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

Good afternoon, everyone, and welcome to the Harmony Biosciences Company Presentation. My name is Ethan Taylor. I'm the associate in JPMorgan's Healthcare Investment Banking Group. It is my pleasure to introduce Jeffrey Dayno, Interim CEO and Chief Medical Officer. Upon conclusion of Jeffrey's presentation, we will hold a brief Q&A session to discuss topics that are top of mind among investors. So with that, Jeff, please take it away.

Thank you, Ethan, for the kind introduction. And I also want to thank JPMorgan for the opportunity to have Harmony share a bit of their story at the conference this year. Good afternoon, everyone, and thank you for attending this session, especially late on a Wednesday afternoon at JPM to hear a little bit about Harmony Biosciences. So as a reminder, I'll be making forward-looking statements today. Please refer to Harmony's SEC filings and our corporate website for more details. So who are we? Who is Harmony Biosciences? We are a pharmaceutical company that specializes in developing and commercializing innovative therapies for patients living with rare neurologic diseases. At Harmony, patients are at the heart of everything we do. And because of that, we believe that, where empathy and innovation meet a better life can begin for these patients. So let me walk you through our journey now that we're 5 years in. Harmony was founded in 2017 when Jeff Aronin and the team at Paragon Biosciences secured the U.S. license for WAKIX from Bioprojet. Bioprojet, a French company, that's the innovator of the Pitolisant molecule. This was a vision that Jeff and the team had at Paragon in terms of an opportunity to find another solution for an area of unmet need in neurologic disorders. The Paragon team had a long history of that, and that's just one example. And then with that, actually, Jeff Aronin, the Chairman of the Board of Harmony Biosciences is in the audience with us today. Jeff, thank you for being here on behalf of Harmony. We appreciate all your support. 2018 was what we referred to as the year of the NDA. When we went sort of got busy preparing the NDA and along the way, received both Fast Track and Breakthrough Therapy designation for Pitolisant, and then filed the NDA in December of that year. 2019 was the year of the NDA approval and launch of WAKIX. We received the FDA approval for EDS in Narcolepsy in August, and then launched WAKIX to the market in November of that year. In addition, we started opening up INDs for our life cycle management programs based on pitolisant, based on the mechanism of action in different rare neurologic disorders. The first was with Prader-Willi syndrome and the IND opened for PWS in 2019. 2020 was the first full year of commercialization for WAKIX. And that year, we achieved $160 million WAKIX net sales in the first year post launch. In addition, we received the cataplexy indication for narcolepsy in October of that year. We initiated the Prader-Willi syndrome Phase II proof-of-concept trial, opened another IND in our life cycle management programs in Myotonic Dystrophy. 2021 was a year of execution and focus, both on the commercial side as well as in clinical development. We initiated a Phase II proof-of-concept trial in patients with Type 1 Myotonic Dystrophy or DM1. And then we were very excited to open our IND for another development program in patients with Idiopathic Hypersomnia or IH. That year in September of 2021, WAKIX was added to the American Academy of Sleep Medicine treatment guidelines and received a strong recommendation for both the treatment of EDS and cataplexy in narcolepsy. The importance of that is the last time those guidelines were issued was in 2007. And 2022, last year, that was actually the best year yet for Harmony, and I'll come back to that in a minute and give you some of those highlights. So with that journey, where are we today? So Harmony is a rapidly growing emerging leader in the neurology arena. This is based on the strong launch of WAKIX in Narcolepsy and the very strong business fundamentals. With that, we see it as a potential $1 billion plus net revenue opportunity via narcolepsy in additional indications. Harmony is also a fully integrated pharmaceutical company with established infrastructure and really proven capabilities and deep talent across the organization, clinical development, regulatory affairs and a really strong commercial team. We also were very patient-centric approach. We have a very experienced innovative patient advocacy team that sort of complements the work that we do. Our life cycle management programs for Pitolisant, and you'll see multiple Phase II programs are underway with the goal of expanding the utility of Pitolisant beyond narcolepsy. We're also very proud of our culture and the award-winning team and across the organization with deep expertise in orphan rare neurology. So at Harmony, we'd like to keep things simple and we refer to our growth strategy, sort of as a 3-pillar growth strategy and very simple and straightforward. Pillar #1, to optimize the WAKIX commercial performance; Pillar #2, expand the clinical utility of Pitolisant; and pillar #3 related to our activity in business development to acquire new assets and build out the pipeline. Those activities are led by our Chief Strategy Officer, Andrew Serafin, who is also in the audience with us today. I want to thank Andrew for his leadership in that part of the organization. So turning back to 2022, I mean, what we feel is sort of our best year-to-date and provide some highlights based on the 3 pillars. So on the commercial side, strong commercial performance for WAKIX with net revenue of $310 million as of Q3 last year, which represents a 45% growth year-on-year. Continued growth in the average number of patients on WAKIX as of Q3 last year at 4,600. In clinical development and in Pillar 2, we initiated a Phase III registrational trial called the INTUNE study in patients with IH and we're very excited about that program. We also generated positive signals from the Phase II proof-of-concept study in patients with Prader-Willi. And we announced those last November based on that program. From Pillar 3, we signed a new agreement with our partner, Bioprojet, for up to two new pitolisant based assets, then to extend our leadership position in narcolepsy beyond WAKIX. Looking ahead to this year, 2023, and we're really excited about the prospects of where Harmony is and what we hope to achieve. And we're focused on continued strong commercial execution for WAKIX as we've been doing since the launch, continue to grow the average number of patients on WAKIX for narcolepsy. We expect to surpass $1 billion in cumulative net revenue just 3 years after the launch. Continue patient enrollment in Phase III in the registrational INTUNE study, and we're seeing very good momentum there with a lot of interest from both the physician community and the patient community. We'll engage with the FDA in an end of Phase II meeting from the Prader-Willi program with plans to advance that development program. And we anticipate top line data from the Phase II proof-of-concept study in DM1 or Type 1 Myotonic Dystrophy. Pillar 3 will look to acquire new assets to expand the portfolio beyond WAKIX. Our focus is on orphan rare neurological diseases and also possibly considering other neurological disorders as adjacencies in larger patient populations. And we'll continue to strengthen our financial position. So with that, let me provide some more color on each of these 3 pillars, starting with optimizing WAKIX commercial performance. So for those of you not as familiar with narcolepsy, just sort of a brief primer, if you will, from a medical perspective. This is a rare chronic debilitating neurological disorder. And there's about 165,000 Americans living with narcolepsy. EDS or excessive daytime sleepiness is the primary symptom of this disorder, and there are 2 different types. There's Type 1 narcolepsy that has EDS with cataplexy and Type 2 EDS without cataplexy. Cataplexy is the sudden loss of muscle tone, usually due to a strong emotional response. But more importantly, it's a really difficult disease to live with lifelong chronically. You see at the bottom here, 86% of people living with narcolepsy reported that it is a life-changing disorder. So what about the faces of people living with narcolepsy that you see here. Again, at Harmony, we're very patient focused. We engage with the patient communities, along with -- even in our development programs and actively involved. So you see in terms of the impact reflected in some of the quotes from these patients. "Narcolepsy severely impacts not only me, but my family and friends. It's a daily battle fought over a lifetime." "My biggest accomplishment every day is just getting out of bed." And then "Narcolepsy is an ugly life stealing disease - it makes you feel useless and labeled as lazy and unmotivated. I couldn't hold a job or drive a car for years." And you see in the last quote this theme about loss, "I lost my best friend, my spouse and my daughter, for a number of years, I couldn't even function." And as a neurologist by training, who practiced for 12 years in clinical academic medicine, taking care of patients with narcolepsy, incredible burden on these patients day-to-day and difficulty functioning, and that you see that reflected in some of these quotes. So before WAKIX was approved that Harmony, we wanted to understand sort of the status of the market and where things were. There had been no new treatments in over a decade for patients dealing with narcolepsy. So based on market research that we conducted in 2018, what we saw was over 90% of patients expressed frustration with narcolepsy medications. 94% believe they needed new treatment options. And this was actually supported by a chart review study that was conducted at Rush University and presented in 2019 and that showed 75% of patients reported having residual symptoms that disrupted their life even while on the current medications of the day. So I think the takeaway from this is that, this was a dissatisfied market with continued unmet medical need. So into this market, we launched WAKIX in November 2019 with its unique and differentiated product profile. And it's really based on the attributes of this product and the uniqueness of this molecule. It's a first-in-class molecule with a novel mechanism of action. It's referred to as a histamine 3 receptor antagonist/inverse agonist, and the first one approved by the FDA. What that means is, it increases histamine levels in the brain and histamine coming out of the hypothalamus of the brain is a major wake-promoting neurotransmitter. And based on its mechanism, there is no evidence of abuse liability. So it's the first and only FDA-approved treatment for narcolepsy that's not scheduled as a controlled substance. It's also not a stimulant. Traditional stimulants were commonly used for patients with narcolepsy. And this is different. There's no evidence of tolerance or withdrawal symptoms that you see with those agents. WAKIX has broad clinical utility. It can be used as monotherapy or administered concomitantly with other narcolepsy treatments. There's actually data in the label showing no significant PK drug-drug interaction with commonly used treatments for narcolepsy, including modafinil and sodium oxybate. And importantly, it's a once-daily oral tablet administered in the morning upon wakening, which means that it's easy for patients to take and easy for physicians to prescribe. With that product profile, we've demonstrated a strong track record of performance with WAKIX in the market. With $780 million of cumulative net revenue, just 3 years since launch. And this is based on the underlying strong business fundamentals that you see here with over 80% of U.S. lives covered with formulary access. We continue to show growth in both the depth and breadth of our prescriber base, which results in the 4,600 average number of patients on WAKIX. And I think this is a reflection of our focus and really strong commercial execution, and that's headed up by our Chief Commercial Officer, Jeffrey Dierks and his really strong teams in sales and marketing and market access underpinning all of this. And with that, we're confident in WAKIX becoming a potential $1 billion-plus franchise via narcolepsy and additional indications. What about looking forward? We see a significant market opportunity going forward as well, just in narcolepsy. And that's because of the patient dynamics. And you see on this slide on the right, the current WAKIX patient opportunity. And what you see here is there are 44,000, 45,000 patients that are currently diagnosed and treated, usually with polypharmacy, multiple agents and another 28,000, 30,000 that are diagnosed, but not currently on medications for one reason or another. And then the balance are patients living with narcolepsy, but not yet diagnosed based on epidemiologic data. So even if the market didn't grow for an orphan rare disorder, there's a sizable patient population and with WAKIX broad clinical utility, we see that opportunity continuing with this franchise. Turning to Pillar 2 and expand the clinical utility of pitolisant. This is our pipeline slide. I'll walk you through it and then hit some highlights of these programs. So our partner, Bioprojet conducted a pediatric narcolepsy trial and submitted the data to the EMA, and we anticipate an EMA decision this quarter. As I mentioned, we're very excited about our program in IH and our Phase III registrational trial, which we initiated last April. Prader-Willi syndrome, our top line data that read out last year and positive signals on EDS. And we're in the clinic with DM1 in a Phase II proof-of-concept study, and we anticipate top line data from that study later this year. I mentioned the new pitolisant based assets that we announced last year, our third quarter, the agreement with our partner, Bioprojet, intended to extend the narcolepsy franchise with new formulations of pitolisant. These programs are early in development, and we'll provide an update on those later this year. And then turning to our other assets, HBS-102, an early-stage asset actually preclinical. That is a melanin concentrating hormone receptor 1 antagonist, and that is a mouthful. But basically, what that is MCH neurons are in the hypothalamus actually right near the histamine neurons, the hypocretin orexin neurons, and they mediate several different functions, including feeding behavior, metabolic function, actually sleep-wake state stability. So with that and with the profile, we are now doing a preclinical proof-of-concept study in a knockout mouse model of Prader-Willi working with Tom Scammell, in his lab at Harvard with HBS-102. So let me share some highlights of our key clinical programs. And what I'd like to do is just share some of the scientific rationale, the market opportunities as well as other aspects of these programs, the unmet medical need. I'll get back to IH, but starting with Prader-Willi. It's a rare pediatric neurodevelopmental disorder and it's mainly due to hypothalamic dysfunction. And in the hypothalamus, you have the sleep-wake switch, and you also have the hunger-satiety switch. So disorders of those 2 switches, that's why hunger-sitiety results in the hyperphagia, the cardinal symptom of PWS. But we've also seen, as we learned more about this disorder, that sleep-wake switch is disturbed, so those patients have excessive daytime sleepiness and are sleepy and have behavioral consequences. There's evidence of decreased hypocretin levels in some of these patients. And that's the overlay with narcolepsy Type 1, NT1, is the prototypical disorder of decreased orexin, hypocretin levels. When there's less hypocretin orexin, histamine comes in as a major player, as an important neurotransmitter. And a lot of the circuitry -- there's sort of parallel circuitry, both of those, both hypocretin orexin and histamine stimulate wakefulness. . There's about 15,000 to 20,000 patients in the U.S. with Prader-Willi and more than half of them experienced EDS with significant impact on daily functioning. And there are no approved treatments for EDS in patients with Prader-Willi. Turning to Myotonic Dystrophy, another rare neurologic disorder, multisystem disease. And the main symptoms are myotonia, which is difficulty in muscles relaxing and progressive muscle weakness. But in addition to those, the two most common non-muscular symptoms are EDS and actually fatigue in up to 90% of patients. And based on some work that was done by Chad Heatwole at the University of Rochester and inventories of patients with DM1, the impact of EDS and fatigue is as great, if not greater, than the muscular symptoms in this patient population. There is also evidence of decreased hypocretin levels. Some of the scientific rationale and the mechanism-based approach that we're taking in our LCM programs. The epidemiology is interesting. There's about 160,000 people in the U.S. living with a genetic defect for DM1. And of those, only about 50% are symptomatic, which is sort of based on the genetic load. It's a disorder of trinucleotide repeat. And then of those symptomatic, only about 50% are diagnosed. So U.S. claims data suggests about 40,000 patients diagnosed in the U.S. with DM1, and there are no approved treatments for this condition. Turning back to Idiopathic Hypersomnia, a program that we're very excited about. So this is another central disorder of hypersomnolence like narcolepsy, although it's phenotypically different. So there's irresistible need for patients to sleep and they have long sleep times, but the sleep is non-refreshing. They could sleep over 10 hours, 12, 14 hours a night and still not feel rested. And that leads to another symptom that's unique compared to narcolepsy of what's referred to as sleep inertia, sometimes called sleep drunkenness, difficulty awakening from sleep. And all that feeds into another symptom commonly referred by patients as sort of the brain fog, the mental cloudiness. And this market opportunity is also significant. First of all, the unmet medical need, there's only 1 FDA approved treatment for IH. What's used are the traditional agents that are used in narcolepsy, stimulants, methylphenidate, modafinil. But the efficacy of these agents have never been demonstrated. And if patients are on it, most of them still have residual symptoms. So we're investigating pitolisant for IH with its unique mechanism of action, again, working through histamine to improve wakefulness. And if approved, the opportunity could be significant given the synergy with our existing commercial infrastructure. The physicians who treat narcolepsy, they're the same physicians who are treating patients with IH. Those patients with IH are in the same offices that our sales force is calling on. So really good sort of commercial synergy if we're successful with this new indication. Turning to the PWS Phase II proof-of-concept study and the top line data that we shared last November, just sort of a summary of that. We saw a clinically meaningful reduction in EDS in all age groups, so we looked at children, adolescents and adults in this small trial, proof-of-concept trial. And we saw that in both the low-dose and high-dose treatment groups. . But as you'll see on the left-hand of the slide, there was a high responder rate for pitolisant compared to placebo, and we also saw evidence of a dose response favoring the higher dose. Importantly, in this patient population, pitolisant was well tolerated with the overall safety profile consistent with the known safety profile of pitolisant. And lastly, turning to Pillar 3 and our BD activity to acquire new assets. So as I mentioned, we have a dedicated business development team headed up by Andrew Serafin and deep internal capabilities to conduct diligence across clinical development, regulatory, our commercial analytics group as well as launch, experience and execution. It's our intent to acquire a portfolio of orphan rare neurology assets or potentially adjacencies and other neurologic conditions. This is meant by design to leverage our existing expertise and infrastructure and the synergies with the current WAKIX position and our footprint in the market. We're looking across all stages of development, early stage and late stage in our assessment of what's out there in terms of BD opportunities. And we have the ability to do this based on our strong financial position. With $316 million in cash, cash equivalents and investments as of Q3 last year, we have access to an additional $100 million with Blackstone -- our Blackstone debt facility. We're profitable, we're cash generating and we have access to the capital markets. So with that, it's our goal at Harmony to evolve into a leading pharmaceutical company focused on developing and commercializing innovative therapies for patients living with rare neurological diseases who have unmet medical needs. So to sum up, to sort of conclude, as we look ahead to this year, we're focused on continued strong commercial execution for WAKIX, increasing average number of patients, and we expect to surpass $1 billion in cumulative net revenue since launch. Focus on our Phase III registrational trial in IH, the Phase III INTUNE study with really good momentum there, engaging with FDA to advance our Prader-Willi development program, and we anticipate top line data readout from our Phase II proof-of-concept study in DM1. We'll look to acquire new assets so we can expand the portfolio beyond WAKIX, focus on orphan rare neurological disorders. And obviously, we'll continue to strengthen our financial position. So with that, thank you for your attention, and I'll turn things back over to Ethan. I want to thank JPMorgan again for the opportunity to present at the conference this year, and we'll be happy to take questions.

So first of all, Jeff, congrats on appointment to your new role as CEO. How has the first week been?

It's been great. It's been great. I'm out here at JPM. No, it's been really great a chance to sort of see people face-to-face and have the opportunity to share the Harmony story with everyone. And I've been at Harmony since the beginning. It's a really unique opportunity. I'm looking at our Chairman, Jeff Aronin. I'm a neurologist by training the science, got my attention from the start. And from there, we build a company and with deep expertise and experience. And I think what's important is the success of Harmony to date really reflects the talent and the strength across the organization. It's not a reflection of any one individual. It's a team effort. And that's the way we built the company. So that's where we are. Our focus is on execution, and I'll go back and make the rounds around the organization. And our underlying business fundamentals are strong. Execute on our 3-pillar growth strategy and look forward to that opportunity. I'm excited.

Great. And speaking of growth, you've had such tremendous success with WAKIX over the past several years. How should we think about growth in 2023?

Well, I think that I highlighted some of that potential in terms of WAKIX for narcolepsy. Based on the patient dynamic and the size of the market, even though it's an orphan rare disorder with about 75,000 patients diagnosed, some treated, some not currently on therapy. So even if the market doesn't grow, we have that opportunity in front of us. And I guess with that, I'll turn it over to Sandip, reflective in some of the financials.

Yes, sure. I mean, look, we're not -- at this point, we're buying guidance, forward-looking guidance at this stage, something that obviously we'll seriously consider. But what I'd say is we had a very strong quarter in quarter 3, which was the last quarter that we reported our sales. We had $117 million of sales there. We have about 4,600 patients average on therapy. And as Jeff mentioned, we have 75,000 patients market opportunity here. So really still see the potential to grow the business for many more years to come to a point where we certainly believe at this stage that this -- that WAKIX is $1 billion-plus opportunity in narcolepsy, another indication.

Great. And it seems like IH is the next near-term opportunity for the company. Can you expand a bit more about that opportunity and the ongoing INTUNE study?

Yes. So as I mentioned, IH and we're really excited about that. So that's our most advanced clinical development program, and we're seeing really good momentum. And as I said, adjacency in narcolepsy, sort of the natural follow-on, the overlay of our commercial footprint, and the sizable market opportunity with about 40,000 patients diagnosed. So we continue to be focused and execute in the Phase III registrational trial, and we'll provide updates on that as the year goes along.

Got it.

I mean the only thing I would probably add, we do see this as a very distinct opportunity, right? Patients that have IH are usually excluded from being narcoleptic patients. So there's a separate in a code for IH patients. So we believe this is actually an incremental opportunity for us as a business, if successful, we'd be able to capitalize on that.

Great. Yes. And along those lines, you highlighted in your presentation the possibility of synergies between the IH launch. So how should we think about the uptake of that?