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

All right. Good afternoon, and welcome to the Raymond James Human Health Innovation Conference. My name is Daniil Gataulin, one of the members of the biotech research team here at Raymond James. It's my pleasure to introduce John Jacobs, President and Chief Executive Officer; and Sandip Kapadia, Chief Financial Officer, who are joining us for a fireside chat from Harmony Biosciences. John and Sandip, welcome, and thank you for joining.

Thank you, Daniil. Appreciate it. Glad to be here with you.

Thank you. Before we dive deeper into your programs, it would be helpful for those of us new to the story to hear an overview of your company and your team. Can you spend a few minutes to tell us about Harmony and perhaps touch on the core technologies or key areas of expertise?

I'd be glad to do so, Daniil. Thank you for the question. And thank you, everyone else, who's joining us for your time to learn a bit more about Harmony. Well, Harmony is a rare disease company, and we're focused on the development of unique and differentiated rare disease therapies for patients with unmet need, especially focused in the neurology central nervous system arena. And our first product offering is WAKIX, which is currently indicated for excessive daytime sleepiness and/or cataplexy in adults with narcolepsy. And our vision at Harmony is to become a leading neurology-focused rare disease company with multiple products approved across the portfolio beyond WAKIX, and for WAKIX itself multiple indications, so we can fully break out the utility of that product for patients who live with rare neurological disorders. And Daniil, you asked me about our core technologies and areas of expertise for Harmony. First and foremost is our people, our employees and our company, and we're a highly focused organization designed to develop and commercialize treatments for patients with rare neurological disorders and especially, as I said earlier, for those who have significant unmet medical need. And our team, we built the company from the ground up. I was about the fourth person hired at Harmony, and the office you see behind me was an empty shell. We built it all out from scratch, and we did so with people who have years of experience in developing and launching drugs for patients in this particular arena. So we may be a newer company, but we're absolutely not a new leadership team. We're deeply experienced in this arena. And part of what makes Harmony special as well, Daniil, is our culture. We were a Great Place to Work certified, which is an organization that Fortune magazine uses as well to recognize positive corporate cultures. In fact, Fortune magazine recognized our company, Harmony, in 2020 as a Top 10 biotech organization to work for based on our positive culture for employees. From a core technology perspective, our first product, as I said earlier, is WAKIX. WAKIX is a first-in-class molecule. It's very differentiated. It has a novel MOA that works through histamine with unique attributes, and we believe WAKIX has the potential to succeed in and expand the existing multibillion-dollar narcolepsy market. We also view WAKIX as a portfolio and a product opportunity due to that unique MOA, Daniil, and believe it has broad utility across a potential myriad of rare neurological disorders. Hopefully, that's helpful.

Yes. Thank you, John. That was a great overview, and I'm sure we'll touch on some of the points that you mentioned here. And I guess with that, let's move on to WAKIX in the narcolepsy program. So there are several products that are being used in patients with narcolepsy. So where do you see WAKIX fitting into the narcolepsy treatment paradigm? And you mentioned about WAKIX being differentiated, so maybe you can expand a little bit on that.

Yes, Daniil. Narcolepsy is a chronic condition, as you know, and it has significant unmet need. And most patients who are taking treatment for narcolepsy, they're on polypharmacy, so multiple medications. And very importantly, about 3 out of 4 of those patients who are being treated still have residual symptoms that can negatively impact their lives, significantly impact their lives. And about 90% of those patients indicate they're unhappy, though they may be getting some benefit from current medication, unhappy overall with therapy and are looking for something more. So WAKIX is not only one of the first new therapies introduced in a very long while for these patients but is clearly differentiated from other FDA-approved therapies in the market. First, our unique MOA, WAKIX works through histamine like no other therapy. So it's the first histaminergic product indicated to help patients with narcolepsy. It's also, importantly, the only FDA-approved therapy that's nonscheduled for patients and physicians. So potentially nonaddictive, nonscheduled by the DEA. And it's also a simple once-a-day tablet. No need for reconstitution. No sodium. No REMS program. You can combine WAKIX with alcohol and safely added in addition to WPAs, wake-promoting agents, like Nuvigil or Provigil or Xyrem. And importantly, WAKIX is not a stimulant. So where it's being positioned by physicians is really broadly across the narcolepsy spectrum, broadly prescribed and utilized and added to existing regimens or as a monotherapy.

Got it. Got it. That's very helpful. And in terms of the narcolepsy market itself, how large is that opportunity? And what is the strategy at Harmony for capturing the market share with both current and future competition?

Yes. No, good question, Daniil. And the narcolepsy market was valued at over $2 billion in 2020, and it continues to grow, and you have roughly 72,000 patients in the United States that are diagnosed with this disease. Now in fact, in 2020, the market grew in value approximately 16%, and that was during our first year of promotion and product -- first full year of promotion and product availability for WAKIX. And certainly, WAKIX' unique MOA and clearly differentiated profile are already helping us to capture significant market share. In fact, during 2020, our first year of launch, we achieved $160 million in net sales. And that was despite, Daniil, a global pandemic that was unprecedented and unexpected, and that pandemic hit in the first few months of product availability and launch for WAKIX. In Q1 2021, in fact, we announced that we had about 2,800 patients on average taking our product, and that approximately 1/3 of the target universe of physicians who diagnose and treat these patients that we call on with our sales team had already prescribed the product, at least once since launch. And the vast majority of those say that they'll continue to do so and even prescribe more and broadly for their patients who are living with narcolepsy. And finally, we fully expect to see continued momentum in 2021 and beyond, driven by the ongoing strong underlying demand for this unique therapy option that we brought to the U.S. market.

Got it. And in terms of diagnosis, do you see or does your research show that there are a lot of undiagnosed patients or patients that are diagnosed but are not being treated?

Well, there's thought to be just over 165,000 patients or so living with narcolepsy in the United States. That's what the epi data suggests, Daniil, but only 72,000 are diagnosed. And roughly 1/3 of those who are diagnosed are not currently getting drug therapy, and roughly 2/3 are under drug therapy. We're seeing WAKIX get sourced across both of those buckets of patients. Those who'd given up on therapy in the past or refuse therapy in the past, we're sourcing patients from that pool who want to try WAKIX. We're also sourcing patients from the treated pool. As I said earlier, 3 out of 4 tend to have residual symptoms that negatively impact their life, and about 90% are unhappy overall. With therapy, though, they may be getting some benefit from that therapy, of course, and so WAKIX can be added right on top of those regimens for the most part, quite safely.

Got it. I understand. All right. So WAKIX was initially approved in excess of daytime sleepiness, or EDS, in August 2019, and it expanded to cataplexy in October of 2020. How important is it to have WAKIX approved for both of these indications for narcolepsy patients?

It's really important to be approved for both. And we were thrilled with the FDA's decision to grant that cataplexy indication based on the original data that we filed, Daniil, because we know that the product works effectively to help many patients that may be suffering with cataplexy. And the reason it's important is WAKIX would only be the second product now in the U.S. market indicated for both EDS and cataplexy in patients with narcolepsy. And secondly, from a payer perspective, from a managed care access perspective to drug, what we saw was many payers -- almost immediately and continuing today, many payers started to make the decision to reduce or even, in some cases, eliminate the 1 or 2 generic step edits that would usually proceed a branded therapy in this space for WAKIX, if the patient had type 1 narcolepsy, which, as you know, means they also have cataplexy involved as a key symptom.

Understand. All right. So 2020, you mentioned, was the full year that WAKIX was on the market. And you mentioned that in the full year, it did $160 million in sales. So of course, we know that the pandemic has been happening in the U.S. since spring of last year. How do you think the launch was affected by the pandemic? And perhaps, if you can tell us what changes are you seeing now that the pandemic is getting more or less under controlled, at least here in the United States.

No, great question, Daniil. And I'll say, first of all, we're very pleased with our performance in 2020 despite the global pandemic, and we exceeded analyst consensus for the year and each quarter so far during our launch and for the full year of 2020. And we really saw strong underlying demand and momentum all throughout the year despite the pandemic that continued into 2021. In fact, Q1 '21, we reported our first profitable quarter in our company's history. We're very proud of that. And that represented our fifth consecutive quarter of growth since launch despite having faced the headwinds of an ongoing pandemic and, frankly, the typical Q1 headwinds, Daniil, faced by our industry due to insurance reset, which puts pressure on gross to net and early product demand in the early stages of Q1 for most companies. And despite that, we were able to demonstrate that growth. And look, you asked about what we see maybe as the pandemic starts to lift as well as the second part of your question. We've not provided projections for 2021, but what I can say is that we fully expect strong underlying demand for WAKIX to continue based on the tremendous unmet need of these patients who are living with narcolepsy and the strong profile that we're offering with our first product offering here in the U.S., and we expect that throughout the year. And we're increasingly optimistic that as COVID lifts, we have the opportunity for more efficient market penetration as more face-to-face interactions occur between our sales team and physicians. And frankly, more patients get back out there to see their doctors and visit their physicians and their offices.

And I have 1 more question on the narcolepsy program before we move into the rest of the pipeline, and that is about the feedback. So the question is, what kind of feedback do you hear from both the patients and the health care providers on WAKIX?

Well, great question, and we recently completed market research with both physicians and patients who had experience with WAKIX and shared some of those highlights in our Q1 earnings call. And just a couple of those highlights: one, over 80% of HCP state that there's significant unmet need in narcolepsy. They see it with their patients despite current therapies prior to the launch of WAKIX. And the majority of those physicians with WAKIX experience who were surveyed, they said, Daniil, that they would continue prescribing our product or to prescribe it more -- even more often in the future. And we also surveyed patients, all of whom had experience in trying WAKIX now since the launch. And the vast majority of those patients on WAKIX said they intended to continue taking the product and also, not only that, but to tell other narcolepsy patients about the product and their positive experience. So really good, positive feedback from both HCPs and patients that were here.

That's good to hear, and I think that's all that I have for the narcolepsy program, and we can spend some time on the rest of your pipeline.

Let's do that.

So you referred in your introduction the WAKIX as a portfolio and a product. Can you explain in more detail what you mean by that and outline some of the indications that can be pursued with WAKIX?

Absolutely. Yes. So look, we view WAKIX, as I said earlier, as a portfolio and a product opportunity, Daniil, and we do because of its unique MOA that works through the histamine system and the CNS and the hypothalamus. And WAKIX affords, we believe, because of that, the potential for broad utility beyond narcolepsy and sleep into a multitude of rare orphan neurological disorders. And we've built our clinical strategy to highlight that and to leverage that opportunity, to develop WAKIX for conditions beyond narcolepsy, where its unique histaminergic MOA has the potential to address key unmet needs in specific rare neurological conditions. And where we're starting, to your question, is first in Prader-Willi syndrome. We're already in the clinic there. And then by the end of this month, we intend to start our Phase II clinical trial in myotonic dystrophy type 1. Now we also intend to acquire additional rare neurological disease assets, different products beyond WAKIX, to expand our portfolio and have great confidence in the ability of our clinical and regulatory team to develop these future assets once we acquire them successfully.

Okay. So you mentioned Prader-Willi or PWS. Can you describe in a little bit more detail what it is -- comment on some of the main symptoms, perhaps how common it is? And what is the rationale for using WAKIX in patients with PWS?

No. Absolutely. And look, this is a tough disease. I mean Prader-Willi syndrome is a rare genetic multisystem disease, and it's characterized by hypothalamic dysfunction and decreased orexin levels in some patients. And there were believed to be between 10,000 and 15,000 patients in the U.S. that have this disease, PWS. And more than half of them have excessive daytime sleepiness, similar to narcolepsy patients in that regard, right, as a symptom due to sleep/wake state instability of central origin, among other factors. And we will seek an indication for EDS, excessive daytime sleepiness, in this program. Other symptoms do include behavioral issues, cognitive impairment, which could be related to or exacerbated by EDS. And there are currently no approved treatments for EDS in these patients. And you asked me why we believe EDS -- and maybe not -- we get often asked, why not hyperphagia or some of those other symptoms of the disease. Well, very interestingly, orexin depletion is the similar disease mechanism that leads to EDS in narcolepsy is found in patients with Prader-Willi syndrome. So a large percentage of patients with Prader-Willi syndrome have depletion of orexin neurons in the hypothalamus, which is the same mechanistic reason that narcolepsy patients are believed to suffer EDS. And that's why we believe WAKIX has reasonable odds of success here in patients with orexin completion because by up-regulating histamine, that can address EDS in patients with orexin depletion. Now we're also studying as secondary endpoints, things like cognition and fatigue in these patients, to see what we can learn and if WAKIX can help there as well.

I see. That makes sense. And I believe you initiated a Phase II trial in PWS patients last year. When should we expect to see the data? And can you also help us gauge the expectations for the readout?

Yes, yes. So we're expecting first half of next year for the Phase II data readout, and we're on track with the trial right now to do that, so.

Okay. Got it. Another indication that you mentioned that you're pursuing is EDS in patients with myotonic dystrophy, or DM, which is perhaps underappreciated as this is not what we normally think about when we discuss DM. Can you talk about the DM opportunity and rationale for using WAKIX there?

Yes. Let's do that. And as you know, myotonic dystrophy, or DM, is a rare genetic multisystem disease. And it's characterized by the hallmark symptoms, to your point on you don't usually think about EDS, right? The hallmark symptoms are myotonia and progressive muscle weakness. And it's a devastating disease for the unfortunate folks who have to live with this during their life, right? And there are 2 forms, Daniil, type 1 and 2, DM1 and 2. And DM1 is much more common. Genetic testing suggests that about 160,000 Americans may be living with a genetic defect for DM1. And of those, about half are symptomatic, and of those half are [ tight nodes ]. So you wind up with about 40,000 patients today in the U.S. diagnosed. There is a genetic test available, though. It's being offered at birth, and so people are optimistic that diagnosis rates will continue. And there are currently, shockingly and sadly, no currently approved treatments at all to help patients with any symptom of myotonic dystrophy. And so now let's address your question about excessive daytime sleepiness. Though muscle weakness, myotonia and progressive muscle weakness are the cardinal symptoms of the disease, the #1 nonmuscular symptom is excessive daytime sleepiness. In fact, 80% to 90% of patients with DM1, the more common version of myotonic dystrophy, have that. And they have it as a core symptom and often noted as a debilitating symptom that they need and want relief from. Now there's not much relief from current standard of care used off-label there, and that's in the medical literature. And again, for the same reason, we feel that WAKIX could work in patients with Prader-Willi syndrome that orexin depletion. It's also thought there there's medical evidence in the literature suggesting that patients with myotonic dystrophy will also suffer from orexin depletion. And so that's one of the core factors in the disease ideology that we believe could be underpinning that symptom of excessive daytime sleepiness. So that's why we believe that common threat across all 3 diseases: narcolepsy, Prader-Willi and myotonic dystrophy, that common thread that leads to the symptom of EDS at least is thought to be, to some degree, caused by that orexin depletion. And that's why histamine up-regulation through WAKIX, we believe, has an opportunity to help these patients. Our IND is open. We're on track to start that clinical program by the end of this month, and I have to tell you the patient community is very excited to have a company finally starting a clinical trial with a therapy that might be able to help them at least with one of the core symptoms of their disease.

Got it. So by the end of this month, so you only have about 9 days or so...

That's right, Daniil. That's correct. That is correct, and we're on track.

And in terms of that trial, can you provide some details perhaps about the trial design and the expectations for it?

Yes. Absolutely. Look, it's a randomized, double-blind, placebo-controlled parallel group study, about 135 patients. Age range would be 18 to 65. There'll be approximately 20-or-so U.S. clinical trial sites. And the primary objective is to evaluate the safety and efficacy of WAKIX or pitolisant compared with placebo in treating EDS, as I said earlier, in patients with myotonic dystrophy type 1. And then secondary objectives include the assessment of the impact of pitolisant on fatigue, cognitive function, patient assessment of overall disease burden, clinician assessment of overall disease severity and long-term safety and effectiveness in patients with DM1. We expect data readout there second half of 2022.

Got it. Okay. And you also mentioned earlier about other rare CNS disorders. Can you comment a little bit on that, which ones -- perhaps, which indications do you plan on pursuing with either WAKIX or you mentioned acquiring out -- potential other programs?

Absolutely. Look, we're working on a pediatric narcolepsy program right now as we speak, and we're considering other disorders to pursue with WAKIX. And that includes idiopathic hypersomnia or IH. And that would be, Daniil, as you can imagine, a natural fit for a product like WAKIX due to its mechanism of action and proven effectiveness in narcolepsy. So we're still deciding. Once we make that decision, we will announce it, but we do fully intend to pursue at least one, if not more, additional indications beyond that pediatric narcolepsy that we're already working on, starting with DM and PWS. And we'll announce accordingly when that decision is made.

Got it. I understand. And finally, to conclude the pipeline discussion, if you could summarize for all us here the important milestones or catalysts that we should expect in the next half year to a year, that would be helpful.

Yes. I think if we look out about a year or so, it's certainly that Phase II data readout for PWS, our first clinical trial beyond narcolepsy with WAKIX, that's first half of '22. And then as we get into the second half of next year, we're excited to have the data readout in myotonic dystrophy type 1. We also expect continued strong performance for the launch of WAKIX over the course of the next year as well as we're working on 3 pillars of growth strategy for Harmony, Daniil. We've announced that publicly. And just for a moment, I'll quickly share with the audience that Pillar 1 of growth for our company beyond just growth with WAKIX. Pillar 1 is certainly where we started with WAKIX, its continued performance on our launch and what we've seen 5 consecutive quarters of growth, as I said, our first profitable quarter. Q1 this year, I think our team has demonstrated that despite the headwinds of an unprecedented and unfortunate global pandemic, we've been able to execute because we have the right team, an excellent product and a market, unfortunately, where for the patients who live with narcolepsy, tremendous unmet need. But WAKIX aligns nicely with their needs, and we expect continued strong demand for our product in the future. Pillar 2 is what we just finished chatting about for a while, Daniil, right, which is the pipeline for WAKIX [ day cells ], expanding the utility of this unique histaminergic asset beyond narcolepsy into conditions like Prader-Willi, myotonic dystrophy and potentially others such as, for example, potentially idiopathic hypersomnia and others in the future. And last but not least, Pillar 3, we will not be a one-product company forever, Daniil. And it's certainly our intention, and we're starting early now in our company's history, so we can take our time to be thoughtful about BD acquisition. But we do intend to acquire additional assets beyond WAKIX to build a robust portfolio of rare orphan neurological assets to help patients who live with these diseases. And that would include concepts and approaches like partnering, in-licensing or outright acquisition. And we can take products from any stage of clinical development forward. So when we do make a deal, we look forward to announcing that, but we're not promising any time lines or making projections on that today, certainly.

Excellent. Thank you, John. That was a very helpful overview. And I know you have just a few minutes left, and I think I'm done asking questions on the pipeline, but I would like to also touch a little bit about finances. And...

Let's do that.

So you mentioned that the importance of Q1, the milestone of Q1, you -- with your profitability. And although you're not providing any guidance, do you expect to continue to be profitable going forward?

Yes. So maybe Sandip Kapadia, our CFO, can take that question.

Sure. Yes. Look, we're pleased with the profitable WAKIX franchise, which obviously gives us the ability to allocate resources appropriately to continue to support the launch as well as advance our pipeline. What we have stated is we expect to be profitable for the year as we continue to see quarter-over-quarter sales growth while maintaining a fairly disciplined approach in terms of managing our overall investments. We have -- more broadly speaking, we have cash, cash equivalents of $141 million. On the balance sheet, we're in a strong position. We believe we have appropriate resources to run our base business as well as fund many of the LCM programs that we just spoke about a few minutes ago. So hopefully, that provides a bit of color in terms of our thinking going forward.

Yes. That's excellent. And also, in terms of future strategy and then the company developing further, do you -- are you looking actively to form partnerships with other companies?

Sure. I think it's a very important part of our strategy for Pillar 3, as John mentioned. We're certainly open to partnering, co-development, co-promotion opportunities, in-licensing or really, yes, new assets. I think the key thing to note is we're going to stay focused in our core areas, which is rare neurological diseases. We're going to leverage our current infrastructure and the competencies that Harmony has. We're not going to -- we're going to ensure not to exponentially grow our overall cost structure. And as John mentioned, we're going to start early in our history and be thoughtful in how we do this. And we also have a very dedicated team that's also focused on this. So stay tuned.

Got it.

Well said, Sandip. Thank you.

Thank you. And I think with that, we're coming up on the time, but thank you very much for joining us. It was great hearing you at our conference. Thank you.

Thank you.

Thank you, Daniil. Have a great day. And thank you, Sandip. And thank you, everyone, who's joined us for the presentation today. Appreciate it.

Bye now.

Thank you.