Harmony Biosciences (ticker: HRMY) has reported a solid start to the year with a 30% increase in first-quarter net revenues, reaching $154.6 million. The company's growth is attributed to the performance of its narcolepsy treatment, WAKIX, and the expansion of its clinical development programs. Harmony remains on track to meet its net revenue guidance of $700 million to $720 million for 2024.
The acquisition of Epygenix Therapeutics marks the company's third business development deal, aiming to bolster its pipeline with new assets targeting rare epilepsies. Harmony's strategic initiatives signal a commitment to strengthening its position in the central nervous system (CNS) biotech industry, with expectations to launch new products or indications annually over the next five years.
Key Takeaways
- Harmony Biosciences reports a 30% year-over-year increase in Q1 net revenues, totaling $154.6 million.
- The company confirms its 2024 net revenue guidance of $700 million to $720 million.
- Harmony acquired Epygenix Therapeutics, adding two assets for rare epilepsies to its pipeline.
- WAKIX shows durable growth, with Harmony optimistic about its billion-dollar potential in adult narcolepsy.
- Harmony plans to introduce at least one new product or indication each year for the next five years.
- The company ended the quarter with $453.6 million in cash and investments.
Company Outlook
- Harmony anticipates strong quarter-over-quarter growth.
- The company aims to become a leading patient-focused CNS biotech company.
- Harmony is advancing its life cycle management programs and pursuing new indications for pitolisant.
- The company has multiple late-stage development programs and a robust pipeline.
Bearish Highlights
- Harmony faces the challenge of managing the safety concerns associated with CNS drugs, as evidenced by discussions around the cardiovascular safety profile of EPX-100.
Bullish Highlights
- Harmony's acquisition of Epygenix Therapeutics is expected to enhance its epilepsy franchise.
- The company's disciplined approach to capital deployment focuses on profitability and self-sustainability.
- Harmony's pipeline includes TPM-1116, with potential advantages for central disorders of hypersomnolence.
Misses
- There were no specific misses reported during the earnings call.
Q&A Highlights
- Harmony reported 150 patient adds in Q1, consistent with previous years, and expects around 7,000 average patients by year-end.
- The company had a positive interaction with the FDA regarding their Idiopathic Hypersomnia program.
- Harmony is considering NT1 as the first indication for their Orexin-2 agonist and is exploring other central disorders for TPM-1116.
- The company plans to take IP and R&D charges for the licensing of TPM-1116 and the acquisition of Epygenix in Q2.
- Harmony is actively looking at opportunities to add to their CNS franchises or diversify into other CNS areas.
Harmony Biosciences has positioned itself for continued growth through strategic acquisitions and the advancement of its clinical development programs. The company's confidence in meeting its revenue guidance and the anticipated launch of new products or indications in the coming years highlight its commitment to expanding its CNS portfolio and addressing unmet medical needs. Harmony's financial stability, underscored by the significant cash reserves, supports its ambitious growth strategy and development plans. The company's focus on patient-centered treatments and responsible capital management suggests a prudent approach to scaling its operations and achieving its long-term objectives.
InvestingPro Insights
Harmony Biosciences (ticker: HRMY) has not only shown impressive revenue growth but also demonstrates a strong financial position and a positive market outlook. According to InvestingPro data, Harmony has a market capitalization of $1.76 billion and a P/E ratio of 14.58, which adjusts to a slightly lower 12.79 when considering the last twelve months as of Q4 2023. This indicates a reasonable valuation in relation to the company's earnings. The revenue growth of nearly 33% in the last twelve months is a testament to the company's robust performance.
InvestingPro Tips highlight that management's aggressive share buyback strategy could signal confidence in the company's future performance. Additionally, Harmony's balance sheet strength is evident as it holds more cash than debt, providing financial flexibility for further strategic initiatives. These insights suggest that Harmony is not only managing its current assets well but is also prepared for future investments to sustain growth.
InvestingPro also notes that the company's valuation implies a strong free cash flow yield, which can be attractive to investors looking for companies with the potential to generate cash. It's worth mentioning that there are 5 more InvestingPro Tips available, offering a deeper dive into the company's financial health and market potential.
For readers seeking to explore these insights further and access additional tips, they can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. This could be an invaluable resource for those looking to make informed investment decisions based on real-time data and expert analysis.
The company's strategic acquisitions, such as Epygenix Therapeutics, and the continued success of its narcolepsy treatment, WAKIX, are well-reflected in the company's financial metrics and market performance. Harmony Biosciences’ focus on expanding its CNS portfolio is supported by its solid financial foundation and market confidence, as evidenced by the InvestingPro data and tips.
Full transcript - Harmony Biosciences Holdings (NASDAQ:HRMY) Q1 2024:
Operator: Good morning. My name is Madison, and I will be your conference operator today. At this time, I would like to welcome everyone to Harmony Biosciences' First Quarter 2024 Financial Results Conference Call. All participant lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I will now turn the call over to Luis Sanay Head of Investor Relations. Please go ahead.
Luis Sanay: Thank you, operator. Good morning, everyone and thank you for joining us today, as we review Harmony Biosciences' first quarter 2024 financial results and provide a business update. Before we start, I encourage everyone to go to the Investors section of our website to find the materials that accompany our discussion today including a reconciliation of our GAAP to non-GAAP financial measures. At this stage of our life cycle, we believe non-GAAP financial results better represent the underlying business performance. Our speakers on today's call are Dr. Jeffrey Dayno, President and CEO; Jeffrey Dierks, Chief Commercial Officer; Dr. Kumar Budur, Chief Medical Officer; and Sandip Kapadia, Chief Financial Officer and Chief Administrative Officer. As a reminder, we will be making forward-looking statements today, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties. Our actual results may differ materially and we undertake no obligation to update these statements even if circumstances change. We encourage you to consult the risk factors referenced in our SEC filings for additional details. We have a lot to share this morning so in order to allow ample time for Q&A, we will keep our prepared remarks brief this morning. I would now like to turn the call over to Dr. Jeffrey Dayno. Jeff?
Jeffrey Dayno: Thank you, Luis and thanks everyone for joining our conference call today. Earlier this morning, we were excited to announce our third business development deal in the past eight months with the acquisition of Epygenix Therapeutics. As you may have seen in our earnings release, in addition to this news, we have accelerated our growth strategy and have transformed our business to position Harmony for long-term value creation. Given all the exciting news and upcoming catalysts that we have to share today, we will not be able to go into depth on everything on this call. But the key points that I want you to take away from our call today regarding the Harmony story are the following. Our commercial business is strong and WAKIX continues to demonstrate durable growth now year five in the market. WAKIX is a $1 billion-plus market opportunity in adult narcolepsy alone and we are well on our way as we expect to continue to grow the brand through LOE in 2030. We are growing organically by advancing our life cycle management programs for pitolisant with the next-generation formulations, designed to improve the patient experience and patient outcomes as well as generate new IP to extend the pitolisant franchise out beyond 2040. We are also pursuing new indications for pitolisant including near-term catalysts in pediatric narcolepsy and idiopathic hypersomnia to help even more patients living with unmet medical needs and drive incremental revenue. We are making good progress toward pediatric exclusivity which would provide an additional six months of regulatory protection on the back end of our longest patent, a commercial opportunity of upward around $1 billion. And we are growing inorganically through business development. With our previous announcement regarding the licensing of TPM-1116, a highly potent and selective Orexin 2 receptor agonist to solidify and grow our Sleep/Wake franchise and today's announcement regarding the acquisition of Epygenix and their rare epilepsy portfolio. We now have three orphan rare CNS franchises in late-stage development, each with potential peak sales opportunities of $1 billion to $2 billion and patent protection ranging from the late 2030s to mid-2040s. At Harmony, we believe we are well positioned to become the leading patient-focused, CNS biotechnology company, delivering innovative treatments to patients with unmet medical needs and while doing so, drive significant and durable value creation. I want to take a minute to emphasize the value of our pipeline that we have been building. Across these three franchises, we are currently working with eight assets being studied across 13 development programs. More importantly, we expect these programs to result in at least one new product or indication launch each year over the next five years. We have planned ahead executed smart and strategic business development deals with low upfront costs and risks tied to the achievement of certain clinical regulatory and sales milestones that if successful are poised to generate significant near-term and long-term value creation. And we are not stopping here. While we have made significant progress on our business development goals we continue to look to build out our pipeline even further. While we do a broad suite of the BD landscape, our focus is on assets in the orphan rare CNS space consistent with the three deals we have done over the past eight months. We feel there are other opportunities out there that would fit our growth strategy. And with approximately $454 million in cash, cash equivalents and investments as of March 31, we are in a solid financial position to execute on additional BD opportunities and have demonstrated our ability to do so. Let me share a few highlights with you from each of our three franchises that are in late-stage development. First building off our leadership position in Sleep Wake with WAKIX. We began working on extending the Pitolisant franchise several years ago by developing new formulations of Pitolisant that are planned to come to the market both during and towards the end of the WAKIX life cycle. Importantly, these products are designed to improve patient experience and patient outcomes and we'll have new IP that extends our durable growth and leadership in Sleep Wake out beyond 2040. We remain committed to the idiopathic hypersomnia patient community and gaining an indication for Pitolisant in IH and plan to submit an sNDA to FDA in the second half of this year. After following the Alkermes (NASDAQ:ALKS) space for the last few years and doing diligence on several of the assets, we licensed TPM-1116 a highly potent selective oral orexin two receptor agonist with a potential best-in-class profile due to its unique chemical structure and preclinical data. This solidifies our leadership position in sleep medicine and demonstrates our long-term commitment to the field. Our second franchise in rare nerve behavioral disorders continues to make good progress and the lead program with ZYN002 is in a pivotal Phase 3 registrational trial for Fragile X syndrome and on track for top-line data readout in mid-2025. With approximately 80,000 patients living with Fragile X in the US this is a sizable market opportunity and we also have global rights to this asset with even bigger market potential. And today with the announcement of our latest BD deal the acquisition of Epygenix Therapeutics we established a rare epilepsy franchise and acquired two new assets to serve as the foundation of what could be a larger franchise. The lead program is with clemazole hydrochloride or EPX-100 which has received both orphan drug designation and rare pediatric disease designation from the FDA for Dravet syndrome and Lennox-Gastaut syndrome. It is currently in a pivotal registrational trial for Dravet syndrome with top line data expected in 2026. We also plan to start a pivotal Phase 3 trial with EPX-100 in patients with Lennox-Gastaut syndrome in the second half of this year. Kumar will be providing more color on the growth of our development enterprise and our robust pipeline programs later in the call. The important takeaway is that we expect these programs to result in at least one new product or indication launch each year over the next five years with multibillion dollar revenue potential extending out beyond 2040. While I have focused on the significant progress in our catalyst-rich pipeline that has the ability to deliver durable growth out beyond 2040, I don't want you to lose sight of the continued durable growth that WAKIX has demonstrated now year five in the market. We delivered another strong quarter with net revenues of $154.6 million which represents 30% growth year-over-year. With these strong results, we are reiterating our 2024 net revenue guidance of $700 million to $720 million. We believe that we can continue to grow the franchise for years to come, and remain confident that WAKIX represents a $1 billion plus opportunity in adult narcolepsy alone, and we are well on our way. With that, I will turn the call over to Jeffrey Dierks, our Chief Commercial Officer for an update on our commercial performance in our Sleep Wake franchise. Jeff?
Jeffrey Dierks: Thanks, Jeff. The first quarter was another strong quarter for WAKIX in adult narcolepsy highlighted by continued product adoption and growth in our underlying business fundamentals. Net sales for the quarter were $154.6 million, representing 30% growth from the same quarter previous year. The solid net sales performance in the first quarter reaffirms our confidence in our net sales guidance of $700 million to $720 million for the full year 2024. Key drivers of our performance in the quarter were continued growth in the average patients on WAKIX, growth in the WAKIX prescriber base and continued strong favorable market access as seen on Slide 5 and 6. The average number of patients on WAKIX increased approximately 6,300 in the first quarter. We are extremely pleased with the continued growth in patients on WAKIX and the durability we're seeing in that growth in year five of our rare orphan commercialization. We successfully navigated the traditional Q1 seasonal payor dynamics and changed healthcare cybersecurity impact, and are seeing good leading indicators in our underlying business fundamentals heading into the second quarter. We saw continued growth of the WAKIX prescriber base beyond oxybate writers in the first quarter as well. We saw meaningful growth in new writers of WAKIX and the approximately 5,000 non-oxybate REMS-enrolled healthcare professional audience. And our more than 33% writer penetrated in the segment at the end of the first quarter. This audience represents an insulated group of prescribers and patients from the oxybate and the continued growth of prescribers in the segment each quarter reaffirms WAKIX is growing the branded writer segment beyond the oxybate by providing a meaningfully differentiated product profile and one that offers broad clinical utility and across the entire narcolepsy treating healthcare professional universe. In addition to the growth in new prescribers, we continue to see growth in the depth of prescribing among the approximately 4,000 oxybate REMS enrolled healthcare professionals, even with the availability of new and generic oxybate options. WAKIX is highly penetrated within this prescriber audience and see growth in this segment each quarter as WAKIX is being prescribed to additional narcolepsy patients. Our ability to call on the entire narcolepsy treating healthcare professional audience allows us to tap into the full diagnosed narcolepsy patient opportunity, giving us confidence in the long-term future growth of WAKIX. The last driver of our performance in the first quarter was the continued strong and favorable market access coverage for WAKIX even with the availability of new and generic oxybate options on the market. We've seen no changes to the overall payor coverage for WAKIX over the past year, and we believe we are well positioned to support future growth. In summary, we had another strong quarter of durable growth and performance in net sales, patient adds and growth in prescribers of WAKIX. We're seeing good leading indicators on our underlying business fundamentals heading into the second quarter. And the solid performance in Q1 reaffirms our confidence in our full year net sales guidance of $700 million to $720 million. I'm excited about our performance, and we are confident that WAKIX represented a potential $1 billion plus opportunity in adult narcolepsy alone, and we are well on our way. I would like to now turn the call over to our Chief Medical Officer, Kumar Budur, to discuss the advancements in our clinical development programs. Kumar?
Kumar Budur: Thank you, Jeff. Good morning, everyone, and thank you for joining us today. We are making great progress in advancing, expanding and diversifying our pipeline programs, several of which are in late stage development. As Jeff mentioned, we now have 13 different development programs ranging from preclinical to registrational studies across eight different assets and under three distinct franchises focused on rare orphan neuro indication with high unmet need and with the ability to launch a number of these indications in the coming years. Our full clinical development pipeline is shown on Slide 7. And I think you can appreciate how much it has grown over the past year. Let me start by sharing some key updates in each of our sectors. Starting with our growth in sleep wake franchise and program in Idiopathic Hypersomnia. We met at the FDA in March to discuss the next steps for our IH program. We were encouraged by the discussions we had with the agency on our data, the burden of the disease limitation of current treatment options and the off-label use of scheduled drugs. We feel the agency understands and appreciates the high unmet need in IH. While we understand the bar for approval is high, we are moving forward and plan to submit an sNDA in the second half of 2024. The submission will be based on the totality of the data generated from the [indiscernible] study including data from the ongoing long-term extension study which strongly supports pitolisant's efficacy in patients with IH. We have also identified other supportive information that will be included in the sNDA to further strengthen our submission. We are optimistic and remain committed in bringing a new treatment option to patients living with IH that is not scheduled has an established safety profile and a simple dosing regimen. Moving to pediatric narcolepsy. We are on track for the PDUFA date of June 21. We are pleased with the FDA's decision to priority review. This decision highlights the need for new treatment options for the approximately 4,000 pediatric patients living with narcolepsy. For Prader-Willi Syndrome, we initiated the Phase III TEMPO study in the first quarter. This is a global multicenter double-blind randomized placebo-controlled study that will randomize approximately 134 patients in development or placebo in a 1:1 ratio. We are committed to obtaining pediatric exclusivity for pitolisant. We are making good progress on the two requirements, data in pediatric narcolepsy and data in PWS patients, but submitting peds narcolepsy sNDA and initiating the Phase III study in PWS, respectively. Hoping pediatric exclusivity will add six months of regulatory exclusivity to the back end of the longest patent and this represents a significant commercial opportunity for WAKIX. An important element of our franchise growth strategy is to develop new pitolisant based assets with the goal of generating new IP extending the pitolisant franchise beyond 2040 and bringing new and improved versions of pitolisant to the market for people living with narcolepsy and other sleep wake disorders. We are making good progress on these formulations NextGen 1 NG1 and NextGen 2 NG2 with our partner. We are pleased to report positive PK data in NG1 and enteric-coated pitolisant formulation designed to demonstrate bioequivalence to WAKIX through an upgraded development pathway. The NG1 formulation is designed to potentially decrease GI side effects and also have an important additional clinical differentiation compared to WAKIX that is the ability to start dosing at 17.8 milligram as the beginning of the therapeutic dose range for pitolisant, rather than the need to titrate up to the therapeutic range. This clinical differentiation will be supported by a dosing optimization study. As shown on Slide 9 the pilot BE study showed similar rate and extent of absorption that is Cmax and AUC between NG1 and WAKIX, demonstrating relative bioavailability. The next step for NG1 includes, initiating the pivotal bioequivalence and dosing optimization studies in the fourth quarter of this year. Based on the development time line, we expect a PDUFA date in 2026. In addition, our provisional patent for NG1 has been filed and the potential for patent protection out to 2044. Moving on to Nex-Gen 2 or NG2. This is an enhanced formulation of pitolisant, designed to deliver an optimized PK profile and a higher profit trend. This formulation will have a new IP a full development program and is expected to launch towards the end of WAKIX life cycle. We are on track to report PK data from this formulation in the first half of this year. We are also very pleased to continue to strengthen our leadership position in Sleep/Wake with licensing of TPM-1116, licensing and audits and assets were the natural next step for us, as it leverages our established experience and expertise, both in development and commercialization of treatments of Sleep/Wake disorders. TPM-1116 a novel orexin-2 receptor agonist represents a potential best-in-class product profile amongst the current orexin-2 receptor agonist. It has a new chemical scaffold compared to the other orexin-2 agonist potentially contributing to its unique product profile. TPM-1116 will be evaluated for the treatment of narcolepsy and other Sleep/Wake disorders. The preclinical data suggest its potential best-in-class profile based on its high potency, good selectivity, potential for once daily dosing and good safety profile. We look forward to sharing the preclinical data at an upcoming scientific conference. In terms of development milestones, we expect to file an IND in mid-2025 and initiate first inhuman studies in second half of 2025. Moving on to our next franchise with the neurobehavioral disorder franchise. ZYN002, a pharmaceutically manufactured, synthetic cannabidiol gel devoid of THC with a patent-protected permission enhance gel for transdermal delivery, which like WAKIX could be a foundational asset in our growing neurobehavioral franchise. We are currently enrolling patients in the pivotal Phase 3 RECONNECT trial in Fragile X syndrome. With approximately 80,000 patients diagnosed with Fragile X syndrome in the US alone and no approved treatment, there is significant unmet medical need. We expect to complete patient enrollment in the first quarter of 2025 with top line data in mid 2025. ZYN002 was also studied in an open-label Phase 2 proof-of-concept study, like INSPIRE study in patients with 22q Deletion syndrome, and generated positive signals in aberrant behavioral checklist. This represents another opportunity to help approximately 80,000 patients with 22q Deletion syndrome in the US alone and we have been interacting with the FDA about the Phase 3 program in 22q and expanding this franchise. It is worth noting ZYN002 is a global opportunity for Harmony, and we look forward to exploring opportunities to bring this novel treatment to patients living with Fragile X syndrome and 22q Deletion syndrome around the world. Finally, we announced today the establishment of our third rare orphan neuro franchise in epilepsy with the acquisition of Epygenix Therapeutics. This acquisition brings us two assets targeting great epilepsies, both global opportunities for us. The first asset EPX-100 is clemizole hydrochloride, a potent, centrally acting serotonin agonist, which is currently in a pivotal registrational clinical trial for the treatment of Dravet syndrome in children and adults. Dravet Syndrome is a rare and severe developmental epileptic encephalopathy with high unmet medical need. The proven mechanism of action of clemizole via the seratonic system could offer good efficacy, and importantly, a safer product profile than currently available treatment options and improve the quality of life and functioning in patients with DS. The schematic of the trial design for this registration study known as the ARGUS study is shown on slide 11. We anticipate top line data from the ARGUS study in 2026. EPX-100 is also poised to enter a Phase 3 registrational trial for the treatment of Lennox-Gastaut syndrome, another rare and serious developmental epileptic encephalopathy with high unmet medical need. We anticipate starting this study in the second half of 2024. EPX-100 has received both orphan drug designation and rare pediatric disease designations from the FDA for both Dravet Syndrome and Lennox-Gastaut syndrome. Our second investigational product, EPX-200 is a potent, or centrally acting selective 5HT2C agonist that is currently in IND-enabling studies. EPX-200 also received orphan drug designation for Dravet syndrome and Lennox-Gastaut syndrome as well as Rare Pediatric Disease Designation for Lennox-Gastaut. To conclude, we have made tremendous progress in advancing our development programs, expanding our pipeline and diversifying our portfolio resulting in multiple late stage development programs across three different franchises: sleep wake neurobehavioral and rare epilepsy. If successful, these programs could result in at least one new product or indication launch every year over the next five years along with the potential to help hundreds of thousands of patients across all the rare neurological disorders we are investigating. I'm proud of the hard work and dedication of our teams at Harmony and look forward to sharing additional updates as we continue to advance our clinical development program. On behalf of Harmony, I would like to thank all the patients and their families for participating in our clinical trials as well as clinical investigators and site personnel for their efforts and commitment in helping us advance our development programs. I'll now turn the call over to our CFO, Sandip Kapadia, for an update on our financial performance. Sandip.
Sandip Kapadia: Thank you, Kumar, and good morning, everyone. This morning, we issued our first quarter earnings release and filed our 10-Q, where you'll find the details of our first quarter 2024 financial and operating results. Our financial performance is also shown on slides 12 through 15. We're off to a great start to the year in 2024. We reported another strong quarter of growth in revenues and net income along with continued cash generation. Our unique financial performance and profile positions us well to continue advancing our growth strategy and look for opportunities to drive value for shareholders. We reported net revenues of $154.6 million compared to $119.1 million in the prior year quarter, representing a growth of 30%. Performance in the quarter reflects the continued strong underlying demand for WAKIX coupled with the typical seasonality dynamics that the industry as a whole experiences each year in Q1 including a higher gross to net deduction along with a couple of days of drawdown in trade inventories. We also reported strong growth in net income and margin. Non-GAAP adjusted net income for the first quarter of 2024 was $50.7 million or $0.88 per diluted share compared to $40.7 million or $0.67 per diluted share in the prior year quarter. We believe non-GAAP adjusted net income better reflects the underlying business performance. Please refer to our press release for a reconciliation of GAAP to non-GAAP results. We ended the first quarter with $453.6 million of cash, cash equivalents and investments on the balance sheet. The balance reflects continued cash generation of our underlying business, which provides us the financial flexibility to continue executing on business development and opportunistically returning capital to shareholders via our share repurchase program. Looking ahead, we continue to expect strong quarter-over-quarter growth with the potential for trade inventory drawdown of a few dates in Q2 as we head into the summer. We are reiterating our net revenue guidance of 2024 of $700 million to $720 million highlighting our progress towards the $1 billion-plus opportunity in narcolepsy alone. With respect to expenses, we do expect to take IP, R&D charges for the licensing of TPM-1116 and the acquisition of Epygenix in the second quarter. The charges will primarily consist of the upfront cost of $25.5 million and $35 million respectively, offset by the value of net assets we have acquired. In addition, we expect ongoing operating expenses of approximately $35 million for 2024 as we advance both programs. As you saw from the terms of both transactions, we continue to be disciplined with capital deployment. We structured both transactions with low upfront payments with success-driven regulatory and sales milestones. As a result of our recent efforts in business development, we now have multiple programs in late-stage development with the potential to generate revenue in the coming years. So in conclusion, we're off to a great start to the year along with strong outlook for the balance of the year and well-positioned to continue to drive value for shareholders. And with that, I'd like to turn the call back to Jeff for his closing remarks. Jeff?
Jeffrey Dayno: Thank you, Sandip. As we have just highlighted for you, Harmony is a growth story and our growth is accelerating. We have strategically been executing on expanding our pipeline and diversifying our portfolio to drive near-term revenue out to 2030 and durable long-term revenue growth out beyond 2040. The key drivers of our catalyst-rich pipeline and future revenue potential include the next-gen formulations of pitolisant that can generate new IP and extended the pitolisant franchise and drive durable revenue out beyond 2040. New indications for pitolisant, including near-term catalysts in pediatric narcolepsy and idiopathic hypersomnia, gaining pediatric exclusivity and an additional six months of patent protection from the back end of our longest patent, which represents a significant commercial opportunity. Our three business development deals over the past eight months that has resulted in three orphan rare CNS franchises in late-stage development each with potential peak sales opportunities of $1 billion to $2 billion and patent protection ranging from the late 2030s to mid-2040s. And the growth of our development enterprise, which now includes eight assets advancing across 13 development programs resulting in the potential for at least one new product or indication launch each year over the next five years. At Harmony, we believe we are well-positioned to become the leading patient-focused CNS biotech company, delivering innovative treatments to patients with unmet medical needs. And while doing so drive significant and durable value creation. Thank you for your attention and I will now turn the call over to the operator for Q&A. Operator?
Operator: Thank you. [Operator Instructions] We will take our first question from Charles Duncan with Cantor Fitzgerald.
Charles Duncan: Hi. Good morning, Jeff and team. Thanks for taking our questions, and congratulations on good commercial quarter, as well as the recent business development deals, impressive activity.
Jeffrey Dayno: Thank you, Charles.
Charles Duncan: So I had a quick question for Jeffrey Dierks in terms of the commercial business. Nice growth year-on-year, appreciating the seasonal issues. But in terms of the number of patient adds, let me ask you about how you feel about that, as well as one of the things that Kumar mentioned is in the next generation an ability to titrate more rapidly. And I guess, I'm wondering if you look at the current patient population taking WAKIX, how do you feel that's impacting the use of WAKIX? Will the improved titration rate make a difference in terms of the persistence within WAKIX? Thanks.
Jeffrey Dayno: Yes. Charles thank you for your question. Jeff do you want to?
Jeffrey Dierks: Sure. Yeah, thanks for the question Charles. To answer your question on the average number of patient adds in the first quarter, first off, I'll tell you we're extremely pleased with the durable growth that we're seeing in the average number of patients. It grew 150 patients sequentially from what we reported in Q4. We continue to see strong top line demand and new patient starts. And Charles as you know the 150 average patient growth is well in line with our past Q1 average patient growth in the last two years. And as you cited, we typically have the Q1 seasonal payer dynamics, the reauthorization, the prescriptions. And a reminder coming into 2024, we had a larger established patient base. We had 6,150 average patients coming into 2024, whereas, a year ago we only had about 4,900. And all of those established patients are exposed to those reauthorizations that occur every January for specialty and branded products. And certainly Charles as you know those reauthorizations just simply add time. So about 25% more of our patients were exposed to that. And then on top of that, we did have the additional headwind of changed Healthcare. But as you know, we've got a great commercial model. We have a closed distribution network, and the outstanding work of our team. We did a tremendous job in navigating those dynamics. And we've continued to be able to demonstrate growth every single quarter in average patients. We're going to continue to tap into that large patient opportunity as the market allows each quarter. And we're confident as Sandip shared in his prepared comments, to see quarter-over-quarter growth for the remainder of 2024 and beyond.
Charles Duncan: That's helpful. If I could ask one development question, that is regarding the new assets Epygenix. Congratulations on that. Kumar, you mentioned 2026 being data with EPX-100. I guess I'm wondering, what is really modulating that timing of 2026? I know these are difficult studies to enroll. But could that prove to be an overly conservative estimate of time, to top line data on EPX-100?
Kumar Budur: Hi, good morning Charles. Thanks for the question. Look, we just acquired this asset. And right now, we believe 2026 is when we will be able to come out with the top line data. Obviously, as the study progresses, as we are able to bring in Harmony resources, the expertise in R&D and especially the additive support group that we have, very well established here at Harmony who work with hand in glove with patient community. So all of these things will definitely help, with the recruitment. And you are right, recruiting DS patients is not necessarily easy, but I think we have a really A+ team to recruit these patients. And as we make progress with the clinical client, we will provide more granularity for the time line.
Charles Duncan: Okay. Thank you for taking our questions.
Operator: Thank you. We will take our next question from Francois Brisebois with Oppenheimer.
Q – Francois Brisebois: Hi, I apologize if the question was already asked. I got dropped off the call for a second. But I was just wondering in terms of the acquisition, the Epygenix acquisition is there any data that shared – that you intend to share soon about other past readouts just given it's a private company and people might not be familiar with their story.
Jeffrey Dayno: Good morning, Francois. Thank you for your question. I think yes, Kumar can talk about data generated and what we'll be sharing going forward?
Kumar Budur: Yes. Thank you, Frank. Yes I mean Clemizole hydrochloride is a first-generation antihistamine that was introduced in 1950 and some 1920s introduction of second and third generation antihistamines. There is some safety data from that period of time, which is very benign. And then the SCN1 mutation model of zebrafish with clemizole hydrochloride was studied -- is published extensively by Scott Baraban, who is a professor at University of California in San Francisco. The mechanism of action front is the potent centrally acting serotonergic drug. And this is proven mechanism of action when it comes to developmental epileptic encephalopathy. So that alongside with the robust data that we observed in SCN1 mutation zebrafish model and the safety data that we have from clemizole, most of it is available in the public domain. And within the clinical trial this is a Phase 3 registrational clinical trial and we have asked us to be long-term open-label data that has not been published yet. Obviously, we don't have the double-blind data. It is double-blind, but the open-label long-term study data is available and we will be discussing on, what will be the appropriate time to put those data in the public domain.
Q – Francois Brisebois: Okay. Perfect. And then just a question in terms of -- again sorry, if you mentioned this, but the 150 new patient adds, is there any seasonality impact here on the number of patient adds? Is it mostly the gross to net and that impact on the inventory also having an impact? Or does the number of patient adds also get impacted by seasonality in the first quarter, because we had seen it a few years ago, it was only 100 patients I think in Q1 2022. So just wondering about that And then you don't -- you mentioned the 700 to 720 guidance. But you -- I don't think you mentioned the 7,000 patients on drug. Is that still something that we should expect? Or are we, getting away from that 7,000 number here? Thank you.
Jeffrey Dierks: Sure. Franc, thanks for the question. And yes, from a Q1 perspective, we do see seasonal payer headwinds that do have an influence on the number of patient adds in the first quarter. And you cited the 150 patient adds we had this quarter is in line with the last two years. We had 200 last year, we had 100 two years ago. So very consistent as we get reauthorization headwinds on prescriptions. And the one thing we take into account this year Frank is we had a larger established patient base coming into 2024. We had about 6,150 average patients that were exposed to that reauthorization this year. Whereas coming into 2023, we only had 4,900. So we had about 25% more patients exposed to that reauthorization of prescriptions at most specialty and branded products faced in January. And as you know, simply adds time to the process, which does have a little bit of influence on patient adds but it's in line with our expectations. We're extremely pleased with what we saw in the first quarter and then leading into your questions about guiding towards approximately 7,000 patients at the end of the year. In addition to reiterating our guidance on net sales, I am reiterating the guidance that we're expecting to end the year at around 7000 average patients.
Francois Brisebois: Thank you.
Jeffrey Dayno: Thanks, Franc.
Operator: We will take our next question from Ami Fadia with Needham.
Ami Fadia: Hi, good morning. Congrats on the progress at the company along with the recent deals. My first question is on Idiopathic Hypersomnia. Could you share some of the details of the discussions that you had with the FDA, and how they view some of the additional analysis that you were going to share with them? And did you specifically get clarity on whether these data would be adequate for approval? Or was that characterized as a review issue by the FDA? And then I have one more question.
Jeffrey Dayno: Good morning, Ami. Thank you for your question. It's Jeff. I think as you know we had a good interaction with FDA regarding the IH program. And also as you're aware it always comes down to a review issue. But based on the discussion and interaction – and the strength of the data that we generated, we feel that there is a path forward. And Kumar can share some more of the color around the FDA interaction.
Kumar Budur: Thank you, Jeff. Thank you, Ami for the question. Yes, we had good discussions with the regulatory agency on the data, the unmet need, the lack of treatment options and especially around the off-label yield of controlled stimulants. We did feel that the FDA recognizes acknowledges and appreciates the lack of treatment options in patients with Idiopathic Hypersomnia. We are optimistic based on the totality of the data Ami, not just the open label but also the trends we saw in the random with all period and especially the long-term extension study, which I have mentioned earlier, where we still have approximately 90 patients in the long-term extension study. All of those patients have completed six months of treatment and more than half of them have completed 12 months of treatment and about 10 of those patients have completed 18 months of treatment and we continue to see persistence of effectiveness and we are safe but also the effective data as well. So combined with all of these things, in addition, we are also planning on obtaining the real-world data and other data that will not just strengthen the submission but also contextualize the data that was generated from the infield study. So based on all of this we are optimistic. We do recognize the bar is high. But as Jeff has consistently mentioned, we are committed to patients with idiopathic hypersomnia to bring it all ends to them as soon as possible as efficiently as possible and giving them an option for a non-scheduled drug with a simple dosing interaction and an established safety profile.
Ami Fadia: Got it. That's very helpful. Just with regards to EPX-100, this class of drugs have had a history of some safety issues. And so could you comment on how you got comfortable with the safety profile of EPX-100? And if you could give us some color around the dose that's being studied in the trial relative to the dose that has been approved in the market for all these years? And also, if you could talk about the IP protection that you anticipate for the assets? Thank you.
Kumar Budur: Yeah. Sure, Ami. I mean, I guess you're referring to some of the cardiovascular issues that Printerpa has, which also act via histaminergic mechanism of action. The histaminergic mechanism of action, Ami, with this particular indication, set of indications like DEE, is a proven mechanism of action, particularly with senfluramine, which is the active moiety in pentathlon, does show some cardiovascular effects like pulmonary arterial hypertension, which in turn results in thickening of the heart valves. And that's why that particular product has a black box warning and is also subject to the REMS program. With the cleanse of hydrochloride, there is a huge body of safety data. One from the time that it was introduced as a first-generation antihistamine in 1950s, 60s and 70s. And on top of it, we conducted a full battery of non-clinical safety studies, including six-month repeat-dose studies in rats, nine-month repeat-dose studies in dogs. And as you know, dogs are extremely sensitive when it comes to the findings of cardiovascular issues. We did not see anything to suggest that the clinical hydrochloride has any cardiovascular impact, including QDC. And then these data were reviewed by the FDA. And they did not ask us to conduct any additional cardiovascular monitoring apart from routine EAP and the monitoring of pulse and blood pressure. And on top of it, Ami, earlier I mentioned that the patients who complete the double-blind randomized study roll into open-label extension study. And that's a three-year open-label extension study. And some of these patients have exposure past one year. And the safety profile looks pretty good in the sense none of them have had any cardiovascular issue. And also, we haven't seen any laboratory abnormalities as well. There are two drugs that are often used in this indication. One of them has significant GI issues and requires fewer function monitoring on a regular basis. And the other one, as we mentioned, has issues with cardiovascular system. And we haven't seen either of them. The safety profile is pretty benign. And the efficacy data that we have seen in the open-label part is pretty compelling, potential to offer a very unique benefit-risk profile in this patient population.
Ami Fadia: Thanks, Kumar. That was really helpful. And I just have that IT question as well, if that's okay.
Kumar Budur: Yeah. This is an old compound, Ami. So we don't have a composition of matter patent, but we do have a method of use patent. And of course, because both of these are often diseases, rare diseases, we will get seven years of exclusivity, orphan drug exclusivity in US for each of these indications. And this is a global opportunity for us. So we will get 10 years of exclusivity in Europe for each of these indications.
Jeffrey Dayno: And just to clarify, Kumar, method of use out to 2034?
Kumar Budur: 2034, and any other extension. And regulatory exclusivities.
Jeffrey Dayno: Right.
Ami Fadia: Thanks very much.
Jeffrey Dayno: Thank you, Ami.
Operator: We will take our next question from David Amsellem with Piper Sandler.
David Amsellem: Hey, thanks. So I have two questions, one on Clemizole and then one on the Orexin. So on Clemizole, so can you talk about how the product compares versus next generation options with serotonergic activity? I'm thinking specifically of Longboard's Bexicaserin given its recent body of data. How do you think about how Clemizole stacks up? And I understand it's a polypharmacy-based market, but do you think that there's room for these agents with some overlap mechanistically? So that's number one. And then number two, on the Orexin, I know it's early, but can you talk to the development path here? You've got Alkermes and you've got Takeda advancing their Orexins in NT1 and Alkermes also in NT2. Do you think more about yours potentially in IH or in other settings where hypersomnolence is a hallmark symptom or are you also looking at your garden variety path forward in terms of narcolepsy 1 and 2? Just help us better understand how you're thinking about it. Thank you.
Jeffrey Dayno: Thanks David for your questions. Kumar you want to address on EPX100 and then I'll respond to the Europe question?
Kumar Budur: Sure. Thank you, Jeff. Hey, good morning David. Thanks for the question. Regarding [indiscernible] I guess you're referring to the data from the PACIFIC study right which was recently disclosed. Look it's a small study 52 patients. The efficacy data looked good. but it's also short study too and we haven't seen the long-term safety data yet as we continue to collect. So, I see that as early stage still. And you just need to how it will pan out as it goes to the next of it. And in this particular space David as you know or as we mentioned just now it's a polypharmacy market a significant unmet need. There is a place for a different mechanism of action to costs even incremental differentiation in efficacy or safety is embed by the providers and the patient alike.
Jeffrey Dayno: And David with regards to your question about TPM1116 and our Orexin-2 agonist while we recognize that it's an early stage and the other development programs ahead, I think that we're still learning from. So, I think that we are still learning from those data and those programs and as they are generated. So, with regards to our development plan and approach I think we have optionality. I think that there'll be optionality based on what we learned from some of these other development orexin development programs ahead. The most logical approach I think as you're aware going in through NT1 which is the prototypical disorder with orexin deficiency as opposed to NT2 and IH. But we will learn from some of the other programs and have the optionality with regards to what the best cap forward will be as we advance TPM1116 for additional--.
Kumar Budur: Yes. Thank you, Jeff. Yes. Just to add on question regarding is it garden variety NT1, NT2 or something else? David this particular compound, TPM1116, has a real high potency and that actually provides us optionality in terms of looking at other central disorders of hypersomnolence as well. I mean as you know Takeda had to limit the dose to 10-milligram and the study to only pursue NT1 not NT2 or idiopathic hypersomnia this stage. The preclinical profile that we see with the 116 looks pretty good. And based on that we do see optionality here after than the European central deporter of combo.
Jeffrey Dayno: Thanks Kumar.
David Amsellem: All right. Thanks guys.
Jeffrey Dayno: Thanks David.
Operator: We will take our next question from Graig Suvannavejh with Mizuho.
Graig Suvannavejh: Hey thank you. Can you hear me okay?
Jeffrey Dayno: Yes we can Graig. Good morning.
Graig Suvannavejh: Thanks Jeff. Congrats on the great progress that we're seeing from the company. I've actually got a question for Sandip. Sandip just in light of the new BD deals that you've done and your plans to potentially continue adding to the pipeline I guess it's a two-part question. First -- or maybe Jeff you can answer this first part of the question. Is the current plan on any next deal that you do the first prioritize on adding in another or a fourth CNS franchise? Or is the current plan or your thoughts currently to build on the existing three seniors franchises you have now? And then the second part of my question maybe this is really more for Sandip as in light of kind of the added pipeline programs which is I think we all think it's going to positive. Just wondering if you've got any initial thoughts on what the P&L might look like for the company both in terms of SG&A and R&D for Harmony over the next one or two three years? Thanks.
Jeffrey Dayno: Sure Graig. Let me address your first question. In terms of the, sort of, the BD growth strategy going forward again I think it's also optionality again. I'm very pleased with what -- how we've been able to expand and grow the pipeline diversify our portfolio and these three CNS franchises where we are now each with potential peak sales opportunities of $1 billion to $2 billion. We could either base on we continue to be active in BD and looking at the landscape. So we could go further in either of these franchises with additional assets or if we see another opportunity in another CNS area that we could diversify the pipeline further. We are -- that would be another path forward. The other thing I want to comment on and to I think just bring light to this approach also is important that it leverages our internal expertise in the CNS area as well as the commercial model, our internal synergies. So as we expand and diversify this portfolio in these CNS areas than just the commercial model where we can thoughtfully apply that model to any new indications any new products that would go to market. So I think that's how we're seeing the strategy going forward. Pleased with the progress to-date, but we're not stopping there. Sandip you want to...
Sandip Kapadia: Yes sure. With respect to your question in terms of the financial impact overall. As you talk about these deals, but we continue to be very disciplined in capital deployment. We structured down with low upfront relative to the age of the assets with more success-driven milestones. These are all fairly late-stage programs in terms of actual capital resources or really for the next couple of years maybe just think about it. And also we've got growing revenues. We've got internal synergies overall that we can also bring and growing profitability that gets the capacity to continue to do additional business development opportunities while still maintaining our relatively profitable in our business that's self-sustaining and can continue to grow. So I think I feel good about what we've been able to acquire. These are again very late-stage assets, like I mentioned for this year it's about $35 million more in terms of incremental cost and probably still early to go into next year and we'll get close to top line. So really a good smart investments upfront to hopefully unlock incremental value.
Luis Sanay: Operator, next question.
Operator: We'll take our next question from Corinne Jenkins with Goldman Sachs. Please go ahead. Your line is open, Corinne Jenkins.
Corinne Jenkins: Sorry, I was on mute. Good morning, guys. Can you just help us understand how you thought about the market opportunity and potential value for these assets EPX100 and 200? And in particular how do you think about the path to differentiation there? And with that differentiation what kind of the peak sales opportunity could be for such an asset?
Jeffrey Dayno: Good morning, Corinne. So in terms of the market opportunity referring to epigenic and the rare epilepsy franchise. So I think obviously the epilepsy space is significant market opportunity beginning in this area of orphan rare and the developmental epileptic encephalopathies. We are in a registrational trial for Dravet's kind of a smaller patient population, but planning to initiate a Phase 3 study in Lennox-Gastaut syndrome second half of this year, a larger market opportunity. But we also see this acquisition as sort of the foundation of a broader epilepsy franchise. So with regards to current market opportunity -- with regards to what's currently available. I think as Kumar has been alluding to we see the potential product profile of EPX-100 in terms of overall benefit risk compared to the current treatment options as a significant product offering in terms of therapeutic option in the near-term. And then we look to draw on our internal sort of expertise in this area look for potentially additional assets to build out a broader epilepsy franchise. And I think that's the current view on where we are on there. Kumar any other thoughts?
Kumar Budur: I mean as I mentioned earlier based on what we have seen, we believe that it will offer a compelling value proposition with a unique benefited profile for patients especially from a safety profile given some of the significant limitations, we see with some of the drugs that are currently approved in this space.
Corinne Jenkins: Okay.
Operator: We'll take our next question from Jason Gerberry with Bank of America.
Jason Gerberry: Hey, good morning. Thanks for taking my question. I guess, one question on EPX100. Is the base case here that you have the same class safety labeling around CV talks as FINTEPLA. I'm seeing in the preclinical there's some affinity for 5-HT2B. So just wondering that coupled with its only a 100-patient pivotal study. If you can -- or think you may be able to decouple that safety issue from a safety labeling perspective. And then from a development perspective are you planning to run a second pivotal trial? Would that be done in parallel once you get the asset in-house? Or would that be after you get data in 2026? Just wondering the time line to market for EPX100? Thanks.
Jeffrey Dayno: Good morning, Jason, yes. Thank you for your question. Yeah, I think Kumar can unpack that with regards to the opportunity that we're seeing near-term with regards to Dravet's, and then in terms of differentiated from a safety perspective with regard to FINTEPLA.
Kumar Budur: Yeah. Jason, good morning and thanks for the question. I mean, the answer to your first question is, no. We do not anticipate any cardiovascular liability with clemizole hydrochloride that is based on the large body of data from the first generation antihistamine. And then all the preclinical data that we have generated for this particular compound, including [indiscernible] studies in the preclinical space. And also looking at the data, the FDA did not ask us to echocardiogram or monitor for pulmonary arterial hypertension or cardiovascular abnormalities. So we do not believe that this will have any of the safety issues that we do see with FINTEPLA, which has a black box warning and that is subjected to REMS program. And also based on the long-term extension study, open label types that we have seen so far, we are actually very pleased with the safety profile both in terms of lack of any lab abnormalities and also from the cardiovascular safety perspective, and just safety and tolerability in general. And to your second question about the second study, the current study, and I know that on clinicaltrials.gov which still says it a Phase 2 study but it's actually a registrational Phase 3 study. It started out as a Phase 2 study. And then the sample size was increased to 100 subsets, equally randomized 1:1 between clemizole and placebo. And now this is a pivotal registration study, and the top line data will be available in 2026. And typically just as you know in rare disorders one adequate and well-controlled study is generally accepted as substantial evidence for effectiveness by the regulatory agencies. So we do plan to file based off of this study should the data look good.
Jason Gerberry: Got it. Okay. Thank you.
Kumar Budur: Thanks, Jason.
Jeffrey Dayno: Thank you.
Operator: And we will take our last question from Danielle Brill with Raymond James.
Danielle Brill: Hi. Good morning. Thanks for the question. I'm curious how you're gauging TPM-1116 profile versus Oral Orexin-2 Receptor Agonist? And what type of data should we expect to be presented at the upcoming scientific meeting and which conference are you targeting? Thank you.
Jeffrey Dayno: Thanks, Danielle for your question. Kumar?
Kumar Budur: Sure. Hey. Good morning, Danielle. Thanks for the question. Yeah, just some background information Danielle on TPM-1116. This originated out of TEIJIN PHARMA. This is a conglomerate with deep expertise the drug discovery. They actually worked very closely with -- of the study [indiscernible] who many of you know, is the one who actually discovered [indiscernible] and their impact on Sleep/Wake. They have been working on this series of compounds for a while, and the advanced TPM-1116, because that was the best in the series that they filed. TPM-1116 has a very Novel Chemical Scaffolds compared to the Oral Orexin-2 Receptor Agonist, that are out there. And we believe this Novel Chemical Scaffold offers certain unique features that we have seen in our preclinical studies. First and foremost, high potency, good selectivity, potential for once-a-day dosing and good preclinical safety data, we are completing the rest of the IND-enabling experiments and we plan to submit IND in mid-2025. And start first in human study, in the second half of 2025.
Operator: Thank you. I am showing no further questions. I would now like to turn the call back for any closing remarks.
Jeffrey Dayno: Thank you Madison, and thanks everyone for joining our call today and for your interest in Harmony. As you heard from us this morning, the future is bright at Harmony, based on the strength of our commercial business of WAKIX in Narcolepsy, and the value of our expanding pipeline, which will serve as the foundation for durable revenue generation out beyond 2040. We look forward to providing updates, as we continue to accelerate our strategy for long-term growth. Thank you. And have a great day.
Operator: This does conclude today's Harmony Biosciences First Quarter 2024 Financial Results Conference Call. You may now disconnect your line. And have a wonderful day.
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