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

Good morning. My name is Todd, and I will be your conference operator today. At this time, I would like to welcome everyone to Harmony Biosciences Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I will now turn the call over to Brennan Doyle, Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us today as we review Harmony Biosciences Second Quarter 2024 financial results and provide a business update. Before we start, I encourage everyone to go to the Investors section of our website to find the materials that accompany our discussion today, including a reconciliation of our GAAP to non-GAAP financial measures. At this stage in our life cycle, we believe non-GAAP financial results better represent the underlying business performance. Our speakers today on the call are Dr. Jeff Dayno, President and CEO, Jeffrey Dierks, Chief Commercial Officer; Dr. Kumar Budur, Chief Medical and Scientific Officer; and Sandip Kapadia, Chief Financial Officer and Chief Administrative Officer. As a reminder, we will be making forward-looking statements today, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties. Our actual results may differ materially, and we undertake no obligation to update these statements even if circumstances change. We encourage you to consult the risk factors referenced in our SEC filings for additional detail. I would now like to turn the call over to Dr. Jeffrey. Dayno Jeff?

Thank you, Brennan, and thanks, everyone, for joining our conference call today. Q2 was another very productive quarter for the team at Harmony, delivering another quarter of strong revenue growth for WAKIX and continued advancement in our late-stage clinical development programs, highlighted by the significant progress made on our next-generation pitolisant high-dose or pitolisant HD development program, formerly referred to as NG2. During our Q1 earnings call, we shared the initial pilot PK data for the pitolisant gastro-resistant or pitolisant GR program, formerly referred to as NG1, along with the development plan as the first part of our pitolisant life cycle management activities. This quarter, we are excited to provide an update on our pitolisant HD program with a targeted PDUFA date in 2028 and a provisional patent filed out to 2044, providing us the opportunity to extend the pitolisant franchise to the mid-2040s with durable long-term revenue generation? First, let me provide some color regarding the reasons why we are excited about advancing this program because of the unmet medical need in the narcolepsy community that pitolisant HD is designed to address. Later in the call, Kumar will share some of the initial pilot PK data and a few other details from the pitolisant HD development program. WAKIX offers a strong overall benefit risk profile for patients living with narcolepsy, has brought a meaningful enhancement to the market as the first and only nonscheduled treatment indicated for both excessive daytime sleepiness or EDS and cataplexy and has been extremely successful in the market. But given the nature of narcolepsy as a chronic neurological disorder with difficult-to-treat symptoms, there still remain unmet needs and opportunities for continued innovation. For pitolisant GR and HD, the innovation is more focused on the continued unmet needs in the narcolepsy market and what we can do to address those needs? First, we know that greater than 75% of narcolepsy patients experience residual symptoms while on treatment and could benefit from a treatment with greater efficacy. This is why we are pursuing a high-dose pitolisant formulation that also has an optimized PK profile to drive greater efficacy to address this need in the market. Second, about 60% of patients living with narcolepsy experience fatigue, which is a different symptom than EDS and a common symptom in chronic neurological diseases. With a higher dose of pitolisant and based on the positive signals that we saw in both EDS and fatigue with pitolisant in our Phase II proof-of-concept study in type 1 myotonic dystrophy or DM1, we plan to pursue a fatigue indication for pitolisant HD in patients with narcolepsy as well as other neurological diseases such as DM1? Next, as we explained for our pitolisant GR program, a driving force behind the gastro-resistant coating is the fact that about 90% of patients with narcolepsy experience GI symptoms such as nausea, dyspepsia and abdominal discomfort. There is a mechanistic rationale for this, especially in patients with NT1 or type 1 narcolepsy related to the orexin deficiency since orexin has effects on the vagus nerve in the brain, which is the central controller of gut motility. In addition to the underlying disease mechanism, one out of 5 patients on narcolepsy medications experience GI side effects related to the common narcolepsy treatments that are used. WAKIX is well tolerated with a low incidence of nausea, but the gastro-resistant coating feature is designed to address the predisposition to GI symptoms in patients with narcolepsy as well as the GI tolerability issues patients have experienced with other narcolepsy treatments? Taken together, the higher dose, optimized PK profile, gastro-resistant feature and our plan to pursue additional indications would address significant unmet needs in patients with narcolepsy and position pitolisant HD as a meaningfully differentiated product and result in a differentiated label compared to WAKIX. With a provisional patent filed and potential IP out to 2044 and a target PDUFA date in 2028, this gives us an opportunity to introduce a differentiated product prior to WAKIX LOE in 2030 to extend the pitolisant franchise through the mid-2040s and drive durable long-term revenue generation. Our commercial team conducted preliminary market research based on the target product profile for pitolisant HD. And initial results suggest that the features I described to you would be of real interest to patients, be viewed as offering meaningful benefits by health care professionals, and perceived as clinically superior compared to WAKIX by payers? To round out our sleep/wake franchise, we were very pleased with the FDA approval of WAKIX for EDS in pediatric narcolepsy patients ages 6 years and older, and we're excited to launch this new indication into the market on July 1. As a reminder, the pediatric narcolepsy data along with data from the ongoing Phase III TEMPO study in Prader-Willi syndrome keeps us on track toward obtaining pediatric exclusivity and an additional 6 months of regulatory protection on the back end of our longest patent, which would take us to September 2030? We are on track to submit an sNDA for idiopathic hypersomnia later this year, and we're very excited about our potential best-in-class orexin-2 agonist program for TPM-1116. We are working with our partner, Bioprojet, and are on track towards filing an IND mid-2025 and then initiating first-in-human studies second half of 2025? Beyond our strong sleep/wake franchise, we are also advancing late-stage programs in our other 2 franchises, neurobehavioral and rare epilepsy. Harmony has expanded its pipeline and diversified its portfolio that now includes 3 orphan/rare CNS franchises, each one of which has peak sales opportunities of $1 billion to $2 billion? I want to highlight that our pipeline now has 8 assets advancing across 13 development programs, and 3 of them are in Phase III with a fourth Phase III trial to begin later this year. Importantly, this pipeline is poised to deliver at least one new product or indication launch each year over the next 5 years? This, along with pitolisant HD PDUFA date targeted for 2028, translates into the potential for significant durable long-term value creation out beyond 2040. Kumar will be providing you updates on our development programs later in the call. While we advance our pipeline programs, we remain focused on execution across the company and delivered another solid quarter with WAKIX net revenue of $172.8 million, representing 29% growth year-over-year. With these strong results, we are once again reiterating our 2024 net revenue guidance of $700 million to $720 million and remain confident that WAKIX represents a $1 billion-plus market opportunity in narcolepsy alone, and we are well on our way? What reinforces our confidence in the durability of the WAKIX franchise is the news we shared earlier this morning regarding the WAKIX polymorph patent being upheld once again after the second and final attempt to challenge the patent. Late last week, the U.S. Patent and Trademark Office, or USPTO, issued its final denial of the petition for reexamination of the WAKIX patent, which was filed by a short seller. We have always stood by WAKIX and our intellectual property? This reexamination request represented the second attempt to challenge the WAKIX patent. And in its decision, the USPTO stated and I quote, "This decision is final and non-appealable." We remain very confident in the strength of our patents, the validity of the patent portfolio, and our ability to rigorously enforce the intellectual property rights protecting WAKIX? This bolsters our confidence in the durability of the pitolisant franchise. With a PDUFA date for pitolisant GR in 2026, with a target PDUFA date for pitolisant HD in 2028, the IP for WAKIX out to 2030 and provisional patents filed for pitolisant GR and HD out to 2044, this puts us in a solid position to extend the pitolisant franchise out to the mid-2040s. We also remain active in business development with the goal of building out our pipeline even further. With approximately $434 million in cash, cash equivalents and investments as of June 30, we are in a solid financial position to execute on additional BD opportunities that are consistent with our growth strategy and offer the potential to drive further value in our overall business? Lastly, we look forward to hosting our inaugural Investor Day on October 1 in New York City, where we will have an opportunity to highlight our robust late-stage pipeline and share some new data with you. With that, I will turn the call over to Jeffrey Dierks, our Chief Commercial Officer, for an update on our commercial performance. Jeff?

Thanks, Jeff. We saw another solid quarter of continued commercial progress for WAKIX in the second quarter, highlighted by continued product adoption and growth in our underlying business fundamentals. Net sales for the quarter were $172.8 million, representing 29% growth from the same quarter prior year. The solid net sales performance in Q2 reaffirms our confidence in our net sales guidance of $700 million to $720 million for the full year 2024? We saw continued growth in the average number of patients on WAKIX and in the WAKIX prescriber base, both facilitated by favorable market access as seen on Slide 4 and 5. The average number of patients on WAKIX increased to approximately 6,550 in the second quarter. We're extremely pleased with the sequential increase of approximately 250 patients from what we reported last quarter and the durable growth in year 5 of our rare/orphan commercialization. The growth in average patients in Q2 was in line with our expectations and reaffirms our confidence in our guidance of approximately 7,000 average patients by the end of the year? We also saw the WAKIX prescriber base increase again in the second quarter. We're seeing continued growth in the WAKIX prescriber base beyond the oxybate REMS enrolled health care professionals. And we're approaching 40% penetration in this segment of approximately 5,000 health care professionals at the end of the second quarter. This segment of health care professionals represents an insulated group of prescribers and patients from the oxybate that we continue to tap into each quarter to drive performance. The growth in this segment demonstrates WAKIX is broadening the branded writer segment beyond the oxybates by providing a meaningfully differentiated product profile and one that offers broad clinical utility across the entire narcolepsy-treating health care professional universe? Coupled with the growth we're seeing beyond the oxybate REMS enrolled health care professionals, we continue to see utilization of WAKIX among the approximately 4,000 oxybate REMS enrolled health care professionals, even with the availability of new and generic oxybate options. We're highly penetrated within this prescriber audience and see WAKIX being prescribed to additional narcolepsy patients each quarter in this segment? As we've shared during previous earnings calls, our ability to call on a broad approximately 9,000 narcolepsy-treating health care professional audience allows us to tap into the full diagnosed narcolepsy patient opportunity, giving us confidence in the $1 billion-plus opportunity for WAKIX in narcolepsy? Supporting the growth in patients and prescribers is our favorable market access and formulary coverage for WAKIX. We've seen no changes to the overall broad payer coverage for WAKIX over the past year with the introduction of new branded and generic options, and we believe we are well positioned to support future growth. As we are closing out another solid quarter of performance, we are excited to receive the news of the approval of WAKIX for the treatment of excessive daytime sleepiness in pediatric narcolepsy patients 6 years and older on June 21. WAKIX now represents the first and only nonscheduled treatment option for pediatric narcolepsy patients. And importantly, all narcolepsy patients have EDS. So with this approval, we have the opportunity to access the full diagnosed pediatric narcolepsy patient opportunity? The pediatric narcolepsy opportunity is a small but meaningful opportunity. It represents approximately 5% of the diagnosed narcolepsy opportunity or approximately 4,000 patients. And this approval was contemplated at our full year 2024 net sales guidance. Our commercial team was prepared for this approval and started our now approved outreach the week following the approval? Our field sales team was trained later that week and was out educating health care professionals about the new indication starting July 1. Although it's still early, we are seeing positive indicators from the launch. We're getting very positive feedback and interest from the patient and health care professional community, and payers have begun to add WAKIX for pediatric narcolepsy to their formularies within the first 30 days from approval? In summary, we had another strong quarter of durable growth and performance in net sales, patient adds and growth in prescribers of WAKIX, reaffirming our full year net sales guidance and average patient guidance that we issued earlier this year? With the addition of the pediatric narcolepsy approval for the treatment of EDS coupled with the strong fundamental business in our adult narcolepsy, we're seeing good leading indicators in our underlying business fundamentals. Heading into the third quarter, we anticipate the typical summer seasonality of fewer patient visits, lower foot traffic in offices consistent with previous years, and other chronically managed conditions. And we remain confident in continued growth in average patients and prescribers of WAKIX moving forward. I'm excited about our performance and confidence in WAKIX representing a potential $1 billion-plus opportunity in narcolepsy alone, and we're well on our way? I would like to now turn the call over to our Chief Medical and Scientific Officer, Kumar Budur, to discuss the advancements in our clinical development programs. Kumar?

Thank you, Jeff. Good morning, everyone, and thank you for joining us today. We continue to make great progress in advancing our pipeline programs, several of which are in late-stage development. As Jeff mentioned, we now have 13 different development programs, ranging from preclinical to registrational studies, across 8 different assets and under 3 distinct franchises, focused on rare neuro indications with high unmet medical need? Our full clinical development pipeline is shown on Slide #6. It is important to note that we currently have 3 ongoing Phase III registrational studies that are actively recruiting patients for 3 distinct indications and plan to start our fourth Phase III registration study in patients with LGS during this half of 2024? Starting with our sleep/wake franchise, the pitolisant high dose or pitolisant HD program. It is an enhanced formulation of pitolisant designed to deliver an optimized PK profile, along with a higher-dose GR coating and target unique symptoms. We conducted a pilot PK study with 4 different prototype formulations in a 5-way crossover study comparing the 4 prototype formulations with WAKIX as a reference formulation at a dose strength of 35.6 milligrams, the highest labeled dose for WAKIX? Based on the pilot PK data, we are pleased to advance this program forward. The preliminary data from the prototype formulations showed a meaningful differentiation with at least approximately 20% increase in relative bioavailability and a decrease in the variability compared to WAKIX? Alongside formula work on formulation optimization, we will progress this program and study up to 2x the current highest labeled dose of WAKIX, where we expect to demonstrate a further increase in relative bioavailabilty and decrease in variability in the PK profile. In addition, the GR coating is designed to address the predisposition to GI tolerability issues in patients with narcolepsy and enable to start at the beginning of the therapeutic dose range? Therefore, an optimized PK profile, along with a higher dose, GR coating and targeting unique symptoms such as fatigue in narcolepsy is expected to provide a differentiated label and product profile. We will pursue an abbreviated clinical development program based on the leading-edge work, including establishing safety margins for pitolisant up to 180 milligrams in a repeat-dose study, and qualitative research study in fatigue in narcolepsy that were completed over the past couple of years to support pitolisant HD program. We are targeting a PDUFA date in 2028. Provisional patents have been submitted with a potential for patent protection until 2044? Moving on to pitolisant gastro-resistant, our GR program. We are on track to initiate the dosing optimization study in the fourth quarter of this year and a pivotal bioequivalence study in the first quarter of 2025 with PDUFA in 2026. For the idiopathic hypersomnia, our IH program, we are on track to submit an sNDA in the fourth quarter of this year. The submission will be based on the totality of the data generated from the INTUNE study, including data from the ongoing long-term extension study, which strongly supports pitolisant efficacy in patients with IH? We have also identified other supporting information that will be included in the sNDA, including real-world evidence from pitolisant use in idiopathic hypersomnia in Europe to further strengthen our submission. We are optimistic and remain committed in bringing a new treatment option to patients living with IH? In our neurobehavioral franchise, we remain on track to report top line data from the Phase III RECONNECT registrational trial of ZYN002 in Fragile X syndrome in mid-2025? In the rare epilepsy franchise, patient enrollment continues in the EPX-100 Phase III ARGUS trial for Dravet syndrome with the topline data expected in 2026. We are also preparing to initiate a Phase III study in LGS, another rare and severe development of epileptic encephalopathy with high unmet medical need later this year? In summary, we have made significant progress in advancing our late-stage pipeline across 3 distinct franchises. If successful, these programs could result in at least one new product or indication launch each year over the next 5 years, along with the potential to help hundreds of thousands of patients across all the rare neurological disorders we are investigating? On behalf of Harmony, I would like to thank all the patients and their families who are participating in our clinical trials as well as the clinical investigators and site personnel for their efforts and commitment in helping us to advance our development programs. I'll now turn the call over to our CFO, Sandip Kapadia, for an update on our financial performance. Sandip?

Thank you, Kumar, and good morning, everyone. This morning, we issued our second quarter earnings release and filed our 10-Q, where you'll find the details of our second quarter 2024 financial and operating results. Our financial performance is also shown on Slides 10 through 13. We delivered another quarter of solid financial performance with continued double-digit top line growth, profitability and strong cash generation? Our financial performance and profile positions us well to continue advancing our growth strategy for the remainder of the year and beyond. We reported net revenues of $172.8 million compared to $134.2 million in the prior year quarter, representing a growth of 29%. Performance in the second quarter reflects the continued strong underlying demand for WAKIX. We also reported growth in income and margin. Non-GAAP adjusted net income for the second quarter of 2024 was $60.6 million or $1.05 per diluted share compared to $45.9 million or $0.76 per diluted share in the prior year quarter. We believe non-GAAP adjusted net income better reflects the underlying business performance. Please see our press release for a reconciliation of GAAP to non-GAAP results? With respect to expenses during the second quarter of 2024, we incurred 2 one-time charges related to business development transactions in the quarter, which impacted the R&D expense line. We incurred a $25.5 million charge related to the upfront licensing fee paid as part of the 2024 Bioprojet sublicensing agreement for TPM-1116 and a $17.1 million IP R&D charge related to the acquisition of Epygenix. The IP R&D charge related to Epygenix reflects the upfront payment of $35 million, offset by assets acquired in the transactions primarily composed of the deferred tax of approximately $18 million. We structured both transactions with low upfront and success-driven milestones. This allows us to efficiently use shareholder capital and focus future investments on advancing the development program and reaching value inflection points? We ended the second quarter with $434.1 million of cash, cash equivalents and investments on the balance sheet. The balance reflects continued strong cash generation, which provide us with financial flexibility to execute on business development and to opportunistically return capital to shareholders via our share repurchase program? Looking ahead, we continue to expect quarter-over-quarter growth for the balance of the year. We do expect an impact of summer seasonality we typically experience in the third quarter. We are once again reiterating our net revenue guidance for 2024 of $700 million to $720 million, highlighting our progress towards the $1 billion-plus opportunity in narcolepsy alone. And with that, I'd like to turn the call back to Jeff for his closing remarks. Jeff?

Thank you, Sandip. In closing, I am very proud of the accomplishments that were made by the Harmony team during Q2, including significant progress and continued advancement of the pitolisant HD development program toward an expected PDUFA date in 2028. This, along with the USPTO's final decision upholding the validity of the WAKIX patent after 2 failed attempts to challenge the patent, with IP out to 2030, puts us in a solid position to extend the pitolisant franchise out to the mid-2040s? Continued strong revenue generation for WAKIX with 29% growth year-on-year. The approval and launch of the pediatric narcolepsy indication for WAKIX. Advancement of our Phase III clinical trials for ZYN002 in Fragile X syndrome, EPX-100 in Dravet syndrome, and pitolisant in Prader-Willi syndrome, along with a fourth Phase III trial of EPX-100 on track to initiate later this year in Lennox-Gastaut syndrome. And 2 business development deals, including the in-licensing of the orexin-2 agonist, TPM-1116, with our partner, Bioprojet. And the acquisition of Epygenix Therapeutics that brought in EPX-100 and established an exciting rare epilepsy franchise for Harmony? We remain focused on execution, driven in the advancement of our late-stage pipelines, strategic in our approach to further build out our pipeline, and committed to creating durable long-term value for our shareholders, while bringing innovative treatments to market to help even more patients living with rare neurological diseases and unmet medical needs? This concludes our planned remarks for this morning. Thank you for joining our call, and I will now turn the call back over to the operator to facilitate the Q&A session. Operator, can you please open the call to questions?

[Operator Instructions] We'll take our first question from François Brisebois with Oppenheimer.

Congrats on the quarter. In terms of seasonality, you talked about the summer, the third quarter months, to be kind of similar to what we've seen in the past. I think last year, the patient-add average was actually very solid and strong and kind of kept going in the third quarter. In the past, we have seen some drop. So is it something that could be downward from the second quarter? Or just help us understand a little bit more what you mean by saying that it's normal seasonality that you've kind of seen in terms of patient adds in the past years.

Thanks for the question. I'll turn it over to Jeff Dierks to respond.

Sure. Yes. So Frank, when we talk about typical summer seasonality, it really relates to fewer patient visits and the lower foot traffic, and that's more of a reflection on new patients versus existing patients. So we do anticipate typically a little bit lower in terms of the new patient starts that happens with most chronically managed medications. Those patients don't schedule their medication visits during the summer when they're on vacation and holiday? But we do anticipate continued growth, as you've seen in the last 4 or 5 years of our commercialization. We are obviously reiterating our guidance at approximately 7,000 average patients by the end of the year. And obviously, with the addition of the pediatric narcolepsy indication, that's going to help us support future growth as we continue to tap into this opportunity as the market allows around the typical seasonal dynamics.

That's helpful. And then on that note, you talked about -- it's about 4,000 patients on the pediatric side. Do you expect penetration in that -- in the pediatric population to be better or more difficult than the adult centers?

So Frank, what I would say is that what we're seeing within the pediatric market is I would expect the pediatric patients to be added over a couple of years versus a bolus of patients, right? This is a brand-new audience for us, although there are WAKIX prescribers with knowledge of the product and its profile. We have to go out and look at educating not only patients but more importantly, the parents and the caregivers about the profile. So a little bit different than the adult population when we launched, where there was sort of a bolus of patients looking for a new option? We're going to look to tap into this opportunity. I would anticipate probably a very similar patient penetration over time. But we're going to be looking to add these patients every single quarter as opposed to a large bolus that you anticipate in the third quarter or fourth quarter this year.

Yes. And Frank, I would just add, as the first and only nonscheduled product approved for patients with narcolepsy, I think WAKIX is a strong product offering for pediatric narcolepsy patients?

Our next question will come from Charles Duncan with Cantor Fitzgerald.

Jeff and team, congrats on a great quarter and I appreciate you taking the questions. I actually had a follow-up to that last question regarding pediatric patient population. I'm wondering, when you consider the prescriber base of the 4K oxybate patient prescribers versus the 5K non-oxybate registered prescribers, where do you think the pediatric patient population exists more? And then secondarily, in addition to penetration, what do you think about persistence? It would seem to me that persistence could be even greater in the pediatric patient population.

Charles, thank you for your question. Jeff, thoughts on where the patients are coming from?

Sure. So Charles, we know there are about 1,100 health care professionals that manage that approximately 4,000 diagnosed pediatric narcolepsy patients. It probably skews a little more heavily to the oxybate REMS enrolled health care professionals because, as you know, this is a very difficult lifelong neurologic disorder to treat. And ultimately, these patients end up in some of those larger sleep centers? But the great news is of those 1,100 doctors, a good amount of those were already in our existing call plan. They already have familiarity with WAKIX, so a lot of that is simply just getting in touch with the parents, caregivers and patients and bringing them in the office. And I think, again, it's very early, but I would probably assume that we've seen very good persistency rates with WAKIX in adult. So I would assume that the pediatric population may have the potential for equivalent or better persistence? As you know, WAKIX, as Jeff shared, is a very ideally suited product profile for pediatric patients. It's a once-daily oral tablet you take in the morning upon wakening. So you don't have to worry about patients having to maybe go to the nurse during the day at school or have to schedule med visits for parents to drop off medicines. And being a nonscheduled treatment option, certainly, that profile really appeals to the doctors but also to parents of these individuals.

Excellent. Can I ask one quick pipeline question of Kumar? And that is regarding the IH sNDA filing this year, are you waiting for any additional, call it, clinical data or experimental results to enable that filing? And perhaps, can you describe a little more the real-world use that you're thinking about including it? And finally, would you anticipate that to be a relatively quick turnaround, so maybe enabling an approval and launch by second half of next year?

Charles, thanks for the question. First of all, we are on track to submit the sNDA by the end of this year. In terms of the evidence, as we have discussed in the past, the totality of the data from the INTUNE study, the open-label part, randomized controlled period, and also the long-term extension study result, now it's almost close to a year since the study was completed. We still have about 2/3 of the patients who entered into the long-term extension study still participating in the study. Almost all of them have completed 12 months. About 1/3 of them have completed 18 months, and some of them are approaching 2 years. So this speaks to the persistence of efficacy and persistence on treatment and also the benign safety profile? In terms of the additional data, we are leveraging some real-world evidence data from [ zero ], where pitolisant was prescribed in patients with idiopathic hypersomnia. And we'll be leveraging this data to make a stronger submission. But at the end of the day, Charles, I mean we strongly believe in this unique benefit risk proposition pitolisant offers in patients with idiopathic hypersomnia, where the currently available treatment option is a Schedule III controlled substance or off-label of controlled substance versus pitolisant, which has the profile of a nonscheduled drug with a very simple dosing regimen of taking once a day in the morning.

Our next question will come from Ami Fadia with Needham.

Congratulations on all the progress across the pipeline. My first question is for Kumar regarding the pitolisant high-dose formulation. Can you help us better understand how the increased exposure rate would translate into higher efficacy, and maybe more from a mechanistic rationale and maybe the occupancy? And sort of how much -- what is sort of the unmet need there? And how do you see a patient benefit during the course of the day with the higher-dose formulation?

Thank you for the question. Yes, first of all, Ami, we are really excited with the data that we saw in pitolisant high-dose formulation. We saw both an increase in relative bioavailability and also decrease in [ inter-individual ] variability. And also, as we have discussed earlier in the press release, we will be studying up to 2x the highest labeled dose of WAKIX. We have a body of evidence, Ami, to show a dose response where increasing the dose results in increased effect size both for daytime sleepiness and also some of the symptoms that we plan to target with pitolisant HD program like fatigue and narcolepsy. It's a [ higher rate ]. We are not [ stopping ] treatment? So the computation of an optimal PK profile, the highest dose, the gastro-resistant formulation, which is designed to address widely prevalent GI symptoms in patients with narcolepsy, the ability to start up the therapeutic dose range and finally, targeting the symptom for which there are no approved treatment offers a very unique product profile for our patient. And this product profile was very well received when Jeff Dierks and his team did market research. Jeff, do you want to add anything?

Sure. So Ami, just from a commercial perspective, we did do some preliminary market research across about 100 narcolepsy patients, 25 sleep specialists and health care professionals, and 7 pharmacy directors of payers just to get some feedback with the initial target product profile. And I think as Kumar stated, looking across those 3 audiences, what was coming out of the research was that this is a very meaningfully differentiated product profile and one that looks to be clinically superior than WAKIX simply because the biggest unmet need that's in the marketplace is enhanced efficacy. About 75% of patients that are on treatment still report residual symptoms that impact their daily life. And so we know in a polypharmacy market, physicians and patients are looking for enhanced efficacy? Then the other second unmet need was really the untreated fatigue, which no product currently is approved for right now. And data suggested up to 60% of narcolepsy patients also have untreated fatigue, which is very distinct and different from excessive daytime sleepiness? And then lastly, what we've seen in the literature as well as in research is more than 90% of people living with narcolepsy have GI disturbances, mostly attributed to their pathophysiology of their disease. But up to 20% of them also experience GI issues such as nausea on their medication. So the combination of this profile addressing enhanced efficacy, untreated fatigue and the GI symptoms with the gastro-resistant coating really seems to present a very clinically superior product, one that payers are going to be broadly covering and one that physicians really see as a very attractive treatment option for the vast majority of their patients.

My second question is for Sandip. With all of these different programs underway, there is obviously going to be a fair amount of investment from the R&D front as these assets progress. Where is business development in terms of the company's priorities? And what type of assets do you think would make sense to bring on? Would it be later-stage assets as opposed to in-market assets -- I'm sorry, early-stage assets as opposed to in-market assets? If you could give us some color there?

Sure, Ami. Thanks for the question. I mean, business development continues, as Jeff mentioned, a priority for the company. We've done several transactions as you saw from the last year or so. We've done 3 transactions. Indeed, we've done them in a financial disciplined manner. We've looked at them [ at all as well upfront ] success-driven milestones overall? And the filters for us continue to be in rare/orphan space in CNS, looking at things that can help leverage a lot of the capabilities that we've already built as a company. And as we think we have more programs in-house, we're building better and better capabilities that we can leverage both on the clinical side as well as commercial. I don't know, Jeff, any thoughts further?

Yes. I would just add that I think that the strategy that we've taken thus far in regards to business development with the strategic focus in orphan/rare neuro, how we build out sort of the 3 franchises that we have now with our main franchise in sleep/wake, the neurobehavioral franchise and the rare epilepsy franchise we brought in, I mean we see that strategy and opportunities in a similar vein going forward? And where we are now with regard to the 3 CNS franchises and doing it in a thoughtful and a prudent manner has set us up for each of those with potential peak sales opportunities of $1 billion to $2 billion. We can potentially add to each of those franchises or if we see an opportunity sort of in an adjacent area in neuro or neuropsych disorders, then we would contemplate that as well. We like our profile. We like the way we've approached it thus far, and we continue to take a similar approach going forward?

Our next question will come from David Amsellem with Piper Sandler.

Just a couple. So first, on the high-dose formulation, can you talk through the dosing in contrast to both the legacy formulation and GR? And what I'm wondering, in particular, is with the greater potency, is there any risk at all that it could cross into controlled substance territory in terms of scheduling? And what kind of -- are you going to do the full suite of human abuse liability work there? So that's number one? And then number two, I might have missed this earlier. But you talked more about the doctors who are not enrolled in the oxybate REMS. Can you talk about your penetration there? And what your expectation is over time in terms of penetration into that portion of the physician audience?

Thanks for your questions. Let me address part of the first one, and then I'll turn it over to Kumar and the others. With regards to the potential for changing the abuse potential of pitolisant HD, David, this is pitolisant. So in terms of mechanistically, I mean the short answer is no. The higher dose does not change the mechanism with regards to the lack of abuse potential or abuse liability. So the program will not require further abuse liability studies? And then in terms of the dosing and with regards to pitolisant GR, that is based on the demonstration of bioequivalence so at equivalent doses to WAKIX within the current labeled range of 17.8 to 35.6. I'll turn it over to Kumar to comment on the plan with regards to the opportunity in the pitolisant HD program and what the thinking is there?

Thank you, Jeff. Dave, thanks for the question. Yes, there were like several parts to your questions. So let me address one after the other. Starting with the dosing regimen, Dave, the dosing regimen here will be different compared to the legacy WAKIX program, and we will provide those details at a later point in time in terms of the dosage trends that we'll be pursuing. But as we said earlier, we'll be studying up to 2x the highest WAKIX labeled dose? And the second question was around safety and the high -- the safety profile, we have studied already as part of the leading-edge work that we did in preparation for the pitolisant HD program. We did a multiple ascending dose study up to 180 milligrams of pitolisant in a repeat-dose study, and we established a safety margin. The safety profile is very similar to the safety profile of WAKIX, including the impact on cardiovascular system. There was no QTc impact even at 180 milligrams repeat dose? And in terms of our view, that as Jeff mentioned, [ endoV ] is not a concern because multiple studies in the preclinical arena have not shown any release of dopamine in [ nucleate action plans ]. That is the one that usually results on abuse potential, and we haven't seen that. And human abuse potential studies were done up to 6x times of pitolisant, and we did not see anything. In fact, pitolisant was very similar to placebo. There was another question for Jeff.

Yes. And the second part of the question to Jeff.

Sure. So David, I believe you're inquiring about the penetration within the non-oxybate REMS enrolled health care professionals. And so within that audience, there's about 5,000 of those health care professionals. And what we saw in the second quarter that we're approaching about 40% penetration within that audience. It's been a regular rhythm that we've been able to tap in and see growth within the segment? With respect to a goal for penetration, I don't necessarily have a goal per se in mind, but I do believe there is still ample room to grow in this area. We know that all 5,000 of these health care professionals have at least a couple of narcolepsy patients under their care. And our representatives are out educating the entire 5,000 network, so I would say we continue to tap in. We've seen growth from 30% to 33% and north of 35%. We're now approaching 40%. So I think there's a regular rhythm of continuing to add to this space, and we're anticipating continued growth in this segment. And I do believe that there's ample room to grow for unique prescribers? And then the second phase of that, David, is when they start their first patient on WAKIX, the next phase of growth in this audience is growing the depth of their prescribing. And we are starting to see that as well. So it's a very unique audience, insulated from the oxybates, both branded and generic. Certainly, it's a catalyst for future growth moving forward?

Our next question will come from Graig Suvannavejh with Mizuho Securities.

Congratulations also from me on the progress in the quarter. My first question is on the commercial business in WAKIX, and I might have missed this detail before. But as we think about the second half in terms of net patient adds, I think that historically, we've seen over the past several years net patient adds for the second half of around 600 to even 700. And I think based on what I had heard earlier from Jeff Dierks that you had planned to end the year at 7,000. Just wanted to revisit what the second half implies if you ended at 6,550, I think, by my math. And again, if I have my math correct, that only implies 450 in additional net patient adds for the balance of the second half. So if you could just provide some commentary around what our expectations should be for the second half on net patient adds, and appreciating that the revenue guidance has remained the same? And then my second question, just on the HD formulation. Knowing that you're going to be testing higher doses to improve on efficacy, I was just wondering what the expectation on safety should be. I realize you've got a GR formulation. But are you anticipating that with the higher doses that you're going to be evaluating versus the legacy WAKIX product, that the side effect profile relatively will be the same or perhaps even less than legacy WAKIX? Any comments around what you're anticipating to see on safety relative to WAKIX with the HD formulation would be appreciated.

Yes. Thanks, Graig, for your questions. The first one, over to Jeff Dierks on the commercial side.

Sure. So Graig, with respect to thinking about full year 2024 in patient adds, so yes, we did add about 250 average patients sequentially from the first quarter and the second quarter and reported approximately 6,550 average patients. We are reiterating our guidance of approximately 7,000 at the end of the year. So your math is correct? And I think it's important that, yes, historically, when you're looking at year 2, year 3 and even year 4, we're now in year 5 of a rare/orphan commercialization. And we feel extremely confident and good about the growth we're seeing. We expect continued growth for the balance of the year. As we shared a little bit earlier, we do expect the typical summer seasonality that impacts new patient starts. You tend to have some patients who are chronically managed scheduling their appointments in the fourth quarter for med management. So we do anticipate strong refill behavior in the fourth quarter. Typically, patients like to fill their new and refill medicines before the end of the year. Insurance resets, insurance changes next year? We're seeing good underlying business fundamentals, right? We recently added the pediatric narcolepsy indication approval that ultimately helps support future growth. And we'll continue to tap into that diagnosed patient opportunity as those seasonal market dynamics allow each year? But we're continued -- as Sandip alluded earlier, we're confident in continued growth for the balance of the year and quarter-over-quarter growth. I think as you're looking at where we anticipate ending the year, our guidance of about 7,000 should kind of help you think about the third and fourth quarter moving forward.

And Graig, I would say in terms of the overall -- the benefit risk profile with regards to pitolisant HD and our expectation, based on what we've previously seen on dose response and other data in the pivotal program, we expect that same profile to be maintained with regards to the opportunity for improved efficacy with no change in overall safety and tolerability. And Kumar, any added color on that?

I think, Jeff, you covered everything. The only other thing that I would like to add is, Graig, as I mentioned earlier, we plan to accelerate this program with a PDUFA date in 2028. And we did some leading-edge work where we looked at higher doses of pitolisant. About 18 months ago, we started this study, looked at multiple doses of pitolisant and studied up to 180 milligrams in the repeat-dose study. And the safety and tolerability profile was very similar to the highest labeled dose of WAKIX, which is 35.6 milligrams. So we did not see any change in the safety and tolerability profile. And you mentioned about the gastro-resistant coating. Gastro-resistant coating, if anything, should actually result in a more positive patient experience?

Our next question will come from David Hoang with Citigroup.

So first one, I just wanted to ask about your level of confidence here in meeting the projected PDUFA date in 2026 and 2028 for the pitolisant GR and HD formulations, respectively. And what are the key gating factors to get to in terms of data packages for filing with the agencies? And then second question, in terms of the TPM-1116 molecule, which you're taking forward to IND filing, are there any features there which you believe could differentiate from other orexin agonists that are currently in development? And then how do you think about developing for various indications such as narcolepsy versus IH?

David, thanks for your question. With regards to our confidence in the projected PDUFA dates for pitolisant GR and HD programs, I think we are -- we're confident in terms of the development plan that's laid out and our ability to hit those things. I can have Kumar provide further color on that and what some of the key major milestones are towards that. Kumar?

Thanks for the question. Regarding the gastro-resistant formulation, as we disclosed earlier during the call, we are on track to start the dosing optimization study in the fourth quarter of this year, and we will start a pivotal bioequivalence study in the first quarter. And we are on track for PDUFA filing in 2026. We are confident about it? In terms of the HD formulation, we just disclosed the initial PK data from the pilot study. And I also mentioned earlier doing some of the leading-edge work that we have already done to accelerate this program like establishing safety margins. We conducted a qualitative [ repeat ] study in patients with narcolepsy who have fatigue, identified the right instrument to study fatigue in this patient population. We anticipate this to be in the next stage of the clinical development in mid-2025, and we will provide more color to this as we solidify some of our plans? Regarding your last question about TPM-1116, our orexin receptor agonist, some of the differentiating features, David, are -- I mean, first of all, this belongs to a novel chemical category. It has a different chemical scaffold and it's different than any other orexin receptor agonist that we know. And what we have seen in our preclinical experiment is it is the most potent orexin-2 receptor agonist based on the information that is available in the public domain on various orexin receptor agonists. The fact that this is the most potent orexin-2 receptor agonist does give us confidence to play around with the dose for NT1, NT2 and idiopathic hypersomnia. Based on the information on other compounds, you may have noticed that typically, NT2 requires a higher dose than NT1. IH requires a higher dose than NT2? So from that perspective, in terms of avoiding these off-target side effects that gives us some concern and also the preclinical safety data that we have seen is actually very interesting and definitely believe that TPM-1116 could be the potential best-in-class compound when it comes to orexin receptor agonists.

Our next question will come from Corinne Johnson with Goldman Sachs?

Maybe for Jeff Dierks, you've talked about the $1 billion target for sales. I guess, maybe you could just talk a little bit more about the past from here, where we are today, to there, particularly with respect to the patient growth you need to see to get to that target. And then on maybe like a little bit more just clarification, can you just provide some color around gross-to-nets through the first half of this year? I think sales were relatively flat versus second half '23. But obviously, you took price and patients have continued to grow. So curious what you're seeing there and how we should think about growth in that through the balance of the year.

Sure, Corinne. Good morning. Jeff?

Yes. So a great question, Corinne. So the path to $1 billion, I mean, based obviously on our net average price per patient, achieving $1 billion basically is looking -- getting north of about 9,000 average patients on product. We just finished the quarter and reported approximately 6,550, so our goal to achieve $1 billion is simply looking at adding another 2,500 average patients between now, mid-2024 and mid-2030, so over the next 6 years. And I think, obviously, based upon our 4 years of history and what we believe in continued growth, the path to $1 billion is very clear? We obviously have a very good analog in the oxybates, which was able to achieve $1 billion on its path with a much smaller ability to tap into only about 4,000 health care professionals. It didn't have, obviously, the access to the full diagnosed patient opportunity. So we believe accessing 9,000 health care professionals with the goal of having to achieve another 2,500 average patients in the next 6 years, I think, is absolutely achievable. And that's why we look at this as a $1 billion-plus opportunity? And I think we're very excited about the ability to enhance the pitolisant franchise by adding both GR and HD along that time period and really building out this franchise and being able to help thousands of patients living with narcolepsy. Sandip, comments on gross-to-net?

Sure, yes. Thanks for the question. Gross-to-net, generally, I would say, behaved in line with what we've seen in the past. Typically, it's lower in the first quarter of the year. And then as you go into the second quarter, it tends to improve and that's what we've seen. Roughly, our average per patient is up about [ 7% ] last quarter to this quarter. We took a price increase earlier this year. So I think generally, it's in line with our expectations on how is the evolution, and so it stabilizes and improves in the second half of the year?

Our last question will come from Jason Gerberry with Bank of America.

This is Pavan Patel on for Jason Gerberry. The first question is that [ E5 ] improves GI side effects that pitolisant gastro-resistant has the potential to address. So given rates were only 6% in Phase III and presumably mitigated by titration, is there a higher real-world dropout rate with WAKIX? And then I have a follow-up question, if I may.

Sure. Thanks for the question. I think Kumar can address -- I think it's -- the pitolisant GR, the design is it's really the predispositions, so it's not related to the tolerability profile with the WAKIX and the incidence of nausea. But as we said, patients with narcolepsy, the vast majority have GI symptoms related to underlying mechanism of disease. So a lot of them experience the potential for nausea, vomiting and abdominal discomfort, and they see that also with other common narcolepsy treatments? So the predisposition to what is likely sort of co-morbid symptomatology, the GR feature can potentially reduce that potential. And then especially in the HD program, as we go up on the dose, that GR feature could be beneficial in that regard. Kumar, additional thoughts?

I think you got it, Jeff. The only other thing I may want to add is with the GR formulation, apart from the gastro-resistant positive attributes, not just in general for patients with narcolepsy, it also enables us to start at the therapeutic dose range. I mean, as you know, pretty much all the medications that are used by these patients requires some kind of titration. And this enables us to start at the beginning of the therapeutic dose range so that the patients don't have to wait until they realize efficacy, so faster efficacy, better compliance and better patient experience overall.

And then my second question is related to your pipeline. On EPX-100, the 5HT2 mechanism is similar to UCB's commercial-stage FINTEPLA and Longboard's development-stage bexicaserin, for which the Phase III study is expected to start by year-end 2024. So I guess how can EPX-100 differentiate itself in the landscape? Is it efficacy or safety improvement that we're looking for in Dravet syndrome with the top line data in 2026? And maybe if you can help us understand where you see this fitting into the current treatment landscape?

Yes. No, that's a great question. Look, as you mentioned, the serotonergic mechanism of action in developmental epileptic encephalopathies is well established, right? And we also saw that with the zebrafish model where [ clamizole, hydrazole ] are very well. And this has a pretty good predictive ability when it comes to efficacy in developmental epileptic encephalopathies. The question about differentiation is a very good one. How do we differentiate? I mean as you know, the drugs that are currently used in developmental epileptic encephalopathies like DS, [ dynera ] and LGS, they have significant limitations in terms of safety and tolerability? For example, [ epidarlex ] has significant incidence of nausea, abdominal discomfort and diarrhea in up to 30% of patients. And the patients also need to monitor liver function tests before starting treatment and then regular intervals thereafter? For example, you mentioned about UCB's FINTEPLA. FINTEPLA has the REMS adjusted to it. And on top of it, the patients have to get echocardiogram before starting the treatment and once every 6 months because of the risk of cardiovascular disease and pulmonary arterial hypertension. What we have seen with EPX-100, which by the way, we are developing with for us a new chemical entity, as instructed by the FDA, the battery of nonclinical tox studies did not show any concern about any cardiovascular issue or hepatic issue. And neither we did see anything in our Phase I healthy volunteer studies as well anything of concern. So the differentiation really is safety and tolerability. And in our clinical trial, we haven't seen any dose-limiting tolerability issues, any laboratory abnormalities, so we believe the efficiency will be somewhere in the range that will be meaningful to the patient. But from a safety profile, it will offer a distinct safety profile that would be of help for patients?

At this time, I show no further questions. I would like to turn the call back to Jeff Dayno for any closing remarks.

Thank you, Todd, and thanks, everyone, for joining our call today and for your interest in Harmony. We look forward to our Investor Day on October 1 in New York City, when we'll have the opportunity to showcase and highlight the value of our late-stage pipeline as well as providing you updates later this year as we execute on our long-term growth strategy. Thank you, and have a great day.

Thank you. This does conclude Harmony Biosciences Second Quarter 2024 Financial Results Conference Call. You may now disconnect your lines, and have a wonderful day.