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

Hi, everybody. Thank you so much for joining us. My name is Chris Howerton. I'm part of the biotechnology research team here at Jefferies; thrilled to be hosting a fireside chat with the next company, Harmony Biosciences. And of course, on behalf of the company, we have John Jacobs, the CEO. Thanks so much for joining us, John.

My pleasure, Chris. Great to be here with you.

Excellent. Well, yes. I mean I must say you have a stunningly beautiful background there. So I happen to know that you're in my area, which I also think is a nice area, but kudos to you, sir.

Thank you very much, Chris. Yes, we're -- I'm actually back in the office. And we've done a soft reentry into the office on a voluntary basis for our employees now that we're getting vaccinated. And I'm fully vaccinated and proud of that and able to start engaging a little bit more face to face. It certainly makes a difference.

Absolutely, yes, absolutely. And I think that, well, certainly will be a topic. I think we'll kind of get into within the context of your company as well, so I guess maybe let's get into it.

I -- we've gotten to know each other, I think, fairly well over the last maybe 1.5 years or so, but maybe for those that are perhaps a little less well acquainted to the Harmony story and WAKIX -- well, maybe I'll take a step back. So I will pause it, first of all, that the commercial launch of this drug has been great thus far. So with that perspective -- and you are, as a small company, executing on that. Like how did you pull that off, I guess, at the end of the day? How did you pull that off a successful launch?

Well, it's a great question, Chris. I appreciate it. Look. We're indeed proud of our launch success. I mean we finished 2020 despite being in the midst of a global pandemic just a few months into our launch, had $160 million in net sales. And that means we helped a lot of patients who are living with a rare and chronic disorder, which really means a lot to us. And that momentum, Chris, carried into 2021, as exemplified by our strong Q1 performance which was our fifth consecutive quarter in a row of growth, as you know, and importantly, as we disclosed in our latest earnings call, our first quarter of profitability in company history. And we're expecting to remain profitable in 2021. So I think, for a company this early in our history, that's certainly an impressive milestone. And I believe there's a few reasons, Chris, to answer your question, for our remarkable success to date. And for those same reasons, I believe that we will continue to experience robust growth in our business moving forward because they're fundamental to what Harmony is able to do. And first, we have a relentless focus on our core mission, and I just alluded to that earlier with my comment about patients. Harmony is a rare disease company. And at Harmony our mission is really, Chris, as you know, to identify, develop and introduce therapies to help patients who are living with rare neurological or CNS conditions. And we're starting with WAKIX in narcolepsy. We don't intend to end it. We're going to be adding products to our portfolio [indiscernible], but that focus is part of our success. The second reason: We've assembled an expert team, Chris. We hand built our team from scratch. The company was founded -- you don't get to do that often, right, as a leader. I was among the first 5 people hired in the company back in 2017, and I've got to oversee virtually every hire of our 160-plus employees right now. We're a fully functional company. All services, all functions are in house. And our employee systems and processes were all selected, designed and built to do one thing really well with that mission in mind, and that's to develop and launch rare orphan neurological therapies to help these patients in need. And finally, we choose our products to develop, starting with WAKIX, very thoughtfully, Chris. It has to be a product that aligns well with unmet needs in a marketplace that has significant unmet need, often with patients who are underserved from a medical or a therapeutic perspective. And we did that very well with WAKIX. It's a truly differentiated product, the first and only nonscheduled asset for adults living with narcolepsy in the United States. And the profile of WAKIX aligns really well with the unmet needs in the market and, I think, together with our company culture, certified 3 years in a row as a great place to work and recognized by Fortune magazine last year as a -- 1 of the top 10 biotech companies to work for because of our care and culture. I think all of those things together combined really helped us to deliver the remarkable success we did even in the face of the pandemic.

Yes, absolutely. And I think the -- I guess maybe let's dig into a little bit within the narcolepsy space because I think -- you and I were there, I guess, during the initial launch and IPO. I think there was a lot of questions around like will you be competitive with a market that's being dominated by sodium oxybate and potentially other formulations therein. Like, I guess, how do you see it stacking up with the status quo thus far?

Yes. I -- so WAKIX has been extremely competitive, and one of the reasons why is good market access coverage, Chris. And I think I can start there and say overall we've achieved -- due to the good profile of the product and our decisions with pricing and the way we launched the drug and educated payers, we've got robust coverage for WAKIX. And it's roughly 80% of U.S. covered lives have formulary access to the product, the majority requiring 1 to 2 generic step edits for the product. And actually and importantly, Chris, since the approval of the cataplexy indication, which positioned us just quite nicely versus competition, actually now Xyrem is not the only product indicated for both EDS and cataplexy, but WAKIX now has that cataplexy indication as well, which is beneficial for physicians and patients in the community. So what we saw when that happened last October were payers starting to make decisions to remove or reduce the step edits required to get WAKIX for type 1 narcolepsy patients. Not every payer, but many have started to make that decision. That's removed some friction out of the marketplace, yes.

Yes, totally. And I think all -- we've written about this in the past. And I think our view is that that's obviously been meaningful to kind of the short-term impact but I think probably also very important for the durability of WAKIX moving forward. That is that go-to option that could treat all the patients. It's oral. And as you already pointed out, it doesn't have a REMS program, so obviously all positives.

Right, right. Thank you, Chris.

Okay, all right. So then I guess some of the things that we've talked about in the past, certainly with one of the Jeffs on your team, is, Jeff Dierks, on kind of the marketing and promotional activities that have been going on. And I guess, how have you been seeing that going thus far? And if you'd like to comment kind of how in-person interactions might be either influenced or enhanced by that.

Yes, well, it's going really well. And we call on approximately 8,000 health care providers who are responsible for diagnosing and treating the majority of patients in the narcolepsy marketplace. We've been able to achieve quite a good reach in penetration and frequency not only with our marketing efforts but also with our field-based teams. And we have a field-based sales force of about 70 salespeople with management. We also have an MSL, medical science liaison, team who's highly educated at the PhD level, and interact with KOLs [ on ] solicited requests there by the KOLs. And we also have a full payer team in the field. And they've been very successful in penetrating the market. We've got about 1/3 of the physicians in the marketplace now, Chris, having written WAKIX at least once, with the vast majority indicating they intend to keep prescribing the product time and time again and are getting very good feedback from their patients. And we're hearing great feedback from those physicians who have tried it. And that was despite the headwinds of the pandemic which have limited but not totally eliminated face-to-face interaction with physicians. And what we're seeing now, Chris, is that's starting to open up. [ As ] vaccinations increase in the U.S., our reps are getting more face-to-face interactions. And we know that that's directly correlated with a better return on investment for each interaction, especially when educating them about a new potential therapy.

Yes, yes, okay. Well, I mean -- but that's extremely encouraging, that over 1/3 thus far of physicians have written a script and obviously continue to do so, so certainly something to be proud of for you guys to achieve thus far...

Well, thank you, Chris. And we also reported 2,800 average patients on the product in Q1, and there's obviously a larger number than that actually with prescriptions in their hand. That's an average number across a quarter, as it directly ties to revenue, for you when you're planning but a really good patient penetration as well. But we have to say we've only just begun to scratch the surface with 72,000 diagnosed patients and a high level of unmet need. [ When the ] pandemic lifts, we have a great opportunity to help significantly more patients moving forward.

Very good, okay. So I guess like maybe thinking a little bit more about the feedback that you've been receiving. I think you said you've been getting good feedback thus far. Is there any features in particular that they like, any features that you think you want to work more on to change the perception? Anything like that?

I think the features that -- well, I know that the features that we're hearing strong positive feedback on are certainly the nonscheduled status of WAKIX.

Makes sense.

It's the only product that's not scheduled by the DEA, as you know, Chris, the first and only in the U.S. for these patients. And that's a big deal. That's a big deal for parents of patients. That's a big deal for spouses and caregivers [ for ] patients and for patients themselves. And believe it or not, those physicians in the space are comfortable certainly writing scheduled medications. If they don't -- if they have an option not to, that's a nice option. They're not getting tracked, when they do that, in a federal database, et cetera, so it's a nice option for physicians to start patients out, especially on a therapy like that. And we recently surveyed physicians who have a mix of experience. Some have prescribed WAKIX. Some had yet not have the opportunity to do so but are considering it. We had 50 physicians in that survey that wrapped up during Q1, and we reported some of those results in our earnings call. So we had 84% of those health care providers stated there was a significant unmet need in the narcolepsy market and that they see WAKIX as a unique and differentiated treatment option for their patients. And about 95% actually said WAKIX is effective for excessive daytime sleepiness, and 90% said effective for cataplexy. And approximately 95 -- 90% of those who said they intend to continue to prescribe WAKIX -- at the same level or to increase that prescribing in the future, especially since that cataplexy indication was granted in October of last year, yes.

That's fantastic. I mean I -- that's -- I don't know. I mean you would probably know much better than I, but those feel like on the high end of the spectrum in terms of responses that one might expect.

No, they really are. And look, it is 50 doctors. It's not 5,000 doctors. It's representative of the sample of physicians that we call on, though. It's projectable to that sample of physicians that we call. And it is representative of all the anecdotal feedback we get in our call center and from patients writing letters into the office. In fact, we surveyed patients as well, 30 patients who all had recent experience with WAKIX. 75% that -- they said that patient interest in general in the patient community is strong and becoming even stronger towards WAKIX as the word spreads. And 80% say they were likely to tell other people living with narcolepsy about the therapy, "Hey, check it out. It's a new option." And 90% with experience on the drug said that they'd expect to continue taking WAKIX therapy. It's made a difference for them, so very, very good, Chris. And I think, as COVID lifts, we can get the message out more and more to help give people a new therapy option.

Excellent. Okay, all right. So then you touched on this a little bit, but I'd -- maybe I'll just set the stage a little bit in that we on kind of the sell side and, I guess, investors hear about, well, you have a couple different kinds of treatment centers or treatment settings, maybe narcolepsy specialists or "KOLs", maybe at academic centers. Maybe you have more community-type physicians that maybe are just getting into treating more narcolepsy. So I guess, is that right? Do you hear those same kind of phenotypes? Do you see others? And how are you kind of seeing the WAKIX utilization in those different settings thus far?

Yes, Chris. Let's talk about where we're sourcing prescriptions from it. And I think, both the HCP and patient community, it's quite interesting. And WAKIX -- and what we heard even in the development of the drug and early market research and what we're hearing in these surveys and feedback after is that WAKIX offers broad clinical utility. And in summary on that physician survey, that's what the doctors said. They said they see this as an appropriate therapy, WAKIX, for the "vast majority" of their patient population with narcolepsy. So what do we mean by broad clinical utility? Well, what we're seeing from HCPs is all specialties that tend to treat narcolepsy are comfortable prescribing WAKIX for their patient population. We call on a mix of -- and [ they're sleep specialties in an aggregate ], Chris, right, by default. They're diagnosing and treating the vast majority of narcolepsy patients in the U.S., 8,000 physician cohort that does 90% or more of that diagnosis and treatment in the U.S. market. And they're made up of neurologists, psychiatrists, a little over 1,500 or so pulmonologists who run the sleep labs for diagnostic and some primary care physicians who act as neuropsych-like in their community because they are the specialists there. And they're sleep specialty designated or they act that way. And we're sourcing from across that full spectrum. We're also sourcing from physicians who traditionally prescribe Xyrem and are signed up for their REMS program with Jazz as well as those who aren't signed up for the REMS or don't intend to prescribe Xyrem. And physicians who would rather not prescribe a scheduled medication, including those in primary care, are comfortable trying WAKIX because of the nonscheduled status and the nice tolerability profile the product offers. And it's simple to prescribe and utilize. From a patient perspective, WAKIX can be safely added to standard of care. There's PK drug-drug interaction data right in our package label for the wake-promoting agents and for Xyrem. WAKIX can safely be added onto the standard-of-care polypharmacy mixes that are given to patients today to treat narcolepsy, and it's being done so quite frequently. A majority of patients in this space are on multiple meds. A physician can safely add WAKIX right on top and then, over time, if appropriate, wean the patients off of stimulants or other medications that they may be on. And that's what we're seeing.

Yes, okay. Well, that's yes. I mean that's very cool. So the -- and I know that that's one of those things that we'll have to kind of pay attention to moving forward, and I know that I am personally. It's kind of what is the combinatorial and polypharmacy kind of strategy ultimately going to be for these patients? And I would posit that WAKIX should be a very important part of that because, as you pointed out, it's the only one that doesn't have a REMS.

Well, right. I mean certainly Xyrem has REMS. And the others have protocols that need to be followed as a scheduled medication and come with limitations of scheduled medications. I will say all of the medications in the space offer some benefit to patients, Chris, and it's good. And as [ new meds ] enter the market, that's good for this patient population. The different mechanism approach is really nice for a complex disease like narcolepsy. And that's why approaching narcolepsy from a histaminergic perspective with our mechanism of action is nice, synergistic and complementary to the other mechanisms that may come with Xyrem or the other products on the market. So physicians are finding comfort in prescribing these in a polypharmacy environment together. And also very importantly, there's 2 basic groups of patients here, Chris. Roughly 72,000 or so diagnosed in the U.S., but roughly 1/3 of those patients, and you and I have discussed this before, had given up on therapy before.

Yes.

They're diagnosed, but they're going untreated. And we're starting to source from that pool of patients for WAKIX because our profile is unlike the profile elements that they didn't like about some of the other therapies they might have been on. And they can now get it first line if they have type 1 narcolepsy; [ and have ] one of those plans who started to drop or limit those step edits, 1 or 2 generics in the majority of plans, because it's type 1. They might be able to get our product even first line now as they come back to therapy, some of them for the first time in a long time. Good to see.

Got it, yes. Well, that -- I mean yes. That's extremely encouraging, like that their experience was so bad that they had to stop and now they're willing to come back. So I mean certainly very convincing. All right. So then like one of the things that we've -- I guess there's 2 topics, I'd say, moving forward, if we were look -- to look on the 3- to 5-year horizon in the narcolepsy space. One of them is that generic sodium oxybate should become available, I think, an authorized generic first and then several others afterwards; and then maybe some potentially new therapies. So I guess, does that -- how do you see that affecting WAKIX moving forward?

No, it's a great question, Chris. And as I said earlier -- and we mean this. We're not just saying this at Harmony. The more therapies from different mechanisms in this space, the better it is for patients who really need therapeutic options here. It's a tough disease. I can't imagine having to live with a disease like that for my entire life without a cure right now. And so it's really good to see that the focus on this space -- and actually there's 165,000 patients or so thought to be living with narcolepsy or be susceptible to it in the U.S. Less than half are diagnosed today. So as companies like Harmony add our share of voice to others like Jazz who have been there a long time and helping, we're growing the market together. And this gets to your question about competition. Our first full year of launch with WAKIX in 2020, the market grew, as you know, Chris, 16% approximately in value. I believe -- and I won't speak for other companies in this space, but I do believe, it's my recollection that Xyrem, Sunosi and WAKIX all gained patients and prescriptions throughout the course of 2020. And why is that? The drugs offered benefit. WAKIX is certainly unique and clearly differentiated versus other therapy options, but patients need options here. So the market is growing. And as new entrants come in the future, Chris, we see that as a positive for continued growth. There's so much upside here from a diagnosis standpoint and a polypharmacy standpoint in this marketplace. I think there's a lot of room for growth for everyone that comes onboard. And by that time, by the time the orexins, for instance, might come to market [indiscernible] for WAKIX, right, patients will have cycled through WAKIX and other products. There'll be a pool of patients that want something different, plenty of room for everyone. And we don't see that as an impediment. We see it as actually a growth engine when Xyrem goes generic, you mentioned that, [ in ] 2023 and then probably more toward '26 and beyond, when price pressure increases in that generic field, will be my personal perspective on it, but even then, that might be an advantage for products like WAKIX because if the price comes down for a gold standard therapy...

It's easier to combo it, right...