtedness incurred to refinance the~~ ~~2021 Notes~~, (iv) create liens on their assets, (v) sell their assets, (vi) enter into certain transactions with affiliates or (vii) merge, consolidate or sell of all or substantially all of ~~their~~our assets. The 2024 Indenture also requires us to make an offer to repurchase the 2024 Notes upon the occurrence of certain asset sales.

and the failure continues for five business days, (iv) not issuing certain notices required by the 2024 Indenture within a timely manner, (v) failure to comply with the other covenants or agreements in the 2024 Indenture for 60 days following the receipt of a notice of non-compliance, (vi) a default or other failure by us to make required payments under other indebtedness of our or certain ~~of our subsidiaries; other indebtedness~~subsidiaries having an outstanding principal amount of $30.0 million or more, (vii) failure by us or certain ~~of our~~ subsidiaries to pay final judgments aggregating in excess of $30.0 million, (viii) certain events of bankruptcy or insolvency and (ix) the commercial launch in the ~~United States~~U.S. of a product determined by the ~~U.S.~~ FDA to be bioequivalent to Inbrija. In the case of an event of default arising from certain events of bankruptcy or insolvency with respect to ~~the Company,~~us, all outstanding 2024 Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding 2024 Notes may declare all the notes to be due and payable immediately.

We assessed all terms and features of the 2024 Notes in order to identify any potential embedded features that would require bifurcation. As part of this analysis, we assessed the economic characteristics and risks of the 2024 Notes, including the conversion, put and call features. We concluded the conversion features required bifurcation as a derivative. The fair value of the conversion features derivative was determined based on the difference between the fair value of the 2024 Notes with the conversion options and the fair value of the 2024 Notes without the conversion options using a binomial model. We determined that the fair value of the derivative upon issuance of the 2024 Notes was $59.4 million and recorded this amount as a derivative liability with an offsetting amount as a debt discount as a reduction to the carrying value of the 2024 Notes on the closing date, or December 24, 2019. There are several embedded features within the 2024 Notes which, upon issuance, did not meet the conditions for equity classification. As a result, these features were aggregated together and recorded as the derivative liability conversion option. The conversion feature is measured at fair value on a quarterly basis and the changes in the fair value of the conversion feature for the period will be recognized in the consolidated statements of operations.

~~We received stockholder approval on August 28, 2020 to increase the number of authorized shares of our common stock from 13,333,333 shares to 61,666,666 shares.~~ ~~As a result of the share approval, we determined that multiple embedded conversion options met the conditions for equity classification.~~ We performed a valuation of these conversion options as of September 17, 2020, which was the date we completed certain securities registration obligations for the shares underlying the 2024 Notes. The resulting fair value of these conversion options was $18.3 million, which was reclassified to equity and presented in the statement of stockholder’s equity as of September 30, 2020, net of the $4.4 million tax impact. The equity component is not re-measured as long as it continues to meet the conditions for equity classification. We performed a valuation of the derivative liability related to certain embedded conversion features that are precluded from equity classification. The fair value of these conversion features was calculated to be negligible as of June 30, 2022. The outstanding 2024 ~~Note~~Notes balances as of ~~June 30, 2022~~March 31, 2023 consisted of the following:

In June 2014, we issued $345 million aggregate principal amount of 1.75% Convertible Senior Notes due 2021 (the “2021 Notes”). On December 24, 2019, we completed the private exchange of $276.0 million aggregate principal amount of then-outstanding 2021 Notes for a combination of newly issued 6.00% Convertible Senior Secured Notes due 2024 and cash. Accordingly, upon completion of the exchange, $69.0 million of the 2021 Notes remained outstanding. On June 15, 2021, we repaid the outstanding balance of the 2021 Notes at their maturity date using cash on hand.

Our Biotie Therapies Ltd. subsidiary received ~~fourteen~~several non-convertible capital loans ~~granted by~~from Business Finland ~~(formerly Tekes)~~ for research and development of specific drug candidates, with an aggregate adjusted acquisition-date fair value of $20.5 ~~million (€18.2 million) and an aggregate carrying value of~~ ~~$26.3~~ ~~million as of June 30, 2022.~~million. The loans ~~are~~were to be repaid only

when the consolidated retained earnings of Biotie from the development of specific ~~loan-funded~~ product candidates is sufficient to fully repay the loans. ~~In light of the status of the loan-funded product candidates, we~~We filed an application with Business Finland for waiver of the loans and accrued interest. In July 2022, Business Finland granted ~~these waivers,~~the waiver request, which ~~will become~~became effective ~~upon Biotie’s compliance with specified conditions to be completed, including~~in December 2022. We recorded a ~~residual payment~~gain on extinguishment of ~~approximately $50,000~~debt of $27.1 million for ~~one~~the carrying amount of the ~~loans. As of June 30, 2022, Biotie had approximately~~ ~~$14.0~~ ~~million~~loans including accrued interest in ~~cash.~~December 2022.

In addition to the non-convertible capital loans described above, Research and Development Loans (“R&D loans”) were granted to Biotie by Business Finland with an acquisition-date fair value of $2.9 million (€2.6 million) and a carrying value of $0 as of June 30, 2022. These loans were repaid in equal annual installments from January 2017 through January 2021.

At ~~June 30, 2022,~~March 31, 2023 cash and cash equivalents were approximately ~~$23.1~~$30.3 million, as compared to ~~$45.6~~$37.5 million at December 31, ~~2021.~~2022. Our cash and cash equivalents consist of highly liquid investments with original maturities of three months or less at date of purchase and consist of investments in a Treasury money market fund. Also, we maintain cash balances with financial institutions in excess of insured limits. We do not anticipate any losses with respect to such cash balances. Our ~~June 30, 2022~~March 31, 2023 cash and cash equivalents balance does not include ~~$12.4~~$7.5 million of restricted cash, ~~that~~of which $6.2 million is currently held in escrow ~~under~~for payment of the ~~terms~~June 1, 2023 interest payment on the 2024 Notes, $0.8 million is related to self-funded employee health insurance, and $0.5 million is related to collateralized standby letters of ~~our convertible senior secured notes due 2024, further described above under~~ credit.~~Financing Arrangements, which may potentially be released from escrow if we pay interest on those notes using shares of our common stock (the amount released would correspond to the amount of interest paid using shares).~~

Net cash used in operations was ~~$28.2~~$7.0 million for the ~~six-month~~three-month period ending ~~June 30, 2022.~~March 31, 2023. Cash used by operations for the ~~six-month~~three-month period ended ~~June 30, 2022~~March 31, 2023 was primarily due to:

Net cash used in investing activities for the ~~six-month~~three-month period ended ~~June 30, 2022~~March 31, 2023 was ~~due primarily to purchases of property and equipment of $0.1 million.~~$0.

Net cash provided by financing activities for the ~~six-month~~three-month period ended ~~June 30, 2022~~March 31, 2023 was $0.

A summary of our minimum contractual obligations related to our material outstanding contractual commitments is included in Note 1312 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. Our long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business.

Under certain agreements, we are required to pay royalties or license fees and milestones for the use of technologies and products in our research and development activities and in the commercialization of products. The amount and timing of any of the foregoing payments are not known due to the uncertainty surrounding the successful research, development and commercialization of the products. As

Our most liquid assets are cash and cash equivalents. Because of their liquidity, these assets are not directly affected by inflation. Because we ~~have inventory-related purchase commitments~~intend to retain and continue to use our equipment, furniture and fixtures and leasehold improvements, we believe that the incremental inflation related to replacement costs of ~~approximately $2.9million, as compared to $2.7 million as~~such items will not materially affect our operations. However, the rate of ~~June 30, 2021. Under~~ inflation affects our ~~agreement with Catalent, we are obligated to make minimum inventory purchase commitments for Inbrija through the expiration~~ expenses, primarily employee compensation and contract services, which could increase our level of the agreement on December 31, 2030. As of June 30, 2022, the minimum remaining purchase commitment to Catalent was $9 million through December 31, 2022, plus any additional payments to Catalent for actual product delivered during the remainder of the Adjustment Period subject to the cap of the Adjustment Period, and $18 million annually each year thereafter.expenses.

Our critical accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~ ~~Effective January 1, 2021, we adopted ASU 2019-12, “Simplifying the Accounting for Income Taxes” (Topic 740).~~2022. Effective January 1, 2022, we adopted ASU 2021-04, “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.” Other than the adoption of these new accounting guidance, our significant accounting policies have not changed materially from December 31, ~~2021~~2022..

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the ~~Exchange Act)~~“Exchange Act”) we carried out an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under

the Exchange Act, as of the end of the ~~second~~first quarter of ~~2022,~~2023, the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer and Treasurer. Based on that evaluation, these officers have concluded that, as of ~~June 30, 2022,~~March 31, 2023, our disclosure controls and procedures were effective to achieve their stated purpose.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~SEC’s~~Securities and Exchange Commission’s rules, regulations, and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding disclosure.

In connection with the evaluation required by Exchange Act Rule 13a-15(d), our management, including our President and Chief Executive Officer and our Chief Financial Officer and Treasurer, concluded that there were no changes in our internal control over financial reporting during the quarter ended ~~June 30, 2022,~~March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

From time to time, we may be involved in litigation or other legal proceedings relating to claims arising out of operations in the normal course of our business, including the matters described below. The outcome of litigation and other legal proceedings is unpredictable, and regardless of outcome, they can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

~~On November 9, 2020, Drug Royalty III, L.P.,~~In January 2023, the Company filed a petition in the District Court for the Southern District of New York (“District Court”) to confirm and ~~LSRC III S.ar.l. (collectively, “DRI”) filed an arbitration claim against us with~~modify the American Arbitration Association under a September 26, 2003 License Agreement that we originally entered into with Rush-Presbyterian St. Luke’s Medical Center (“Rush”). DRI previously purchased license royalty rights under the license agreement from Rush. DRI allegedarbitral award received in October 2022 relating to a dispute ~~over~~with Alkermes plc (“Alkermes”). In that arbitration proceeding, the ~~last-to-expire~~arbitration panel found in the Company’s favor that Alkermes had leveraged its patent ~~covering sales~~to illegally obtain royalties beyond the life of the ~~drug Ampyra under~~patent in violation of federal law. The arbitration panel held that Alkermes’ conduct in continuing to charge royalties after the ~~license agreement,~~patent expired was unlawful per se and ~~claimed damages based on unpaid~~that the underlying agreements were unenforceable. The panel awarded the Company approximately $18.3 million, including interest, representing license royalties ~~of $6 million plus interest. On June 28, 2022, we settled DRI’s claim in exchange for a payment~~overpaid since July 2020 (“Award”). The Company is asking the District Court to confirm the Award, with modifications to the extent the arbitration panel disregarded federal law by usdeclining to ~~DRI of $750,000 expressly without any admission of wrongdoing. Although we believed we had valid defenses~~award royalties the Company paid prior to ~~this claim, we also believed~~July 2020 and after July 2018, the date on which the arbitration panel found that the ~~settlement was~~parties’ agreements were unenforceable as a matter of law. The Company is seeking restitution of the remaining illegal royalties that the arbitration panel found were demanded and collected by Alkermes in violation of the law in the ~~best interests~~amount of approximately $65 million together with pre- and post-award interest and costs. On February 8, 2023, Alkermes filed a brief opposing the ~~Company and its stockholders to avoid the future expense and distraction associated with continuing the arbitration.~~

~~On August 20, 2020, ratiopharm Gmbh (an affiliate of Teva Pharmaceutical Industries Ltd.) filed nullity actions against us~~relief requested in the ~~German Federal Patent Court seeking to invalidate both of our German patents that derived from our European patents, EP 1732548 (the ‘548 patent)~~Company’s petition and EP 2377536 (the ‘536 patent), with claims directed to the use of a sustained dalmfapridine composition (known under the trade name Fampyra in the European Union) to increase walking speed in a patient with multiple sclerosis. In November 2021, the German Federal Patent Court issued preliminary opinions indicatingrequested that the ~~claimed subject matter of the ‘548 patent lacked inventive step and the claimed subject matter of the ‘536 patent lacked novelty and inventive step. At an~~Award be confirmed without modification. The Company filed a brief in response on February 22, 2023. The District Court will likely schedule oral hearing in February 2022, the German court dismissed ratiopharm’s action against the ‘536 patent as inadmissible because of ongoing formality proceedings relating to the ‘536 patent in the European Patent Office. At an oral hearing in April 2022, the German court dismissed ratiopharm’s action against the ‘548 patent as inadmissible because of ongoing formality proceedings relating to the ‘548 patent in the European Patent Office.~~Ratiopharm has appealed the decision~~argument on the ~~‘536 patent but not the~~petition and render its decision on the ‘548 patent, and could refile the nullity actions. Ratiopharm has initiated a generic launch in Germany, notwithstanding the dismissals of the nullity actions. On January 11, 2022, STADA Arzneimittel also filed a nullity action against the ‘536 patent, and on July 27, 2022, Teva GmbH also filed a nullity action against the ‘548 patent, both in the same court as the ratiopharm nullity actions. We are working with Biogen to vigorously defend these actions and enforce our patent rights.sometime thereafter.

~~Item 1 of Part II of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 includes prior updates to the legal proceeding described above.~~

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, as updated in our Quarterly Reports subsequently filed during the current fiscal year, including this report, all of which could materially affect our business, financial condition and/or operating results. There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022. These risks are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating ~~results.~~

Following is the restated text of certain risk factors, as well as additional risk factors, to report changes since our publication of risk factors in our 2021 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

~~We received a notice from Nasdaq that we are not in compliance with Nasdaq’s minimum bid price listing rule.~~

On June 22, 2022, we received a deficiency letter (the “Notice”) from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market, LLC (“Nasdaq”) notifying us that, for the last 30 consecutive business days, the bid price for our common stock had closed below $1.00 per share, which is the minimum closing price required to maintain continued listing on the Nasdaq Global Select Market under Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid

Requirement”). The Notice has no immediate effect on the listing of our common stock. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days to regain compliance with the Minimum Bid Requirement. To regain compliance with the Minimum Bid Requirement, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days during this 180-day period, unless the Staff exercises its discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H). Our compliance period will expire on December 19, 2022. We are currently evaluating our alternatives to resolve this listing deficiency, such as, subject to approval of our stockholders and Board of Directors, implementing a reverse stock split. However, there can be no assurance that a reverse stock split would be approved or would result in a sustained higher stock price that would allow us to meet the Nasdaq stock price listing requirements, and the announcement and implementation of a reverse stock split could negatively affect the price of our common stock. In the event that we do not regain compliance within the Minimum Bid Requirement within the 180-day period and we receive notice from the Staff that our common stock is being delisted, Nasdaq rules permit us to appeal any such delisting determination by the Staff to a Hearings Panel (the “Panel”). We expect that our stock would remain listed pending the Panel’s decision. However, there can be no assurance that if we appeal the delisting determination to the Panel, such appeal would be successful, or that we will be able to regain compliance with the Minimum Bid Requirement or maintain compliance with the other Nasdaq listing requirements.

A delisting of our common stock from the Nasdaq Global Select Market would materially and adversely affect a holder’s ability to dispose of, or to obtain accurate quotations as to the market value of, our common stock. Furthermore, our common stock could become subject to the SEC’s “penny stock” regulations. Under such regulations, broker-dealers are required to, among other things, comply with disclosure and special suitability determinations prior to the sale of shares of common stock. If our common stock becomes subject to these regulations, the market price of our common stock and the liquidity thereof would be materially and adversely affected.

In addition, if our common stock is no longer listed on the Nasdaq Global Select Market, even if they could be listed on the Nasdaq Capital Market, this occurrence would give holders of our outstanding convertible senior secured notes due 2024 the right to require us to repurchase those notes for 100% of the principal amount thereof, plus any accrued and unpaid interest, and result in an increaseresults in the ~~conversion rates of such notes.~~future.

Lastly, a delisting from the Nasdaq Global Select Market could greatly impair our ability to raise additional necessary capital through equity or debt financing, or use shares of common stock for business development or other corporate purposes.

Our ability to use net operating loss carry forwards to reduce future tax payments is substantially limited because under the Internal Revenue Code of 1986 we are deemed to have experienced a change in ownership.

In general, under the Internal Revenue Code of 1986, as amended (the “Code”), a corporation is subject to limitations on its ability to utilize net operating losses, or NOLs, to offset future taxable income. As of June 30, 2022, we had approximately $283.9 million of U.S. Federal NOL carryforwards, including approximately $162.0 million for the Acorda tax return filing group and approximately $121.6 million that were incurred by our Biotie subsidiary. Generally, the ability to use NOL carryforwards depends on our ability to generate taxable income and is subject to an annual limitation of 80% of taxable income. Our ability to utilize the Acorda NOL's has become subject to an additional substantial limitation because we are deemed to have experienced a change in ownership under Section 382 of the Code. This deemed ownership change was based on cumulative changes in our ownership over three years, including most recently our issuance of shares of common stock in connection with the June 1, 2022 interest payment on our convertible senior secured notes due 2024. As a result of this deemed ownership change, Section 382 imposes a substantial annual limitation on the amount of post-ownership change taxable income we may offset with pre-ownership change Acorda NOL's. Accordingly, in the quarter ended June 30, 2022, we recorded a gross reserve of approximately $76 million against the value we assign to our Acorda NOL asset and a corresponding valuation allowance against our deferred tax asset of ~~approximately $27.4 million~~33, resulting in a reduction of the Company’s deferred tax assets with no impact to cash. The Section 382 limitation on our ability to use these NOLs could have a material adverse effect on our future operating results and financial condition if and to the extent we generate taxable income that otherwise could be offset by the NOLs.

Our ability to use the Biotie NOL carryforwards will depend on the ability of that specific subsidiary to generate taxable income, and because we do not expect any taxable income from that subsidiary we have not assigned any value to these NOLs for several years.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


2 Blue Hill Plaza, 3rd Floor, Pearl River, New York		10965
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock $0.001 par value per share	ACOR	Nasdaq Global Select Market


Class		Outstanding at ~~August 5, 2022~~May 9, 2023
Common Stock, $0.001 par value per share		~~24,277,683~~24,337,696 shares


			Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements		1
	Consolidated Balance Sheets as of ~~June 30, 2022~~March 31, 2023 (unaudited) and December 31, ~~2021~~2022		1
	Consolidated Statements of Operations (unaudited) for the ~~Three- and Six-month~~Three-month Periods Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~		2
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the ~~Three- and Six-month~~Three-month Periods Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 202~~1		3
	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the ~~Three- and Six-month~~Three-month Periods Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 202~~1		4
	Consolidated Statements of Cash Flows (unaudited) for the ~~Six-month~~Three-month Periods Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 202~~1		65
	Notes to Consolidated Financial Statements (unaudited)		76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2522
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4031
Item 4.	Controls and Procedures		4031
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings		4133
Item 1A.	Risk Factors		4133
Item 6.	Exhibits	34	43
Signatures		35	44


(In thousands)
Restricted Stock and Performance Stock Units	Number of Shares
Nonvested at January 1, ~~2022~~2023		~~116~~—
Granted		0—
Vested		~~(35~~—	)
Forfeited		(6—	)
Nonvested at ~~June 30, 2022~~March 31, 2023		75—


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

	Common stock
(In thousands)	Number of shares		Par value		Treasury stock			Additional paid-in capital		Accumulated deficit			Accumulated other comprehensive (loss) income			Total stockholders equity
Balance at December 31, 2021		13,250	$	13	$	(638	)	$	1,023,136	$	(870,357	)	$	(1,017	)	$	151,137
Compensation expense for issuance of stock options to employees		—		—		—			181		—			—			181
Compensation expense for issuance of restricted stock to employees		35		—		—			304		—			—			304
Other comprehensive income, net of tax		—		—		—			—		—			449			449
Net loss		—		—		—			—		(24,522	)		—			(24,522	)
Balance at March 31, 2022		13,285	$	13	$	(638	)	$	1,023,621		(894,879	)	$	(568	)	$	127,549
Compensation expense for issuance of stock options to employees		—		—		—			471		—			—			471
Interest payment for convertible notes		10,992		11		—			5,252		—			—			5,263
Other comprehensive income, net of tax		—		—		—			—		—			1,306			1,306
Net loss		—		—		—			—		(46,682	)		—			(46,682	)
Balance at June 30, 2022		24,277	$	24	$	(638	)	$	1,029,344	$	(941,561	)	$	738		$	87,907


	For the three-month period ended June 30,				For the six-month period ended June 30,				For the Three-month period ended March 31,
(In thousands)	2022		2021		2022		2021		2023		2022
Research and development expense	$	25	$	208	$	52	$	374	$	1	$	27
Selling, general and administrative expense		446		737		903		1,271		70		457
Cost of Sales		—		9		1		16		—		1
Total	$	471	$	954	$	956	$	1,661	$	71	$	485

(In thousands)
2022 (excluding the three months ended June 30, 2022)	$	590
2023		1,546
2024		1,588
2025		1,633
2026		1,678
Later years		539
Total lease payments		7,574
Less: Imputed interest		(1,332	)
Present value of lease liabilities	$	6,242

(In thousands)	Restructuring Costs
Restructuring Liability as of December 31, 2021	$	1,851
Q1 Restructuring Costs		226
Q1 Restructuring Payments		(1,700	)
Restructuring Liability as of March 31, 2022	$	377
Q2 Restructuring Costs		25
Q2 Restructuring Payments		(145	)
Restructuring Liability as of June 30, 2022	$	257

(In thousands)	June 30, 2022
Liability component:
Principal	$	207,000
Less: debt discount and debt issuance costs, net		(48,326	)
Net carrying amount	$	158,674
Equity component	$	18,257
Derivative liability-conversion Option	$	—


	Acorda Therapeutics, Inc.

	By:	/s/ Ron Cohen
Date: ~~August 9, 2022~~May 11, 2023		Ron Cohen, M.D. President, Chief Executive Officer and Director (Principal Executive Officer)

	By:	/s/ Michael A. Gesser
Date: ~~August 9, 2022~~May 11, 2023		Michael A. Gesser Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)