Harmony Biosciences Holdings, Inc. ($HRMY)

All right. Welcome, everyone. Good morning, and thanks for joining us here at the Goldman Sachs Global Healthcare Conference. We're thrilled to be joined by the team from Harmony Biosciences today. And maybe I will start by allowing you guys to give a brief introduction to yourself. And just talk about the new strategic vision that you recently unveiled at the most recent earnings call.

Yes. Good morning, Corinne. Good morning, everyone. Thank you for the invitation on behalf of the Harmony team. So with regards to where we are sort of at Harmony, it's really an evolution of the strategy, and we think that we are identifying sort of 4 main strategic pillars, which we think that's how we'll be valued or judged in terms of the performance and drive long-term value. So the first is really protecting the pitolisant franchise to the 2030s and we feel we have a strong position with our IP that we can sort of dive into in terms of where we are there. The second main strategic pillar of value creation is really to continue to grow the WAKIX franchise while protecting the IP out to 2030. So we're on track to $1 billion-plus opportunity this year in narcolepsy alone and continue to extend that with the next-gen formulations. The third strategic pillar is really our pipeline and driving more value from our pipeline with our late-stage programs and now really, it's all about the orexin -- sort of the orexin opportunity. That's obviously a very large opportunity, a lot of excitement about that. And we feel we have a potential best-in-class orexin and we can spend a little time on that opportunity. And then last is sort of BD, business development. And with our strong balance sheet, a renewed emphasis and the conviction to really transact in BD to build out the pipeline and expand the commercial portfolio. So that's sort of the framework how we think we will be sort of valued and judged and when we execute on those 4 pillars to drive long-term value for our shareholders.

Great. Maybe we'll talk about the litigation quickly and get that one out of the way. I guess, recently, you had a lot with Navidea that you filed against AAT, and it helps to kind of maps to that goal, you said about protecting the WAKIX expenses to 2030. Could you just talk about that update and then the confidence that you derive from there in the IP?

Absolutely. I think, again, we feel really strong and confident in the strength of our IP out to 2030. And I think Peter can sort of expand on the license of tedium patent and this multilayered strategy with regards to protecting our IP.

Yes, just real quickly to introduce myself. I'm Peter Anastasiou, I'm the Chief Operating Officer. I was on the board for the last 3 years. So I've been an active participant in the Harmony story for the last 3 years, and I joined the management team about 2 months ago. But just to clarify on the IP, we have 2 cases that are going on. One is the ANDA that had the court case in February. That continues and we feel very strongly about our ability to prevail in that litigation. But in addition to that, during that trial, AAT and Sandoz introduced a significant amount of evidence that they are infringing upon a polymorph -- or excuse me, amorphous patent that we have exclusively licensed from Novidium. So at that time, we decided in April, together with Novidium, that we would file lawsuits defending our rights from infringement. And so that is at the beginning of the trial that has its own course of 24 to 30 months. Then you have a appeals to it, it's another 18 months. So that's why we feel so confident, as Jeff said, that we will have IP through March of 2020 -- through March 2030. And that is because if the court cases go to their full extreme, we feel very strongly in our ability to win, but also because of the strong hand we have, we believe it also enables a settlement to be reached. And so either way, the clear message is 2030 -- March of 2030 is our IP.

Inclusive of the 6 months of pediatric exclusivity.

Great. All right. We're going to come back to the WAKIX franchise, but I know that one of the key areas of focus for you guys right now is the orexin so I wanted to start there. in terms of products. Maybe on that front, you acquired Zerex and 2 agonist a couple of years ago now. How are you thinking about the class of agents and their potential in narcolepsy, particularly given a relatively crowded set of therapies.

So obviously, the orexin space is a really exciting one. And as I said, we feel in BP205, we have a potential best in class. So maybe to take a step the reasons why we're excited about that. And then I think the team can expand on where we see that class going and our opportunity. So BP205, what is unique. It has a unique chemical structure and chemical scaffold, which differentiates from the other recent compounds in the clinic. And based on that, it drives the attributes of this compound. So the first is potency and being the most potent orexin-2 agonist in the clinic right now. and potency matters with regard to the ability to have lower doses and drive greater efficacy, but also acceptable safety tolerability profile. So a lot of it comes down to sort of a risk-benefit assessment in terms of what that profile will be. In addition to potency, there's excellent selectivity of the orexin-2 receptor over orexin-1 and as the preclinical data have shown, and we're now in the clinic in terms of to bear that out, potential for once-daily dosing and a very clean in terms of the safety tox data that we've demonstrated there. So I think with that, the potential not only for sleep wake disorders. But again, beyond NT1, which is a disorder of orexin deficiency, when you move into NT2 and IH and then these broader CNS targets where there's a lot of discussion around, potency really matters to be able to have enough potency to drive efficacy with acceptable safety tolerability.

Okay. Obviously, this is a key piece of why you guys acquired that asset. And maybe you could just talk -- put a bit of a finer point on exactly how you think that could play out in terms of clinical differentiation and meaningfulness with respect to the specific side effect profile that you could see here?

Yes. So I think that it's the ability to dose lower and drive strong efficacy. And based on the preclinical data that we've seen over now in the clinic, with regards to sort of side effects that are on target in terms of lower percentages of those side effects and minimizing and avoiding the off-target effects. And I think that where we're seeing the class, Peter, from a commercial perspective where we see those opportunities.

Yes. Just rarely in a new class is the first entrant, is it the best entrant, and so we believe we have the best entrant for all the reasons that Jeff mentioned. I would add one more, and that is the once a day. One of the things that we hear is split dosing is a challenge for some of these patients, especially in the open-label phases of the clinical trial. So we believe pretty strongly that we're going to be once a day. And so we believe we're going to be bringing into the market the best offering among the orexins and it does give us the chance to take advantage of all the opportunities that exist in the space, not just in narcolepsy, but also in those other broader indications because of the features of the drug, particularly the potency.

Right. As we approach these orexins actually entering the market here, do you anticipate any impact to your WAKIX franchise in narcolepsy?

I can answer that. The short answer is no. And I can point to a couple of things. So when we were the first new mechanism to come out about 7 years ago, we had incredible growth and still do, but it didn't impact the growth of the oxybate, that's because this market has a high degree of unmet need. Doctors use polypharmacy as more the norm than the exception. These patients are highly heterogeneous and so having multiple mechanisms to treat these patients is really kind of the standard. And so we expect that will continue. WAKIX has been on the market now 7 years. It has an established efficacy and safety profile. Doctors are comfortable with it. They know the value that it brings. And so we expect it to be resilient in the marketplace and continue to grow even with the orexins coming.

Great. And you're pointing to share Phase I data in healthy volunteers this year. As you think about the hypothesis you just laid out, what kind of results would kind of push that advance that kind of hypothesis?

Yes. So where we are in the clinic. So we are in the clinic with healthy volunteer Phase I PK data. So we're right around the corner from the single ascending dose data that we'll be sharing the first opportunity we have. And really, that will confirm sort of the profile of the potential for once-daily dosing that we saw kind of from the preclinical PK data. And we want to confirm that in the clinic with healthy volunteers. . And then later this year, the multiple ascending dose data in healthy volunteers, we'll be sharing those data. And importantly, we'll be submitting an IND shortly and then we'll be doing the sleep-deprived healthy volunteer study this year or early next year. And that will be the first sort of signal in terms of signals of efficacy in that model potentially at lower doses and once-a-day doses with BP205 compared to some of the other orexin programs in the clinic, where they started with once-daily dosing and except for Takeda, which is BID and NT1 and then other programs went to sort of the split dosing paradigm. So we feel we have the potential once-daily dosing at lower doses to drive strong efficacy and those sets of data will bear that out.

Okay. So as you think about the metrics you'll be sharing with these updates near term, what should investors be paying attention to? And how would we think about the right benchmarks as we assess those results relative to the broader [indiscernible].

So I think it's looking for a favorable PK profile of short Tmax in terms of time to onset and then a half-life that can support once-daily dosing and minimize the in terms of the on-target effect of insomnia. .

It's also worth noting that as far as we know, the hasn't shown some of those early PK data. So they're not out there. And so we intend to share ours. And so I think it will be viewed positively and really shows the potential we're talking about is starting to bear itself out in the clinic.

Okay. In terms of safety and tolerability, I guess, when would you expect those sort of events to emerge? And so at what point can we say pretty definitively this does have the better tolerability profile you're guiding to?

Yes. So obviously, the more patients that you accrue in the clinic and the clinical trials. So I think we'll get initial signals with regards to what we're seeing, especially in the sleep-deprived healthy volunteer study, the Phase Ib study. And then when we move into sort of Phase II and accruing more patients, we'll get a pretty good read with regards to what we believe will be a favorable safety tolerability profile.

So do you give a thought, maybe you could speak to the broader development strategy that you're [indiscernible] what indications are you planning to prioritize here?

Peter and Glenn, I think we all have a lot of thoughts on this. So obviously, the initial targets in the sleep wake space, which started this whole opportunity. And remember, beyond NT1, these are not disorders of orexin deficiency, which is where we think a more potent compound can be beneficial. So I think that we have that opportunity and then these broader CNS targets, the potential in cognition, in ADHD, in mood disorders, fatigue, and really where we are now. So we're working with our partner, Bioproject beyond BP-205 for additional compounds, the orexin-2 agonist because you'll need. If you're going into sleep wake and orphan rare, you'll need other compounds, follow-ons if you go to broader CNS indications, different commercial models, different price points. So we are assessing all those opportunities, and I think we said later this year, we'll be providing kind of an update of the development strategy, if you want to add anything?

No, I would just emphasize that we are committed with our partner, Bioprojet to aggressively develop this and to take advantage the variety of indications that this asset could be targeted for. And as Jeff said, later this year, we'll give a substantive update on some of those specifics.

Okay. We'll look forward to that. Maybe in terms of the ability to look at other people providing proof of concept in different indications versus doing it yourself, how are you going to prioritize which indications you kind of take a lead on?

Yes. So I think being a little behind, we've always said, we're learning from some of those other programs. But in addition, we're also working with our partner, Bioprojet at the bench in terms of preclinical models in some of these broader CNS targets that I mentioned. So we will also have those data to inform our strategy. And the other opportunity that out there is there is a potential for synergistic mechanism between an orexin-2 agonist and pitolisant, antihistamine-3 antagonist. So we are also looking at preclinical models to the potential for synergy between pitolisant and orexin agonist. And that could afford an opportunity sort of down the road for fixed dose combination drug development. We're also working on that opportunity with our partner, Bioprojet.

The only other thing I just wanted to put in some perspective, that while we can concede that we won't be first in NT1 because of the aggressive development approach, that we plan to take. There's a real chance we could be first or second in some of these other indications. And so that's, I think, one of the other areas of differentiation with the compound.

Yes. It's a good point. So how do you think about balancing where you're going to invest dollars in and how important is being kind of first to market in some of those other indications versus kind of following in more established indications for the category?

I think the most important thing is the profile and a strong profile can succeed in any market even if you're fourth, fifth, sixth, we won't be but that's the most important part. But if you can see that all these drugs will be good in NT1, where we think we can really shine is in these other areas, and that's where we intend and believe we can be first or second with also the best profile.

Yes. And in terms of the investment, we now -- we see the opportunity and have talked about investing in a broader orexin development program. We're also looking at the rest is our pipeline and reassessing in terms of where can we drive the greatest value from the pipeline programs and a broader Orexin program.

Great. so you mentioned the development learnings that you can take away from leaders in the class. But maybe we could talk about the commercial launches that we start to expect over the course of the next couple of years. What will you be watching in terms of their commercial progress? And how are you going to take that learning into account as you think about your own? .

Sure. Do you want to take.

Okay. I think several things. several things. First and foremost is what does the profile look like in the real world. We all know that for all drugs, the clinical environment is not the same as the real-world environment. clinical environment, patients are very homogenous. There's no comorbidities. There's very strict rules around what concomitant meds, you can take and not take. So the real-world profile, I think, for any drug is critically important. So some of the long-term efficacy that is unknown about these competitive products will remain to be seen, the long-term tolerability when you get into broader populations. So those are clearly some of the things that we're looking for, but also things like price. So it's -- depending -- there's a lot of rumors out there about what Takeda will price that makes a big impact on the payer access situation and patients' ability to get those. So those are a number of things that we'll be watching. But at the end of the day, all we can control is what we do with WAKIX. And so we're continuing to be focused on driving that long-term efficacy -- short- and long-term efficacy, short- and long-term tolerability. It's the only unique mechanism that's in the market beyond the oxybate and has its own place carved out because of its unique mechanism, even in the face of orexin and it's also still the only nonscheduled product. So that's where we'll be focusing. But of course, we'll be paying attention to some of these other factors.

With respect to figuring out indications on the orexin, I think what you're going to see is a process you see a pretty broad effort on Phase II, and then we'll have the data dictate. But the selection of the targets will really be determined by our strength, right? So we're looking for areas with great pricing, kind of niche where we can address it with our sales force and value with respect to our hub and the way we get reimbursement for patients and treat patients.

I think the opportunity for WAKIX, we still believe that it will continue to be a polypharmacy market. I know there's a lot of debate around that. But chronic CNS disorder, difficult to treat symptoms often you need multiple mechanisms to really control these patients. So as Peter said, WAKIX has been in the market for 7 years, well-established our commercial model. So I think there continues to be that opportunity. Pricing, obviously, in terms of place in therapy will have an impact. And while that's happening, we'll be aggressively advancing our orexin 2 agonist programs. sleep wake looking at Phase II proof of concept in these other targets and sort of guide, let the data drive us and guide us in terms of what the best opportunities will be.

Yes. In terms of prioritizing R&D, what we're going through over the next couple of months is just looking at our entire portfolio of products and figuring out where we're getting our best return. The last thing we want to do is not have enough money to fund the most exciting opportunities in front of us. So we're going through that process. We're going to really test the P&L pretty hard just to make sure we're fully funding everything into 2030.

Can I ask a follow-up on that point, which is that as you're doing this, I imagine you're also taking into consideration what Harmony's real strengths are. So as you think about the core competencies of the business and like what are those? And how do they inform the development strategy and prioritization that you're undertaking?

Yes. No, it's a great question. So I think our core competencies are really a lot of expertise in the CNS arena, I think, and not just sleep wake but epilepsy and other target indications, including some of the broader ones based our R&D team and their sort of backgrounds and their experience. So I think that is an important part, along with obviously the commercial prowess and the strong commercial engine that we've developed the unique commercial model. So we would be able to apply that to other orphan rare CNS indications, other rare indications outside CNS. So I think that will all inform as we move forward with the Orexin program the best.

Maybe talk a little bit about our partner as well. I appreciate.

Yes. that's a key advantage as well. Yes. So that's a good point. So Bioprojet, our partner, who are the innovators of WAKIX or pitolisant, actually the principal scientist John Charles Schwartz, discovered the histamine 3 receptor. So the seat of the science sits there. So they're really strong at the bench in terms of their basic R&D and preclinical models. And that's who we are collaborating with in terms of advancing the Orexin program. So they have a lot of strength there. And it provides kind of our research arm working with them closely on the orexin opportunity.

I would just add I think at this point, we've established ourselves as the leader in the sleep wake market across all facets, commercial certainly, but also R&D advocacy. We know the KOLs, we know the advocacy groups. They know us. We've been obviously successful in the market and expect that, that's one of our superpowers, and will continue to be as we introduce GR and HD, but also the orexin as well. .

Right. So one of the things you mentioned that list was the commercial prowess. So it's a good segue to WAKIX you've guided to reaching blockbuster status this year. I guess what does that embed with respect to patient growth? And how are you guys continuing to deliver such good kind of patient growth this well into the commercialization of the product?

Sure. I'll let Peter expand on that as he has a long history with his commercial expertise. .

Yes. I mean it all starts with the product. Again, I know we keep repeating it, but it is the only unique mechanism relative to the oxybate. It has its own place carved out. It's a known efficacy and safety profile. And then of course, we have demonstrated strength in commercial and so we don't take anything for granted. There is a strong growth trajectory, but we are constantly innovating and sometimes incrementally, sometimes more so. So we recently expanded our footprint both in the sales force, but also in specialty pharmacy and hub, our field reimbursement managers, getting to more prescribers, helping more patients get through the process from a prescription to a paid Rx for rare disorders, especially at this type of price point and higher, there's a lot of support that's needed. And so we're constantly innovating and tweaking our model to be able to help with that and it's paying dividends. We had strong growth last year. We've -- we're on track to hit the $1 billion, and we're seeing some very strong growth this year as well. And so we expect that to continue.

Yes. So you followed the story for a while. And we've always said it's a unique profile. It's the first and only nonscheduled product. And when I saw those data from the abuse liability study readout, I realized this could be something special. And remember, it's still a large market for an orphan rare condition, it's still a sizable market. We continue to sort of tap into that.

90,000 patients that are undiagnosed and untreated.

So it continues to grow. Top line demand is strong, and we believe we can continue to drive that. And then into the next-gen new formulations of too.

Thank you for the segue. I wanted to talk about life cycle management. So at a high level, maybe you could just talk about where you see the gastro-resistant and high-dose formulations fitting within the context of the broader franchise.

Yes. So latest update on that and then I can turn it to Peter in terms of strategy, the commercial strategy. So as we've said that we were going to be submitting the NDA for Pitolisant GR in the second quarter. So we've submitted the NDA, and we are on track for Target PDUFA do a first quarter next year. We see that as a significant opportunity right around the corner to extend the pitolisant franchise out to March of 2030, which is our base case LOE. Also pitolisant GR and HD have utility patents filed to 2044 as well. In terms of the commercial opportunity, I think Peter can expand on that.

As good of a product as WAKIX is, as we've said, there are ways to -- and back to the point about constantly innovating and adding additional value, we believe that GR can be an incremental step forward even already on a great profile with WAKIX. And the main area is because of the GR coating, we believe it's going to be very helpful for narcolepsy patients because narcolepsy patients have a high degree, 80% to 90% of them. This is irrespective of WAKIX, part of their disease, they have a high degree of GI symptoms that kind of co-travel with their disease. So they're always very sensitive GI side effects. So having the GR formulation will certainly help that. But also what that enables us to do is, right now, there's a 2-step titration with WAKIX and so by having the GR formulation, it should help us avoid the first step in the titration and get right to a therapeutic dose from the very first day of treatment. And so these are incremental advancements on an already good profile, very strong profile. And so we plan to launch it in Q1, and we think it will be helpful to patients. And also, as Jeff said, because of its IP to be helpful long term beyond 2030.

Great. On the high dose, could you speak to what you view as clinically meaningful in terms of incremental efficacy you could achieve at a higher dose? And I know 1 of the areas you've spoken to is it's kind of showing benefit on fatigue. So maybe you could embed that in the answer to this question.

Yes. I think the bar is demonstrating what's clinically meaningful in terms of the 2- to 3-point improvement over WAKIX the label data on the [indiscernible] sleepiness scale. So we have data from the development program in terms of dose response. And we feel at about 2x the current maximum label dose with pitolisant HD, which is also -- it's also a unique formulation. So it's not bioequivalent. It's got greater bioavailability milligram per milligram, and we're at about 2x the highest label dose currently for WAKIX. So we feel we can drive clinically meaningful benefit improvement, 2 to 3 points at a minimum on the Epworth reduction in cataplexy and then the Phase III trial in narcolepsy is also including fatigue as a secondary endpoint. And in terms of demonstrating improvement in fatigue so differentiated labeling in about 60% to 70% of patients with narcolepsy also experienced fatigue as another sort of debilitating symptom.

Okay. So how do you think about what portion of patients are going to be good candidates for a switch if you deliver on that kind of profile?

Yes. If I can add just one thing before we answer that question is the idiopathic hypersomnia program that we're pursuing, which is not an indication that WAKIX has but it will be an indication that HD has. So that's even additional differentiation. And even in the face of generics post 2030, we think that, in addition to all the things that Jeff said, will help WAKIX HD continue to be a thriving formulation because it has an indication generic WAKIX won't.

Sure. Okay. So maybe on that, the percentage of patients that are currently on WAKIX that you think would be good candidates to switch to high dose assuming the profile you prescribed.

Yes. we certainly haven't guided a specific, but I think we point to pretty frequently the Xyrem ieWave analog as something that we believe we can achieve or do better with a switch. And so we believe that there is more benefits to both the GR and BHD then Xywav gave over Xyrem. So I think with more differentiation in those 2 formulations, we think we can do that and possibly better.

And maybe some comments on the commercial model, so the opportunity we have, starting with GR.

Yes. So again, this product is not distributed in retail pharmacies. It is closed distribution network of specialty pharmacies and a hub that manages all this data. And so we have data on all the patients, all the prescribers for WAKIX. And so that's also something that we can leverage to be able to share the benefits of both GR and HD with patients that are currently on the product as a potential switch opportunity. But just as important, patients who maybe have tried WAKIX in the past and have left WAKIX for some reason to bring them back with one of these 2 new formulations.

Yes. So I think the opportunity to extend the pitolisant franchise is right around the corner with the NDA submission for GR and the target PDUFA in first quarter next year, really starting in terms of to extend the franchise and then the HD program, currently Phase III, as Peter mentioned, both narcolepsy and the IH study. And then for IH, we're also looking at, in addition to excessive daytime sleepiness, sleep inertia as a unique sort of endpoint to get data in the label and have differentiated labeling for the IH program as well.

Okay. Great. I wanted to quickly talk about business development. You've got quite a bit of cash on the balance sheet, and you have talked about business development as being a key pillar. So maybe you could just talk about the areas of focus with respect to indication, size of the asset, stage of development, and I'll let you guys kind of go from there.

Yes. So from a BD perspective, I think the strategy continues to evolve. And as I mentioned upfront, renewed emphasis and conviction to transact, especially with a very strong balance sheet, continued strategic and thoughtful. We've gone deep in several opportunities, but I think for the right reason, have not pulled the trigger yet. Glenn can expand on the current thinking and where we are in business development. .

Yes, obviously, like a big balance sheet. So you have the optionality of doing transformative, something transformative. I think that term scares a lot of people. So that's not really our inclination to do something that's transformative. What will most likely happen here is we're going to do a series of smaller transactions, all playing into our strengths in terms of niche neuroscience opportunities. Our biggest emphasis are on those products that could -- that are complementary to what we're selling right now that would contribute to revenues in the 2028 to 2032 time frame. And the reason we kind of picked that time frame is, obviously, we have to deal with the threat of orexin between now and 2030 and then post 2030, you have an LOE to deal with. And at that point in time, we're just beginning, hopefully, for the takeoff of the orexin for our own Orexin program. So that seems to be the sweet spot in terms of revenues.

Okay. In terms of capital allocation priorities, how do shareholder returns kind of rank relative to the... .

I heard that question last time in the U.S. in terms of shareholder returns. We're very cognizant of shareholder returns because we're all shareholders, and I certainly want our employees to think of it that way. And so it has to make sense, obviously, from a return on investment perspective. I think it would help if it was obvious to investors. But in terms of share repurchase, it continues to be my strong belief that we can do better for shareholders investing in the business, either our Orexin program. or with BD than it would be to return cash to shareholders today, not ruling that out, but that's where the priority is right now.

Yes. And we don't think it's either or. We think the opportunities are both investing in good BD opportunities as well as this broader Orexin program that we're really starting to accelerate and focus on and maybe some of the other strategic filters in BD in terms of what the types of deals.

I mean the [indiscernible] deal was a blessing in some ways because we're able to really show folks what a transformation to a biotech entity really would look like. So here we are a company that is fighting it out to generate $1 billion of revenues. And we're sitting on close to $1 billion of cash. And we sell at a market cap of $1.7 billion. We are undervalued. But then you look at Cyntesta being bought in a range of $6 billion to $8 billion. You can see how transformative 1 molecule that's unique can be to an organization. So obviously, if we can identify that molecule either through a BD deal or our own portfolio, we can create tremendous value for folks, particularly with 205 or orexin agonist.

Yes, of course. Maybe in the last one that we have here, I just want to give you a chance to talk about the epilepsy data, we'll expect later next year? And just what should we be looking for there?

Yes. So EPX 100 currently in Phase III for both Dravet and LGS. On target for top line data next year in 2027, it's really similar to some of the long-term extension data that we shared last year at the AES meeting showing, I think, the profile of efficacy, about 50% responder rate in terms of kind of the bar of entry for showing good efficacy, but more importantly, with a very good safety tolerability profile. The profile of EPX 100 clemazole hydrochloride is very similar to another product in the polypharmacy market, strong efficacy with a very favorable safety tolerability profile. And that product is called, WAKIX, with regards to the broad clinical utility and the overall benefit risk proposition in a polypharmacy market. We know there's a lot of competition in that space. but we feel with EPX 100, we can have a very strong product profile and strong offering for both [indiscernible] and the opportunity in LGS.

Beautiful. With that, I think we're at time. Thanks everyone who joined us here and online.

Thank you.