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

Welcome to the Cantor Global Healthcare Conference. I'm Pete Stavropoulos, biotech analyst with Cantor. With us, we have Harmony Biosciences, a company I cover. Pleased to introduce Jeffrey Dayno and Sandip Kapadia. So welcome, and let's start off with a brief intro and a description of Harmony.

Yes, sure. Thanks, Pete. Thanks for the invitation on behalf of the Harmony team. Good to be here with you. Jeff Dayno, President and CEO of Harmony Biosciences, neurologist by training, 10 years in clinical academic medicine, 27 years in the industry now and through many different from big pharma to evolving biopharma and biotech. And I've been with Harmony since the beginning when we launched the company in October 2017. and really excited for the opportunity of growing the company, growing the pipeline ahead. And with me, Sandip Kapadia, Chief Financial Officer. Sandip?

Yes. No, I mean, similarly, 25-plus years in the industry in biotech, both combination of large pharma as well as biotech as well and been here for the last 4 years. So...

I'm just going to ask what do you like better? Large pharma or biotech.

Biotech.

Biotech, much more dynamic, more exciting. In terms of -- no, it's great to be here. So overview of Harmony for those not familiar, as I mentioned, launched in the fall of 2017. And really, the theme is we continue to be kind of a growth story from sort of our commercial franchise and the successful launch and commercialization of WAKIX in narcolepsy. That continues to grow in a sizable market of about 80,000 patients diagnosed with narcolepsy. From there, we have the next-gen pitolisant programs that are advancing and excited about those opportunities. We can dive into those. And really, the story from there over the past 2 years is building out our pipeline. And I think if you look at our pipeline, sort of robust late-stage catalyst-rich pipeline. And if you look across the industry, in the orphan/rare neuro space, we think it's one of the most exciting pipelines in that space given the opportunities that we are working on. In sleep/wake, we obviously have WAKIX, our commercial product, the next-gen products and then an early phase orexin 2 agonist in that pretty exciting space. pretty exciting. And then we also have a rare epilepsy franchise based on our acquisition of Epygenix Therapeutics. And we've got EPX-100 in the clinic, a serotonin agonist in Phase III trials for both Dravet syndrome and Lennox-Gastaut syndrome. And those are advancing in Phase III in those rare epilepsy patient populations. And then I think an exciting in terms of our neurobehavioral franchise, the third of our 3 orphan/rare neuro franchises. And based on the acquisition of Zynerba Pharmaceuticals, we brought in ZYN002, and we are in our pivotal Phase III program and on track for top line data readout later this month in Fragile X syndrome. So if we take a step back in terms of our pipeline, 8 assets across 13 development programs, up to 6 in Phase III by the end of the year. Each of these 3 franchises have peak sales opportunities of $1 billion to $2 billion each. And this pipeline is poised to deliver one or more new product or indication launches each year over the next several years. And the one right ahead of us that we're very excited about is ZYN002 in patients with Fragile X.

And that's where we should start off with. So what is the biological and mechanistic rationale for 002 in Fragile X?

Yes. So in terms of -- if we look at ZYN002 and Fragile X, kind of break it down -- with regards to the mechanistic fit, I think the uniqueness, sort of the innovative product itself, and then we can look at the data. So let me just kind of walk through that. So Fragile X syndrome is the most common known cause of inherited intellectual disability and autism spectrum disorders. It's based on -- Fragile X is a defect in the FMR1 gene. And that defect causes a lack of production of FMR protein. So with regards to the effect on that is disruption of the endocannabinoid system in the brain. So ZYN002 works at CB1 receptors in the brain to sort of generate homeostasis and of the endocannabinoid system. And disruption in that system is what causes the neurobehavioral symptoms. So the mechanistic fit is explained by the underlying pathophysiology of disruption of the endocannabinoid system and ZYN002, especially through transdermal delivery, which causes -- results in steady-state plasma levels helps to generate homeostasis and regulate that system. In terms of the product, so we see ZYN002 as an innovative product because I think the analog that's often considered is a product called Epidiolex, which is in the market for the rare epilepsies. The difference is that product is a plant-based cannabidiol that has THC, which is not good for kids with Fragile X and also has some rate-limiting GI tolerability issues because it's delivered orally, and it also causes elevation in LFTs that you have to follow. So ZYN002 is a very different product profile. It's a purely synthetic pharmaceutically manufactured product devoid of THC. That has a patent-protected permeation enhanced gel formulation, and it's delivered transdermally through the skin, and that results in steady-state blood levels. Those steady-state levels help regulate and control the endocannabinoid system. So we see there is a fit in terms of mechanistically, there's innovation in the product. And then if we look at the data with regards to where we are. So the Phase III RECONNECT trial that we are working towards top line data readout before the end of the month, what we're trying to do is replicate the positive findings from the Phase II CONNECT study. So Phase II CONNECT study in patients with Fragile X, over 200 patients, so a sizable study in the Fragile X community. And what it showed is in the subset of patients with complete methylation, and I'll come back to that, the importance, it showed a statistically significant and clinically meaningful outcome in the subset of patients with complete methylation of the FMR1 gene. So the importance of that is the Phase III RECONNECT study is trying to sort of replicate those findings along with the learnings from the Phase II CONNECT study. So primary analysis in Phase III RECONNECT is in patients with complete methylation, right? We saw in Phase II CONNECT that patients continue to improve beyond the 12-week endpoint out to 16 weeks, which is consistent with the mechanism because if you are driving homeostasis of the endocannabinoid system, over time, patients continue to improve. So the endpoint in Phase III RECONNECT is out to 16 weeks in terms of the primary readout.

Rather than 12. Okay.

Rather than 12 weeks. Right. And then we also saw a dose response in the Phase II CONNECT trial. So for patients over 50 kilograms, we added a third dose, a higher dose to ensure that there was enough drug on board to drive a therapeutic response. So given those design sort of enhancements, the learnings from Phase II CONNECT into Phase III RECONNECT, we feel confident and have a high degree of conviction in terms of the readout of the Phase III RECONNECT trial.

All right. When you look at the data from the CONNECT trial, especially when you cut it by subgroup, was there a sufficient amount of patients who actually had fully methylated versus not? And so like is there a strong signal there and do you feel comfortable?

Yes. I mean I think that, again, Phase II CONNECT was a large study, over 200 patients. So as this area has evolved, the importance of sort of what's called the methylation status of the FMR1 gene was becoming kind of more recognized. So the importance is patients with complete methylation of the FMR1 gene have more severe symptoms. So there's little to no FMR protein, which is what stabilizes the endocannabinoid system. So that subgroup, which was about 80% in the Phase II CONNECT study is where you can show greater benefit, greater efficacy and it's more predictable. So about 80% in that study. And in the Phase III RECONNECT, we're looking for a similar target, about 80% of patients with complete methylation and then there will be about 20% of patients in that cohort with partial methylation. The importance of that, Pete, is in discussions with FDA, the primary endpoint is in the subgroup of 80% with complete methylation around the social avoidance subscale. If we see similar trends in the 20% patients with partial methylation, then we'll have an opportunity potentially for a broader label in the entire Fragile X patient population. The importance of that is the backdrop here is that there are no approved therapies for patients living with Fragile X. So if successful, if we have positive data, and this is what we're excited about, we could be on the path to the first approved treatment for patients living with Fragile X.

And hopefully, they show some flexibility and directionality can have an impact on the label.

Yes. So we've had good interactions with the agency in terms of concurrence on trial design, on primary outcome, on the instrument that we're using to measure the social avoidance. And so we've made very good progress there.

So one question that I have when I was going through clinicaltrials.gov as well as CONNECT. So CONNECT had a placebo run-in period where the subjects needed to -- need a certain score on social avoidance and the irritability subscales. They were then sort of rescreened after 2 weeks and those that met the certain criteria, which included those thresholds on social avoidance and ability again and had no more than a 30% improvement during the placebo run-in with then randomized. And so how does that sort of impact the probability of success and you have the same run-in period for RECONNECT?

Yes. So you've done your homework in terms of the trial design. And so I think what you're describing is the placebo run-in phase of the trial. And it's not uncommon in neuropsych trials with regards to managing a placebo response. So using a placebo run-in to sort of manage and exclude placebo responders is a common approach. So we have taken the same approach in the Phase III RECONNECT trial in terms of using a placebo run-in phase. We've not -- we purposely haven't disclosed the details around that while the trial was being conducted because we didn't want to sort of upset the blind or give any indication of that. But when we present all the data, then we'll describe what the placebo run-in phase look like and the criteria. And it will be similar to what you saw in the CONNECT study.

Which I believe was 33 or so patients.

It's about -- yes, 30% placebo response.

Okay. Walk us through the primary endpoint. Help us understand what the ABC FCS subscale 1 social avoidance is as well as the key secondary, which is the durability score. And what's clinically meaningful for these scales or subscales?

Yes. So the primary endpoint in the Phase III RECONNECT trial is on social avoidance measured by -- so the ABC, aberrant behavior checklist community version for Fragile X, specifically for Fragile X and measuring the aspects of social avoidance. And that is what was used in the Phase II CONNECT study, carried forward to Phase III RECONNECT and in agreement with FDA. A clinically meaningful outcome is within a 3-point difference within patient difference on that scale. In terms of the Phase III RECONNECT statistical analysis, right? It is a -- what would define a positive study being statistically significant is a placebo-adjusted 1-point difference between active and placebo on that scale. And that is also recognized as clinically meaningful, and that's how the study is powered and demonstrating stat sig on that outcome would define a positive study and I think a path forward towards regulatory approval.

Okay. What endpoints will be shared on the top line readout? And just help frame, which I guess you just did, what a positive outcome would be. But just sort of to take a step back, what exactly just can you describe what it is exactly social avoidance and like on the scale, like what are caretakers sort of looking for and how they're scoring it?

Yes. So a lot of it is a pattern of interaction in terms of these kids interaction. And there's the different components of that 5 or 6 different components of how they kind of interact with others in the environment. And then that kind of makes up that social avoidance subscale. In terms of top line data readout, I think traditionally, we'll be sharing the patient demographics to kind of describe the study population. And then really the primary outcome around the social avoidance, primary endpoint in the patients with complete methylation, some of the key secondary endpoints, the secondary endpoint around the irritability subscale and along with the top line safety and tolerability data, just to kind of give the top line readout of the main components from the study. I mean, after that, as you know, kind of the full data set and the other outcomes will be shared at a scientific meeting.

And when you look at the CONNECT study and you look at the AE profile, anything concerning? Or do you expect to sort of replicate the same.

Nothing concerning. I think we're expecting the same. And in terms of the benefit risk profile, this product is well tolerated. Again, transdermal delivery. Another benefit of that interesting that some of the KOLs have pointed out, these kids have difficulty taking pills. So that mode of delivery through the skin that the parent or caregiver applies is actually a beneficial aspect. Randi Hagerman, who's one of the top KOLs at UC Davis, has pointed that out recently, and she was an investigator in the Phase II and Phase III trials. So I think that's another benefit there.

Okay. I guess before we move on, how many patients actually are there in the U.S.? And how many of them are actually fully methylated or what percentage of that?

Yes. So looking at the market opportunity. So the prevalence, the Epi data suggests about 80,000 patients with Fragile X in the U.S., about 60,000 patients identified through claims data and then 60% to 70% of patients with Fragile X are fully methylated. So I think that kind of identifies market opportunity there. And I also want to add, there is a follow-on opportunity with positive data readout, we've already been working with the FDA. There's another related condition called 22q deletion syndrome, also known as the Georgia syndrome, which is a related neurobehavioral disorder, similar symptom complex. Zynerba ran a small Phase II open-label study and generated positive signals, positive data. So we've already been engaging with the FDA an agreement around a Phase III pivotal trial design, primary endpoint. So with positive data, then we're preparing to initiate a Phase III trial as well in 22q deletion syndrome. Both of these programs, we've had interactions with both FDA and EMA. And the importance of that is we have global rights to ZYN002. So with positive data and if we're successful, then we plan not only to file an NDA with the FDA, but we'll also, in parallel, work on preparing an MAA to submit to the European agency.

You've been consistently communicating with the FDA. And I guess one of the concerns with the new administration is -- you've had a lot of movement within the agency. Is it the same individuals that you're interacting with in the division for.

Yes. Actually, it has been. No, it's a great question given the current climate. So it's actually the same division in the psychiatry division that we've been interacting with. And it's also the same individuals we've been interacting with WAKIX, the original approval of WAKIX, pitolisant. And I think we -- Tiffany Farchione is the Division Director. So we've had a lot of regular interactions with that division, and they're very familiar with the ZYN002 program.

Okay. All right. Let's move on to WAKIX. Turning to your commercial success, a successful asset, also known as pitolisant. It continues to grow and it's tracking towards the other $1 billion revenue marker with continuous year-over-year growth. What levers can you pull for sustained and durable uptake until generic entry, which I believe is in 2030s?

Yes. So LOE first quarter 2030, but then -- and we are on track of obtaining pediatric exclusivity, which is important, providing an additional 6 months of regulatory exclusivity, which would take us to third quarter 2030. Big market, a lot of headroom for growth. I know Sandip, if you want to sort of comment on where that's coming from?

Sure. We're now in year 6 of commercialization of WAKIX, and it's been remarkably steady in terms of the growth. of the product over last quarter, quarter 2, we did a little over $200 million in sales, a 16% sales growth overall. So really tracking well. We expect continued growth for the balance of the year and tracking towards our guidance of $820 million to $860 million in terms of sales. Now with respect to some of the levers that you talked about, the business, there's still a large opportunity overall. It's about 80,000 patients that are diagnosed with narcolepsy. We currently have about -- as of the end of the last quarter, which was a very nice patient add of approximately 400 net patient adds to about 7,600. So you can see there's still a lot of room for continued growth for WAKIX for many more years to come. And what's driving the growth is really -- it's a very differentiated profile. It's the only non-scheduled agent out there. And we have a remarkable team with strong payer access there. And we call on about 9,000 HCPs, which -- 5,000 of which are not in the Oxybate REMS. So we have a broader set of universe of physicians that potentially can also write WAKIX and schedule. So there's still a lot of opportunity to grow in this polypharmacy market. There's a lot of headroom, as Jeff mentioned. And we have a broad prescriber universe in terms of continued -- so we see continued growth for not only WAKIX, but even next-gen formulations over many years to come.

So next-gen formulations and I guess, life cycle strategy, GR and HD formulations. How are you positioning them to sort of extend and expand the franchise? And what does this sort of mean for mitigating the loss of exclusivity risk in 2030 and preserving brand?

Yes. So I think at a high level, so the life cycle management strategy, so we see WAKIX as obviously a very successful product in the market. The unique product profile, the benefit risk proposition. And when we launched into the market in 2019, it was the first sort of novel mechanism of action in over a decade. And this profile has held up in terms of the continued growth. So what we're trying to achieve out ahead of the LOE in 2030, like you said, is kind of a two-pronged approach. Pitolisant GR, so the gastro-resistant formulation is really a quick-to-market opportunistic approach based on the demonstration of bioequivalence with a target PDUFA date in 2026. So we're on track for reporting the top line data from the pivotal BE study in the fourth quarter this year. We're also doing a dose optimization study designed to demonstrate where you don't need the titration dose, so patients can start at a therapeutic dose and potentially experience clinical benefit faster. So that is, again, target PDUFA in 2026, near term, really meant to expand the base of patients on both WAKIX and pitolisant. And then the real value driver after that is the pitolisant high dose or pitolisant HD formulation. That is a new novel formulation of pitolisant with an optimized PK profile that has greater bioavailability, less variability in the PK profile. And then we're going to take it up to a higher dose because when our partner, Bioprojet, did the original pivotal program, it was a pretty conservative approach to dosing, and we think they left some efficacy on the table with a product that's well tolerated. So HD, we're on track for initiating 2 Phase III trials in the fourth quarter this year, one in narcolepsy and in idiopathic hypersomnia. I think the other important aspect in the programs, we're also looking to drive as much differentiation from the current WAKIX product. So the opportunity is in addition to EDS and cataplexy in the narcolepsy program, we're also going to investigate fatigue, the symptom of fatigue, which is distinct from EDS. And that occurs in about 60% of patients with narcolepsy. So it's a distinct symptom. And the relevance with pitolisant mechanistically is fatigue is mediated through histaminergic circuits in the brain. So -- and pitolisant is the only agent working through histamine. So that has potential benefit. We demonstrated that a couple of years ago when we did a Phase II proof-of-concept trial in patients with myotonic dystrophy. And we saw positive signals not just in EDS, but also in the endpoint of fatigue. And those 2 symptoms are really prevalent and debilitating in patients with myotonic dystrophy, another rare neurologic disorder that we could potentially restart that program with pitolisant HD in patients with myotonic dystrophy. But first things first is on narcolepsy and idiopathic hypersomnia, and we're on track to initiate both of those studies in the fourth quarter.

Yes. And I'll just add a little bit to that in terms of our commercial capabilities, given our single hub model distribution capabilities, puts us in a great position to both leverage the GR formulation because we have the ability to contact every patient that essentially has been on WAKIX at one point or currently on WAKIX. And that gives us the opportunity to help potentially transition the business over the long term.

Okay. So I guess if you do show the differentiated profile and you hit down those endpoints, which would have a distinct profile overall, pricing. Would it be the same? Would you price it at a premium?

Yes. So yes, we haven't sort of disclosed sort of the strategy around pricing. I think the approach at a high level is we want to price it to ensure access and generate the value for the innovation of the product. And I think as we get closer, we'll share the thinking around the pricing strategy. I think if you look at the market, WAKIX currently is priced favorably to the market leader. It's a favorable formulary position. No payer is stepping WAKIX through an Oxybate product, which is a Schedule III restricted access REMS product. So we think there'll be good opportunity in terms of pricing and helping to transition the franchise from WAKIX to pitolisant HD in 2028, the target PDUFA for HD out ahead of the 2030 LOE.

Okay. All right. So I think we are out of time, but I will ask you, if we're sitting here a year from now, what would you like to say was your key value-creating events?

So a year from now, I think starting with, I think, ZYN002 in Fragile X syndrome with regards to if we are fortunate to report out positive data and then be on the path to NDA submission. I think with no approved therapies, we would anticipate an opportunity for priority review and then a target PDUFA date late '26. So I think we see that as an important driver of value as well as important for that patient community that has no approved therapies. In addition, really advancing the pitolisant HD programs, advancing them both narcolepsy and IH, working towards transitioning the pitolisant franchise, another key value driver. Lastly, we didn't even get to touch on strong balance sheet, favorable position, very active in BD. So I think the last component of that would be looking potentially can never predict business development.

Additional assets.

But there are opportunities out there given the market backdrop. So I think possibly looking back and having the opportunity to announce additional assets in the pipeline to further build that out and more shots on goal and driving future value creation.

How about the epilepsy studies?

And the epilepsy, so on track for top line data readout late '26, early '27. So another potential catalyst driving value.

And any updates on the orexin program, which I'm pretty sure you have interest in.

Yes. So orexin, yes, importantly. So we're excited about that molecule. So the update, we're on track for first-in-human studies later this year. In terms of Phase I studies, both healthy volunteers in a single ascending dose study, healthy volunteers sleep deprived in a dose-ranging study and then to report clinical data next year in 2026.

Look forward to all the updates. And thank you very much for attending our conference. Great.

Thank you, Pete.

Thanks, everyone.