Good afternoon, everyone. Thanks for joining us for the next session with Harmony Biosciences. My name is Balaji Prasad. I'm the senior analyst for the specialty pharmaceutical sector. Joining us today from the Harmony management team, we have Jeff Dayno, President and CEO. We have Jeffrey Dierks, Chief Commercial Officer, and Sandip Kapadia, the Chief Financial Officer. Jeff, Jeff, and Sandip, thank you for joining us. So.
Thanks for the invitation, Balaji. Thank you.
Yeah. So I think before we get started, could you maybe provide a brief overview of the company, the outlook into 2024 as you see now, and pushes and pulls to the outlook?
Yeah, sure. Happy to. So, you know, I think, you know, Harmony, it continues to be a growth story where it's, you know, seven years in and, you know, sort of building our pipeline. But, you know, starting with, we have a strong, you know, commercial business in our core business of WAKIX and narcolepsy, successful launch and commercialization. And, you know, it's a big market opportunity, 80,000 diagnosed patients with narcolepsy in the U.S., a highly differentiated product profile, you know, the only approved product that's not scheduled for narcolepsy in the U.S. So, you know, that drives sort of the broad clinical utility and the continued opportunity in WAKIX and narcolepsy.
I think, you know, from that, we've been, you know, managing the life cycle, you know, with, you know, WAKIX or pitolisant and advancing our clinical development programs in terms of follow-on indications, you know. With that, working towards an opportunity in idiopathic hypersomnia, which is an adjacency to narcolepsy, as well as our program in Prader-Willi syndrome. We're about to initiate a pivotal phase 3 trial in patients with Prader-Willi down to age 6. Then we also last December announced positive signals from a phase 3 proof of concept study in patients with myotonic dystrophy and positive signals, you know, both in excessive daytime sleepiness as well as fatigue, which is an opportunity to expand upon the current indications that we have in narcolepsy for both EDS and cataplexy. So advancing the life cycle management programs.
Then beyond that, we're also working on next-generation formulations of pitolisant. So we have a novel molecule with a novel mechanism of action leading to the only non-scheduled product in the market for narcolepsy and a very, you know, successful product in the market. So we wanna optimize that opportunity. So, working with our partner, Bioprojet, who is the innovator of the pitolisant molecule, on new formulations to generate new IP and extend the pitolisant franchise not just beyond 2030 but be potentially out to 2040 and beyond. And, we'll be sharing some of the initial top-line PK data on those programs first half of this year. And then lastly, I think a big part of our growth strategy is expanding our pipeline and diversifying our portfolio, you know, beyond WAKIX and beyond pitolisant.
And we started last fall with the acquisition of Zynerba Pharmaceuticals, a small company that was working on a program in Fragile X syndrome. So we brought in that asset. We refer to it as ZYN002, which is another really interesting. It's a purely synthetic cannabidiol product, devoid of THC, that is delivered transdermally through the skin. So it sort of improves upon some of the oral cannabidiol limitations around GI side effects, etc. And that program that is in phase 3 for Fragile X syndrome, which is, you know, an important unmet medical need, no approved treatments, and another sizable market opportunity of about 80,000 patients diagnosed.
I think, you know, in summary, Harmony, seven years in, we feel that we're just getting started with strong commercial business, advancing our pipeline programs with pitolisant, and working very active in business development to expand our pipeline, diversify our portfolio, sort of leverage our current profile with expertise in the CNS orphan rare space.
Great. Jeff, thank you for that, lay of the land. As we think about this 80,000-odd patients in the space, considering that you have, like, multiple other therapeutic modalities, can you help us understand how WAKIX is positioned and, how the market itself is categorized as the way you see it?
Sure. Jeff, you wanna expand on that?
Sure. So it's obviously a very large diagnosed patient opportunity.
Yeah.
There's significant unmet medical need, and it's a polypharmacy market. So sadly, most of these patients are taking two or three medicines to try to manage their symptoms effectively. And the vast majority of patients will start on a generic treatment, whether it be a wake-promoting agent and/or a stimulant. And WAKIX sort of sits as one of those first branded treatment options for healthcare professionals with inadequate response or a partial response to one of the generic treatments. And I think the unique thing about WAKIX and what we've seen is 80%-90% of patients run multiple meds. 80%-90% of use of WAKIX is concomitant with other medications as is standard with most of these treatments. But there's about 9,000 healthcare professionals that manage the, you know, the diagnosed patient opportunity. 4,000 of them are enrolled in the Oxybate REMS program.
Approximately 5,000 of them are not. So as we're seeing introductions of new, you know, once-nightly formulations of oxybate, generic oxybate this year, there are still 5,000 doctors that cannot prescribe oxybate for their patients. And we've seen very steady continued growth in that area. We reported on our last earnings call that we're more than 30% penetrated in that audience, highly penetrated in the REMS-enrolled healthcare professionals. We have more unique prescribers of WAKIX and sodium oxybate, you know, four years into our launch, and that product's been on the market for two decades. And we see the non-scheduled status not being a controlled substance as a big driver and a key differentiator for the brand.
Most exciting for us is we've got over 6,000 average number of patients on the product by the end of next year, demonstrated very strong, durable growth over the first four years of our commercialization, and, you know, very excited to look at the outlook into 2024.
Great. As we think about this patient population, again, the introduction of both the authorized generics of oxybates and then you have a once-nightly version, how has it impacted or developed the market for you in terms of just maybe expanding access or increasing prescriptions? How has it impacted the market for you?
Sure. So we actually haven't seen any impact with generic or, you know, the once-nightly formulation of oxybate introduction. As I said, because WAKIX is a little bit insulated due to the prescriber dynamics, the, you know, the nature of the REMS-enrolled healthcare professionals. But I think what it does is it brings new products to the market. It brings new investment to the market, which is great for the patients, right? This is an underserved patient population. More companies coming to the market means more investment, increases in diagnosis rates, which brings more patients into the market. So because of the nature of this polypharmacy unmet need, as more brands come to the market, what we've seen is growth among all brands, right? With the introduction of Avadel, Avadel's growing. Harmony is growing. Jazz is growing. So I think the patients win when there's more products here.
But we really haven't seen any impact on our business. You know, we've shared that we believe that WAKIX represents a potential billion-dollar-plus opportunity in narcolepsy. And given our guidance that we just shared for 2024 of over $700 million, we're well on our way.
Yeah. Okay. Great. That was probably my next question. So I just want to dig into this guidance a bit, $700M -$720M . So help us bridge this in terms of the pushes and pulls which drive this guidance and both the upside and downside risks do you see to the guidance? Yeah.
So maybe just to start, and Sandip, you can comment. Yeah. So I think, you know, we came out this, our first year giving guidance, and we took sort of, you know, like a, a thoughtful, balanced approach, you know, based on, you know, sort of the rhythm of the business in, in the first four years in the market and now some of the durability, year five in the market that Jeff spoke to. As we said, you know, significant patient opportunity in the 80,000, you know, diagnosed patients. So lots of opportunity, you know, to grow there. And then sort of the rhythm of the business in terms of patients coming into the physician offices. And Sandip, do you wanna?
Yeah. No. I think, you know, part of the rationale for the guidance, we had really strong results last year. We had over $589.82 million in sales. It was a 33% growth overall. So we had great momentum. We had nice patient adds in the last quarter. Grew 350 average number of patients, both in quarter three and quarter four. So we took a lot of that momentum as we and, and be as, as Jeff mentioned, be really thoughtful about how we presented guidance for the first time as a company, $700 million-$720 million. I think now most investors are pretty clear this is a well over a $1 billion opportunity in narcolepsy alone. So we've been saying that for several years, but now with guidance of $700 million, I think more, more and more, are seeing the opportunity ahead of us.
We certainly see opportunities to, to exceed that. But, you know, generally right now, you know, that's, that's where we're comfortable. And as we have results and success throughout the year, we'll provide, you know, more of an update to investors.
Yeah.
Great.
I think it's part of our nature, Jeff and his team. You know, you set a goal. I think the team, the commercial team sort of, you know, sets the rise on that to, you know, potentially, you know, exceed that. But we'll, you know, as the year goes along, we'll, you know, provide updates.
Okay. Look forward to that. As we think about the broader narcolepsy market longer term, I think one major update that we've been getting is around the orexin class of molecules, both the agonist and antagonist, orexin. So given the developments on this side, can you help us understand how that will shape the market for you and influence your longer-term outlook?
Yeah. So obviously a very popular topic, you know, with regards to the orexins and those programs moving forward. So we follow them closely. You know, we know this space really well. We look at opportunities in our BD efforts. So, you know, I think next novel target for, you know, the treatment of narcolepsy, at least NT1 at this point, you know, some questions with regards to NT1, narcolepsy type 1 condition where there's orexin deficiency versus NT2 and IH. So still some questions there. But hopefully the programs, you know, will be successful. I think, you know, new treatment options are always good for patients, more share of voice, more education, increased diagnosis rates. And but at the end of the day, I think narcolepsy will always be a polypharmacy market.
So we don't think that and, you know, that's why we're working on next-generation formulations of pitolisant that, you know, if successful, would be in the market around the same time 'cause we think that, you know, there are opportunity for multiple products in a polypharmacy market. And the other interesting aside mechanistically, the orexin, you know, mechanism of action, orexin neurons in the brain actually connect and to the histamine neurons in the hypothalamus. So there could be an interesting sort of synergistic effect between those two types of treatment options in the future.
That's interesting. Thank you. Just wanna shift from the narcolepsy market to the pipeline that you commented about. So maybe you can provide any additional data or insight on the IH indication ahead of your FDA meeting? And your last comment was that it's sometime in March, so we're in March.
Right.
It should be sometime very soon. What can you share with us on this, on this indication?
Sure. Yeah. So it is coming up soon. We've not met with them yet. It's coming up soon in March. And basically, you know, what we are doing is we're building, you know, a strong case for the overall benefit-risk proposition, you know, for WAKIX. So you've got a non-scheduled treatment option that you take once daily in the morning, on awakening compared to the only approved treatment option in what's in the market is Xywav for IH, you know, as a schedule three restricted access REMS product that puts patients to sleep, you know, consolidates nighttime sleep. You dose at night, then you have to wake up again, patients that are long sleepers and have sleep inertia. So the product profile of pitolisant of WAKIX, you know, represents, you know, a different approach.
We've taken the totality of the data from the phase 3 trial, the strong signal in the open-label dose optimization phase. We've looked at, you know, some explanations, you know, what happened within the 4-week randomized withdrawal phase. And then about 90% of patients went into the long-term extension, that we're continuing to collect, real-world, you know, efficacy data and safety data. So we're bringing all that to build that case around, you know, overall benefit-risk and then discuss with the agency, you know, different options for the most efficient path, you know, forward to the market. And after that, and we get, you know, minutes from the FDA meeting, we'll provide an update as to, you know, what the opportunities are.
Fantastic. We look forward to that. Maybe on the shifting to the pediatric narcolepsy side, again, you received a priority review for your sNDA.
Yep.
It would be a good occasion maybe to just revisit the pediatric market opportunity with the broader market opportunity and contextualize this. Sure.
You wanna speak to the market opportunity?
Sure. So there are about 4,000 children under the age of 18 with narcolepsy. So it's a smaller opportunity relative to the larger adult narcolepsy opportunity. But I think it's a very meaningful one. This is an underserved patient population. There's only one FDA-approved treatment option now. So, you know, we look at this as a very meaningful commercial opportunity. But I think the larger opportunity is really the way that that data will play into pediatric exclusivity and our ability to extend some of the regulatory runway we have on our latest patent.
Yeah. So that, that's part of the important sort of opportunity there. So, you know, we're excited for that. We submitted the SNDA in December. We got priority review. We're on track to a PDUFA on June 21st. But in other discussions with the agency, over the past, you know, couple of years, we're pursuing pediatric exclusivity. So the two data sets that, will be required, to achieve that, are the pediatric narcolepsy data that we submitted and then the phase three study in Prader-Willi, you know, that we're about to initiate 'cause we were already in the clinic. So the agency sort of saw that was an important, patient population. So, they wanted us to go forward and continue that program.
So in addition, in Prader-Willi, potential indication, it satisfies the other requirement, the importance of pediatric exclusivity, the additional six months of regulatory protection on the back end, you know, of, of our patents. So it would take, you know, where we are now, March of 2030, and the peds exclusivity would extend that to September of 2030.
Got it. And remind me, do you have other IP efforts to extend the life, the IP life of this product?
So, you know, that's what we're working on the new formulations, you know, that's part of the strategy, generating new IP around the novel formulations of pitolisant, and new IP around that.
Got it. You mentioned that you're expecting PK data, PK data in first half of 2024. What will be the next steps for this post us getting the data?
Right. So yeah, PK data first half. And then, you know, based on the readout, we'll provide sort of further color on the development, you know, programs going forward.
Okay. So maybe shifting to Zynerba, that you acquired last year. So can you provide the latest update on the asset, the market opportunity, be it both in Fragile X and 22q deletion syndrome? So 80,000 patients, again, looks like a pretty large opportunity, but in terms of commercial value for it, how do you or should we think about this market?
Yeah. Jeff, your thoughts on the market for Fragile X?
Yeah. So again, it's another relatively large patient opportunity, about 80,000 patients. There's no FDA-approved treatment option significant on that medical need. And we have the ability to potentially bring another novel non-scheduled treatment option to this underserved patient population. So, you know, we look at this as, you know, maybe a good comparator when you look at some of the oral cannabinoids, is looking at something like an Epidiolex is kind of a good surrogate for where we are. We're in the middle of phase 3. So, you know, once we have a little bit clearer line of sight about that trial, we'll be able to, you know, sort of size the opportunity. But I think it's very creative, significant and looking forward to the ability to bring this product to this patient group.
Yeah. And the timing that we shared in our earnings call. So, you know, we anticipate completing the trial first quarter next year.
Right.
With top-line data readout in mid-2025. I think, yeah, we're excited. That's sort of the first step in expanding our pipeline and diversifying the portfolio and, you know, driving longer-term growth. We continue to remain active on the business development front.
Got it. Great. Maybe something, Sandip, as you think about where the company is positioned with multiple moving parts, how have your capital allocation priorities changed as you think about 2024 and 2025, and especially focus on BD?
Yeah. Look, we're in a very strong financial position. As you mentioned, we have $425 million as of the end of the last quarter. We're generating positive cash flow. Last year, we generated over $200 million, $77 million just in the fourth quarter itself. So really in a solid position to really transact, you know. And as we think about capital deployment, you know, clearly a key focus for us will be expanding the pipeline, as Jeff mentioned, looking for, you know, assets within the orphaned rare neurospace, where we can leverage our capabilities, as a company. At the same time, we're equally as committed to looking for other opportunities to drive value for shareholders. You know, we have an active share repurchase program.
Right.
That we've announced, you know. We're, as evidenced last year, we executed $100 million under that program. We have $150 million of additional authorization that we could certainly leverage. And we're committed to leveraging it everywhere where we believe our equity is undervalued overall. We will deploy the capital to generate value again for shareholders.
Great. If I recollect right, the remaining $150 million of share repurchases are scheduled to be completed in 2024?
We haven't announced a specific, but it's that's the open capacity that we have. And we look at it more opportunistically.
Yep. Yep.
Overall. And again, we're focused on both, you know, expanding the pipeline through business development, as well as looking at it opportunistically, for share repurchase where we believe our equities, you know, is undervalued.
Yeah. It's kind of a balanced approach, you know, looking at the opportunities from a business development perspective versus, you know, share repurchase. Where can we deploy, you know, capital to maximize shareholder value? And, but the pipeline and building that out is an important priority.
Thank you. I mean, thank you, Sandip. Clearly kind of easily leads into my next question. So what is the focus what are the focus areas for business development? How do you think about assets which can sit along with your existing commercial assets or pipeline which is coming up? What would your priorities be? And.
Do you wanna just comment?
Sure. Yeah. So I think our focus on, you know, we like the company profile where we are, you know, with sort of the expertise and competency and sort, you know, the infrastructure in, you know, orphaned rare CNS neurospace. So we cast a wide net and then have some sort of strategic filters as we're looking at opportunities. And then ideally, in the rare sort of, you know, neuropsych arena, late stage, mid to late stage, you know, development assets, we'll consider, you know, if something is commercial on market for the right opportunity. You know, and then obviously, you know, deal terms and what, you know, sort of, you know, fits, you know, where we are now. So that is the overall, you know, approach. You know, there are opportunities out there.
You know, we continue to, you know, to sort of look at them, put them through these filters, and see how we can best, you know, build out the pipeline.
Yeah. Great. What I'd add is just, you know, generally, we have broad capacity, as I just mentioned, in terms of the financial flexibility to be able to transact on business development, looking across the spectrum. As Jeff mentioned, you know, we have the ability to, you know, look at additional debt capital, ability to, you know, access the public markets if necessary. So we have broad capacity and really excited about the opportunity to build out the pipeline over the coming months and years.
So if it's all about the debt capital markets and, yeah, equity capital markets, if you see that too, what kind of a dry powder should I think about in terms of ability and the size of deals that you'll be comfortable with?
I think we have broad capacity. I think it'll really depend on the asset itself. As I mentioned, we have $425 million on the balance sheet. We're generating strong cash flow. You know, this year, we did a term loan deal last year where we had $200 million. We could certainly expand that capacity through additional debt. We also have access, you know, to the public markets as well. So generally, we feel good about our capacity. It really will come down to the asset, and the opportunity.
Got it. Thank you, Sanjeev. Maybe one last one. We have one minute remaining. Just getting back to ZYN002 and cannabidiol, is the transdermal application the path of differentiation versus existing cannabidiol products? And, what are the indications that you'll be targeting with this?
Yeah. No, it's a great question. So I think first, it's the target indication. So, you know, the existing ones in the market, so Epidiolex, looking sort of the rare epilepsies and the, you know, the sort of the DEEs. And, we're focused initially on the neurobehavioral conditions, Fragile X. And then right behind that, there's actually a phase three ready program in what's called 22q deletion syndrome. So Fragile X is the most common form of inherited intellectual disability, part of the autism spectrum disorder, you know, conditions. And then 22q is a related disorder, that Zynerba generated positive phase two proof of concept data, have discussions with the agency that we've now been engaged to set up a phase three program there. It's another about 80,000 patient market opportunity.
you know, that's something that, you know, we are, you know, excited about. The application, I think the important thing, the oral cannabidiols are limited by kind of the GI tolerability. You have about 25%-30% nausea, vomiting, diarrhea that can be sort of rate limiting in treating and managing those patients, as well as elevation in LFTs. The transdermal application avoids first-pass metabolism. So you don't have the LFT issue. And we're only seeing about 5%-9% or 10% of the nausea and vomiting, the GI side effects. So I think it's an improvement in that regard, in that delivery mode.
Fantastic. Multiple moving parts, both on the pipeline side and the commercial side. Wishing you the best. I hope you also had a productive conference. Jeff, Jeffrey, and Sandip, thank you for joining us and sharing your thoughts. Thank you.
Thank you. Thank you. Thank you.