Harmony Biosciences Holdings, Inc. (HRMY) Earnings Call Transcript & Summary

Hi, this is David Amsellem from the Piper Sandler specialty pharma team, and we will be spending the next 25 minutes or so chatting with Harmony Biosciences. And with us is CEO, John Jacobs. John, thanks very much for joining us. I wanted to flip it over to you, John, for some quick introductory remarks, and then we can dive right in to what will be a lively discussion given the launch of WAKIX. So John, why don't you take it away?

David, first of all, thank you for the nice introduction, and we appreciate this opportunity to share a little bit more color and context on our launch of WAKIX with Harmony. Our company, for those of you who are new to our story, we were founded in October of 2017. And since then, we built out a company of over 150 employees, and we've launched our first product in the U.S. Market, WAKIX. And we're starting with WAKIX in narcolepsy, although we do see our product as a portfolio and a product opportunity due to its unique mechanism of action, which we can discuss a little bit more later today. We're starting in narcolepsy. And our focus is on rare orphan neurological disorders and helping patients who are so often underserved that are living with those diseases, David.

Great. So I'll start off with a high-level question on the role of WAKIX and specifically in narcolepsy, I should say. So narcolepsy is very much a polypharmacy type of a treatment landscape. So with that in mind, how do you view WAKIX' role over time relative to other mainstay agents such as oxybate or I should say, Xyrem -- low-sodium Xyrem and other wakefulness-promoting agents. What's your general take on the broader role of WAKIX in this space that is admittedly evolving?

It is David. Look, very good question and an important one for patients and health care providers as well. Narcolepsy is a complex disease, and it is a polypharmacy market. Importantly, WAKIX offers a meaningfully differentiated product profile. WAKIX is a unique MOA. It's the first product of its kind to work through histamine in the hypothalamus. It's the first nonscheduled medication from FDA. It's not a stimulant. There's no evidence of withdrawal symptoms or tolerance building up in our clinical trials. And we're seeing WAKIX used in combination with other therapies across the spectrum, whether that's wake-promoting agents and stimulants or oxybate products, et cetera. And it can be used as monotherapy as well. We're seeing both, and we see that as a long-term role because there's so much dissatisfaction in the market, David. And of who are currently treated in the space, about 3/4 of them have residual symptoms that are not only measurable but negatively impact patients' lives. So there's a high level of dissatisfaction and a lot of need for additional products in the market. And WAKIX fits very nicely to match those unmet needs with our product profile.

Okay. So you mentioned previously that there is quite a significant number of patients. I think it's roughly about [ 40,000 ] or so narcolepsy patients who are diagnosed but not treated. Why is that the case? And what's your view on your ability to access these diagnosed patients over time as they cycle through legacy agents like stimulants and modafinil.

David, we're actually sourcing from that pool of patients. And you asked why, it's a question that I asked as well as we really dug deeply into this market when we founded the company. And again, that data, data demonstrates a high level of unmet need and dissatisfaction. So as I said earlier, about 3/4 of patients have residual symptoms. Over 90% of treated patients have expressed dissatisfaction with current therapies, side effects, tolerability issues, scheduling, difficulty getting access to the medication, et cetera. And so many patients have just decided to go it alone and fight the disease without any therapy at all. But WAKIX has been introduced. We're starting to source from that bucket, and we can access those patients as long as they go through the step that is required by managed care. And the vast majority of those 1 to 2 generic step edits and they can get access to WAKIX.

Okay. And I wanted to talk about the payer landscape in a bit, but let's go through some metrics on WAKIX specifically, your metrics on average number of patients who are on drug, and this is bearing in mind that the product launched in late 2019. So I wanted to put that out there. Just average number of patients on drug and how that's been trending and then also unique prescribers and particularly repeat prescribers. Maybe you can walk us through that.

Absolutely. Look, we're very pleased so far with our launch success, David. And it's never ideal to launch a product in the middle of a global pandemic and have that hit in your first quarter of launch or so. But despite that, we're really pleased with the growth. Our average number of patients in Q3 was about 2,200, which represents over a 20% increase from the prior quarter. And that also considers new starts as well as patient behavior like compliance and persistence. It's all baked into that number. And we're very optimistic we can maintain that continued growth. And as COVID lifts, really see the optimal performance in our launch that we believe we're capable of with this product. And when it comes to unique prescribers, very interesting, there's about 8,000 or so physicians that diagnose and treat the majority of narcolepsy patients in the U.S. And once again, we've had great reaction from them in the market, especially with the new cataplexy indication. In fact, we've had over 2,000 unique HCPs prescribe our drug, and that's about 1/4 then of the entire prescribing universe, at least one time, and the vast majority of those are starting to become repeat prescribers as more and more patients come into their therapy choices.

Okay. And I wanted to touch on the mix of patients who are getting WAKIX as monotherapy versus patients who are getting it in combination with oxybate. Maybe talk to what you're seeing in terms of the usage and mix. And I guess the -- there's a couple of ways that I wanted to sort of slice and dice this. One is portion of patients who are taking their -- staying on their background, modafinil or stimulants, a portion of patients who are on background and oxybate? And then what are you seeing in terms of WAKIX and some therapy?

And David, we're not disclosing the specific percentages by category. But what we're actually seeing is combination therapy across the spectrum. So it's with your gold standard, modafinil plus a stimulant or it's with Xyrem or it's with the combination of all of those. And why is WAKIX profile? There's no PK drug interactions. That's right in our label with the drug. So WAKIX can safely be added on to gold standard combinations or long-established therapy combinations. We are seeing some stimulant sparing behavior over time. So once WAKIX is added into combo, we're seeing quite a large number of patients stop taking or reduced their use of stimulants, which is really great because there are public health indications there that we're very pleased with. So to offer the first and only nonscheduled medication that's not a stimulant is obviously having a benefit to some patients there.

Okay. All right. That's helpful. And then what about the mix of patients who have narcolepsy with cataplexy versus patients who have narcolepsy type 2? I know you've alluded to this in the past, but maybe help us understand where that is right now. And maybe this is a way to talk about your cataplexy label expansion.

Yes, which we're very excited about, David. Excellent question. And what you see in the market, general diagnosis codes, it's about 50-50, type 1 and type 2 when it comes to diagnosis, even though the prevalence is thought to be about 65, 35 or so, it's 50-50 in diagnosis and reality in the U.S. and that's about what we're seeing with WAKIX. So really, in general, it mirrors the marketplace. I think it's important to realize for everyone who's maybe some of the folks who are new to this market, that every patient with narcolepsy has excessive daytime sleepiness. And that was our first indication when we were first approved by FDA last year. That's the cardinal symptom, whether they have type 1 or type 2 narcolepsy, that's the core symptom. Type 1, they also have cataplexy, but we were on label for all of those patients since our launch. But we are excited about the new cataplexy indication, David, and we've had a very good response from patients and physicians. And there are some physicians we were seeing that might have been on the fence before, brand-new drug that are starting to get more excited about using WAKIX and trying it for the first time now that we also have the cataplexy indication.

And I wanted to switch gears and talk about the payer landscape. You alluded to it earlier in the discussion, but I wanted to dive a little more deeply. What portion of commercial lives have access? And can you elaborate on the kind of step edits and prior offs that we're typically seeing? And as part of that question, do you see any step edits through -- in other brand's product? I think that would also be important to cover.

Yes. Yes, we do. But the vast majority of lives, it's only 1 or 2 generic step edits to get WAKIX. So the vast minority. Right now, we have over 180 million U.S. lives that have access to WAKIX, and that's across commercial Medicaid and Medicare plans. So we've had some, we think, remarkable managed care penetration and access for the product. And so far, no negative formulary decisions to date, meaning an NDC block, et cetera. So very good access to WAKIX so far. We're very pleased with it, and we're even more excited with the new cataplexy indication that, that may happen both the near term and the long term to be protective for the product and to help even more patients have access to it.

And so you're not seeing any patients having to step through, say, SUNOSI, which is another new narcolepsy agent, but has a very different price point for reasons we don't need to get into. But you're not seeing anything like that?

I wouldn't say we're not seeing anything. There are a small portion of plans that are requiring one branded step, David, but the vast majority are not. The vast majority are 1 to 2 generics.

Okay. So I wanted to speak about the COVID impact or the impact of the pandemic on the business is something that you've talked to a number of times. So I guess, as a starting point, can you -- maybe I'll ask the question generally is, can you talk about what aspects of the WAKIX commercialization, the rollout are being hit the hardest as a result of the pandemic?

Well, I'd say, look, in general, the pandemic has affected our entire industry, right, whether it's physicians, patients and companies and how each of those groups interact with one another. And I think most companies, if not all, in our industry, have seen some impact on their ability to generate top line demand because of less connectivity with their sales teams and physician office staff, et cetera, and also on persistency, compliance rates and all those different factors. So I think it's on the top on demand and also on retention. And patients' relationship with their medicines and with their doctors has been altered temporarily by the pandemic. The way that they take their meds, the way that they're getting counseled on meds, whether they see the nursing staff or not for reminders, all of those things can have an impact on drug uptake, utilization and compliance rates, et cetera.

Yes. So do you think that the -- speaking of persistence rates, I mean, this is a -- again, a polypharmacy market, there's a lot of switching. And do you think that persistence rates, in general, have been lower than what they would be? If it will be lower the pandemic, and specifically, your physicians rates lower on WAKIX than what you anticipated because of the pandemic?

I think the way to think about it is that, again, that patient's relationship with their med has changed for most pharma companies. And though we're not disclosing our specific persistence or DC rates, the way to think about it, I think, David, for everyone, is prior to the pandemic, DC rates for drugs -- a publicly available data indicates DC rates for all the drugs in this category were between 30% to 50%. And WAKIX is in that range. And you figure WAKIX with a really good profile, excellent tolerability, nonscheduled, right, might be in the middle to the lower end of that range. But certainly, certainly, COVID has put pressure on any medication, in general, you'd have to think within that range and on that range itself when it comes to compliance and persistency. A big factor in that, David, is unemployment, right? And we've seen them lose their jobs and then lose their health insurance. Importantly, Harmony is a patient-centric organization, and we have a patient assistance program in place. And as long as patients meet our eligibility criteria, they can get the product at no cost if they've lost their insurance or they're unable to get it from us.

Okay. So now let's talk about that a little more. You've talked about subsidization of cost of drug as a headwind. In other words, impacting your net sales. Can you give us some more color on the nature of that impact? You don't have to quantify it, but talk how impactful that's been, not just in 3Q, but as we think about 4Q and early 2021.