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

Welcome, everyone. I'm [ Sangibita ] with JPMorgan Healthcare, and we are pleased to have with us Dr. Jeffrey Dayno, President and CEO of Harmony Biosciences. For logistic purposes, please reserve any questions you may have until the end of the presentation. With that, I will let Jeffrey take over.

Thank you, [ Sangibita ]. Good afternoon, everyone, and thank you for attending our session later on a Wednesday afternoon. Appreciate your interest in Harmony. And on behalf of the Harmony team, our thanks to JPMorgan for the invitation to present again this year. Our forward-looking statements, please refer to SEC filings for the latest information. So for those of you newer to the story, excited to share with you today, Harmony Biosciences and who we are. So we are now 260 members strong industry veterans, and we specialize in developing and commercializing innovative treatments for patients living with rare neurological diseases and other disorders with unmet medical needs. We're 7 years into our journey, our journey of growth. And we've been busy, and that's why this slide looks so busy. Let me just share a few highlights along our past 7 years. We were established in October 2017 based on securing an exclusive license, U.S. license for WAKIX from our partner, Bioprojet, the innovator of WAKIX or Pitolisant. And I'm pleased actually the CEO of Bioprojet Jeanne-Marie Lecomte is here with us today, and we've had a great partnership over the years. Thank you, Jeanne-Marie. From there, we basically opened the IND in 2018. I refer to 2018 as the year of the NDA. And we also received both Fast Track and Breakthrough Therapy designation for Pitolisant that year. 2019 was our first approval, the FDA approval of WAKIX for the treatment of excessive daytime sleepiness in narcolepsy in August of 2019. And then we launched WAKIX into the market in November that year. In 2020, we received our second indication for the treatment of cataplexy in adult patients with narcolepsy. We also started working on our life cycle management programs and opening INDs for follow-on indications. In 2021, WAKIX was added to the American Academy of Sleep Medicine treatment guidelines for central disorders of hypersomnolence, receiving a strong recommendation for the treatment of both excessive daytime sleepiness or EDS and cataplexy. The importance of that, the only other treatments approved for both of the indications where sodium oxybate, the oxybate and then WAKIX got the approval for both indications. In 2022, we reported top line positive signals from a Phase II proof-of-concept study in patients with Prader-Willi syndrome, a rare nerve developmental disorder demonstrating improvement and clinically relevant improvement in both excessive daytime sleepiness and behavioral symptoms. And then turning to 2023. Let me share with you some of the accomplishments last year that we achieved. So as we reported the full year 2023 WAKIX net revenue of $582 million, representing 33% growth year-over-year, ending the year at 6,150 average number of patients on WAKIX. We were also really active advancing our clinical development programs and expanding and building out our pipeline. We announced the acquisition of Zynerba Pharmaceuticals last October and brought in ZYN002 and an interesting innovative synthetic cannabidiol in Phase III for Fragile X syndrome and another Phase III ready program in a related disorder of 22q deletion syndrome. We reported our top line results from our Phase III INTUNE study in IH. We advanced our Prader-Willi syndrome program and are ready to initiate a pivotal Phase III study later this quarter. And then last month, late last year, another Phase II proof-of-concept study in another rare neurological disorder, type 1 myotonic dystrophy, we reported positive signals from this proof-of-concept study an improvement in both excessive daytime sleepiness and fatigue, 2 key symptoms in that patient population in addition to the neuromuscular symptoms. Also, last month, we submitted an sNDA for pediatric narcolepsy. And importantly, we're working with our partner, Bioprojet, on next-gen new formulations of Pitolisant and I'll provide a little more color on that. So we are profitable cash generating the end of Q3 last year, $438 million on the balance sheet. And it also initiated a share repurchase program, repurchased 3.2 million shares at a cost of $100 million over the course of last year, and we have a remaining authorization for another $150 million. So that brings us to Harmony today 2024. So we're a profitable and rapidly growing CNS-focused company. Obviously, strong commercial success for WAKIX in adult narcolepsy. I shared that with you in terms of the performance last year. And importantly, the potential of $1 billion plus net revenue in adult narcolepsy alone, and we're well on our way there. We have an expanding late-stage pipeline with multiple Phase III assets. And if successful in those, that represents another about 100,000 diagnosed patient opportunity, an additional $1 billion revenue opportunity there. The new next-gen nupatolecent-based formulations are designed to generate new IP. So taking the franchise now from 2030, potentially out beyond 2040 and beyond. So our priorities for this year are really to continue to drive the commercial success and the strong growth for wages and narcolepsy. And as we guided to $700 million to $720 million net revenue for the year, growing to about 7,000 patients by year-end and advancing the clinical development programs. We look forward to reporting the initial pharmacokinetic or PK data on the next-gen new Pitolisant formulations in the first half of this year. We're driving patient enrollment in the Phase III pivotal RECONNECT trial of ZYN002 in Fragile X syndrome. We are initiating the Phase III TEMPO study in patients with Prader-Willi syndrome later this quarter. We submitted a request to the FDA to meet to discuss our program in idiopathic hypersomnia, or IH, and we anticipate meeting with the agency later this quarter, and then we'll provide an update to the market on a path forward. And then we're completing the review of the full data set after we reported top line readout from the DM1 Phase II proof-of-concept study and strong and robust signals that we saw an improvement in ES and fatigue. We'll assess that opportunity going forward with regards to how we advance the program. And we're looking in terms of disciplined capital allocation to maximize shareholder value. That's been part of our culture at Harmony from the beginning, actively pursuing business development to expand our pipeline and diversify our portfolio, and we'll continue to be opportunistic on the execution of the share repurchase program as well. So in our first 4 years in the market, this slide shows you, we've demonstrated a strong track record of commercial performance leading up to how we guided this year, as I said, $700 million to $720 million in WAKIX annual net revenue. This is based on really solid underlying business fundamentals driving our growth. And you see this continued growth while we've been in the market and just to highlight a few things. In second quarter last year, we had our highest number of new patient starts in year 4 in an orphan rare launch and commercialization, which is not typical. And then last quarter, we had our highest quarter of net sales in our history of $168 million. We have more unique prescribers of WAKIX than sodium oxybate, obviously, a leader in the class, in the field that's been in the market for over 20 years. And despite the entrance of generic oxybate products a once-nightly formulation, we've maintained strong market access coverage and about 84% of covered lives. And this slide demonstrates, I think, one of the reasons for the growth of WAKIX in adult narcolepsy and it speaks to a differentiated product profile and also a first-in-class molecule with a novel mechanism of action coming from the innovation of Bioprojet and where the principal scientist Jean-Charles Schwartz, is the one who discovered the histamine 3 receptor in the brain, which is the target mechanism of action for WAKIX. But we also, from the beginning, when we were established as a company, we listen to patients. We deeply listened. And as you see on the left of this slide, to the unmet needs in terms of the current treatment options back before we launched. And then if you look to the right in terms of the product profile, you see it's well aligned. And leading off with probably the strongest differentiator, it's the first and only FDA product approved for narcolepsy that's not scheduled as a controlled substance. And I'll share with you the relevance of that in a few minutes. It's approved for both excessive daytime sleepiness and cataplexy. And importantly, it fits into patients' lives. It's taken once daily in the morning upon awakening as opposed to some of the other dosing regimens for some of the other products to treat narcolepsy. It can be used as monotherapy, but more often in this polypharmacy market, where most patients run multiple agents, it can be easily added on patients on a traditional stimulant on a wake-promoting agent such as modafinil easily added on without stopping that treatment to treat the residual symptoms of either EDS or cataplexy. So although this is a rare disease, it's a sizable market opportunity and continues to be. It's about 80,000 patients in the U.S. diagnosed with narcolepsy, which is the current WAKIX opportunity. And even if it doesn't grow, the market doesn't grow, we keep tapping into that potential. In 2022 is estimated to be the narcolepsy market about $2.5 billion, expected to grow at about $5 billion by 2030. And we have a unique product profile tapping into the market. So this slide really describes why this is happening, why we're confident in WAKIX being a $1 billion-plus opportunity in terms of the broad clinical utility of this product profile. So we're calling on 9,000 HCPs that really covers almost 100% of the narcolepsy market. 4,000 of these HCPs are enrolled in an oxybate REMS. They are the KOLs, they're the early adopters. They have more patients in their clinic came on early. But we continue to see depth of prescribing in that segment of HCPs. But in addition, and based on strong commercial analytics, there's another 5,000 HCPs that we call on that do not participate in an oxybate REMS program and can't write any of the choices now, the different oxybate products. They don't like scheduled products. They don't have as many patients in their clinic, but it's still a sizable opportunity. And we continue to grow in the breadth of prescribing across that segment of HCPs. So last October, we conducted market research to take the pulse of what's happening in the HCP community and the results here, 100% of the HCPs that had experience with WAKIX stated that they would write the same or increased prescribing over the next 6 months. So their clinical experience, obviously favorable and intend to continue prescribing new patients when they come in. In those that were not experienced prescribing WAKIX over 40% said that they intend to start prescribing over the next 6 months. And as I highlighted before, one of the most unique features driving this outcome was the nonscheduled status of WAKIX compared to the other options in the market, Schedule II stimulants, Schedule III oxybate products and Schedule IV wake-promoting agents. So turning to our development pipeline. This is a snapshot of our pipeline. I think the takeaway continues to grow, and we've started to diversify it with the acquisition of ZYN002 or the cannabidiol gel. I'm going to walk you through the highlights of these programs and where we are and what's to come. So as I mentioned, we continue to advance the pipeline programs and make good progress and representing about over 100,000 diagnosed patient opportunity of successful. Starting with idiopathic hypersomnia, we announced our top line data. And importantly, the proof point was in the open-label treatment phase, a high response rate of 83% of patients with a significant reduction, a robust improvement in EDS as measured by the Epworth Sleepiness Scale. So during the randomized withdrawal phase did not hit on the primary outcome, but the totality of the evidence and the data, we feel that there's a strong case to be made the overall benefit risk proposition. And there's only one approved product for IH in the market being Xywav. So as I mentioned, we submitted a meeting request and we'll be meeting with the agency later this quarter. Prader-Willi syndrome, clinically meaningful improvements seen in both EDS and behavioral symptoms in the Phase II proof-of-concept study, good interactions with the agency agreement on a design of a pivotal Phase III trial that we are on track to initiate later this quarter. Myotonic dystrophy, as I said, in December, top line data readout, strong signals in not just EDS, but fatigue, which is an important sort of symptom in many neurologic disorders, which opens up another path of investigation for Pitolisant or importantly, the next-generation next-gen Pitolisant formulation. So we continue to review all the data and make decisions about how to optimize that program. Pediatric narcolepsy based on the good work of our partner Bioprojet, they conducted a pivotal Phase III trial in patients with pediatric patients with Know Narcolepsy. It was a positive study, and it led to the approval of WAKIX in the EU last March for EDS and cataplexy down to age 6. We've worked with our partner, submitted an SNDA late last year, and we'll be engaging with the agency on the potential pediatric indication. Switching gears to how do we extend this franchise of a very innovative molecule with a novel mechanism of action and a successful product in the market and how can we optimize the life cycle? So we've been working with our partner, Bioprojet on new formulations to achieve that. And just very, at high level. So I'm going to start with formulation to on this slide. This is a very opportunistic approach, fast-to-market strategy during the WAKIX life cycle, modify the formulation, some opportunity with new data for clinical differentiation in an abbreviated development program in a bioequivalence approach in Know Narcolepsy and come to market during the WAKIX life cycle. We're in the clinic and first half this year, we'll have data readout. But more importantly, in terms of the value driver is this formulation one on this slide. And this is really the opportunity to extend the franchise beyond 2030 out beyond 2040 with a truly novel enhanced formulation of Pitolisant to optimize the PK profile, generate new IP and then look at higher dosage strengths, which can improve upon the efficacy signal in a product that has a very well-tolerated and safety profile. This is a full development program to come to market at the end of the WAKIX life cycle and then really to explore not just narcolepsy indication but additional indications. And one example is our program in DM1, where we could pivot that to a new formulation and then have a lot more runway and a lot more value, if successful there. And again, we'll have pilot PK looking at several different formulations to identify the optimal formulation and take that forward. Turning to our acquisition of Zynerba Pharmaceuticals last October, really excited about this opportunity. So potential new therapy for rare neuropsychiatric disorders. So with regards to our experience in orphan rare neuro, this is an adjacency, a very good strategic fit, favorable deal terms and bringing in 2 late-stage products. So what ZYN002? It's the first and only pharmaceutically manufactured, synthetic cannabidiol, the void of THC, so has the opportunity to be a nonscheduled product like WAKIX's. We view this similar to Pitolisant as another portfolio and a product opportunity with multiple indications. And as I said, it's in Phase III for Fragile X syndrome and a Phase III ready program in 22Q. This is a patent-protected permeation-enhance gel for transdermal delivery. So offering benefit over oral cannabidiol products, mainly around the GI tolerability challenges of those oral products. Large safety database for an orphan rare disorder. Over 700 patients that Zynerba had been investigating in the various trials, some of whom have been on the product for over 6 years. And this has patent protection through at least 2040 for the treatment of Fragile X syndrome. So as we diversify, let me just some highlights of these conditions, namely, as you see, both of them represent 80,000 patient market diagnosed patient market opportunity, each one, which is the same size as the diagnosed narcolepsy market opportunity. So Fragile X a rare neuro psychiatric disorder, which is the leading known cause of inherited intellectual disability and autism spectrum disorder. It's caused by mutation, the FMR1 gene, and that causes dysregulation dysfunction of the endocannabinoid system, which is where the mechanistic fit with CBD working at CB1 receptors is the rationale for this treatment approach. It results in cognitive and social behavioral symptoms and the focus on the behavioral symptoms and improvement in the Phase III program, and there are no FDA-approved treatments. It's a similar opportunity on the right in 22q, another rare genetic disorder. There is a midline anatomic abnormalities but mainly the behavioral symptoms and learning disabilities, early onset in this patient population. This is on the heels of a Phase II trial that Zynerba conducted open-label data, but positive signals that they started working with FDA. We have stepped in and discussing the trial design and primary outcomes for a single pivotal Phase III trial in that opportunity. So as I mentioned before, part of the fabric of Harmony has always been disciplined capital allocation, looking to maximize shareholder value, summarized on this slide. So our profitability and cash generation gives us the financial strength and flexibility how to deploy the capital. And it's not either or and fortunate to be in this position. So first, business development, a high priority for us to drive long-term growth and value and also to build out the pipeline. We have a dedicated business development team that's been at the meeting. It's been very busy meeting with lots of different parties as we are active in the space and looking to really grow the pipeline. Our focus is on rare neurologic diseases, neuropsych disorders, adjacencies with unmet medical needs. Our preference, given our current profile is late-stage assets, mid- to late stage. But we look at all stages and for the right opportunity, would consider an earlier-stage asset, something potentially on market or more transformational. So we look at all of them. Return of capital. As I mentioned, the share repurchase program last year, 3.2 million shares, $100 million with remaining authorization of $150 million in that program. And we'll take an opportunistic approach of how to maximize shareholder value. And again, the takeaway message is it's not either or, but we have the financial strength and the ability to execute on both of these strategies. So with that, I think just in closing, looking at Harmony in 2024, I think the takeaway is that we continue to be a growth story. Growth in our core business of WAKIX in adult narcolepsy advancing and diversifying our pipeline and growing those programs towards new indications and then actively pursuing business development to expand the pipeline, diversify the portfolio and obviously continued opportunistic execution on the share repurchase program. We're excited for these opportunities, and I'm glad I had the opportunity to share that with you. And with that, thank you for your attention and your interest in Harmony. I'll now introduce our CFO, Sandip Kapadia and Chief Medical Officer, Kumar Budur to join me for the Q&A. Thank you.

Thank you, Jeffrey. Maybe I'll start off with a few questions. What would be some of the key milestones that we should look forward to in 2024?

So, I think as I mentioned, the key milestones starting off with the next-gen new formulations of Pitolisant with the opportunity of extending the Pitolisant franchise as something that we're looking forward to and excited about. Also initiation of a Prader-Willi Phase III program there. And another important event and milestone for that. We have the meeting with the FDA around the IH development program, important readout there. And I think also the SNDA for pediatric narcolepsy that we'll be engaging with the agency on.

Great, just going back to the different formulations for Pitolisant. So what could we expect in terms of expansion opportunities there?

Sure. Kumar, would you like to answer that?

Yes, so I hope everyone is able to hear me. Thank you for the question. Yes, we have been working very closely with our partner, Bioprojet on the development of the next-gen formulations. Good news is we have made a lot of progress, and both of these formulations are in the clinic, and we anticipate data within the first half of this year. With the first formulation, it's really a fast-to-market strategy to have one more option for patients, adult patients with narcolepsy. This is an abbreviated development program, a modified formulation, utilizing 505(b)(2) pathway. But the real opportunity is with the next formulation, which is an enhanced formulation of Pitolisant with an opportunity to go to a higher dose trend. This provides us an opportunity to have a new IP, and therefore, a long runway and gives us an opportunity to pursue certain indications that we may not be able to pursue because of limited patent runway with WAKIX. For example, myotonic dystrophy. We announced top line data last month, very pleased with the strong signals in excessive data and sleepiness and fatigue. And we'll also look at exploring other indications potentially like fatigue in narcolepsy, which is an indication with high unmet need.

Great, and then in terms of time to market, what time line are you looking at for the new formulation to be available?

The first formulation will be within the life cycle of WAKIX. So this is an additional opportunity for patients, other patients with narcolepsy. With the second formulation, we anticipate it to be towards the end of life cycle of WAKIX.

Great, in terms of DM1, you briefly touched on it during the presentation. Could you maybe highlight the next steps for the program?

Yes, sure. I mean myotonic dystrophy, as you know, 40,000 patients a disease with high unmet need. Whenever people think about myotonic dystrophy, they almost always think about the myotonia, that is inability to relax the models. But what is important is these patients have excessive data and sleepiness and fatigue. In fact, 80% of the patients have excessive data and sleepiness and fatigue. And clearly, they mentioned that these 2 symptoms are the symptoms that adversely impact their life. From the Phase II study perspective, as we mentioned earlier, really excited to see that Pitolisant improved both excessive data and sleepiness and fatigue. We are still evaluating the data. We just reported the top line. The other important aspect is the safety profile of Pitolisant in myotonic dystrophy, despite the fact that these patients have significant comorbidities. The safety profile of Pitolisant was consistent with the established safety profile of Pitolisant. At the appropriate time, we will interact with the regulatory agency. But also, as I mentioned earlier, we might devote this program towards one of the next gen Pitolisant formulation.

Great, and then one last question maybe on the pipeline would be, you did mention that there is a pending FDA meeting request for IH. What is your level of confidence in finding a path forward for that program?