UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

__________________

SCHEDULE 14A
(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.      )

__________________

Check the appropriate box:

Vanda Pharmaceuticals Inc.
(Name of Registrant as Specified in Its Charter)

______________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

Vanda Pharmaceuticals Inc.
2200 Pennsylvania Avenue NW, Suite 300E
Washington, D.C. 20037

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 17, 2024

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders (the “Annual Meeting”) of Vanda Pharmaceuticals Inc., a Delaware corporation (the “Company”). The Annual Meeting will be held on May 17, 2024, at 9:00 a.m. Eastern Time in a virtual meeting format only via webcast on the Internet. You will be able to attend and participate in the virtual Annual Meeting online by visiting the meeting website at www.virtualshareholdermeeting.com/VNDA2024 and entering your 16-digit control number included on your proxy card. We are committed to ensuring, to the extent possible, that stockholders will be afforded the ability to participate at the virtual meeting like they would at an in-person meeting. Additional details on how to participate in the Annual Meeting can be found in the Questions and Answers section below. The Annual Meeting is being held for the following purposes:

1.      To elect Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos as Class III directors until the 2027 annual meeting of stockholders;

2.      To ratify the selection, by the Audit Committee of the Company’s Board of Directors of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2024;

3.      To approve, on an advisory basis, the Company’s named executive officer compensation;

4.      To approve an amendment to the Company’s Amended and Restated 2016 Equity Incentive Plan, as amended (the “2016 Plan”), to increase the aggregate number of shares authorized for issuance under the 2016 Plan; and

5.      To conduct any other business properly brought before the Annual Meeting or any adjournments or postponements thereof.

The record date for the Annual Meeting is April 22, 2024. Only stockholders of record at the close of business on that date, or their duly designated proxies, may vote at the Annual Meeting or any adjournment thereof. A complete list of such stockholders will be available for examination at our offices in Washington, D.C. during normal business hours for a period of ten days prior to the date of the Annual Meeting. On or about April 29, 2024, we will begin mailing to our stockholders entitled to vote at the Annual Meeting our Proxy Statement, proxy card, Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as well as instructions on how to vote via proxy by mail, telephone, or over the Internet.

Your vote is important. Whether or not you plan to attend the virtual Annual Meeting webcast, please vote by telephone or over the Internet, or by completing, signing, dating and returning your proxy card or voting instruction form so that your shares will be represented at the Annual Meeting. Instructions for voting are described in the Company’s Proxy Statement for the Annual Meeting or proxy card.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 17, 2024:

The Company’s Proxy Statement, proxy card and Annual Report on Form 10-K for the fiscal year ended December 31, 2023 are available free of charge at www.proxyvote.com. Information on this website, other than this Proxy Statement, is not a part of this Proxy Statement. You may also obtain these materials at the website of the Securities and Exchange Commission at www.sec.gov.

TABLE OF CONTENTS

2024 PROXY STATEMENT — SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement and does not contain all of the information you should consider. You should read the entire Proxy Statement carefully before voting.

We are making this Proxy Statement, the proxy card and our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”) available to stockholders at www.proxyvote.com. On or about April 29, 2024, we will begin mailing to certain of our stockholders entitled to vote at the Annual Meeting our Proxy Statement, proxy card and Annual Report, as well as instructions on how to vote via proxy by mail, telephone, or over the Internet.

Vanda Pharmaceuticals Inc.
2200 Pennsylvania Avenue NW, Suite 300E
Washington, D.C. 20037

PROXY STATEMENT
FOR THE 2024 ANNUAL MEETING OF STOCKHOLDERS
May 17, 2024

This proxy statement (the “Proxy Statement”) is furnished in connection with the solicitation of proxies to be voted at the 2024 Annual Meeting of Stockholders (the “Annual Meeting”) of Vanda Pharmaceuticals Inc. (sometimes referred to as “we,” “us,” “our,” the “Company” or “Vanda”), which will be held on May 17, 2024, at 9:00 a.m. Eastern Time in a virtual meeting format via webcast, with no physical in-person meeting.

QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING

Why am I receiving this Proxy Statement and proxy card?

You have received these proxy materials because you owned shares of Vanda common stock as of April 22, 2024, the record date for the Annual Meeting (the “Record Date”), and our Board of Directors (the “Board”) is soliciting your proxy to vote at the Annual Meeting. This Proxy Statement describes matters on which we would like you to vote at the Annual Meeting so that you can make an informed decision.

Why is the Annual Meeting being held as a virtual, online meeting?

We designed the virtual Annual Meeting to provide the same rights and opportunities to participate as stockholders would have at an in-person meeting, including the right to vote and ask questions through the virtual meeting platform. We hold our Annual Meeting virtually to enable all of our stockholders to join and participate in the Annual Meeting regardless of their physical location.

How may I vote at the Annual Meeting?

You are invited to attend the Annual Meeting to vote on the proposals described in this Proxy Statement. However, you do not need to attend the meeting to vote your shares. Instead, you may simply follow the instructions below to submit your proxy via telephone or on the Internet. If you received a printed set of materials, you may also vote by mail by completing, signing, dating and returning the proxy card.

To access the virtual Annual Meeting, you will be asked to provide your 16-digit control number. Instructions on how to attend and participate via the Internet are posted at www.virtualshareholdermeeting.com/VNDA2024. If you hold shares beneficially in “street name” (i.e., through a bank, broker or other nominee), you may only vote at the virtual Annual Meeting if you obtain a legal proxy and control number from the broker, trustee or nominee that holds your shares giving you the right to vote the shares.

When you vote, regardless of the method used, you appoint Dr. Mihael H. Polymeropoulos, M.D. and Mr. Timothy Williams as your representatives (or proxyholders) at the Annual Meeting. They will vote your shares at the Annual Meeting as you have instructed them or, if an issue that is not on the proxy card comes up for vote, in accordance with their best judgment. This way, your shares will be voted whether or not you attend the Annual Meeting.

Who is entitled to vote at the Annual Meeting?

Stockholders of record at the close of business on the Record Date will be entitled to vote at the Annual Meeting. On the Record Date, there were 58,197,773 shares of the Company’s common stock outstanding. All of these outstanding shares are entitled to vote at the Annual Meeting (one vote per share of common stock) in connection with the matters set forth in this Proxy Statement.

If you are a beneficial owner of your shares, you have the right to direct your nominee on how to vote the shares held in your account, and your nominee has enclosed or provided voting instructions for you to use in directing it on how to vote your shares. However, the organization that holds your shares is considered the stockholder of record for

purposes of voting at the meeting. Because you are not the stockholder of record, you may not attend or vote your shares at the meeting unless you (i) request and obtain a legal proxy giving you the right to vote the shares at the meeting from the organization that holds your shares and (ii) register to attend the Annual Meeting.

A list of stockholders entitled to vote at the meeting will be available for ten days prior to the date of the Annual Meeting at our principal place of business, 2200 Pennsylvania Avenue NW, Suite 300E, Washington, D.C. 20037, between the hours of 9:00 a.m. and 5:00 p.m. local time.

How do I vote?

If, on the Record Date, your shares were registered directly in your name with our transfer agent, Equiniti Trust Company, LLC, then you are a stockholder of record. Stockholders of record may vote by using the Internet, by telephone or by mail as described below. Stockholders also may attend the virtual meeting webcast and vote via the virtual meeting interface. If you hold shares in “street name” (i.e., through a bank, broker or other nominee), please refer to your proxy card or other information forwarded by your bank, broker or other nominee to see which voting options are available to you.

•        You may vote by using the Internet.    The address of the website for Internet voting is www.proxyvote.com. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on May 16, 2024. Easy-to-follow instructions allow you to vote your shares and confirm that your instructions have been properly recorded.

•        You may vote by telephone.    The toll-free telephone number is noted on your proxy card. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on May 16, 2024. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded.

•        You may vote by mail.    If you received a proxy card by mail and choose to vote by mail, simply mark your proxy card, date and sign it, and return it in the postage-paid envelope.

The method you use to vote will not limit your right to vote at the Annual Meeting if you decide to attend the virtual meeting webcast. Instructions for voting during the virtual meeting will be available on the meeting website. If you hold your shares in street name, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote during the virtual meeting.

Can I change my vote after submitting my proxy?

Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of three ways:

•        You may submit a subsequent proxy by using the Internet, by telephone or by mail with a later date;

•        You may deliver a written notice that you are revoking your proxy to the Secretary of the Company at 2200 Pennsylvania Avenue NW, Suite 300E, Washington, D.C. 20037; or

•        You may attend the virtual Annual Meeting webcast and vote your shares electronically. Simply attending the virtual Annual Meeting webcast without affirmatively voting will not, by itself, revoke your proxy.

If you are a beneficial owner of your shares, you must contact the bank, broker or other nominee holding your shares in street name and follow their instructions for changing your vote.

We urge you to vote your shares by completing, signing, dating and returning the enclosed proxy card, or following the instructions on the enclosed proxy card to submit your proxy via telephone or on the Internet. Changing your vote prior to the Annual Meeting is most easily accomplished if you submit your proxy via telephone or on the Internet, as your vote may then be changed by simply submitting a new vote via telephone or on the Internet.

How many votes do you need to hold the Annual Meeting?

A quorum of stockholders is necessary to conduct business at the Annual Meeting. Pursuant to our Amended and Restated Bylaws (the “Bylaws”), a quorum will be present if holders of a majority of the voting power of outstanding shares of the Company entitled to vote generally in the election of directors are represented in person (virtually) or by proxy at the Annual Meeting. On the Record Date, there were 58,197,773 shares of common stock outstanding and entitled to vote. Thus, 29,098,887 shares must be represented by stockholders present at the Annual Meeting or represented by proxy to have a quorum.

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you attend the virtual Annual Meeting webcast and vote on the meeting website. Abstentions and broker non-votes will be counted for the purpose of determining whether a quorum is present for the transaction of business. If a quorum is not present, the holders of a majority of the votes present at the Annual Meeting may adjourn the Annual Meeting to another date.

What proposals will be voted on at the Annual Meeting?

Majority of Votes Cast means that a proposal that receives an affirmative majority of the votes cast will be approved. Abstentions and broker non-votes (as discussed below) will not be counted “FOR” or “AGAINST” the proposal and will have no effect on the proposal.

What is Broker Discretionary Voting and a Broker Non-Vote?

Broker Discretionary Voting occurs when a broker, bank or other nominee (generally, a “broker”) holding shares on behalf of a beneficial owner does not receive voting instructions from the beneficial owner and votes those shares in its discretion on any proposal on which it is permitted to vote. At the Annual Meeting, the only proposal for which Broker Discretionary Voting is permitted is Proposal 2, the ratification of the Company’s independent registered public accounting firm, which is considered a “routine” matter. With respect to “non-routine” matters, the broker is not permitted to vote shares for a beneficial owner without timely received voting instructions and a “broker non-vote” occurs as to such matters. Broker non-votes will not have any impact on voting results but will be counted for quorum purposes. We strongly encourage you to submit your voting instructions to your broker promptly to ensure your shares are voted in accordance with your instructions at the Annual Meeting.

Could other matters be decided at the Annual Meeting?

Vanda does not know of any other matters that may be presented for action at the Annual Meeting. Should any other business come before the Annual Meeting, the persons named on the proxy card will have discretionary authority to vote the shares represented by proxies in accordance with their best judgment. If you hold shares in street name as described above, they will not be able to vote your shares on any other business that comes before the Annual Meeting unless they receive instructions from you with respect to such other business.

What happens if a director nominee is unable to stand for election?

If a nominee is unable to stand for election, our Board may either:

•        reduce the number of directors that serve on the Board; or

•        designate a substitute nominee.

If our Board designates a substitute nominee, shares represented by proxies voted for the nominee who is unable to stand for election will be voted for the substitute nominee.

What happens if I submit my proxy but do not provide voting instructions?

If you submit a proxy via telephone, the Internet or return a signed and dated proxy card without indicating instructions with respect to specific proposals, your shares will be voted as follows:

•        Proposal 1:    “FOR” the election of Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos to serve as Class III directors until the 2027 annual meeting of stockholders.

•        Proposal 2:    “FOR” the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2024.

•        Proposal 3:    “FOR” the approval, in an advisory manner, of the compensation of our named executive officers as set forth in this Proxy Statement.

•        Proposal 4:    “FOR” the approval of an amendment to the Amended and Restated 2016 Equity Incentive Plan to increase the aggregate number of shares authorized for issuance thereunder.

If any other matter is properly presented at the Annual Meeting, the proxyholders for shares voted on the proxy card (i.e., one of the individuals named as proxies on your proxy card) will vote your shares using their best judgment.

Who is paying for this proxy solicitation?

The accompanying proxy is being solicited on behalf of the Board. We have engaged Innisfree M&A Incorporated (“Innisfree”) to assist in our proxy solicitations. We will pay Innisfree an amount not to exceed $75,000 in fees for its proxy solicitation services and reimburse it for its reasonable out-of-pocket expenses. In addition to this solicitation, directors and employees of the Company may solicit proxies in person, by telephone or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We will pay for the entire cost of soliciting proxies. We may reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

What happens if the Annual Meeting is postponed or adjourned?

Unless the polls have closed or you have revoked your proxy, your proxy will still be in effect and may be voted once the Annual Meeting is reconvened. However, you will still be able to change or revoke your proxy with respect to any proposal until the polls have closed for voting on such proposal.

How can I find out the results of the voting at the Annual Meeting?

Preliminary voting results are expected to be announced at the Annual Meeting. Final voting results will be reported on a Current Report on Form 8-K filed with the SEC no later than the fourth business day after the Annual Meeting.

How can I find Vanda’s proxy materials and Annual Report on the Internet?

This Proxy Statement and the Annual Report are available at our corporate website at www.vandapharma.com. You also can obtain copies without charge at the SEC’s website at www.sec.gov. Additionally, in accordance with SEC rules, you may access these materials at www.proxyvote.com, which does not have “cookies” that identify visitors to the site.

How do I obtain a separate set of Vanda’s proxy materials if I share an address with other stockholders?

In some cases, stockholders holding their shares in a brokerage or bank account who share the same surname and address receive only one copy of the proxy materials. This practice, called “householding,” is designed to reduce duplicate mailings and save printing and postage costs as well as natural resources. If you would like to obtain a separate copy of the Annual Report, this Proxy Statement or the proxy card mailed to you or receive separate copies of future mailings, please submit your request to the address or phone number that appears on your Notice or proxy card. We will deliver such additional copies promptly upon receipt of such request.

In other cases, stockholders receiving multiple copies of proxy materials at the same address may wish to receive only one copy. If you would like to receive only one copy, please submit your request to the address or phone number that appears on your proxy card.

Can I receive future proxy materials and annual reports electronically?

Yes. This Proxy Statement, the proxy card and the Annual Report can be found in the Investors section of our website located at www.vandapharma.com. Instead of receiving paper copies in the mail, stockholders can elect to receive an email that provides a link to our future annual reports and proxy materials on the Internet. Opting to receive your proxy materials electronically will save us the cost of producing and mailing documents to your home or business, will reduce the environmental impact of our annual meetings and will give you an automatic link to the proxy voting site.

May I propose actions for consideration at next year’s annual meeting or nominate individuals to serve as directors?

Yes. The following requirements apply to stockholder proposals, including director nominations, for the 2025 annual meeting of stockholders:

Requirements for Stockholder Proposals to be Considered for Inclusion in Vanda’s Proxy Materials

Stockholders interested in submitting a proposal (other than the nomination of directors) for inclusion in the proxy materials to be distributed by us for the 2025 annual meeting of stockholders may do so by following the procedures prescribed in Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). To be eligible for inclusion in Vanda’s proxy materials, stockholder proposals must be received at our principal executive offices no later than the close of business on December 30, 2024, which is the 120th day prior to the first anniversary of the date that we released this Proxy Statement to our stockholders for the Annual Meeting. To be included in our proxy materials, your proposal also must comply with the Bylaws and Rule 14a-8 promulgated under the Exchange Act regarding the inclusion of stockholder proposals in company-sponsored proxy materials. If we change the date of the 2025 annual meeting of stockholders by more than 30 days from the anniversary of this year’s Annual Meeting, stockholder proposals must be received a reasonable time before we begin to print and mail our proxy materials for the 2025 annual meeting of stockholders. Proposals should be sent to Vanda Pharmaceuticals Inc., 2200 Pennsylvania Avenue NW, Suite 300E, Washington, D.C. 20037, Attn: Secretary.

Requirements for Stockholder Nomination of Director Candidates and Stockholder Proposals Not Intended for Inclusion in Vanda’s Proxy Materials

Stockholders who wish to nominate persons for election to the Board at our 2025 annual meeting of stockholders or who wish to present a proposal at our 2025 annual meeting of stockholders, but who do not intend for such proposal to be included in the Company’s proxy materials for such meeting, must deliver written notice of the nomination or proposal to the Company’s Secretary at our principal executive offices

no earlier than February 13, 2025, which is the 75th day prior to the first anniversary of the date we first mailed this Proxy Statement to our stockholders for the Annual Meeting, and no later than the close of business on March 15, 2025, which is the 45th day prior to the first anniversary of the date we first mailed this Proxy Statement to our stockholders for the Annual Meeting. However, if we change the date of our 2025 annual meeting of stockholders by more than 30 days from the anniversary of this year’s Annual Meeting, such nominations and proposals must be received no later than the close of business on the later of (a) the 90th day prior to our 2025 annual meeting of stockholders and (b) the 10th day following the day we first publicly announce the date of our 2025 annual meeting of stockholders. If the stockholder does not also satisfy the requirements of Rule 14a-4 promulgated under the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the 2025 annual meeting of stockholders. The stockholder’s written notice must include certain information concerning the stockholder and each nominee and proposal, as specified in the Bylaws. Such nominations or proposals should be sent to Vanda Pharmaceuticals Inc., 2200 Pennsylvania Avenue NW, Suite 300E, Washington, D.C. 20037, Attn: Secretary.

In addition, stockholders who intend to solicit proxies in support of director nominees other than those nominees nominated by the Company must also comply with the additional requirements of Rule 14a-19 under the Exchange Act.

Copy of Bylaws

You may request a copy of the Bylaws at no charge by writing to Vanda’s Secretary at 2200 Pennsylvania Avenue NW, Suite 300E, Washington, D.C. 20037. A current copy of the Bylaws also is available at our corporate website at www.vandapharma.com. To access the Bylaws from the main page of our website, click on “About” at the top of the page, then click on “Amended and Restated Bylaws” under “Governance Documents” in the “Corporate Governance” section.

What if I have difficulty accessing the virtual meeting?

If you encounter any difficulties accessing the virtual meeting webcast during the check-in or meeting time, please call the technical support number (800) 586-1548 (US) or (303) 562-9288 (Outside the US). This number will also be posted on the 2024 Annual Meeting log-in page. Technical support will be available beginning at 8:45 a.m. Eastern Time on May 17, 2024 and will remain available until the meeting has ended.

Whom should I call if I have any questions?

If you have any questions, or require any assistance with voting your shares, please contact Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New York, NY 10022. Stockholders may call toll free: (877) 750-0870. Banks and Brokers may call collect: (212) 750-5833.

Important Notice Regarding the Availability of Proxy Materials
for the Meeting to be Held on Friday, May 17, 2024:

This Proxy Statement, the proxy card and the Annual Report are available online at www.proxyvote.com.

PROPOSAL 1
ELECTION OF DIRECTORS

Under our Amended and Restated Certificate of Incorporation, our Board is divided into three classes as nearly equal in size as possible. The members of each class are elected to serve a three-year term with the term of office of each of the three classes ending in successive years. Pursuant to the Bylaws, the Board has fixed the current number of directors at six. Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos are the two Class III directors whose terms expire at the Annual Meeting. Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos have been nominated for election by our Board to serve until the 2027 annual meeting of stockholders. If elected, each director will hold office until his or her successor is elected (or until his or her earlier death, resignation or removal).

Directors are elected by a majority of the votes cast at the Annual Meeting. Pursuant to the Bylaws, a majority of votes cast means that the number of votes cast “FOR” a director’s election exceeds 50% of the votes cast with respect to that director’s election. For this purpose, votes cast shall exclude abstentions and broker non-votes. Because the election of directors is not a matter on which a bank, broker or other nominee is generally empowered to vote, broker non-votes are expected to exist in connection with this matter.

Shares represented by signed proxy cards will be voted on Proposal 1 “FOR” the election of Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos to the Board at the Annual Meeting, unless otherwise marked on the proxy card. If any Vanda director nominee is unable to serve or for good cause will not serve, shares represented by proxy will be voted for the election of a substitute nominee designated by our current Board, unless the Board chooses to reduce its size. Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos, Vanda’s director nominees, have agreed to serve as directors of the Board if elected. We have no reason to believe that Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos will be unable to serve if elected.

Majority Vote Resignation Policy

Pursuant to our Amended and Restated Corporate Governance Guidelines, Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos have each tendered an irrevocable, conditional resignation that will be effective only upon both (i) the failure to receive the required vote at the Annual Meeting for reelection and (ii) our Board’s acceptance of such resignation. If either Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos fails to receive a majority of the vote cast for reelection, the Nominating/Corporate Governance Committee of our Board will act on an expedited basis to determine whether to accept such director’s resignation, and it will submit its recommendation for prompt consideration by our Board. The Nominating/Corporate Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director’s resignation.

Nominees for Election as the Class III Directors at the Annual Meeting

This year’s nominees for election to the Board as our Class III directors are standing for election to serve for a term of three years expiring at the 2027 annual meeting of stockholders. The age of the nominees as of the Record Date is set forth below.

The following is additional information about the nominees as of the date of this Proxy Statement, including their business experience, public company director positions held currently or at any time during the last five years and the experiences, qualifications, attributes or skills that led the Nominating/Corporate Governance Committee and the Board to determine that the nominees should serve as two of our directors.

Mihael H. Polymeropoulos, M.D. co-founded Vanda and has served as President, Chief Executive Officer and Chairman of the Board since June 2021, and as President, Chief Executive Officer and Director from May 2003 until June 2021. Prior to founding Vanda, Dr. Polymeropoulos was Vice President and Head of the Pharmacogenetics Department at Novartis AG (“Novartis”) from 1998 to 2003. Prior to his tenure at Novartis, he served as Chief of the Gene Mapping Section, Laboratory of Genetic Disease Research, National Human Genome Research Institute, from 1992 to 1998. Dr. Polymeropoulos is the co-founder of the Integrated Molecular Analysis of Genome Expression

Consortium. Dr. Polymeropoulos holds a degree in Medicine from the University of Patras. We believe that Dr. Polymeropoulos’ qualifications to sit on the Board include his executive experience at Novartis, his expertise in the fields of psychiatry and pharmacogenetics, his extensive knowledge of central nervous system disorders and his long history with the Company.

Other public directorships held by Dr. Polymeropoulos within the past five years: None.

Phaedra S. Chrousos has served on the Board since October 2019. Ms. Chrousos has served as the Chief Strategy Officer of the Libra Group, a diverse, international business group that is active in 60 countries and focused on six business areas: aerospace, energy, hospitality, real estate, shipping and diversified investments, since November 2018, and was the Libra Group’s Chief Innovation Officer from October 2016 to October 2018. Prior to joining the Libra Group, Ms. Chrousos served as a political appointee for the Obama Administration from June 2014 to July 2016 in various roles, including as an Associate Administrator for the General Services Administration and Founding Commissioner of the Technology Transformation Service at the General Services Administration. Prior to entering public service, Ms. Chrousos co-founded HealthLeap, a health tech company that reimagined the way doctors and patients communicate. HealthLeap was acquired by Vitals.com 10 months after its launch. Ms. Chrousos served as HealthLeap’s President from September 2009 to December 2010 and as Vitals.com’s Vice President responsible for HealthLeap from December 2010 to November 2011. She also has several years of consulting experience with The Boston Consulting Group and The World Bank. Ms. Chrousos sits on several non-profit boards, including that of a maternal mental health foundation and The Beeck Center for Social Impact and Innovation at Georgetown University. Ms. Chrousos also sits on the advisory boards of several ventures and funds that sit at the intersection between technology and the government. Ms. Chrousos was twice named one of the Federal Government’s ‘50 Women in Technology’ by FedScoop and one of Greece’s ‘40 under 40’ by Fortune Magazine. Ms. Chrousos holds a B.A. from Georgetown University, an M.S.C. from The London School of Economics and Political Science, and an M.B.A. from Columbia Business School. We believe that Ms. Chrousos’ qualifications to sit on the Board include her consumer healthcare experience and entrepreneurship, extensive executive experience in a variety of industries and her leadership experience within the federal government.

Other public directorships held by Ms. Chrousos within the past five years: None.

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF MIHAEL H. POLYMEROPOULOS, M.D. AND PHAEDRA S. CHROUSOS

Continuing Directors Not Standing for Election

Certain information about those directors whose terms do not expire at the Annual Meeting is furnished below, including their business experience, public company director positions held currently or at any time during the last five years and the experiences, qualifications, attributes or skills that led the Nominating/Corporate Governance Committee and the Board to determine that the directors should serve as one of our directors. The age of each director as of the Record Date is set forth below.

Class I Directors (Terms Expire in 2025)

Stephen Ray Mitchell, M.D. has served on the Board since February 2020. Dr. Mitchell currently serves as the Joseph Butenas Professor and Dean for Medical Education at Georgetown University School of Medicine, a position he has held since August 2002. Prior to that, Dr. Mitchell served as Associate Dean for Clinical Curriculum at Georgetown University School of Medicine from 1998 to 2000 and as Senior Associate Dean for Academic Affairs from 2000 until 2002. Previously, Dr. Mitchell served as Program Director for Internal Medicine at Georgetown University School of Medicine from 1992 until 1997, and as Founding Program Director Med-Peds at Georgetown

from 1995 until 1999. He served as a member of the Liaison Committee for Medical Education (the “LCME”), the national accrediting body for Medical Schools in the United States and Canada, between 2013 and 2019. Since 2018, he has held the role of Chair of the LCME, where he chaired the Standards subcommittee, and now serves as a member of the Governing Council of that body. Dr. Mitchell is a veteran of the United States Air Force and has served as author and invited external reviewer on Studies by the Institute of Medicine on Chronic Multi-symptoms illness in Gulf War veterans. Dr. Mitchell received his B.A. in Psychology and his M.D. from the University of North Carolina at Chapel Hill, and his Global Executive M.B.A. from The McDonough School of Business at Georgetown University. We believe that Dr. Mitchell’s qualifications to sit on the Board include his extensive experience in the medical field and leadership positions at leading medical institutions.

Other public directorships held by Dr. Mitchell within the past five years: None.

Tage Honoré, Ph.D., D.Sc., has served on the Board since March 2023. Dr. Honoré currently serves as President of Aestus Partners, LLC, a business advisory firm focused on the life sciences sector, where he has served since founding the firm in November 2004. Dr. Honoré is also currently serving as the Head of Pharmaceutical Development at Avicenna Biosciences, Inc., a private biotechnology company, where he has served since 2020. Previously, Dr. Honoré served in various executive positions and advisory roles with a number of public and private pharmaceutical and biotechnology companies, including Alterna Therapeutics Inc., Mitochondria in Motion, Inc., MAA Laboratories, Inc., Dep-Xplora Aps, Zthera LLC, Aestus Therapeutics Inc., Purdue Pharma L.P., Novartis AG and Novo Nordisk A/S. Dr. Honoré also serves on the advisory boards of several pharmaceutical and life sciences companies and organizations including Neuropathix, Inc., Evrys Bio, LLC and the Charcot-Marie-Tooth Association. Dr. Honoré founded and was the President and CEO of Aestus Therapeutics Inc. from 2006 to 2015. Aestus Therapeutics Inc. filed a motion for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court, District of New Jersey (Trenton) on November 17, 2015. The trustee issued a final report in February 2019. Dr. Honoré received his Master of Science degree in Pharmaceutical Science, Doctor of Philosophy degree in Medicinal Chemistry and Doctor of Science degree in Neuropharmacology from the University of Copenhagen. We believe that Dr. Honoré’s qualifications to sit on the Board include his industry leadership experience and his well-established scientific expertise across a diverse range of therapeutic areas.

Other public directorships held by Dr. Honoré within the past five years: None.

Class II Directors (Terms Expire in 2026)

Richard W. Dugan has served on the Board since December 2005. Mr. Dugan served as a Partner with Ernst & Young, LLP from 1976 to September 2002, where he served in a variety of managing and senior partner positions, including Mid-Atlantic Area Senior Partner from 2001 to 2002, Mid-Atlantic Area Managing Partner from 1989 to 2001 and Pittsburgh Office Managing Partner from 1979 to 1989. Mr. Dugan retired from Ernst & Young, LLP in September 2002. Mr. Dugan previously served as a director of two publicly traded pharmaceutical companies, Middlebrook Pharmaceuticals, Inc. and Critical Therapeutics, Inc., and a privately owned pharmaceutical company, Xanthus Pharmaceuticals. Mr. Dugan holds a B.S.B.A. from Pennsylvania State University. We believe that Mr. Dugan’s qualifications to sit on the Board include his more than 25 years as a Partner with Ernst & Young, LLP, his long history with the Company, his status as a financial expert under The Sarbanes-Oxley Act of 2002 and his experience on other public company boards.

Other public directorships held by Mr. Dugan within the past five years: None.

Anne Sempowski Ward has served on the Board since October 2019. Ms. Ward currently serves as the Chief Executive Officer and Chair at CURiO Brands, a consumer goods company that manufactures and sells personal care and home fragrance products. Prior to CURiO Brands, Ms. Ward served as the Chief Executive Officer of The Thymes, LLC from April 2012 until January 2016 when it merged with DPM Fragrance to become CURiO Brands. In July 2008, Ms. Ward co-founded The FORWARD Group, a consulting firm focused on growth strategies for mid-sized companies and key executives, and served as its Chief Executive Officer until April 2012. Previously, from October 2007 until July 2010, Ms. Ward was with Johnson Publishing Company, serving as the President and Chief Operating Officer of its Ebony, Jet and Fashion Fair Cosmetics business units. Prior to that, Ms. Ward served as an Assistant Vice President for The Coca-Cola Company from September 2006 until September 2007 and held

various positions with Procter & Gamble between May 1994 and August 2006, most recently as Associate Marketing Director, Beauty. Ms. Ward currently also serves on the board of directors of SPS Commerce Inc. Ms. Ward holds a B.S. in Mechanical Engineering and Material Science from Duke University and an M.B.A. from Duke University’s Fuqua School of Business. We believe that Ms. Ward’s qualifications to sit on the Board include her executive experience with consumer goods companies and her extensive marketing and brand management for a number of companies across multiple sectors.

Other public directorships held by Ms. Ward within the past five years: Spectrum Brand Holdings, Inc. (until August 2021) and SPS Commerce Inc.

CORPORATE GOVERNANCE

Independence of the Board

As required under The Nasdaq Stock Market (“Nasdaq”) listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Consistent with these regulations, after review of all relevant transactions or relationships between each director, or any of her or his family members, and the Company, its senior management and its independent registered public accounting firm, the Board has determined that each of Phaedra S. Chrousos, Richard W. Dugan, Tage Honoré, Stephen Ray Mitchell, and Anne Sempowski Ward are independent directors within the meaning of applicable federal securities law and Nasdaq listing standards.

Information Regarding the Board and its Committees

As required under Nasdaq listing standards, our independent directors meet in regularly scheduled executive sessions at which none of our officers or other employees are present. Mr. Dugan, our Lead Independent Director, presides over these executive sessions.

The Board has an Audit Committee, a Compensation Committee and a Nominating/Corporate Governance Committee. The following table provides membership, as of December 31, 2023, and meeting information for each of the Board committees during 2023:

Below is a description of each committee of the Board. The Board has determined that each member of the Audit, Compensation and Nominating/Corporate Governance Committees meets the applicable rules and regulations regarding “independence” and that each such member is free of any relationship that would interfere with her or his individual exercise of independent judgment with regard to the Company.

Audit Committee

The Audit Committee of the Board oversees the quality and integrity of the Company’s financial statements and other financial information provided to the Company’s stockholders, oversees the retention, performance, qualifications and independence of the Company’s independent accountants, the effectiveness of the Company’s internal controls and disclosure controls, and the Company’s compliance with ethics policies and legal and regulatory requirements. For these purposes, the Audit Committee, among other duties and powers, (1) approves audit fees for and selects and reviews the performance of the Company’s independent accountants, (2) reviews reports prepared by management and attested by the Company’s independent accountants with respect to the financial statements contained therein, assessing the adequacy and effectiveness of the Company’s internal controls and procedures, prior to the inclusion of such reports in the Company’s periodic filings as required under the rules of the SEC, (3) reviews the Company’s annual and quarterly reports and associated consolidated financial statements, including any related earnings press releases, with management and the independent accountants prior to the first public release of the Company’s financial results for such year or quarter, (4) reviews with general counsel and external counsel, as appropriate, any legal matters that could have a significant impact on the Company’s financial statements, (5) oversees and periodically reviews the Company’s procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls and auditing matters and business conduct or ethics violations and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters or business conduct or ethics violations, and (6) oversees and periodically reviews the Company’s information and cyber security policies and the internal controls and procedures related to the security of, and risks related to, the Company’s information technology systems, and (7) furnishes the Audit Committee Report included in this Proxy Statement. Our Audit Committee

charter can be found in the Corporate Governance section of our corporate website at www.vandapharma.com. Three directors comprised the Audit Committee as of December 31, 2023: Mr. Dugan (the Chair of the Audit Committee), Ms. Chrousos and Ms. Ward. The Audit Committee met seven times during 2023.

The Board annually reviews the Nasdaq listing standards definition of independence for Audit Committee members and has determined that all members of our Audit Committee are independent (as independence is currently defined in applicable Nasdaq listing standards and Rule 10A-3 promulgated under the Exchange Act). The Board has also determined that Mr. Dugan is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K of the Securities Act.

Compensation Committee

The Compensation Committee of the Board reviews and approves the design of, provides oversight for the implementation of, assesses the effectiveness of, and administers our various equity compensation plans and programs, including the issuance of stock options and other stock-related awards, and makes recommendations to the Board regarding the Board’s remaining responsibilities relating to compensation. For these purposes, the Compensation Committee, among other duties and powers, (1) reviews and approves corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other Company executive officers, (2) reviews and approves the terms of employment agreements, severance arrangements, change in control agreements and severance protection plans, and other material agreements between the Company and its executive officers, (3) approves any material changes to the Company’s 401(k) plan, and (4) reviews, discusses with management and recommends to the Board for approval the Compensation Discussion and Analysis included in this Proxy Statement and furnishes the Compensation Committee Report included in this Proxy Statement. In accordance with Nasdaq listing standards and our Compensation Committee charter, our Board has granted our Compensation Committee the resources and authority that the Compensation Committee deems appropriate to discharge its responsibilities, including the authority to retain and obtain the advice of compensation consultants, experts, special counsel and other compensation advisers, the authority to determine the compensation and terms of retention for such advisers, and the responsibility to consider the independence of such advisors based on factors specified under applicable law and any additional factors the Compensation Committee deems relevant. Our Compensation Committee charter can be found in the Corporate Governance section of our website at www.vandapharma.com.

Two directors comprised the Compensation Committee of the Board as of December 31, 2023: Ms. Ward (the Chair of the Compensation Committee) and Mr. Dugan. The Compensation Committee met five times during 2023.

The Board has determined that all members of the Compensation Committee are independent (as independence is currently defined in the Nasdaq listing standards). In addition, each of our directors serving on our Compensation Committee satisfies the heightened independence standards for members of a compensation committee under Nasdaq listing standards and each member of this committee is a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act.

Certain of our corporate officers, including our Chief Executive Officer, Chief Financial Officer, General Counsel and Secretary, and Chief People Officer, often participate in the Compensation Committee’s meetings. None of them participate in the determination of their own respective compensation or the compensation of non-employee directors. However, Dr. Polymeropoulos does make recommendations to the Compensation Committee regarding the amount and form of the compensation of the other executive officers and key employees, and he often participates in the Compensation Committee’s deliberations about their compensation. No other executive officers participate in the determination of the amount or form of the compensation for our executive officers or directors.

The Compensation Committee has retained Willis Towers Watson, a national compensation consulting firm, since November 2006. In February 2024 Willis Towers Watson presented a new executive compensation assessment to the Compensation Committee. Willis Towers Watson provided the Compensation Committee with data about the compensation paid by our peer group of companies and other employers who compete with the Company for executives, updated the Compensation Committee on new developments regarding proxy advisory firms’ evaluation processes and market trends, and advised the Compensation Committee regarding matters related to its equity compensation program. Willis Towers Watson serves at the pleasure of the Compensation Committee rather than the Company, and the consultant’s fees are approved by the Compensation Committee. In 2023, our Compensation Committee evaluated and considered the independence of Willis Towers Watson pursuant to applicable SEC rules and Nasdaq listing standards and concluded that the work of Willis Towers Watson has not raised any conflict of interest.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee is or has ever been an officer or employee of the Company or has any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. No executive officer of the Company serves as a member of the board or compensation committee of any other entity that has one or more executive officers who served as a member of our Board or our Compensation Committee in 2023.

Nominating/Corporate Governance Committee

Our Nominating/Corporate Governance Committee identifies, oversees, evaluates and recommends nominees to our Board and committees of our Board, conducts searches for appropriate directors and evaluates the performance of our Board and of individual directors. Our Nominating/Corporate Governance Committee is also responsible for reviewing developments in corporate governance practices, evaluating the adequacy of our corporate governance practices, reporting and making recommendations to the Board concerning corporate governance matters and overseeing the Company’s progress on environmental, social and governance (“ESG”) initiatives and policies. The oversight of ESG initiatives was adopted by the Board in March 2020 in order to provide for an ESG governance framework and for greater oversight of stakeholder engagement to enhance and potentially redefine value around corporate sustainability and citizenship. Our initial efforts have included, but are not limited to, initiatives to promote human-relevant safety studies instead of wasteful animal testing in drug development, carbon footprint reduction initiatives with the Company’s salesforce, evaluation and tracking efforts of current employee composition and pay equity across the Company, and revisions to human capital policies and programs, such as acute knowledge-based trainings, unlimited paid time off and innovative paid parental leave.

Our Nominating/Corporate Governance Committee charter can be found in the Corporate Governance section of our corporate website at www.vandapharma.com. Two directors comprised the Nominating/Corporate Governance Committee as of December 31, 2023: Ms. Chrousos (the Chair of the Nominating/Corporate Governance Committee) and Dr. Mitchell. The Nominating/Corporate Governance Committee met three times during 2023.

The Nominating/Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, including being able to read and understand basic financial statements and having a general understanding of the Company’s industry. The Nominating/Corporate Governance Committee also considers other factors it deems appropriate given the then-current needs of the Board and the Company, including, but not limited to:

•        the candidate’s relevant expertise and experience upon which to offer advice and guidance to management;

•        the candidate having sufficient time to devote to the affairs of the Company, including the number and nature of other board (and committee) memberships held;

•        the candidate having a proven track record in his or her field;

•        the candidate’s ability to exercise sound business judgment;

•        the candidate’s commitment to vigorously represent the long-term interests of our stockholders;

•        whether or not a conflict of interest exists between the candidate and our business;

•        whether the candidate would be considered independent under applicable Nasdaq and SEC standards;

•        the current composition of the Board; and

•        the operating requirements of the Company.

In conducting this assessment, the committee considers gender, diversity, age, skills and such other factors as it deems appropriate given the then-current needs of the Board and the Company, to maintain a balance of knowledge, experience and capability in the context of the current make-up of the Board. While diversity and variety of experiences and viewpoints represented on the Board should always be considered, the Nominating/Corporate Governance Committee believes that a director nominee should neither be chosen nor excluded solely or largely because of race, color, gender, national origin or sexual orientation or identity.

In the case of incumbent directors whose terms of office are set to expire, the Nominating/Corporate Governance Committee reviews such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors’ independence.

When there is a vacancy on the Board, the Nominating/Corporate Governance Committee uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems it appropriate, a professional search firm. The Nominating/Corporate Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board and seeks to include diverse candidates in any director search (which may include specifically requesting diverse candidates from any professional search firm if deemed appropriate at the time requested). The Nominating/Corporate Governance Committee meets to discuss and consider such candidates’ qualifications and then selects a nominee for recommendation to the Board by majority vote.

Pursuant to our Corporate Governance Guidelines, which can be found in the Corporate Governance section of our corporate website at www.vandapharma.com, the Board shall nominate for election or reelection as director only candidates who have tendered, in advance of such nomination, an irrevocable, conditional resignation that will be effective only upon both (i) the failure to receive the required vote at the next stockholders’ meeting at which such person faces reelection and (ii) the Board’s acceptance of such resignation. In addition, the Board shall fill director vacancies and new directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same form of resignation tendered by other directors in accordance with the Amended and Restated Corporate Governance Guidelines.

Pursuant to its charter, the Nominating/Corporate Governance Committee will consider director candidates recommended by stockholders and evaluate them using the same criteria as candidates identified by the Board or the Nominating/Corporate Governance Committee for consideration. If a stockholder of the Company wishes to recommend a director candidate for consideration by the Nominating/Corporate Governance Committee, the stockholder recommendation should be delivered to the Secretary of the Company at the principal executive offices of the Company and provide the same information to the Company as required from stockholders nominating director candidates directly under our advance notice Bylaws.

Board Composition

We believe that each of our directors and nominees brings a strong background and set of skills to our Board, giving the Board, as a whole, an appropriate balance of knowledge, experience, attributes, skills and expertise. In addition, five of our six directors are independent under Nasdaq standards (Dr. Polymeropoulos, our President, Chief Executive Officer and Chairman of the Board, being the only exception as he is an employee) and our Nominating/Corporate Governance Committee believes that all six directors are independent of the influence of any particular stockholder or group of stockholders whose interests may diverge from the interests of our stockholders as a whole. We believe that our directors have a broad range of personal characteristics including leadership, management, pharmaceutical, business, marketing and financial experience and abilities to act with integrity, with sound judgment and collegiality, to consider strategic proposals, to assist with the development of our strategic plan and oversee its implementation, to oversee our risk management efforts and executive compensation and to provide leadership, to commit the requisite time for preparation and attendance at board and committee meetings and to provide required expertise on our Board committees. As described above, the Nominating/Corporate Governance Committee has recommended the members of our Board for their directorships. In evaluating such directors, our Nominating/Corporate Governance Committee has reviewed the experience, qualifications, attributes and skills of our directors and nominees, including those identified in the biographical information set forth above in the section entitled “Election of Directors.” The Nominating/Corporate Governance Committee believes that the members of our Board offer insightful and creative views and solutions with respect to issues facing the Company. In addition, the Nominating/Corporate Governance Committee also believes that the members of our Board function well together as a group. The Nominating/Corporate Governance Committee believes that the above-mentioned attributes and qualifications, along with the leadership skills and other experiences of the members of the Board described in further detail above under the section entitled “Election of Directors,” provide the Company with the perspectives and judgment necessary to guide the Company’s strategies and monitor their execution.

Board Diversity

The following Board Diversity Matrix presents our Board diversity statistics in accordance with Nasdaq Rule 5606, as self-disclosed by our directors.

Board Leadership Structure

Our Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board, as our Board believes it is in the best interest of the Company to make that determination based on the position and direction of the Company and the membership of the Board. Our Board has determined that having the Chief Executive Officer serve as Chairman of the Board is in the best interest of our stockholders at this time because of the efficiencies achieved in having the role of Chief Executive Officer and Chairman of the Board combined, and because the detailed knowledge of our day-to-day operations and business that the Chief Executive Officer possesses greatly enhances the decision-making processes of our Board as a whole. We have a strong governance structure in place, including a Lead Independent Director, designed to ensure the powers and duties of the dual role are handled responsibly and are sufficiently balanced by meaningful independent leadership. Our Lead Independent Director is responsible for, among other things, working with the Chairman of the Board to prepare the agenda for each Board meeting, presiding over executive sessions of our independent directors and discharging such other duties as the independent directors as a whole may designate from time to time. Mr. Dugan serves as our Lead Independent Director.

Meetings of the Board of Directors

The Board met seven times during 2023. Each director attended 75% or more of the aggregate of the meetings of the Board and of the committees on which she or he served that were held during the period for which she or he was a director or committee member.

Director Attendance at Annual Meetings of Stockholders

Directors are encouraged, but not required, to attend our annual stockholder meetings. All of the then-serving directors attended our 2023 annual meeting of stockholders.

Stockholder Communications with the Board of Directors

Stockholders may communicate with the Board, including the independent members of the Board, by sending a letter to Vanda Pharmaceuticals Inc., 2200 Pennsylvania Avenue NW, Suite 300E, Washington, D.C. 20037, Attn: Secretary. Each such communication should set forth (1) the name and address of such stockholder, as they appear on the Company’s books and, if the shares of the Company’s stock are held by a nominee, the name and address of the beneficial owner of such shares, and (2) the number of shares of the Company’s stock that are owned of record by such record holder and beneficially by such beneficial owner. The Secretary will review all communications from stockholders, but may, in his sole discretion, disregard any communication that he believes is not related to the duties and responsibilities of the Board. If deemed an appropriate communication, the Secretary will submit a stockholder communication to a chair of a committee of the Board, or a particular director, as appropriate.

Code of Ethics and Business Conduct

The Company has adopted the Vanda Pharmaceuticals Inc. Code of Ethics and Business Conduct that applies to all directors, officers and employees. This code is available in the Corporate Governance section of our corporate website at www.vandapharma.com. If we make any substantive amendments to this code or grant any waiver from a provision of the code to any applicable executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website.

Risk Oversight

Our Board oversees the management of risks inherent in the operation of our business and the implementation of our business strategies. The general categories of risk overseen by our Board include, without limitation, operational risk, commercial risk, clinical trial risk, capital risk, credit risk, earnings risk, liquidity risk, market risk, price risk, legal/compliance risk and reputational risk. Our Board performs this oversight role by using several different levels of review. In connection with its reviews of the operations and corporate functions of our Company, our Board provides oversight to address the primary risks associated with those operations and corporate functions. In addition, our Board reviews the risks associated with the Company’s business strategies periodically throughout the year as part of its consideration of undertaking any such business strategies.

Each committee of our Board also oversees the management of the Company’s risk that falls within the committee’s areas of responsibility. In performing this function, each committee has full access to management, as well as the ability to engage advisors. Our Chief Financial Officer reports to the Audit Committee and is responsible for identifying, evaluating and implementing risk management controls and methodologies to address any identified risks. In connection with its oversight role, our Audit Committee meets privately with representatives from our independent registered public accounting firm and our Chief Financial Officer.

The oversight of risk within the Company is an evolving process requiring the Company to continually look for opportunities to further embed systematic enterprise risk management into ongoing business processes within the Company. The Board encourages management to continue to drive this evolution.

Employee Compensation Risks

As part of its oversight of the Company’s executive compensation program, the Compensation Committee considers the impact of the Company’s executive compensation program, and the incentives created by the compensation awards that it administers, on the Company’s risk profile. In addition, the Company’s human resources, finance and legal staff review the Company’s compensation policies and procedures for all employees, including the incentives that they create and factors that may reduce the likelihood of excessive risk taking, to determine whether such policies and procedures are reasonably likely to have a material adverse risk on the Company. The Compensation Committee has considered such review and has determined that, for all employees, our Company’s compensation programs are not reasonably likely to have a material adverse effect on the Company.

Compensation of Directors

Our Board initially adopted a non-employee director compensation program in connection with our initial public offering and subsequently amended and restated such policy in June 2017 and again in April 2022 based on analysis performed by Willis Towers Watson of the non-employee director compensation programs of our peer group companies. Our non-employee director compensation program for 2023 remained the same as the program adopted by the Board in 2022. Under our non-employee director compensation program, our non-employee directors receive a combination of annual cash retainers and equity awards, in addition to the equity awards that they receive upon their initial election to the Board. Both the annual and initial equity awards are split approximately 50% in options and 50% in Restricted Stock Units (“RSUs”), with the number of shares of each to be determined based on the value of each calculated in accordance with ASC 718.

The table below sets forth the provisions of our current non-employee director compensation program.

____________

(1)      All annual cash retainer fees are paid in four quarterly payments.

(2)      Only applicable if the Chairman is a non-employee director.

(3)      Option vests with respect to 25% of the underlying shares when the director completes 12 months of continuous service following the date of grant, with the balance vesting in equal monthly installments over the next 36 months of continuous service thereafter.

(4)      RSU award vests in four equal annual installments beginning on the first anniversary of the date of grant, provided the director has provided continuous service through each annual vesting date.

(5)      Each option and RSU award vests with respect to 100% of the underlying shares on the one-year anniversary of the date of grant, provided the director has provided continuous service through such date.

All stock option grants to non-employee directors will have an exercise price per share equal to the fair market value of one share of our common stock on the date of grant and the stock option and RSU grants will be subject to the terms of our Amended and Restated 2016 Equity Incentive Plan and the governing award agreement. Each option and RSU granted under our current non-employee director compensation program that is not fully vested will become fully vested upon a change in control of the Company or if the non-employee director’s service terminates due to death.

We currently have a policy to reimburse our non-employee directors for travel, lodging and other reasonable expenses incurred in connection with their attendance at board and committee meetings.

2023 Director Compensation

The table below shows the compensation earned by each of our non-employee directors for the year ended December 31, 2023. Mihael H. Polymeropoulos, M.D., our President, Chief Executive Officer and Chairman of the Board, receives no additional compensation for his service on the Board. Please see the 2023 Summary Compensation Table for the compensation received by Dr. Polymeropoulos with respect to 2023.

____________

(1)      Reflects the aggregate grant date fair value of RSUs or options granted during the fiscal year calculated in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions, see Note 2 and Note 13 to our audited consolidated financial statements included in the Annual Report. Our directors will not realize the estimated value of these awards until the awards are vested or, with respect to option awards, exercised and the underlying shares are sold.

(2)      Dr. Honoré joined the Board effective March 15, 2023.

The following table describes the RSUs and options that we have granted to our non-employee directors that were outstanding as of December 31, 2023:

____________

(1)      No shares underlying the RSU were vested as of December 31, 2023.

(2)      119,707 options were vested as of December 31, 2023.

(3)      79,707 options were vested as of December 31, 2023.

(4)      89,707 options were vested as of December 31, 2023.

(5)      55,124 options were vested as of December 31, 2023.

(6)      No options were vested as of December 31, 2023.

(7)      Dr. Honoré joined the Board effective March 15, 2023.

PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of our Board has selected PricewaterhouseCoopers LLP, an independent registered public accounting firm, as our independent auditors for the year ending December 31, 2024, and has further directed that management submit the selection of independent auditors for ratification by our stockholders at the Annual Meeting. PricewaterhouseCoopers LLP has audited our financial statements and has attested to the effectiveness of our internal control over financial reporting since we commenced operations in March 2003. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Neither the Bylaws nor other governing documents or laws require stockholder ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm. However, the Audit Committee of our Board is submitting the selection of PricewaterhouseCoopers LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee of our Board will reconsider whether or not to retain PricewaterhouseCoopers LLP. Even if the selection is ratified, the Audit Committee of our Board in its discretion may direct the appointment of different independent auditors at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.

In order for Proposal 2 to pass, holders of a majority of all those outstanding shares present in person (virtually), or represented by proxy, and cast either affirmatively or negatively at the Annual Meeting must vote “FOR” Proposal 2. Abstentions and broker non-votes will be counted towards a quorum; however, they will not be counted either “FOR” or “AGAINST” the proposal and will have no effect on the proposal. Because the ratification of the appointment of the independent registered public accounting firm is a matter on which a bank, broker or other nominee is generally empowered to vote, no broker non-votes are expected to exist in connection with this matter.

Independent Registered Public Accounting Firm’s Fees

The following table represents aggregate fees billed to Vanda for the years ended December 31, 2023 and 2022, by PricewaterhouseCoopers LLP, our principal accountant.

____________

(1)      The fees billed or incurred by PricewaterhouseCoopers LLP for professional services rendered in connection with the annual audit of our consolidated financial statements and the effectiveness of internal control over financial reporting for the years ended December 31, 2023 and 2022 also include the review of our quarterly financial statements included in our quarterly reports on Form 10-Q, statutory audits of our wholly owned foreign subsidiaries and the consents issued for our registration statements.

(2)      The fees billed or incurred by PricewaterhouseCoopers LLP for financial consulting services.

(3)      The fees billed or incurred by PricewaterhouseCoopers LLP for income tax advice.

(4)      The fees billed or incurred by PricewaterhouseCoopers LLP to access accounting, financial and disclosure resources.

All fees described above were pre-approved by the Audit Committee in accordance with applicable SEC requirements. Our Audit Committee determined that the provision of the non-audit services by PricewaterhouseCoopers LLP described above is compatible with maintaining the auditor’s independence.

Pre-Approval Policies and Procedures

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services rendered by PricewaterhouseCoopers LLP, our independent registered public accounting firm. The Audit Committee can pre-approve specified services in defined categories of audit services, audit-related services and tax

services up to specified amounts, as part of the Audit Committee’s approval of the scope of the engagement of PricewaterhouseCoopers LLP or on an individual case-by-case basis before PricewaterhouseCoopers LLP is engaged to provide a service. All services rendered by PricewaterhouseCoopers LLP were pre-approved by the Audit Committee.

YOUR BOARD OF DIRECTORS AND THE AUDIT COMMITTEE UNANIMOUSLY RECOMMEND A “FOR” VOTE IN FAVOR OF PROPOSAL 2.

AUDIT COMMITTEE REPORT

The Audit Committee has reviewed and discussed with our management the audited consolidated financial statements of the Company and “Management’s Report on Internal Control over Financial Reporting” in Item 9A included in the Annual Report.

The Audit Committee has also reviewed and discussed with PricewaterhouseCoopers LLP (“PwC”) the audited consolidated financial statements and PwC’s opinion of the effectiveness of our internal controls over financial reporting in the Annual Report. In addition, the Audit Committee has discussed with PwC the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) and the SEC. Additionally, the Audit Committee has received the written disclosures and the letter from PwC required by applicable requirements of the PCAOB regarding PwC’s communications with the Audit Committee concerning independence, and has discussed with PwC such firm’s independence.

Based upon the review and discussions described above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Annual Report for filing with the SEC. We have selected PwC as the Company’s independent registered public accounting firm for the year ending December 31, 2024 and have approved submitting the selection of the independent registered public accounting firm for ratification by the stockholders.

Submitted by the following members of the Audit Committee:

Richard W. Dugan, Chair

Phaedra S. Chrousos

Anne Sempowski Ward

The material in this Audit Committee Report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Vanda under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information known to us regarding beneficial ownership of our common stock as of the Record Date by:

•        each person known by us to be the beneficial owner of more than 5% of any class of our voting securities;

•        our NEOs;

•        each of our directors; and

•        all current executive officers and directors as a group.

The table below is based upon information supplied by executive officers, directors and principal stockholders and Schedule 13Gs and 13Ds filed with the SEC through the Record Date.

Percentage of shares beneficially owned is based on 58,197,773 shares of common stock outstanding as of the Record Date. For purposes of the table below, and computing the percentage ownership of that person, we deem shares of common stock subject to options that are currently exercisable or exercisable within 60 days of the Record Date and common stock subject to RSUs that will vest within 60 days of the Record Date to be outstanding and to be beneficially owned by the person holding the options or RSUs, but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. Except as otherwise noted, the persons or entities in this table have sole voting and investing power with respect to all of the shares of common stock beneficially owned by them, subject to community property laws, where applicable.

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*        Represents beneficial ownership of less than one percent of our outstanding common stock.

(1)      Unless otherwise indicated, the address for each beneficial owner is c/o Vanda Pharmaceuticals Inc., 2200 Pennsylvania Avenue NW, Suite 300E, Washington, D.C. 20037.

(2)      Based on Schedule 13G/A filed on January 23, 2024 by BlackRock, Inc., this amount represents 8,346,367 shares held of record by BlackRock, Inc. The stockholder’s address is 50 Hudson Yards, New York, NY 10001.

(3)      Based on the Schedule 13G/A filed on February 13, 2024 by Renaissance Technologies LLC (“RTC”) and its affiliate, Renaissance Technologies Holdings Corporation (“RTHC”), this amount represents 3,681,125 shares held of record by RTC. RTHC is deemed to beneficially own 3,681,125 shares due to its majority ownership of RTC. The stockholder’s address is 800 Third Avenue, New York, NY 10022.

(4)      Based on the Schedule 13G/A filed on February 13, 2024 by The Vanguard Group, this amount represents 3,456,087 shares held of record by the Vanguard Group. The stockholder’s address is 100 Vanguard Blvd. Malvern, PA 19355.

(5)      Includes 507,394 shares subject to options exercisable within 60 days of the Record Date. Excludes 100,106 shares subject to options that are not exercisable within 60 days of the Record Date and 174,050 shares of common stock underlying RSUs that do not vest within 60 days of the Record Date.

(6)      Includes 123,667 shares subject to options exercisable within 60 days of the Record Date.

(7)      Includes 153,667 shares subject to options exercisable within 60 days of the Record Date.

(8)      Dr. Honoré was appointed to the Board effective March 15, 2023. Includes 49,983 shares subject to options exercisable within 60 days of the Record Date. Excludes 35,253 shares subject to options that are not exercisable within 60 days of the Record Date and 19,806 shares of common stock underlying RSUs that do not vest within 60 days of the Record Date.

(9)      Includes 200 shares of common stock pledged by Dr. Mitchell as security for personal financial arrangements. Such pledge was not subject to the Company’s anti-pledging policy as it was put in place prior to Dr. Mitchell joining the Board. Includes 90,543 shares subject to options exercisable within 60 days of the Record Date.

(10)    Includes 240,392 shares subject to options exercisable within 60 days of the Record Date. Excludes 103,858 shares subject to options that are not exercisable within 60 days of the Record Date and 178,386 shares of common stock underlying RSUs that do not vest within 60 days of the Record Date. Also includes 635 shares of common stock held of record by Mr. Moran’s wife.

(11)    Includes 1,489,787 shares subject to options exercisable within 60 days of the Record Date. Excludes 355,213 shares subject to options that are not exercisable within 60 days of the Record Date and 622,500 shares of common stock underlying RSUs that do not vest within 60 days of the Record Date.

(12)    Includes 113,667 shares subject to options exercisable within 60 days of the Record Date.

(13)    Includes 279,150 shares subject to options exercisable within 60 days of the Record Date. Excludes 97,050 shares subject to options that are not exercisable within 60 days of the Record Date and 80,025 shares of common stock underlying RSUs that do not vest within 60 days of the Record Date.

(14)    Includes 362,394 shares subject to options exercisable within 60 days of the Record Date. Excludes 100,106 shares subject to options that are not exercisable within 60 days of the Record Date and 174,050 shares of common stock underlying RSUs that do not vest within 60 days of the Record Date.

(15)    Includes 3,410,644 shares subject to options exercisable within 60 days of the Record Date held by our current executive officers and directors. Excludes 791,586 shares subject to options that are not exercisable within 60 days of the Record Date and 1,248,817 shares of common stock underlying RSUs that do not vest within 60 days of the Record Date.

EXECUTIVE OFFICERS

The names of the current executive officers of Vanda and certain information about each of them as of the Record Date, are set forth below:

Executive Officers

Mihael H. Polymeropoulos, M.D. — For biographical information, see “Proposal 1: Election of Directors — Nominees for Election as the Class III Directors at the Annual Meeting.”

Kevin Moran, age 40, has served as our Senior Vice President, Chief Financial Officer and Treasurer, since July 2020. Prior to that, Mr. Moran served as our Vice President, Acting Chief Financial Officer and Treasurer from March 2020 to July 2020, our Vice President and Controller from March 2018 to March 2020, our Controller from December 2012 until March 2018 and in other finance roles at the Company between September 2010 and December 2012. Prior to that, Mr. Moran was a Senior Associate at PricewaterhouseCoopers, an independent registered public accounting firm. Mr. Moran earned his Bachelor of Business Administration and his Master of Science in Accounting from James Madison University.

Gunther Birznieks, age 55, has served as our Senior Vice President, Business Development since March 2017 and served as our Vice President, Head of Business Development from March 2010 to March 2017. Mr. Birznieks assumed additional responsibilities in 2018 as a member of the Company’s Research and Development Committee as well as project lead for the tradipitant program. Prior to March 2010, Mr. Birznieks held a number of positions within Vanda, including Clinical Program Head of the tasimelteon and VSF-173 programs, Head of Informatics and in Singapore as Head of Operations. Mr. Birznieks previously spent the majority of his career in the areas of healthcare and biomedical informatics including bioinformatics support for microarray and genotyping projects with the Human Genome Project at the National Human Genome Research Institute. Prior to joining us, Mr. Birznieks founded Extropia Pte. Ltd., a Singaporean company which specialized in business and investment banking applications. Mr. Birznieks has published four books on computer technologies as well as numerous articles and talks on information security, programming, and software development life cycle. Mr. Birznieks received his Bachelor of Arts degree in psychology and his Master of Science degree in computer science from Johns Hopkins University.

Joakim Wijkstrom, age 58, has served as our Senior Vice President, Chief Marketing Officer since August 2019. Prior to joining Vanda, Mr. Wijkstrom served as SVP/CMO at Perry Ellis International, and most recently at OneMain Financial. Prior to those positions, Mr. Wijkstrom held a variety of leadership roles at advertising agencies, including TBWA Chiat Day, BBDO, and Crispin Porter + Bogusky, developing marketing strategies with clients including Apple, Absolut vodka, Activision/Guitar Hero, Nextel and Volkswagen. Mr. Wijkstrom received his Bachelor of Arts in Art History from Georgetown University, and his Master of Business Administration in Marketing from New York University. He is also a recipient of the Solomon R. Guggenheim Foundation fellowship for studies in museum administration at the Peggy Guggenheim Collection in Venice, and a Marcus Wallenberg Foundation Scholarship for studies in international business.

Timothy Williams, age 48, has served as our Senior Vice President, General Counsel and Secretary since August 2018. Prior to joining Vanda, Mr. Williams served as Executive Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary at AgNovos Healthcare from September 2013 to July 2018. From April 2009 to August 2013, Mr. Williams was Senior Legal Counsel and Assistant Secretary at Stryker Corporation, a global medical technology company, where he led the legal department’s global M&A, corporate governance, and securities groups. Before joining Stryker, Mr. Williams practiced law in Chicago at Mayer Brown LLP and Bryan Cave LLP. Mr. Williams received his Bachelor of Music and Master of Music from Western Michigan University and his Juris Doctor from the University of Michigan.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This section discusses the principles underlying our executive compensation decisions related to fiscal year 2023 and the most important factors relevant to an analysis of these decisions.

Our NEOs for 2023 were:

Executive Summary

Our primary objective is to attract, retain and motivate superior executive talent with the skills and experience to successfully execute our business strategy, aligning their interests with those of our stockholders, with the goal of creating sustainable long-term stockholder value. To achieve this, the majority of executive compensation is variable and at-risk with the value contingent on Company, individual and stock price performance. In determining executive compensation for 2023, we considered the results of our most recent advisory “Say-on-Pay” vote, feedback received from stockholders through our outreach and market insights. In 2023, we continued to engage in stockholder outreach in order to better refine the compensation program to align management and stockholder interests.

2023 Company Performance Highlights:

Notable achievements in 2023 included:

Many of these key accomplishments for 2023 are reflected in outcomes under our annual cash incentive plan, which is comprised of objectives based on areas of operational importance. For 2023, an award level of 137% of target was earned for each of our NEOs, other than Mr. Wijkstrom, who received 100% of target.

Compensation Program Philosophy

Vanda’s purpose is to work together for the common goal of developing and commercializing innovative therapies that address high unmet medical needs and improve the lives of patients. To successfully achieve this, our executive compensation program needs to attract, retain and motivate superior executive talent with the skills and experience to successfully execute our business strategy. Our executive compensation program is designed with the following principles in mind:

•        Pay for performance — Provide competitive incentives that reward the achievement of operational and financial performance goals that directly correlate to the enhancement of stockholder value;

•        Stockholder alignment — Align the interests of our executive officers with those of our stockholders by rewarding performance that meets or exceeds established goals and awarding compensation in the form of equity; and

•        Strategic alignment — Align our executive officers’ behaviors and compensation with the short- and long-term strategic goals and objectives approved by the Board.

To achieve these objectives, a significant portion of each NEO’s compensation is tied to the achievement of corporate financial and operational goals, with long-term compensation delivered in the form of equity awards that vest over time. The majority of each NEO’s equity compensation has historically been delivered in the form of stock options, which are inherently performance-based, requiring the delivery of stock price appreciation following the grant date in order for the awards to have value, as well as RSUs. In February 2024, the Compensation Committee granted all equity awards to our executives in the form of RSUs, in order to continue to align executives’ long-term incentives with the long-term interests of our stockholders. The RSUs are intended to enhance retention of executives through four-year vesting cycles and to provide executive officers with a long-term incentive to manage the Company from the perspective of an owner. We believe that our ‘working together for a common goal’ approach is reflected in our executive compensation framework, which we apply consistently across our executive officer team.

The Compensation Committee reviews on an ongoing basis the Company’s executive compensation program to evaluate whether it supports the Company’s executive compensation philosophies and objectives and is aligned with stockholder interests. Our executive compensation practices include the following, each of which the Compensation Committee believes reinforces our executive compensation objectives:

Executive Pay Mix for 2023

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(1)      Compensation based on 2023 base salary, annual cash incentive paid in 2024 for 2023 performance, and fair market value of equity awards granted in February 2023.

(2)      “NEO 2023” reflects average compensation for all NEOs other than our Chief Executive Officer.

Compensation Procedures

Our Compensation Committee is comprised of two independent directors who are responsible for fulfilling the responsibilities set forth in our Compensation Committee charter, which relate to the Company’s executive compensation policies and programs. The Compensation Committee’s policy is to review annually each NEO’s cash compensation and equity holdings to evaluate whether they provide adequate incentives and motivation, and whether they adequately compensate relative to comparable officers in similarly-sized biopharmaceutical companies. At the invitation of the Chair, Compensation Committee meetings typically have included, for all or a portion of each meeting, our Chief Executive Officer and, from time to time, our Chief People Officer, Chief Financial Officer and General Counsel. No executive officer is present when their own compensation is being discussed.

Our Compensation Committee also regularly meets in executive session without any of our NEOs or other employees present. For compensation decisions related to NEOs other than our Chief Executive Officer, including decisions regarding the grant or award of equity compensation, our Compensation Committee solicits and considers the recommendations of our Chief Executive Officer and seeks input from our independent compensation consultant.

Use of Independent Compensation Consultant

Under the authority set forth in its charter, our Compensation Committee has engaged Willis Towers Watson, a consulting firm specializing in executive compensation, as its independent compensation consultant. In connection with our Compensation Committee’s 2023 NEO compensation decisions, Willis Towers Watson reviewed and advised on all principal aspects of our executive compensation program and performed the following services:

•        Provided recommendations regarding the composition of the Company’s peer group;

•        Conducted a competitive assessment of the Company’s then current executive compensation arrangements, including analyzing peer group proxy statements, compensation survey data, and other publicly available data; and

•        Reviewed and advised on total compensation, including base salaries, and short- and long-term incentives, including equity awards.

The Compensation Committee has assessed the independence of Willis Towers Watson, the Compensation Committee’s compensation consultant, and concluded that no conflict of interest exists that would prevent Willis Towers Watson from serving as an independent consultant to the Compensation Committee.

Stockholder Engagement

Feedback from stockholders is an important part of our decision-making process and we are committed to open and regular communication with our stockholders. This includes engagement at investor conferences and discussions to understand our stockholders’ perspectives on a wide range of topics related to our business.

Say-on-Pay

The Compensation Committee was pleased to see approximately 97% of votes cast in favor of Say-on-Pay in 2023, an increase over 2022 voting results, and saw this as a further indication that stockholders support the changes that have been made in response to stockholder feedback in recent years. The Compensation Committee will continue to monitor the results of the annual Say-on-Pay vote as well as stockholder feedback received and developments and trends in executive compensation, as part of the annual review of our executive compensation programs.

Peer Group

The Compensation Committee annually selects a group of peer companies to understand the competitive positioning of executive compensation at Vanda relative to the market. Companies are selected to ensure they are relevant for executive compensation comparisons based on their science/business model (innovation and commercialization), revenue, market capitalization, and employee headcount. Given the fast-paced nature of our industry, the peer group is reviewed annually and adjusted as needed to ensure continued relevance.

Based on analysis and recommendations from Willis Towers Watson in September 2022, the Compensation Committee considered the following parameters for life sciences companies when evaluating the Vanda compensation peer group for 2023:

Informed by these parameters, one company was identified for removal, and three additional companies were identified for inclusion, resulting in an aggregate peer group of 20 companies.

The three newly added companies were deemed sufficiently relevant from both a size and operations standpoint, and their inclusion resulted in Vanda remaining ranked near the median and the 50th percentile in terms of revenue scope.

Based on analysis and recommendations from Willis Towers Watson in September 2023, the Compensation Committee considered the following parameters for life sciences companies when evaluating the 2024 Vanda compensation peer group:

Informed by these parameters, one company was identified for removal, resulting in an aggregate peer group of 19 companies.

Anti-Hedging/Anti-Pledging Policy

The Company operates a comprehensive anti-hedging/anti-pledging policy that applies to all our employees and directors. This policy generally prohibits any employee, executive officer or director from engaging in short sales, transactions involving puts, calls and other derivative securities, and hedging transactions, placing standing or limit orders (other than pursuant to certain written trading plans), holding securities in margin accounts and pledging securities subject to limited exceptions.

Clawback Policy

In June 2023, the SEC approved the Nasdaq’s proposed rules implementing the incentive-based compensation recovery provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), which require listed companies to develop and implement a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers and to satisfy related disclosure obligations. To reflect these new requirements, on June 8, 2023, we amended and restated our Compensation Clawback Policy, which applies to incentive-based equity and cash compensation that is granted, earned, or vested based wholly or in part upon the attainment of certain financial reporting measures. The policy applies to executive officers in the event we are required to prepare an accounting restatement. The policy requires the Company to recover from the applicable incentive-based compensation received during the three completed fiscal year period preceding the date on which we are required to prepare an accounting restatement the excess amount relative to what would have been paid under the accounting restatement, unless the Compensation Committee determines that it is impracticable to do so.

2023 Compensation

Base Salary

Base salaries are set at a level we believe enables us to hire and retain individuals in a competitive environment, and rewards satisfactory individual performance and contribution to our overall business goals. The annual base salaries established for our executive officers are determined based on consideration of factors including, but not limited to, the responsibilities of the position, prior relevant qualifications, background and experiences, performance considerations, market considerations and other pertinent inputs. When referencing market data, the Compensation Committee considers an executive’s position relative to the median for comparable roles in our compensation peer group. In 2023, the Compensation Committee took specific measures to re-align executive base salaries with the median base salaries of our peers, also recognizing the development of roles and responsibilities over the past few years, as the executive team changed in membership and size. In most cases, this resulted in an upwards adjustment of 4-13%. Based on these considerations and our compensation philosophy, and taking into account persistent inflation, the Compensation Committee approved the following increases for the 2023 base salaries, effective as of January 1, 2023, and for the 2024 base salaries, effective as of January 1, 2024:

Cash Incentive Awards

Annual cash incentive awards can be earned based upon the achievement of corporate and individual performance goals established by our Compensation Committee. These cash incentive awards are designed to focus our NEOs on achieving key clinical, regulatory, commercial, operational, strategic and/or financial objectives during the year.

The target award, expressed as a percentage of salary, is reviewed annually by the Compensation Committee.

Following the conclusion of each fiscal year, our Compensation Committee evaluates the performance of each of our NEOs with respect to the attainment of their individual objectives as well as the Company’s corporate objectives to determine the amount of their cash incentive awards for the year. The actual amount awarded is determined at the discretion of our Compensation Committee based on the performance of the Company and each NEO. The Compensation Committee reserves the right to make subjective assessments of executive performance and to separately reward performance beyond established individual or corporate goals and targets, and to award a smaller or larger bonus or no bonus at all.

The 2023 corporate objectives and relative weightings were approved by the Board and Compensation Committee and were used to assess the overall 2023 performance.

2023 Corporate Goals

For purposes of measuring the levels of achievement for the 2023 goals, the quantitative objectives, consisting of net product sales for each of HETLIOZ® and Fanapt®, which accounted for 35% of the total weighting, were measured using minimum revenue thresholds (90%), maximum revenue thresholds (120% and 110%, respectively) and a midpoint target. The determination of achievement for these quantitative commercial objectives resulted in an overall achievement level of 127% and a corresponding payout at 159% of target.

The qualitative objectives, consisting of R&D and commercial activities, business development, human resource activities and other goals, which accounted for 65% of the total weighting, were measured using a number of different criteria, including clinical study metrics, regulatory filing timelines, expansion of our patent portfolio and securing key hires, among others, resulting in an overall achievement level of 125%. The combined measurement of achievement versus the 2023 corporate goals resulted in an overall award level equal to 137% of target for each of our NEOs, other than Joakim Wijkstrom, who received 100% of target. This award level compares to a 2022 award level of 101%, derived from 98% achievement of quantitative objectives and 103% achievement of qualitative objectives.

In February 2024, based on the Company’s 2023 performance and the accomplishments of the Company and our NEOs during the year, our Compensation Committee awarded our NEOs the following cash incentive awards:

Equity Incentive Compensation

Our Compensation Committee believes that equity compensation awards help align the interests of our NEOs with those of our stockholders. Through making awards in a combination of RSUs and stock options, we provide both an incentive to increase the value of the Company and our stock price in a sustainable, long-term manner, while enhancing the retention power of our executive compensation program. In February 2024, the Compensation Committee granted all equity awards to our executives in the form of RSUs in order to continue to align executives’ long-term incentives with the long-term interests of our stockholders.

As with other components of compensation, our Compensation Committee generally considers multiple factors in determining the equity compensation of our executive team, including, but not limited to, the responsibilities of the position, prior relevant qualifications, background, experiences, performance considerations, market data, and other pertinent inputs. When referencing market data, the Compensation Committee considers an executive’s position relative to the median for comparable roles in our compensation peer group.

Awards are generally made on two occasions:

•        Commencement of employment: Generally, we have granted equity awards to our NEOs upon commencement of their employment with the Company. The size of these initial equity awards is negotiated in connection with the NEO’s employment agreement and generally vest over a four year period. The intent of the initial grants is to create a meaningful opportunity to acquire a proprietary interest in the Company and to align the NEO’s interest with the long-term interests of our stockholders.

•        Annual compensation: The Compensation Committee also considers equity awards for our NEOs as part of their annual compensation package. These awards also vest over four years and help ensure a meaningful incentive to remain at Vanda and to enhance stockholder value sustainably over the long-term. Awards are determined as part of the annual compensation review, typically in February, informed by performance in the prior fiscal year and the factors noted above.

In February 2024, our Compensation Committee granted RSU awards to our NEOs as set forth in the table below.

Severance and Change-in-Control Benefits

Each of our NEOs has a provision in his employment agreement with the Company that provides for certain severance benefits in the event of termination without cause, as well as a provision in his employment agreement or plan-based equity award agreements that provides for the acceleration of certain of his then unvested options and RSUs in the event of termination without cause following a change-in-control of the Company. In addition, Dr. Polymeropoulos is entitled to certain tax benefits upon a change-in-control of the Company pursuant to a tax indemnity agreement he entered into with the Company in 2007 and amended in 2010. These severance and acceleration provisions are described in the “Employment Agreements” section below, and certain estimates of these severance and change-in-control benefits are provided in “Estimated Payments and Benefits Upon Termination” below. No material changes were made to these severance benefits in 2023.

Other Benefits

Our NEOs are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life and disability insurance and our 401(k) plan, in each case on the same basis as our other employees. We provide matching contributions of up to 50% of the first 6% of each employee’s eligible contributions to the 401(k) plan. There were no material benefits or perquisites provided to any NEO in 2023 other than parking expenses for the NEOs.

Tax and Accounting Considerations

Section 162(m) of the Code generally provides that publicly held companies may not deduct compensation paid to certain of their top executive officers to the extent that such compensation exceeds $1 million per officer in any year, except with respect to certain “grandfathered” arrangements in place as of November 2, 2017. In determining the form and amount of compensation for our NEOs, the Compensation Committee may continue to consider all elements of the cost of such compensation. While the Compensation Committee considers the deductibility of awards as one factor in determining executive compensation, the Compensation Committee may also look at other factors in making its decisions and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program even if the compensation is not deductible by us for tax purposes.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Submitted by the following members of the Compensation Committee:

Anne Sempowski Ward (Chair)

Richard W. Dugan

The material in this Compensation Committee Report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Vanda under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

2023 Summary Compensation Table

The following table summarizes the compensation that we paid to our NEOs for the years ended December 31, 2023, 2022 and 2021. We refer to these executive officers in this Proxy Statement as our NEOs.

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(1)      The salary amount represents the salary earned from January 1 through December 31 of the applicable year.

(2)      Reflects the aggregate grant date fair value of stock awards and option awards granted with respect to the applicable year calculated in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions, see Note 2 and Note 13 to our audited consolidated financial statements included in the Annual Report. Our NEOs will not realize the estimated value of these awards until these awards are vested and sold.

(3)      Represents amounts that were earned and accrued under our cash incentive bonus program for the year ended December 31, 2023 that were paid in March 2024.

(4)      Includes contributions made by the Company to match NEOs’ respective 401(k) elective plan contributions and amounts paid by the Company for group health and term life insurance premiums, disability premiums and parking expenses. For Dr. Polymeropoulos those respective amounts for the year ended December 31, 2023 were: $9,900; $21,173; $1,884; $1,746; and $6,025. Amounts for the other NEOs were similar; variations related primarily to group health premiums.

2023 Grants of Plan-Based Awards

The following table sets forth each plan-based award granted to the Company’s NEOs for the year ended December 31, 2023. The grants of RSU awards and option awards reported for 2023 include grants that occurred in February 2023 which related to compensation for the year ended December 31, 2022.

____________

(1)      Represents target cash bonuses under our 2023 cash incentive bonus program.

(2)      No threshold amount is included because the plan does not provide for a minimum non-zero payout amount.

(3)      Service-based RSU granted on February 16, 2023 vested with respect to 25% of the shares on March 1, 2024, with 25% of the shares vesting on March 1, 2025, 25% of the shares vesting on March 1, 2026 and 25% of the shares vesting on March 1, 2027, subject to continuous service through each vesting date.

(4)      Option vested with respect to 25% of the underlying shares on February 16, 2024 when the NEO completed 12 months of continuous service following the date of grant, with the balance vesting in equal monthly installments over the next 36 months of continuous service thereafter.

(5)      Represents the fair value of each stock option grant or RSU as of the date it was granted in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions, see Note 2 and Note 13 to our audited consolidated financial statements included in the Annual Report. These amounts do not represent the actual amounts paid to or realized by the NEO for these awards.

All options and RSUs listed above may be subject to acceleration upon the occurrence of certain events per the terms of the NEO’s employment agreement as described under “Employment Agreements” below.

Outstanding Equity Awards at 2023 Year-End

The following table sets forth information regarding each unexercised option and unvested RSUs held by each of our NEOs as of December 31, 2023.

____________

(1)      Based on a per share price of $4.22, which was the closing price per share of our common stock on the last trading day of the 2023 fiscal year (December 29, 2023).

(2)      Option vests with respect to 25% of the underlying shares when the NEO completes 12 months of continuous service following the date of grant, with the balance vesting in equal monthly installments over the next 36 months of continuous service thereafter.

(3)      Service-based RSU that vested with respect to 25% of the shares on March 1, 2021, 25% of the shares on March 1, 2022, 25% of the shares on March 1, 2023 and 25% of the shares on March 1, 2024, subject to continuous service through the vesting date.

(4)      Service-based RSU that vested with respect to 25% of the shares on March 1, 2022, 25% of the shares on March 1, 2023 and 25% of the shares on March 1, 2024, with 25% of the shares vesting on March 1, 2025, subject to continuous service through the vesting date.

(5)      Service-based RSU that vested with respect to 25% of the shares on March 1, 2023 and 25% of the shares on March 1, 2024, with 25% of the shares vesting on March 1, 2025 and 25% of the shares vesting on March 1, 2026, subject to continuous service through the vesting date.

(6)      Service-based RSU that vested with respect to 25% of the shares on March 1, 2024 with 25% of the shares vesting on March 1, 2025, 25% of the shares vesting on March 1, 2026 and 25% of the shares vesting on March 1, 2027, subject to continuous service through the vesting date.

(7)      Service-based RSU that vested with respect to 25% of the shares on July 27, 2021, 25% of the shares on July 27, 2022, and 25% of the shares on July 27, 2023 with 25% of the shares vesting on July 27, 2024, subject to continuous service through the vesting date.

All options and RSUs listed above may be subject to acceleration upon the occurrence of certain events per the terms of the NEO’s employment agreement as described under “Employment Agreements” below.

On February 16, 2024, we granted service-based RSUs related to compensation for the year ended December 31, 2023 to Dr. Polymeropoulos in the amount of 450,000 and Messrs. Birznieks, Moran and Williams in the amount of 125,000 and Mr. Wijkstrom in the amount of 32,700 shares each. Each of the grants to Dr. Polymeropoulos and Messrs. Birznieks, Moran, Wijkstrom and Williams will vest with respect to 25% of the shares on March 1, 2025, 25% of the shares on March 1, 2026, 25% of the shares on March 1, 2027 and 25% of the shares on March 1, 2028. These grants are not listed in the table above as of December 31, 2023.

2023 Stock Vested

The following table shows the number of shares acquired upon stock award vesting for each NEO during the year ended December 31, 2023. These amounts do not represent the actual amounts realized by the NEO for these awards.

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(1)      The value realized on vesting is based on the closing price per share of our common stock on the vesting date. These amounts do not represent the actual amounts realized by the NEO for these awards.

Employment Agreements

We entered into employment agreements with each of our NEOs: Mihael H. Polymeropoulos, M.D., our President, Chief Executive Officer and Chairman of the Board; Kevin Moran, our Senior Vice President, Chief Financial Officer and Treasurer; Gunther Birznieks, our Senior Vice President, Business Development; Joakim Wijkstrom, our Senior Vice President, Chief Marketing Officer; and Timothy Williams, our Senior Vice President, General Counsel and Secretary.

Mihael H. Polymeropoulos, M.D. We entered into an employment agreement with Dr. Polymeropoulos in February 2005, which was subsequently amended on December 16, 2008 and December 16, 2010, which provides for an annual base salary of not less than $362,250 and the possibility of an annual target cash incentive bonus amount equal to 40% of his annual base salary upon achievement of certain performance goals (Dr. Polymeropoulos’ current base salary for 2024 is $933,000 and his target bonus amount is 80% of his annual base salary). If we terminate Dr. Polymeropoulos’ employment for any reason other than cause or permanent disability, or, (other than for item (4) below), Dr. Polymeropoulos terminates his employment within six months after the occurrence of any event constituting Good Reason, Dr. Polymeropoulos will receive the following severance benefits following termination: (1) base salary for a period of 12 months; (2) a bonus, payable in a lump sum, in an amount equal to the greater of his most recent annual target bonus or the average annual target bonus awarded to him for the prior three years; (3) payment of his monthly COBRA health insurance premiums for up to 12 months; and (4) an additional three months of service credit under all options held by him and all such options shall be exercisable for the lesser of (i) of six months following his termination or (ii) the remaining option term. In addition, pursuant to the terms of his option and RSU award agreements, if Dr. Polymeropoulos is terminated without cause, or he terminates his employment for Good Reason, within 24 months following a change in control of the Company, he will become vested in all of his then unvested options and RSUs. In addition to the benefits provided in his employment agreement, option agreements and RSU awards, the Company entered into a tax indemnity agreement with Dr. Polymeropoulos in November of 2007 that provides certain benefits to him in the event of a change in control of the Company, as described below in “Severance and Change in Control Arrangements.”

Kevin Moran. We entered into an amended and restated employment agreement with Mr. Moran in July 2020, which provides for an annual base salary of not less than $390,000 and the possibility of an annual target cash incentive bonus amount equal to 40% of his annual base salary upon achievement of certain performance criteria (Mr. Moran’s current base salary for 2024 is $541,000 and his target bonus amount is 45% of his base salary). If we terminate Mr. Moran’s employment for any reason other than cause or permanent disability, or, if he terminates his employment within six months after the occurrence of any event constituting Good Reason, Mr. Moran will receive the following severance benefits following termination: (1) base salary for a period of 12 months; (2) his annual target bonus, payable in a lump sum; and (3) an additional three months of service credit under all options held by him and all such options shall be exercisable for the lesser of (i) six months following his termination or (ii) the

remaining option term. In addition, pursuant to the terms of his option and RSU award agreements, if Mr. Moran is terminated without cause or if he terminates his employment for Good Reason, within 24 months following a change in control of the Company, he will become vested in all of his then unvested options and RSUs.

Gunther Birznieks. We entered into an employment agreement with Mr. Birznieks in June 2009, which was subsequently amended and restated in April 2018, which provides for an annual base salary of not less than $375,000 and the possibility of an annual target cash incentive bonus amount equal to 40% of his annual base salary upon achievement of certain performance criteria (Mr. Birznieks’ current base salary for 2024 is $541,000 and his target bonus amount is 45% of his base salary). If we terminate Mr. Birznieks’ employment for any reason other than cause or permanent disability, or, if he terminates his employment within six months after the occurrence of any event constituting Good Reason, Mr. Birznieks will receive the following severance benefits following termination: (1) base salary for a period of 12 months; (2) his annual target bonus, payable in a lump sum; and (3) an additional three months of service credit under all options held by him and all such options shall be exercisable for the lesser of (i) six months following his termination or (ii) the remaining option term. In addition, pursuant to the terms of his option and RSU award agreements, if Mr. Birznieks is terminated without cause or if he terminates his employment for Good Reason, within 24 months following a change in control of the Company, he will become vested in all of his then unvested options and RSUs.

Joakim Wijkstrom. We entered into an employment agreement with Mr. Wijkstrom in August 2019, which provides for an annual base salary of not less than $500,000 and the possibility of an annual target cash incentive bonus amount equal to 45% of his annual base salary upon achievement of certain performance criteria (Mr. Wijkstrom’s current base salary for 2024 is $560,000 and his target bonus amount is 45% of his base salary). If we terminate Mr. Wijkstrom’s employment for any reason other than cause or permanent disability, or, if he terminates his employment within six months after the occurrence of any event constituting Good Reason, Mr. Wijkstrom will receive the following severance benefits following termination: (1) base salary for a period of 12 months; (2) his annual target bonus, payable in a lump sum; and (3) an additional three months of service credit under all options held by him and all such options shall be exercisable for the lesser of (i) six months following his termination or (ii) the remaining option term. In addition, pursuant to the terms of his option and RSU award agreements, if Mr. Wijkstrom is terminated without cause or if he terminates his employment for Good Reason, within 24 months following a change in control of the Company, he will become vested in all of his then unvested options and RSUs.

Timothy Williams. We entered into an employment agreement with Mr. Williams in August 2018, which provides for an annual base salary of not less than $375,000 and the possibility of an annual target cash incentive bonus amount equal to 40% of his annual base salary upon achievement of certain performance criteria (Mr. Williams’ current base salary for 2024 is $541,000 and his target bonus amount is 45% of his base salary). If we terminate Mr. Williams’s employment for any reason other than cause or permanent disability, or, if he terminates his employment within six months after the occurrence of any event constituting Good Reason, Mr. Williams will receive the following severance benefits following termination: (1) base salary for a period of 12 months; (2) his annual target bonus, payable in a lump sum; and (3) an additional three months of service credit under all options held by him and all such options shall be exercisable for the lesser of (i) six months following his termination or (ii) the remaining option term. In addition, pursuant to the terms of his option and RSU award agreements, if Mr. Williams is terminated without cause or if he terminates his employment for Good Reason, within 24 months following a change in control of the Company, he will become vested in all of his then unvested options and RSUs.

And with respect to the employment agreement between the Company and each of our NEOs, “Cause” means: (i) an unauthorized use or disclosure of the Company’s confidential information or trade secrets, which use or disclosure causes material harm to the Company; (ii) a material breach of any agreement between the NEO and the Company; (iii) a material failure to comply with the Company’s written policies or rules; (iv) conviction of, or plea of “guilty” or “no contest” to, a felony under the laws of the United States or any state thereof; (v) gross negligence or willful misconduct which causes material harm to the Company; (vi) a continued failure to perform assigned duties after receiving written notification of such failure from the Board; or (vii) a failure by the NEO to cooperate in good faith with a governmental or internal investigation of the Company or its directors, officers or employees, if the Company has requested the executive officer’s cooperation. Dr. Polymeropoulos’ employment agreement does not contain clause (vii).

In the employment agreements for Messrs. Moran, Williams, Birznieks and Wijkstrom “Good Reason” means: (i) a change in the NEO’s position with the Company that materially reduces his level of authority or responsibility, (ii) a material reduction in his base compensation or (iii) receipt of notice that his principal workplace will be relocated by more than 30 miles. In the employment agreement for Dr. Polymeropoulos, “Good Reason” shall mean any of the following events: (i) Dr. Polymeropoulos’ receipt of notice that his principal workplace will be relocated more than 30 miles; (ii) a reduction in Dr. Polymeropoulos’ base salary by more than 10%, unless pursuant to a Company-wide reduction affecting all employees proportionately; or (iii) a change in Dr. Polymeropoulos’ position with the Company that materially reduces his level of authority or responsibility (including without limitation failure to nominate him as a directory of the Company). A condition shall not be considered “Good Reason” unless the applicable NEO gives the Company written notice of such condition within 90 days after such condition comes into existence and the Company fails to remedy such condition within 30 days after receiving such NEO’s written notice.

Severance and Change in Control Arrangements

See “Employment Agreements” above for a description of the severance and change in control arrangements for our NEOs. Dr. Polymeropoulos and Messrs. Moran, Williams, Birznieks and Wijkstrom will only be eligible to receive severance payments if each NEO signs a general release of claims in favor of the Company.

Our Compensation Committee, as plan administrator of our equity incentive plans, has the authority to provide for accelerated vesting of the shares of common stock subject to outstanding options held by our NEOs and any other person in connection with certain changes in control of the Company.

In Dr. Polymeropoulos’ employment agreement, a change in control is defined as (1) the consummation of a merger or consolidation of the Company with or into another entity, if persons who were not stockholders of the Company immediately prior to such merger or consolidation own immediately after such merger or consolidation 50% or more of the voting power of the outstanding securities of each of (a) the continuing or surviving entity and (b) any direct or indirect parent corporation of such continuing or surviving entity; or (2) the sale, transfer or other disposition of all or substantially all of the Company’s assets. In addition, with respect to each of Messrs. Moran’s, Williams’, Birznieks’ and Wijkstrom’s employment agreement, change in control also includes: (i) a change in the composition of our Board, as a result of which fewer than 50% of the incumbent directors are directors who either: (A) had been directors of the Company on the date 24 months prior to the date of such change in the composition of the Board (the “Original Directors”); or (B) were appointed to the Board, or nominated for election to the Board, with the affirmative votes of at least a majority of the aggregate of (1) the Original Directors who were in office at the time of their appointment or nomination and (2) the directors whose appointment or nomination was previously approved in a manner consistent with (B); and (ii) any transaction as a result of which any person is the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing at least 50% of the total voting power represented by the Company’s then outstanding voting securities. A transaction shall not constitute a change in control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.

In addition, the Company is a party to a tax indemnity agreement with Dr. Polymeropoulos. Under this tax indemnity agreement, the Company or its successor will reimburse Dr. Polymeropoulos for any excise tax that he is required to pay under Section 4999 of the Code of 1986, as amended, as well as the income and excise taxes imposed on the reimbursement. Section 4999 imposes a 20% excise tax on payments and distributions that are made or accelerated (or the vesting of which is accelerated) as a result of a change in control of the Company. The excise tax applies only if the aggregate value of those payments and distributions equals or exceeds 300% of Dr. Polymeropoulos’ average annual compensation from the Company for the five immediately completed calendar years prior to the change in control. If the excise tax applies, it is on the excess of the aggregate value of the payments and distributions over 100% of Dr. Polymeropoulos’ average annual compensation for the five immediately completed calendar years prior to the change in control. Such payments and distributions consist of the continuation of salary, incentive bonus and health insurance coverage for varying periods of time and accelerated vesting of stock options to varying degrees.

Estimated Payments and Benefits Upon Termination

The following table describes the potential payments and benefits upon employment termination for each of our NEOs, as if the NEO’s employment terminated as of December 31, 2023.

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(1)      Dr. Polymeropoulos is eligible to receive benefits payable in connection with the tax indemnity agreement described above in “Severance and Change in Control Arrangements” which was approved by our Compensation Committee on March 16, 2007. Based on the amounts reported above as of December 31, 2023, representing the potential payments and benefits upon employment termination for Dr. Polymeropoulos as if the NEO’s employment terminated as of December 31, 2023, there would be no federal excise tax and there would be no tax indemnity payment.

(2)      Last monthly base salary prior to the termination for a period of 12 months following the date of the termination.

(3)      Greater of the most recent target cash incentive bonus awarded prior to termination or the average of the prior three years cash incentive bonuses.

(4)      In the event that the NEO’s employment is terminated by the Company for any reason other than cause or permanent disability, the vested portion of the NEO’s options is determined by adding three months to the NEO’s service.

(5)      Full acceleration for all options and RSUs will occur in the event of an involuntary termination following a change of control. For purposes of the table above, settlement of the RSUs is assumed to have occurred on December 31, 2023.

(6)      Payment of the COBRA health insurance premiums up to 12 months or until the NEO begins employment with another company that offers comparable benefits.

(7)      Represents the NEO’s target cash bonus in effect as of December 31, 2023.

Pay Ratio Disclosure

As required by the Dodd-Frank Act and applicable SEC rules, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mihael H. Polymeropoulos, M.D., our Chief Executive Officer:

For our fiscal year ended December 31, 2023:

•        The median of the annual total compensation of all employees (other than our CEO) was $193,854; and

•        The annual total compensation of our CEO, as reported in the 2023 Summary Compensation Table included elsewhere in this Proxy Statement, was $3,720,215.

Based on this information the ratio of the annual total compensation of Dr. Polymeropoulos to the median of the annual total compensation of our employees was 19.2:1.

The above ratio is appropriately viewed as an estimate. To identify the median of the annual compensation of our employees, we reviewed the base salary and the bonus and long-term incentive compensation targets of our U.S. employees who were employed as of December 31, 2023. As permitted by SEC rules, we excluded from our analysis all 9 of our employees who resided in Germany and the UK on December 31, 2023, which represented less than 5% of our employee population as a whole on such date. Our employee population on December 31, 2023, prior to taking into consideration this exclusion, consisted of approximately 203 individuals. Our employee population on December 31, 2023, after taking into consideration this exclusion, consisted of approximately 194 individuals. Once we identified our “median employee,” using the methodology described above, we determined that employee’s annual total compensation in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K for purposes of calculating the required pay ratio.

Pay Versus Performance

As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid (CAP), as calculated per SEC disclosure rules, and certain financial performance measures with respect to the Company. Compensation actually paid, as calculated per SEC disclosure rules, differs from the total compensation reported in the Summary Compensation Table in the applicable year due to the impact of changes in our stock price as well as the achievement of the underlying vesting conditions with respect to our equity awards, while compensation reported in the Summary Compensation Table calculates equity awards based on the grant date fair value of such equity awards and does not include any adjustments for failure to achieve the underlying vesting conditions or changes in our stock price. In addition, the Summary Compensation Table total for a given year captures compensation with respect to equity awards granted during such year, while the compensation actually paid captures compensation associated with fluctuations in the value of prior year equity grants. For further information concerning the Company’s variable pay-for-performance philosophy and how the Company aligns executive compensation with the Company’s performance, refer to Compensation Discussion and Analysis.