Good day and thank you for standing by. Welcome to the Second Quarter 2021 Financial and Business Update Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Lisa Capparelli, Head of Investor Relations.
Thank you, operator. Good morning, everyone, and thank you for joining us today as we review Harmony Biosciences' Q2 2021 Financial Performance and provide business updates. Before we start, I encourage everyone Go to the Investors section of the Harmony Biosciences website to find the press release and slides that accompany our discussion today, including a reconciliation of our GAAP to non GAAP financial measures. At this stage of our life cycle, we believe non GAAP Our presenters on today's call are John Jacobs, President and CEO Doctor. Jeffrey Dano, Chief Medical Officer Jeffrey Dirks, Chief Commercial Officer and Sandeep Kapadia, CFO.
Moving on to Slide number 2. 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, and our actual results may differ materially. I encourage you to consult the risk factors referenced in our SEC filings for additional details. At this time, I would like to turn the call over to our CEO, John Jacobs.
John?
Thank you, Lisa. And I would also like to extend my sincere thanks to all of the participants Thank you for joining our Q2 2021 conference call today. We are halfway through the year, and I'm extremely pleased with the progress our team has made to date. Please allow me to elaborate on our achievements in the context of our 3 pillars growth strategy, which is shown on Slide 3. Pillar 1, optimize the commercial performance of WAKIX.
Q2 represented a strong quarter for Harmony as we delivered nearly $74,000,000 in net sales for WAKIX and achieved our 2nd profitable quarter in company history. This significant growth, nearly 24% versus the prior quarter Q1, was driven by a continued increase in the average number of patients on Wakeix and in the number of healthcare professionals prescribing our product, both of which further underscore the significant unmet medical need in this market for a truly novel mechanism of action and differentiated product profile, which Wakeix provides. Moving on to Pillar 2. Pillar 2 is expand the clinical utility of Wakeix beyond narcolepsy. We are excited to now be evaluating patellecint in 2 additional rare disease patient populations beyond narcolepsy, both with significant unmet medical need and where there are no or limited approved therapies.
In addition to our Phase 2 clinical trial in patients with Prader Willi syndrome that we initiated at the end of last year, In Q2, we initiated a Phase 2 trial in patients with myotonic dystrophy. We are also considering additional indications for Waikix And other rare neurological diseases and we intend to broaden our lifecycle management efforts for this unique product consistent with our strategy for long term growth. And finally, pillar 3, acquire new assets to expand our portfolio beyond Waco's. Through the efforts of our dedicated business development team, I am excited that we acquired our first additional asset beyond WACIK's HBS-one hundred and two, which is a potential 1st in class molecule with a novel mechanism HBS-one hundred and two gives us the opportunity to once again lead with the science in narcolepsy and other rare neurological diseases. As you will hear from Doctor.
Jeff Daigneau, we believe that HPS-one hundred and two with its unique mechanism of action potentially represents the next Generation of targeted therapy for narcolepsy beyond those working through histamine and other neurotransmitter systems in the brain, including Orexin. We view this acquisition as another important step on our journey to becoming a leading rare neurological disease company. Our business development strategy is intended to transform Harmony into a multiproduct company with a robust, catalyst rich pipeline of innovative therapies at various stages of development with the potential for launch both during and after Wakeix lifecycle. An important aspect of this strategy is that we're focusing on assets in the rare neurological arena, where we can leverage our existing expertise and infrastructure, enabling us to optimize development and launch while managing costs, which in turn is intended to create long term value for our stakeholders. To further support this initiative and the long term growth of Harmony, we have entered into a strategic collaboration with Blackstone that gives us access to additional capital On that note, I would like to turn the call over to Jeff Dirks, our Chief Commercial Officer.
Jeff?
Thanks, John. We saw another strong quarter of performance for WaiQix in Q2 as measured by key performance metrics noted on Slide 4. Net revenue for the Q2 was $73,800,000 representing almost a 24% increase from the Q1 2021. This solid double digit growth in net revenue was aided by strong prescription demand at the end of the Q1 that helped to drive additional growth in the quarterly average number of patients For Q2, growth in new prescribers at Wakeix, an improvement to gross to nets from Q1 that is normal given the impact of seasonal payer dynamics in the Q1 each year. And moving on to Slide 5.
The average number of patients on WAYKX increased 15% from what we reported in Q1 to approximately 3,200 patients. More than 2 thirds of these patients are refilling Wakeix prescription at the highest dose. We anticipate that percentage to increase over time as more healthcare professionals gain valuable clinical experience with their patients and see the benefits of the product in treating the debilitating and life impacting symptoms of excessive daytime sleepiness or cataplexy. The growth in the average number of patients on WAYKX demonstrates continued strong demand despite competitive products entering the market and also speaks to how the meaningfully differentiated product profile aligns the unmet needs of the narcolepsy market. Our strong commercial performance continues to be driven by the following key factors.
First, we continue to see broad and meaningful clinical adoption of Wakeix. We saw continued growth in the prescriber base of WAYKX in Q2. Of the more than 8,000 healthcare professionals who treat the majority of the diagnosed narcolepsy Patient population. Over 38% have prescribed Wakeix since launch through the end of the second quarter. We also continue to see the vast majority of those Patient feedback from the community continues to demonstrate positive experience and a strong interest in the product.
2nd, the already strong market access for WAYKX was further strengthened with an increased number of plans making additional positive formulary decision for narcolepsy patients with cataplexy. Over 80% of all U. S. Covered lives have favorable access to Wakeix. And through recent positive formulary decisions for Type 1 patients within these plans, which helped to take some of the friction out of the managed care workflow approval process, Patients' ability to access the WAYCUS has been accelerated in the Q2.
3rd, we saw improved access to healthcare professionals for our field sales team. ZS Access Monitor data showed that by the end of the second quarter, nearly 2 thirds of all field sales engagements with healthcare professionals were in person, providing more of a meaningful education exchange for branded products and newer products still in launch phase. We saw a corresponding increase in Waco's top line that align with the opening of the country as more healthcare professionals are seeing patients in person and more face to face interactions are occurring between healthcare professionals and our field sales team. And lastly, Wakeix offers a meaningfully differentiated product profile. The broad and strong adoption of Wakeix speaks to the significant unmet need in the narcolepsy market and how the overall benefit risk profile of WAYKX aligns to the unmet needs.
Despite the growing competitive landscape of products, Waykix offers a truly unique option for healthcare professionals and patients as seen on Slide 6. Wakeix offers a 1st in class molecule with a novel MOA, the only product that works through histamine. Wakeix is the only non scheduled with no evidence of drug tolerance or withdrawal symptoms in clinical studies. WAYKIES can be used as monotherapy or administered concomitantly with other narcolepsy treatments And Wakeix offers convenient patient friendly once daily oral tablet administration in the morning upon wakening. I am extremely encouraged by our continued strong performance of WAYKX in the narcolepsy market, further reinforcing our perspective That Wakeix offers a unique and meaningful option to treat both excessive daytime sleepiness or cataplexy in adult patients with narcolepsy.
I will now turn the presentation over to Doctor. Jeff Deano for an update on our clinical development program. Jeff?
Thanks, Jeff, and good morning, everyone. I'd like to start by speaking to our updated pipeline chart on Slide number 7. As John mentioned, we have made progress on all three pillars of our company growth strategy. Specifically, with regard to pillar number 2 and our lifecycle management programs for pettolacin, At the end of June, we initiated our Phase 2 clinical trial to evaluate pettolacin in patients with Type 1 myotonic dystrophy known as DM1. In addition, our Phase 2 trial in patients with Prader Willi Syndrome or PWS continues to advance with patients completing the randomized controlled phase and rolling into the open label extension phase of the trial.
Both trials are on track for top line data readout next year. But the real exciting news for us today is the acquisition of our first product beyond Wake HBS-one hundred and two, which represents an innovative drug development opportunity that could enable us to potentially bring another new 1st in class therapy to patients living with narcolepsy and possibly other rare neurological diseases. HBS-one hundred and two is a potential 1st in class molecule with a novel mechanism of action that targets melanin concentrating hormone known as MCH Neurons in the Brain. Scientific evidence suggests that MCH neurons function as the control center and driver of REM sleep and its related behaviors. Let me start with slide number 8, which explains the control centers for sleep and wakefulness that are centered in the hypothalamus.
The main mediators of wakefulness and sleep wake state stability are orexin hypocretin produced in the lateral hypothalamus as well as histamine produced nearby in the tuberomammillary nucleus or TMN. The main driver of non rapid eye movement sleep or non REM sleep is GABA, which is produced in the ventral lateral preoptic nucleus or VLPO. And the main generator of REM sleep is melanin concentrating hormone known as MCH, which is produced in a diffuse network of neurons in the lateral hypothalamus interspersed amongst the orexin neurons. Similar to how orexin and histamine neurons drive the wakefulness component of sleep wake state stability, MCH neurons to drive REM sleep and its associated behaviors. Moving to Slide number 9, which shows the opposing roles of Orexin and MCH related to sleep wake state function.
The panel on the top left depicts how one of the original models of narcolepsy was explained. In an orexin deficient state that occurs in patients with Type 1 narcolepsy, there is an imbalance between orexin and GABA Such that GABA goes unchecked, which results in sleep intruding into wakefulness that patients experience as excessive daytime sleepiness or EDS. The panel on the top right depicts a similar kind of imbalance in anorexin deficient state related to the REM control center When an imbalance in MCH causes REM intrusion into wakefulness that patients experience as the symptoms of cataplexy, hallucinations and sleep paralysis. The figure at the bottom depicts the therapeutic hypothesis for HBS-one hundred and two. Based on its mechanism of action working as an NCH receptor 1 antagonist, HPS-one hundred and two will block the activity of the NCH neurons to restore balance between NCH and orexin signaling, decrease REM overdrive, Decreased REM intrusions into wakefulness, which will then potentially result in decreased symptoms of cataplexy, hallucinations and sleep paralysis.
Moving on to Slide number 10. Preclinical proof Concept of the MCH receptor 1 mechanism of action has been established in an orexin knockout mouse model of narcolepsy. This model has good clinical predictability in patients with narcolepsy. This experiment was conducted by Doctor. Tom Scammel and his team at Harvard.
The graph on the left shows the number of cataplexy attacks and the one on the right shows the number of short latency transitions into REM sleep labeled SLREM, which is an electrophysiologic correlate of sleep wake state instability and REM intruding into wakefulness. In orexin knockout mice at baseline, those treated with vehicle had significantly more attacks of cataplexy and bouts of That's of SLRM compared to those treated with an MCH receptor 1 probe molecule, which in this experiment with SNAP-ninety four thousand eight hundred and forty seven. When the mice were fed chocolate, which excites them and provides a positive emotional stimulus, The number of cataplexy attacks increased as did the bouts of SL REM, but the NCH receptor 1 antagonist block these events to a similar degree as was seen during the baseline condition. This preclinical proof of concept data is impressive And as part of our next steps, which are included on Slide number 11, we will look to replicate this data with HBS-one hundred and two in the orexin knockout mouse model of narcolepsy. In addition, we will work to prepare and submit an investigational new drug application with the plan to initiate a Phase 2 clinical trial once the IND is open.
We will provide additional updates on the development plan for HBS-one hundred and two on future calls. As John stated, this acquisition is an important step in our ongoing mission We now have the opportunity to once again lead with the science and develop a second, 1st in class molecule with a novel MOA for patients living with narcolepsy. This is consistent with our commitment to advancing breakthrough science and addressing true unmet medical needs in patients living with rare neurological diseases. My team and I are excited to go to work on the HBS-one hundred and two development Program. With that, I will now turn the presentation over to Sandeep Kapadia to review our financials.
Sandeep?
Thank you, Jeff, and good morning, everyone. This morning, we announced our strategic financing collaboration with Blackstone and issued our Q2 2021 press release and filed our 10 Q, where you can find the details of our financial and operating results. So let's start with strategic financing collaboration with Blackstone, which includes $330,000,000 of capital as seen on Slide number 12. As you may know, Blackstone is a premier global investment firm with strong transactional experience and providing capital to life science companies to help further develop, expand and commercialize their portfolio. This transaction is meaningful to Harmony as it provides up to 200,000,000 of debt capital to pay off our existing loan at a considerably lower interest rate, which will result in an annual interest savings of approximately $10,000,000 In addition, Blackstone will also provide up to $100,000,000 in capital as we look to expand our pipeline by acquiring and licensing products beyond WAKIX and HBS102.
And finally, the financing also includes a $30,000,000 equity investment in Harmony common stock. We're thrilled that such a fund as Blackstone has chosen to collaborate with us to support our future growth. So moving on to our 2nd quarter performance on Slide 13 and 14. In the Q2, we again posted our highest quarterly net revenues to date with effectively managing our investments and posted our 2nd consecutive quarter with positive net income and earnings per share. I'm pleased with the continued momentum we're seeing.
For the Q2 of 2021, we reported $73,800,000 in Wacoast net product revenue as compared to $38,000,000 in the prior year quarter. This represents a growth of 94.2%. As Jeff pointed out earlier, this is also a 23.7% increase Q1 2021, where we had $59,700,000 in revenues. We're pleased to see the continued growth in the average number of patients and the number of healthcare prescribers. The 2nd quarter 2021 gross margin was 61,100,000 versus $31,500,000 in the prior year quarter.
For the 2nd quarter, operating expenses reached 37,800,000 versus the prior year quarter of $24,200,000 The growth in operating expenses resulted from our continued commercialization of WAYKX and the advancement of our pipeline programs. As a result, we posted Q2 2021 net income of $14,100,000 for $0.24 per diluted share. This compares favorably to a net loss of $10,500,000 or a loss of $1.34 per share in the prior year quarter. The underlying operating profitability improved as well. We posted 2nd quarter non GAAP adjusted Net income of $31,900,000 or $0.54 per share versus the prior year quarter, net loss of $500,000 or $0.07 per share.
Non GAAP adjusted net income excludes interest expense, amortization, depreciation, stock based compensation and other non operating items. Non GAAP adjusted net income is a non GAAP financial measure. Please see our press release for a reconciliation of this measure. We also ended the Q2 in a strong cash position with $159,700,000 in cash, up sequentially from Q1. As we look forward to the second half of twenty twenty one, we anticipate continued quarter over quarter growth in revenue With normal seasonality during the summer period as well as increased investment for R and D and SG and A, we believe the WayTags launch has been quite successful to date And we're focused on driving continued WAYFEX growth as well as expand into additional indications that address rare neurological diseases.
We're also very excited about the acquisition of HBS102. We've been able to be financially prudent in acquiring this early stage asset with a minimal upfront and success based future milestones. This approach allows us to maintain a strong cash position while focusing resources on advancing clinical program. In the future, assuming success, we'll be obliged to make development, regulatory, sales milestone payments in addition to tiered royalties in the single to low double digit range. As an early asset, we expect nominal increases in our R and D until we advance HBS102 in the later stage of clinical development.
So in conclusion, we're operating from a position of strength as we have a solid balance sheet, As we continue to generate revenues and maintain profitability at the Wakeix franchise, we will look forward to reinvesting this capital to fund our ongoing development program and acquire additional assets. So with that, I'd like to turn the call back to John for his closing remarks. John? Thank you, Sandeep, and thanks to
the entire Harmony team. Harmony is delivering on all three pillars of our growth strategy. And with the success of this most recent quarter, we've taken another crucial step forward on our journey to become a leading rare neurological disease company with an innovative pipeline of products. I'm excited about the potential we are building to deliver even more hope and life changing results to patients in the future. In summary, the Q2 2021 represented our 6th consecutive quarter of sequential earnings growth and our 2nd sequential quarter of profitability.
Our development pipeline continues to grow and expand. In addition to our Phase 2 PRADA WILLI trial, We initiated a Phase 2 trial in myotonic dystrophy with Wakeix and acquired the rights to HPS-one hundred and two, a novel first in class molecule. In addition, we have further strengthened our balance sheet and enhanced our flexibility to execute on Pillar 3 of our growth strategy by gaining access to additional financing through the Blackstone collaboration. Operator, We will now open the call to questions from the audience. Thank you.
Our first question comes from Chris Howerton with Jefferies.
Excellent. Congratulations on the great progress this quarter to you, John and the team. Thank you, Chris.
Thank you and thanks for joining our call.
Of course. All right. So I guess maybe just a Congratulations also on the acquisition of 102, it's really interesting. But first, maybe on the commercial Sai, perhaps for Jeff Dirks. Could you give us some color on what you're seeing currently on patients on free drug or the patient assistance programs that you've described in previous quarters and just kind of maybe what you're seeing relative to what you observed previously there?
And then the second question I have is perhaps related to the other Jeff for 102. I guess I'm curious How you're seeing the unmet needs specifically for the REM related symptoms such as hallucination, Cataplexy and sleep paralysis and kind of what segmentation of the narcolepsy market do you see that serving?
Thank you.
Thank you, Chris. Go ahead, Jeff Dirks, why don't you take the first question?
Sure. Thanks for the question, Chris. So as we stated before, throughout the pandemic, we have seen an increased demand for our patient assistance And that elevated demand has been relatively consistent even into the Q2 of 2021 where the COVID limitations had started to subside. That's difficult to speculate as to when there'll be less reliance on the patient assistance program as the country continues to deal sort of with the ongoing challenges of COVID. But I think the important key takeaway here is that even with this elevated demand, we've been able to demonstrate strong net revenue growth and continue to see that strong underlying
Thank you.
Go ahead, Doctor. Dana, why don't you take the second? Sure.
Yes. Good morning, Chris. Thanks for your question. So with regards to HBS-one hundred and two and the target of REM dysregulation in general, as you know, cataplexy is the most common of those symptoms with regards to REM dysregulation and REM intrusion into But the potential for a specific therapy target at all of the symptoms. So the combination of cataplexy As well as sleep paralysis and hallucinations, because the variability of those symptoms in the patient population with narcolepsy.
So we feel that potential new therapy with that specific mechanism targeting remdesiregulation in general would have significant potential significant value and utility.
Yes. And I guess, I mean, if maybe if I could just ask a clarification is, and so I guess, Jeff, would you view this as In adjunctive therapy to maybe existing therapies that a patient is managed on? Or would this be Sufficient as a monotherapy in a certain amount of patients?
So Chris, in addition to the proposed mechanism, In the development program, we're also going to evaluate with regards to the overall potential effect on sleep wake state stability and the imbalance between the orexin signaling and the MCH neurons, we're going to assess it also for the ability to stabilize wakefulness And potential to improve EDS as well. So as we build out the development program, we're looking at both utility and effectiveness For REM dysregulation and the potential also to stabilize wakefulness and address EDS. So I think that is the potential opportunity either as a monotherapy or potentially as Well
said, Doctor. Dana. It's John Chris. One of the things we all know about the narcolepsy market is it is a polypharmacy market. And there's significant level of unmet complexity with this disease in these patients.
And having a unique mechanism of action that comes at this condition from a
Yes, very good. Well, Thanks for all the color and very excited to see the progress there. Thanks. Thank you, Chris. Thanks, Chris.
Our next question comes from Greg Suvannavejh with Goldman Sachs.
Hey, good morning team. Thanks so much for taking my questions Congrats on the quarter.
Thank you.
Maybe if I could ask a forward looking question For some of my commercial stage companies, they've made some proactive comments on how they're monitoring COVID And the evolving delta variance, could you provide any color on how you're thinking about whether it's Moving from Q2 into the Q3 and perhaps just overall comments on what you're seeing about the second half or how you're feeling about the second half. And so that's my first question. I probably have 17 questions, but let me I won't ask 17, but let me just ask that first one.
We'll take them 1 at a time, Greg, if that's helpful. So with the first one, I mean, obviously, Harmony has shown our ability to execute On the launch and commercialization of WAYKX, despite facing immense headwinds that all of our colleagues and patients, families and coworkers experienced last year and into the beginning of And as COVID started to lift, there's a direct correlation with that lift in the opening of offices, foot traffic increasing with patients into those offices and For potential uptake of prescriptions, including Wakeix. I think you saw some of that momentum here in Q2 with our strong results. It's hard to predict what might happen with COVID, but let me hand it over to Jeff Dirks. And Jeff, if you wanted to add some commentary to that and what we're thinking about the second half.
Yes. Sure, John. Thanks for the question, Greg. And to reiterate what John shared, in the Q2, we did see more physician offices opening. We had Great in person educational engagement from our field sales team, more patients coming back into the office for in person medication management visits.
And there certainly is a correlation In terms of the increase in the Wakeix top line prescription demand that we saw in Q2 aligning with the opening of the country, and I think that speaks to the unmet medical need that Talk about and really how the meaningfully differentiated product profile of Wakeix aligns to that need. And as John shared, we're seeing strong momentum in our business. We see a very strong underlying I think it's very difficult to speculate forward looking, Greg, with respect to the impact of the COVID resurgence or The summer seasonality on the industry of Wakeix and the exact growth rates that we're going to see moving forward, but I will reiterate that we're Extremely encouraged by the continuing underlying strong demand that we're seeing, the strong performance of WACX, and we do expect to continue to grow quarter over quarter as we've demonstrated Through the pandemic previously.
Yes. And perhaps, I'll give Kapadia, our CFO. Sandeep, did
you want to add some additional color to that? Sure. I think just in addition to what Jeff said, we anticipate Continued quarter over quarter growth for the second half of the year. Obviously, there's general summer seasonality that typically happens as well. But Certainly, we feel good about the trends that we're seeing, especially very strong Q2 that will certainly carry forward for the balance.
Maybe as a follow-up, I've heard you discuss or bring up the summer seasonality phenomenon. And I'm wondering, Historically speaking, maybe because I'm not losing brain cells these days, like I don't remember how summer seasonality Might have either impacted WayKick's last year, although you were much earlier in your launch, What you've seen historically, given the management team's prior experience with these types of products during the summertime?
Good question, Greg. As you know, last year was an unusual year with COVID. It was also our 1st year of launch. So unfortunately, we didn't have several years of prior to that to be able to give you something to anchor that upon, and we believe last year was skewed due to COVID. So it's really hard to say.
Jeff, do you have anything to add to that or Sandeep?
Yes. I would just say overall, Greg, in any given calendar year, there is seasonality. In the Q1, there's usually Seasonal payer dynamics that occur and put pressure on gross to nets and the reauthorization of prescriptions. 2nd quarter is usually followed with strong uptake. Q3, you see that traditionally people taking vacations, right?
There's fewer representative and healthcare professional interactions, Fewer patient visits to the office and then that's followed usually by a strong Q4, patients filling their prescriptions before the end of the year and their insurance changes. You've got pharmacies looking to make sure they've got adequate stock and supply for the holidays. So we're anticipating to Have an element of that industry phenomenon with the Q3, but again, it's very difficult to speculate. We see very strong underlying organic demand. We're very confident in our continued growth in the average number of patients and net revenue as Sandeep talked about.
Thank you, guys.
Thanks for that color. Maybe if I could ask a question about the Blackstone deal. Certainly, the size of the deal is noticeable. It's great that you can swap out, I guess, in effect, More expensive debt for cheaper debt. But in terms of you're already profitable, you're generating good cash flows and Certainly, building to the balance sheet and in the context of the BD transaction you announced yesterday, which I have a follow-up question on.
How should we be thinking about kind of how That war chest that you're amassed in terms of cash, how you plan to use that? Is it really more With an eye on funding the trials that you have ongoing, or should we be thinking that that is really Perhaps a sign of things to come in terms of increased BD activity, whether it's the number of deals or the size of the deals?
So Greg, as you know, as you stated, we're in a strong cash position, about $160,000,000 in cash and cash equivalents on hand, strong balance sheet and generating positive revenue. We do see the recent arrangement with Blackstone does provide us with additional flexibility to potentially enable execution on a broader range of deals, business The continued growth of Wakeix and commercialization of Wakeix, the expansion of utility of Wakeix beyond narcolepsy into new indications And the acquisition of additional rare neurology focused assets so we can build a rich and innovative pipeline and especially a pipeline with assets that could launch
with a focus in rare neurology.
And our intention is to transform Harmony into a leading rare neuro company with a robust and innovative pipeline. That is our intention. And the arrangement with Blackstone helps to give us additional flexibility to head down that strategic pathway with hopeful success.
Great. Thank you for that. And one last question, broad area of questions, I guess, has to do with HVAS-one hundred and two. An interesting asset and an interesting mechanism of action. I think historically industry has looked at this asset for perhaps the past couple of decades with Efforts initially in the obesity space.
So with that in mind, Can you give a sense of whether your interest in narcolepsy is relatively new and kind of innovative? I don't think I've seen much in the literature on this mechanism necessarily vis a vis the interest by industry on the obesity side. And then secondly, just as it relates to the compound itself, I think this class of compounds has been I've seen some troubles finding therapeutic window or therapeutic margin. And I think the issue has been increased Potential cardiovascular risk due to either her binding activity or QTC prolongation. So I'm just curious if you've Characterized, HPS-one hundred and two for these types of issues and how confident you feel about the overall profile of the asset?
Thanks.
So Greg, 2 part question, Doctor. Dana will help address that. But we're excited about the emerging science around this target and this compound as it relates to sleep And REM behavioral disorder and narcolepsy, as Doctor. Dano stated in his opening comments, but I'll pass it over to Doctor. Dano to address your questions in more depth.
Yes. Sure, John.
So we're actually we're really excited about this asset. As John alluded to, the emerging science with regards to the MCH Neurons and that mechanism of action. And as you said, the original focus around obesity, hypothalamic mediated obesity. Well, as the science evolved and some significant work, as I mentioned, done by Tom Scammer and his group at Harvard, It really pointed to the role of the MCH neurons in terms of the generator and the control center of REM sleep. So with that, going back about 4 or 5 years ago, a lot of the focus shifted and Tom worked on that mechanism and demonstrated with the MCH receptor 1 Antagonist probe molecule, the significant effect in reducing cataplexy in the orexin So with that, the focus sort of shifted and that's what kind of got our attention.
And realizing some of the recent focus on the orexin agonist, this really represents the potential next Generation therapy in patients with narcolepsy, specifically around remdesiregulation. And as I mentioned before, In our development program, in addition to that, we intend to explore it for stabilizing wakefulness as potential monotherapy or as One type of treatment in a polypharmacy approach. With regards to this molecule And what you mentioned in terms of some of the safety issues, the non clinical Toxicology and the work that's been conducted has not shown any significant safety signals to date. And we also have Some Phase 1 PK data that's been generated actually ex U. S.
And in the UK showing that PK profile. So we've got a lot of information to work with to start to prepare an IND and submit that to then open an IND and the plan is to then go into Phase 2 trials.
Okay. Thank you very much. Congrats again on all the progress.
Sure. Thank you.
Our next question comes from David Amsellem with Piper Sandler.
Hey, thanks. So I had a few. First, can you comment On patient attrition for Wakeix, I think in the past, you've Stated that the range in narcolepsy is about 30% to 50%. Where is that trending for Wake X? And Assuming greater societal normalization, delta variant notwithstanding, where do you see that attrition rate settling out?
So that's number 1. Number 2, can you talk about the mix Of patients, who are taking WAYKX in combination with an oxybate product, what percentage of overall patients is that? Are Seeing more combination use with oxybate. 3rd, as the market becomes more varied, Particularly as we get to authorize generics and eventually vanilla generics of sodium oxybate, do you think You'll need to contract more aggressively with payers or recalibrate your payer strategy in any way. Just talk about over the long term, how you expect to manage the payer dynamics.
So I just want to go through those 3 and then I have a follow-up. Thanks.
Hey, David. So all three apply to commercial. So Jeff Dirks, did you want to take the first question on attrition rate for David?
Sure. Thanks, David. So with respect to discontinuation rate, compliance and persistency rate, so as you shared in previous calls, we have looked at publicly available data, which suggests that Discontinuation rate of drugs in this category tends to range between 30% 50% with compliance rates in the industry, usually around 80% to 90%. And what we're seeing is that Wakeix is falling within that range and it's been relatively consistent with other products in the category. Some of the research that we've done with patients and with health care professionals is that the physicians that we've surveyed believe that Wakeix has a lower discontinuation rate Or a low discontinuation rate relative to other narcolepsy treatments.
From the patient perspective, we're seeing about 90% of those patients On Wakeix, expecting to continue to take the product. So very strong persistency rates, discontinuation rates, very consistent with where we're seeing in the category. Now again, it's still early on our launch. We're not even 2 years into commercial. So we're still going to obviously be observing that patient medication behavior moving forward.
And again, I don't want to speculate in terms of what the impact of COVID may or may not be on the discontinuation rate. But I think the overall takeaway is Patient receptivity seems to be very strong. We're getting very positive feedback from the patient community. The perceptions of health care professionals is that Wakeix is well within the norm
Thank you, Jeff. And I believe the next question from David was the mix with sodium oxybate, how often is Wix used in combination, David, if I understood your practice?
Yes.
So with respect to source of business, we've talked a lot about the opportunity with Wakeix as being a novel MOA and Having the ability to be used as monotherapy or concomitantly with all narcolepsy treatment options. And that's what we see in a polypharmacy type of category Wakeix is being used as monotherapy and being used in clinical practice in combination with all other FDA approved narcolepsy medication. With
respect to
the use of Wakeix and sodium oxybate, there's a small percentage of patients are using both. We haven't disclosed the exact figure, but if you're thinking about in the low teens, it's probably where we're looking. And the important thing is that from a payer dynamic, we are not seeing any plans providing any pushback or feedback. This is a very small patient population. There's Small cohort of patients that may require this combination to treat the very debilitating and life altering symptoms of narcolepsy.
So Hopefully, that helps give you a little bit of color in terms of the patient disposition of Wakeix.
And Jeff, you mentioned our unique mechanism of action for Wakeix The only histaminergic agent in the market for narcolepsy, and we anticipate it to remain so for quite some time. So as new products Come in or genericizations occur of existing MOA therapies, we believe and we're optimistic that Wake extends alone in its ability And that there's more pressure on products with the same mechanism of action when you start to see generics in general As a market generalization and we're optimistic that Waco's unique MOA will help us to remain differentiated for the long run.
Correct. And David, I know Your last question was with respect to just introduction of new products and authorized generic or generic versions of sodium oxybate and potential impacts On contracting. So what I would say to that is we continue to be extremely pleased with our strong performance of Wakeix even with the introduction and availability of other competitive products And those are both branded and generic. And we do believe that we are growing the branded segment of the market by offering a meaningfully differentiated product profile that aligns to that unmet need. The overall benefit risk profile of Wakeix makes it appropriate for the vast majority of patients and available for the entire narcolepsy prescribing Healthcare Professional Universe due to its non scheduled status.
As John talked about, this threshold to treat makes it available for the broad audience to prescribe. And we believe this strong underlying demand that we see with Wakeix will continue And support our ongoing patient and net revenue growth even with new competitive entry both branded and generic coming to the market and Really supports our belief in the long term growth opportunity for WaiQix. Okay. That's helpful.
And if I may just ask a question about Biz Dev, with the financing agreement in place, just drilling down, what's your appetite For the addition of a commercial stage or market ready asset where you can leverage the sales infrastructure you have in place Or even just a late stage asset, where presumably you'd be paying significant dollars upfront. What's your strategic calculus regarding those types of assets?
David, as I said Our BD strategy is focused on transforming Harmony to a leading rare neuro company with a robust and innovative pipeline of assets. We have the capabilities internally, whether it's clinical, regulatory, commercial to develop and launch drugs like that with success. And we're looking to go broadly in our search. We have the capabilities to take any asset from early stage all the way through to late stage and on market. And as we stated earlier, we're in a strong cash position.
We've got a good balance sheet. We're growing revenues. We have access to the public markets, and we have our new arrangement with Blackstone, which gives us additional optionality and flexibility. And we don't need to buy a revenue stream in the short run because of that strength, Certainly, we are assessing with an open mind asset anywhere from early stage all the way to on market as long as they meet our filters and help us achieve that business So what we're most excited about is our additional optionality and flexibility with Blackstone, our strong performance right now that further fuels our ability to
That concludes today's question and answer I'd like to turn the call back to John Jacobs for closing remarks.
Thank you very much. Look, everyone. I want to thank everyone for joining us sincerely. And since we appear to be At the end of the call, I would say for everyone who joined, we appreciate your energy, we appreciate your questions, and we're so excited that you're on this journey with us to discover, develop,
This concludes today's conference call. Thank you for participating. You may now disconnect.